Biodun.BBC: Emmerson Mnangagwa

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Wednesday, January 23, 2019

ANALYSIS: Zimbabwe and the economic crisis

January 24, 2019 03H:15 GMT/UTC/ZULU

by Susan Peterson and Biodun Iginla, BBC News and Reuters News Analysts, Harare

HARARE - Zimbabwe’s President Emmerson Mnangagwa has promised action in response to a crackdown by security forces on anti-government protesters following a hike in the price of fuel.

FILE PHOTO: Barricades burn as rain falls during protests in Harare, Zimbabwe January 14, 2019. REUTERS/Philimon Bulawayo/File Photo

Lawyers and activists say police and soldiers have killed at least a dozen people, wounded scores and arrested hundreds over the demonstrations. Zimbabwe’s Human Rights Commission (ZHRC) accused security forces of systematic torture.

Critics say the country is reverting to the authoritarian rule that characterized the 37-year regime of former leader Robert Mugabe, who was forced from power after a coup in November 2017.

The crisis will not be easy to fix. There is a severe shortage of dollars, fuel and medicines, while inflation hit 42 percent in December, the highest in a decade. Foreign investors are, by and large, staying away.

WHAT SPARKED THE LATEST CLASHES?

Everyday life has been getting harder as the price of basic goods spirals. In the past two months, the country has suffered acute shortages of imported goods, including medicines, food and fuel.

Motorists can wait for hours to fill up at fuel stations, where soldiers are often deployed to break up fights over who is next in line.

On Jan. 12, Mnangagwa announced to reporters that the price of petrol had increased to $3.31 per liter from $1.32 from midnight, but there would be no increase for foreign embassies and tourists paying in cash U.S. dollars.

It was the final straw for some Zimbabweans, and violent protests broke out two days after his announcement.

GENESIS OF CASH SHORTAGES

The country abandoned the Zimbabwe dollar in 2009 after inflation reached 500 billion percent the year before. In its place, the government adopted the U.S. dollar and other currencies including sterling and the South African rand.

People hoped the move would spell the end of spiraling prices and rampant money printing that made much of their earnings and savings virtually worthless.

But over time, supply of the U.S. and South African currencies dried up, so in November 2016 authorities in Harare launched a surrogate currency - paper ‘bond notes’ designed to ease acute hard currency shortages.

The notes, which now have a total face value of $400 million, are backed by a $500 million loan from the African Export and Import Bank, the central bank has said. They are used like cash.

Officially pegged to the dollar at a rate of 1:1, on the street $1 fetches up to 3 bond notes, reflecting the ongoing shortage of U.S. dollars and people’s desire to trade out of cheapening bond notes and into more reliable currency.

A dwindling supply of bond notes and coins has led to banks limiting daily withdrawals to as little as $30 in bond notes. Companies are struggling to pay for imports and foreign investors cannot repatriate dividends or profits.

“ZOLLARS”

When the bond note was introduced, dollar deposits in the electronic banking system started losing their value.

Government borrowing via Treasury Bills meant authorities were creating money without the backing of sufficient currency reserves or gold.

It is these electronic dollars, theoretically worth $10 billion and nicknamed “zollars” by economists, that are raising fears that Zimbabwe might be heading for its second financial collapse in a decade.

Zimbabweans can do little but watch as the money in their bank accounts loses value compared with cash, prompting demands from businesses and civil servants for hard currency which can be deposited and used to make payments.

Zollars remain officially pegged at 1:1 to the U.S. dollar, but on the black market $1 is now worth $4 zollars. That has led some businesses to offer discounts on dollar payments.

Zimbabwe’s foreign reserves now provide less than two weeks’ cover for imports, central bank data show.

The government has said it would only consider launching a new currency if it had at least six months of reserves. But Finance Minister Mthuli Ncube said Zimbabwe planned to introduce a new currency in the next 12 months.

HOW ARE BUSINESSES AFFECTED?

Companies are struggling to import raw materials and equipment, forcing them to buy dollars on the black market.

Trump backs Maduro rival amid massive protests

Civil servants are paid in zollars like many other workers across the country. Only a small minority of employees working for foreign embassies, charities, or large international corporations are paid in U.S. dollars.

Last October, the central bank ordered banks to create separate U.S. dollar accounts for clients who are paid from overseas, which analysts said was a tacit admission by authorities that the greenback was not equal to the zollar.

The Confederation of Zimbabwe Industries has warned that some of its members could stop operating by the end of the month due to the dollar crunch. The group said its members had a backlog of $480 million in unpaid payments to foreign suppliers.

Cooking oil and soap maker Olivine Industries said on Saturday it had suspended production and put workers on indefinite leave because it owed foreign suppliers $11 million.

Zimbabwe’s largest brewing company Delta Beverages, part-owned by Anheuser-Busch Inbev, said it had abandoned a plan to only accept hard currency payments rather than zollars for its beer and soft drinks after the government intervened.

WHAT’S NEXT?

Mnangagwa, a former spy chief installed after Mugabe’s removal in a coup in November 2017, was elected in July amid hopes that he would help secure an economic turnaround for Zimbabwe, and has said his nation is “open for business”.

