In the last decade, Zimbabwe’s economy has twisted slowly in the wind. It has broken records for all the wrong reasons: the highest inflation the world has ever seen and 80% unemployment.
After a disputed 2008 election, a creaky political agreement ushered in a power sharing government. In this brave new world the task of running treasury was given to a man, who calls himself a poor constitutional lawyer; an Arsenal fan, who thinks Arsene Wenger’s time is up.
Tendai Biti, 47, is a workaholic who without education would be a demon. They called him Bismarck at university—after the iron-fisted military founder of a united Germany—because of his uncompromising approach to debate. Bismarck is bitter about Wenger: “He has been torturing us with poor results. He must do the right thing”. The analogy is irresistible and perhaps Wenger would feel the same way in return.
Zimbabwe Minister of Finance and Economic Development Tendai Biti
The main entrance to the seat of power has tinted windows and an intercom. It is possibly the only office at the new government complex offices, in the capital of Harare, with such an electronic device. The voice of the security guard asks politely: “How can I help you?” These security measures are not surprising—a group of war veterans once threatened to throw Biti from his sixth floor office.
Inside, his desk is full of paperwork. Biti wears a blunt face as he speaks to a mystified office aide who is handed back a file.
“He doesn’t want this and that signature. I don’t need to sign this paper. Where is he? He should be doing this and that. I don’t like that. This is nonsense,” says Biti.
Suddenly, I’m told: “Let’s do the interview now, I have no time.” No smile. No greeting. He starts swiping across his iPad and ignores several incoming phone calls.
Biti has been at the helm of the leaky financial ship that is Zimbabwe for years. He took the job in 2009, in the midst of the global financial crisis, with the aim of achieving a tough balancing act for a nation floundering in a dreadful recession. For a country with a power-sharing government and several power centers wanting money, especially state security, Biti is also in the midst of ugly politics. It is a job that needs guts, patience and the gonads of an elephant.
He stormed out of a cabinet meeting, which until then was unheard of in conservative Zimbabwe, stunning both President Robert Mugabe and prime minister Morgan Tsvangirai.
I ask him how he manages his emotions, after telling him he can be very difficult.
“Yes, I do have mood swings but I’m a very vulnerable person. I hide in a shell of machoism. I’m very emotional, too emotional. I think and act with my heart. I know I can be a disaster. I get so angry and I speak my mind. What affects me are the tiny little things. People who are late; people who are sloppy; typographical errors kill me; bad English; bad grammar,” he says.
But why did he storm out of a cabinet meeting in July 2010?
“The discussions were going nowhere and I knew I was right so I just expressed my right of disassociation. I don’t like people who are dishonest. I also feel that I don’t owe you, so let’s be objective, let’s be impartial,” he says.
This year could make or break it for Zimbabwe. If the elections go ahead, with violence along the way, the country could go off the rails, taking investment hopes with it.
“Zimbabwe has been scuffled so much, suffocated so much by mediocrity, dictatorship and mendacity when other countries are moving. The election in 2013 must make a distinction. It’s a vote between the past and the future; it’s a vote between opportunity and the liquidation of opportunity,” he says, with a stern face.
Investors are apprehensive about elections. Like eagles, they are keeping an eye on the country from a distance. Biti has been wooing European investors but the odds are against him. His boss is a hard sell abroad. And what more can he expect, he doesn’t like him either but is managing him in a fragile coalition government in which the right hand, doesn’t know what the left hand is doing.
So far, the economy is fairly stable but the manufacturing sector is dead and investors are still watching, reluctant to walk through the open door.
Biti says they should get a bit of credit for cutting half a trillion percent inflation to 7% in a matter of months.
“What we did bordered on the miraculous… It has never been done; I don’t think it will ever be done again. You wear and tear, the arrows are thrown at you, pressure is like a tornado, it affects even your marriage and it’s phenomenal,” he says.
The Zimbabwe Accelerated Debt Arrears Clearance Debt and Development Strategy (ZAADDS) has been crafted to deal with the extensive debt. It is just as well as the country has a staggering $10 billion foreign debt, and will be negotiating its arrears with a visiting IMF team this quarter. Biti says they will try to negotiate out the arrears but the debt remains a structural issue dependent on elections.
“The country has two choices: the crocodile scenario and the cheetah scenario. I don’t want to be a crocodile… I want to be a cheetah. I want to sprint,” he says.
African Investment Markets’ Farai Dyirakumunda says Zimbabwe is on the radar.
“A lot of investors gave a wide array of investment opportunities with good upside potential. Some will sit on the fence during the election year due to uncertainties but there will be an eventual influx of foreign capital under the right conditions,” he says.
Hope pales in the face of reality.
The Confederation of Zimbabwe Industries (CZI) painted a desperate country teetering on the brink, late last year. Several banks have closed, the liquidity crunch is stalling domestic investment and the CZI has called it an economic emergency. Many people, who elbowed out of the formal sector, are selling goods by the roadside, with little or no manufacturing in the heavy industrial sites, which means that fewer taxes flow into the fiscus.
After paying January’s salaries, the government was left with just $217 in its coffers, just about enough for dinner at a posh restaurant. Luckily, $30 million flowed into the fiscus the following day; it highlighted the paucity of government coffers.
“It’s basically a cash economy,” says Biti.
Dyirakumunda says Biti is a practical minister.
“He has done reasonably in controlling government spending so that it is fully funded by tax revenue and government income. There have been funding constraints to what he could do to stimulate the economy through fiscal policy,” he says.
