Fuel Crisis Deepens Zimbabwe's Troubles

By Joseph Chigugu

HARARE, Zimbabwe, March 14, 2006 (ENS) - The never-ending fuel crisis has become the single biggest threat to efforts by the Zimbabwean government to save the economy from its perilous state.

Zimbabwe has been experiencing fuel shortages since 2000, due to a combination of foreign currency shortages, corruption at the state-owned National Oil Company of Zimbabwe, NOCZIM, ruinous economic policies and deteriorating diplomatic relations with key countries and international institutions.

In addition, the specter of increased company closures, unemployment, soaring inflation and low production in remaining manufacturing sectors, where many companies are operating at less than 20 percent capacity, has put great pressure on the ZANU PF government as it promises to implement a turnaround program.

According to the Confederation of Zimbabwe Industry, some 620 companies have closed shop since July 2000. The unemployment rate is at 80 percent and the official inflation rate has officially topped 782 percent, by far the highest in the world, while the International Monetary Fund puts the real rate at more than 900 percent.

Industrialists say the fuel crisis is having a devastating impact on productivity. Key workers are forced to spend hours on end in fuel queues for up to 48 hours at a time to fill the petrol tanks of private and business vehicles - leading to lost man hours that cannot be recovered and which hammer profit and turnover targets.

This fuel queue stretches for blocks in in Harare, Zimbabwe's capital city. (Photo courtesy GPSA)

The tourist industry, touted by the government as a key element in its putative turnaround strategy, cannot meet targets because domestic tourism has ground to a halt. People cannot travel to resort areas because of the shortages, brought on by the fact that NOCZIM owes vast sums to overseas oil companies and the government has run out of foreign exchange to service the debt.

Western countries cut ties with Zimbabwe when the government abandoned the rule of law after launching its chaotic and violent land redistribution program in February 2000. This resulted in Zimbabwe’s foreign currency reserves drying up.

The fuel crisis was made worse by a scam involving the diversion of subsidized fuel from NOCZIM for resale by privately owned underground companies linked to senior government officials at 10 times the officially regulated price.

Staff at NOCZIM generated fake invoices which enabled fuel that should have been routed to the public, essential services and government departments, to be diverted to the flourishing black market, where consumers have to buy at prices 1000 percent in excess of the official pump price.

Top oil industry officials estimate that more than 250 million liters of fuel, mostly diesel, have been diverted by the racketeers to illegal selling points in the past five years. The fuel sold at inflated prices goes mostly to transport operators, including owners of commuter buses, in 200 liter drums.

President Robert Mugabe's response to the deepening crisis has been to print more money, in defiance of all conventional economic thinking, and thus boost inflation. A frankfurter in Harare now costs more than a three-bedroom house cost 25 years ago. Fuel has increased in price at the petrol pump by more than 60,000 percent in the past 24 months.

Zimbabwe President Robert Mugabe has been the head of government in Zimbabwe, first as Prime Minister and later as first executive President, since 1980. (Photo courtesy Sokwanele)

The IMF recently urged the Zimbabwe government to implement its turnaround policy instead of just talking and issuing policy statements about it. The fund said the policy should include strong fiscal adjustment; cutting state expenditure; full liberalization of the exchange rate regime; adoption of a strong monetary anchor by reducing money supply; fundamental structural reform, including price deregulation and public enterprise reform; strengthening of property rights and halting invasions of commercial farmland; and improvements in governance.

Noting that the signs of economic collapse were unmistakable, the IMF said, "In the absence of such a comprehensive and immediate policy package, Zimbabwe's economic prospects would be bleak."

In a lengthy interview on state television, President Mugabe dismissed the IMF's orthodoxy as "bookish economics", a "monster" designed to achieve regime change in Zimbabwe. Dumisani Muleya, news editor of the weekly "Zimbabwean Independent," commented in his regular trenchant column that Mugabe instead "vowed to pursue doggedly his own voodoo prescriptions. He said he would continue to print money on a massive scale to alleviate socioeconomic hardships.

“It provided the clearest sign yet that he is rapidly losing his grip on reality. The interview exposed Mugabe's threadbare grasp of modern economics and his struggle to get to grips with global dynamics. It helped to confirm his wholesale abdication of reason and a complete breakdown of common sense in government.”

Vincent Kahiya, editor of "The Independent," has christened Mugabe's love of printing money "Mugabeconomics." Kahiya warned that soon manufacturers would need to design wheelbarrows and special vehicle trailers to carry Zimbabwe dollars.

Zimbabwe narrowly averted expulsion from the IMF in February by printing 21 trillion Zimbabwe dollars to buy US$9 million for a minimum interest instalment repayment to avoid expulsion from the world's most important lending institution.

U.S. Ambassador to Zimbabwe Christopher Dell (Photo courtesy U.S. State Department)

"The human cost of Zimbabwe's economic crisis has been extraordinarily high. The estimated proportion of the population living below the official poverty line has more than doubled since the mid-1990s. It is now about half the population. At least half the country faces food shortages. Well over a quarter of the population has fled the country," said Dell.

"It is estimated that the economic crisis has set the country back by more than half a century. The purchasing power of the average Zimbabwean has fallen back to the same level as in 1953," the ambassador said.

"What has been the cause of Zimbabwe's unprecedented economic descent? The answer is really quite simple, as well as quite shocking. Neither drought nor sanctions [as argued by Mugabe] are at the root of Zimbabwe's decline," said Dell. "The Zimbabwe government's own gross mismanagement of the economy and its corrupt rule has brought on the crisis."

{Published in cooperation with the Institute for War and Peace Reporting (IWPR). Joseph Chigugu is the pseudonym of an IWPR contributor in Zimbabwe.}