But critics say the man nicknamed “The Crocodile” is moving too slowly on economic and political reforms, including repealing Mugabe-era laws that restrict the media.

Mnangagwa has also called for the lifting of U.S. sanctions against officials from the ZANU-PF ruling party, top military figures and some government-owned firms, which were imposed during Mugabe’s rule for what Washington called violations of human rights and democracy.

The IMF has said it would be difficult for the fund to support the country’s reform program unless its $2 billion arrears with the World Bank, African Development Bank and European Investment Bank are paid.

Harare says that should be done in the next 12 months and plans a program allowing the IMF to monitor its economic reforms, although it does not entail funding from the lender.

Analysts said the ongoing security crackdown could quell the protests for now, but more clashes were expected unless Mnangagwa’s administration could find a solution to the cash shortages.

BREAKING: Zimbabwe troops accused of 'systematic torture' of protesters

Burning barricade during a demonstration on January 14, 2019 in Bulawayo — Image captionProtests erupted over a steep increase in fuel prices

by Susan Peterson and Biodun Iginla, BBC News, Harare

A government-appointed human rights group in Zimbabwe has accused soldiers of using "systematic torture" in a crackdown on protests.

The Zimbabwe Human Rights Commission strongly criticised authorities for using troops to quell demonstrations.

Unrest broke out more than a week ago following a sharp rise in fuel prices.

A government spokesman defended the crackdown, telling us at the BBC: "When things get out of hand, a bit of firmness is needed."

Reports have emerged of assaults allegedly carried out by the military in various parts of the capital, Harare.

Soldiers in Harare were seen beating a large group of minibus drivers on Tuesday.

The BBC's Andrew Harding in Harare spoke to a man who said he and about 30 others had been rounded up and beaten by soldiers for "more than two hours".

The continuing violence raises further questions about President Emmerson Mnangagwa's control over the military, which helped bring him to power 14 months ago, our correspondent adds.

President Mnangagwa has promised that abuses against civilians will not be tolerated.

What has been alleged?

In a blunt statement, the commission said at least eight deaths had been reported since last week, "mostly attributed to use of live ammunition".

"Armed and uniformed members of the Zimbabwe National Army and the Zimbabwe Republic Police instigated systematic torture."

It said the torture was "organised" in that security forces targeted men close to where barricades had been erected, and near areas torched by protesters or looted.

Media captionRoads were barricaded by protesters last week

The commission detailed reports of security forces entering houses at night and making men, and even boys as young as 11, lie on the ground where they were then beaten.

"The deployment of the army in quelling civilian disturbances leads to loss of life and serious bodily injuries and other human rights violations, yet the government continues to make such deployments," the statement said.

Other reports say at least 12 people have been killed and scores treated for gunshot injuries.

What is President Mnangagwa doing?

On Monday Mr Mnangagwa, 76, broke off a trip to Europe to deal with the continuing unrest.

He had been due to attend the Davos economic summit where he was expected to seek investment for Zimbabwe.

Back in Harare, he took to Twitter to urge all sides to work together to fix a broken economy.

In a series of tweets, he said violence or misconduct by security forces was "unacceptable and a betrayal of the new Zimbabwe", adding: "If required, heads will roll."

How did the protests start?

Mr Mnangagwa announced a steep increase in the fuel price earlier this month.

Graphic showing how cost of living has increased in Zimbabwe in the last week

The price rises were meant to tackle fuel shortages, but mean that Zimbabwe now has the most expensive fuel in the world, according to GlobalPetrolPrices.com.

Many Zimbabweans, worn down by years of economic hardship, have suddenly found they cannot even afford the bus fare to work.

This led to angry protests in Harare and the south-western city of Bulawayo.

Ellen Ngwenia, a pre-school teacher in Epworth, told us at the BBC: "I'm not afraid to protest, because we are hungry."

Her mother, the school's headteacher, was killed in last week's protests after being hit by an army truck.

Ellen Ngwenia outside the school — Image captionTeacher Ellen Ngwenia insists she will carry on protesting

Ms Ngwenia, who blames the government for her mother's death, said "we will continue protesting until things [are] settled."

Who does the government blame for the violence?

It accuses the opposition MDC party of using the protests for political means.

Presidential spokesman George Charamba said on Sunday: "The MDC leadership has been consistently pushing out the message that they will use violent street action to overturn the results of [last year's] ballot."

The opposition rejected a court ruling in August 2018 that confirmed President Mnangagwa had defeated MDC leader Nelson Chamisa

What has the opposition said?

The MDC said on Tuesday that five of its MPs had been detained and refused bail.

Party official Morgen Komichi dismissed Mr Mnangagwa's announcement of an investigation into security forces, saying: "We don't trust his word. We don't regard him as an honest leader."

The Zimbabwe Congress of Trade Unions, the umbrella group that called the protests, says its leader, Japhet Moyo, has also been arrested.

Mr Chamisa told us at the BBC there was "no justification whatsoever of having soldiers with live ammunition, with guns, machine guns, AK47 on the streets, beating up citizens".

"People are being approached in their homes, they are being taken out of their homes with their families even if they are sleeping... a lot of people have been arrested for no apparent reason," he said.