No wonder Biti has been tasked to beg for $200 million for the next referendum and elections.
In the retail sector, the painful reality is that most products in supermarkets are foreign-owned. The country suffers from a huge current account deficient. The imports amount to $7 billion, with exports a mere $3.5 billion, a gap the treasury wants to narrow. Zimbabwe is placed 132nd of 144 countries in the Global Competitiveness Report 2012-2013.
“There is still a lot to be done… and some of us we will look the beast in the eye and we will not blink,” he says.
Biti says his wife, Charity, is his rock. She couldn’t understand why someone had thrown a bomb at their house in order to, in her own words, “stress a point” but it was her unruffled demeanor, which helped Biti cope with the trauma.
Economist John Robertson, who has been studying Zimbabwe’s economy for nearly half a century, says that Biti’s opponents in government made promises about civil service salary increases, which they knew Biti could not keep.
“They pilloried him through the press for failing to keep the government’s promise. The intention was to force his resignation but all attempts failed,” says Robertson.
Biti describes his party boss, Tsvangirai, as the most open and humane person he has ever met. He wonders how after having emerged from one of the poorest villages in Zimbabwe, without a university education he has managed to achieve such great heights against the odds.
At home, he reads at lot about economics and philosophy. Perhaps it was this thirst for knowledge, which helped Biti become the youngest partner at a top Harare law firm Honey and Blackenberg at the age of 26.
“I can take the bull by the horns and I’m not afraid of work.”
He is inspired by biblical prophets and is fascinated by the books of Jeremiah, Judges and Solomon—“a fascinating collection of stories about cruelty, blood, murder, love and commitment,” he says. Biti also draws inspiration from American politicians, musicians, footballers and Nelson Mandela. He admires how, “You stay in prison for 27 years and walk out without bitterness”. And Thomas Jefferson amuses him.
“What did he mean by crafting in pursuit of happiness?” he asks with a chuckle.
As he warms up he reveals that he is in awe of how Barcelona’s Lionel Messi weaves his magic on the field. His love-hate relationship with Mugabe has defined his career but he doesn’t mince his words. Take a recent interview with state newspaper, Sunday Mail: “I’m still critical of him. I think if he had resigned many years ago a lot of the problems that are happening in this country would not be happening. I have a problem with people who are not democratic. How can someone sit in one position for 32 years? He belongs to a generation that is history, that is in the archives.”
After years of debate, the draft for the new Zimbabwean constitution was drafted on February 6. Both the ZANU-PF and Movement for Democratic Change put forward their interests. Tsvangirai tried to reduce the power of the presidential office, while Mugabe tried to include clauses that would help him maintain power. Once the draft is passed by Senate, Mugabe will set the date for the 2013 elections, which are tentatively scheduled for late June.
Biti said he has never been trusted by the ruling ZANU-PF because he emerged from a Movement for Democratic Change formation to run treasury.
“Some people don’t read; they are ignorant. They didn’t and some still don’t understand what we were trying to achieve. Some say education is important, I would like to submit that the cost of ignorance is incalculable.”
Zimbabwe can’t afford any more costs.
Too Many Worries Spoil The Broth
Fine words of economic recovery may resound in government offices but they ring hollow in the battered and weary world of Zimbabwean business.
On the streets of Harare you could call supermarket chain Food World a monument to survival. For years, it suffered emptying shelves, job losses and a currency meltdown. The business kept breathing through a decade of economic disasters. Prices were pulled around by speculators and black marketeers. Then, government statutory price controls ate into its profit margins.
“We lost a lot of business in the era,” says Denford Mutashu, Food World manager.
“It’s certainly a period I don’t want to go back to, industry went to its lowest point, local supply dwindled later and we had to rely on imports. You didn’t have a strategy to implement, you could not plan.”
In 2013, Mutashu still feels his company is living on the edge. He fears the temporary stability brought by dollarization of the economy could go up in smoke if the elections turn violent.
His supermarket may be full but Mutashu feels that the finance minister isn’t helping much by imposing punitive duty on imports. Zimbabwe has bought around $7 billion worth of imports, while only exporting $3 billion worth.
“There is little production going on. We have to import 70% of the products you find here, cooking oil, flour and other products. That badly affects our profit margins… The disparity between exports and imports is worrisome; the country is facing serious challenges in terms of liquidity,” says Mutashu.
Food World imports the majority of its commodities from South Africa.
“There is quite a lot of inactivity and industrial capacity utilization has gone down. Other than looking at industry capacity, we then have to concentrate on industrial competitiveness,” he says.
Mutashu believes dollarization, which has seen dollars and rands used as legal tender, has been a salvation, saying that the worthless Zimbabwe dollar was killing business.
“The functional currency system has brought predictable prices, which rarely fluctuate, it has brought some sanity. We used to sell a loaf of bread for millions of dollars. But now there is restocking and prices have stabilized.”
On the other side of the coin, be it a dollar or a rand?
“Since we are using a currency, which we do not own and control, it is still a challenge for us to be able to control the economic pendulum. Whatever happens in South Africa also affects us because we don’t have control over the currency,” says Mutashu.
Zimbabwe used to export cooking oil, now it’s importing. As the recession heat took its toll, many companies went under. National Foods, one of the major cooking oil producers shut its plant. Household name Olivine weathered the storm but failed to cope.
At the very least the struggling supermarkets of Zimbabwe, such as Food World, are cooking but hope that the elections don’t spoil the broth.