Where the Money Isn’t

For years now, observers of the Zimbabwe scene have been talking about reaching the tipping point when the economy just collapses entirely and the currency becomes as worthless as Weimar Republic paper—they were saying that back in the late '90s, when inflation was "only" 40,000 percent a year. "I don't think in Africa you get a tipping point," said an economist at a Western embassy. "The formal sector just slides into the informal sector, but what happens is the government loses its ability to raise revenue." Robertson takes the view that sooner or later it has to come to an end. "The tipping point will come when the people with the guns say don't even think of paying us in Zimbabwean dollars, we want foreign exchange. We want something we can actually spend."

In the meantime, though, the government goes to extreme measures to make sure that won't happen. Favored government officials and ruling party members are given the right to import cars and other goods duty-free, and to buy foreign currency at the government's official rate—now less than half of the street or black-market rate. Fuel, too, prohibitively expensive here now, is also sold to government officials at concessionary prices, a fraction of the market value. "It's a form of asset stripping," says Makumbe. "They're looting the country." So in Harare, there are, considering the economic crisis, an astonishing number of late model SUVs and luxury cars.

Over at Fidelity Printing and Refining, on George Drive in the Msala Industrial Area in Harare, the unmarked plant had a line of such cars out the gates and a quarter-mile down the road—to buy subsidized fuel from the Reserve Bank's pumps.

Another move the government has made to try to raise hard cash has been to monopolize gold production, requiring all gold miners, big firms and individual panners to sell their gold to the government at rates far below world prices. That gold is either refined at Fidelity or, more recently, diverted to another Reserve Bank-owned company, Aurex, where it is made into jewelry in order to maximize the return from it. But the result of this policy has been a catastrophic fall in gold production, from a ton a month to only 350 kilograms (about 770 pounds) a month now, according to Robertson, which he says is the lowest level since 1907.

A visit today to Aurex's plant and its retail gold outlet store in the village of Ruwa, about 20 miles east of Harare, was instructive. Entry to the gold store is by invitation only, but wrangling one isn't that difficult for buyers with foreign exchange. Aurex is on a road in an isolated industrial estate, the turn indicated only by a signpost reading "Liquorland." Behind high walls and double electronic gates, the buildings sprawl over a large compound. But inside the gold store, there's an astonishing paucity of gold on sale, mostly a few thin chains and slight rings, all only 9 karats. "It's the situation," a clerk said. The only other customers were two Reserve Bank employees, who explained they were taking advantage of the 10 percent discount they get for buying gold. "It sounds like people are hedging their bets by getting in first," says Robertson.

Moyo says it's unsurprising that Zimbabwe is wildly printing paper. "It's fire-fighting, what anyone else in a similar situation would do." Such moves have been made necessary, in his view, by the sanctions on Zimbabwe and by denial of credit facilities to it by international institutions. "No one wants to lend money to this country," he says. "I don't know any third-world country that would survive this kind of pressure." Just possibly, it won't.

With Tiffanie Wen in London

© 2008