Institute for War and Peace Reporting | Giving Voice, Driving Change

Mugabe Finds New Enemies in Business Sector

As manufacturers and retailers raise prices to keep pace with inflation, the president accuses them of a concerted plot to unseat him.
By Edison Ngomahuru
President Robert Mugabe’s declaration of war on the business sector for implementing steep price rises smacks of desperation as he casts around for someone to blame for Zimbabwe’s economic decline.

Speaking at the National Heroes’ Acre on June 27, Mugabe accused manufacturers and retailers of acting in the interests of political forces abroad which wanted to destabilise the country. His remarks came after two weeks of price madness which saw the prices of most basic commodities shoot up by more than 400 per cent before tumbling after threats of drastic action by the government.

The National Heroes’ Acre is the place where leading figures from the liberation war of the Seventies are interred. This occasion was the burial of Brigadier-General Armstrong Paul Gunda, who was killed when his car crashed into a train. The death of Gunda, who was reportedly linked to an alleged coup plot against Mugabe, is still shrouded in mystery as he was supposed to be under house arrest at the time of his death.

Mugabe has always used events at Heroes’ Acre to articulate his thoughts on major national issues.

In a voice heavy with emotion, he repeated his threat to nationalise mines and manufacturing companies which he said were trying to achieve “regime change” by hiking the prices of most food products including bread, the staple maize meal, soft drinks and salt.

“This nonsense of price increases must come to an end immediately,” said a livid Mugabe to loud applause from the crowd.

“It’s going to be a rough game and we will not lose it,” he said, warning retailers who increased the prices of basic commodities that “We can play the dirty game”.

Inflation has been running at high for some years, but the pace of price rises has picked up in recent months. At the end of May, prices were 100 per cent higher than they had been at the end of April. The annual inflation figure for May stood at 4,500 per cent compared with the same month in 2006.

The government reacted by setting up a price monitoring task force headed by Industry and International Trade Minister Obert Mpofu.

On June 26, after a week of galloping price rises, the minister ordered retailers to shift prices back to where they were on June 18. On average, this meant cuts of about 50 per cent. Any prices rises must be justified by a clear scientific model, as agreed at the signing of the “social contract” between government, business and labour on June 1, said Mpofu said. Like Mugabe, Mpofu said the government was “aware that these escalating price increases are a political ploy engineered by our detractors to effect an illegal regime change against the ruling party ZANU-PF".

As a result of the instruction, the popular orange drink Mazoe Crush fell in prices from 400,000 to 120,000 Zimbabwe dollars, ZWD, in a matter of hours, while bread prices fell from 45,000 to 22,000 ZWD.

Earlier this year, a number of business executives were arrested and briefly detained for increasing the price of bread. Several shops were fined for overpricing goods.

Zimbabwe is in its eighth year of economic crisis, marked by rampant inflation, high unemployment and a critical shortage of most products.

Mugabe denies that his government is culpable, blaming the widespread poverty instead on the “targeted sanctions” the West imposed on him and other ZANU-PF heavyweights following his disputed re-election in 2002.

A political analyst in Harare said he sensed an air of desperation in the president’s June 27 address. He said Mugabe clearly felt betrayed by the business sector.

“It is evident that Mugabe is very angry with business,” he said. “His government cannot on its own stop the economic slide, and he was hoping that together with business there could be a reprieve regardless of how short.

“Whether the price increases are justified or not is not the issue.”

With business appearing to act in concert to increase prices across the board, it was not hard for a beleaguered government like Mugabe’s to suspect a conspiracy, said the analyst.

A business analyst also in Zimbabwe said the government’s reaction - imposing price restraints from above in an inflationary environment - could be counterproductive, generating further shortages that would hit the very people that it was trying to protect.

“Price controls don’t always work,” he said. “In the past when they were imposed, they led to more shortages. Instead the poor were paying more for the same goods on the black market.”

He said it was almost impossible for business to keep production costs low, given the collapse of the Zimbabwean dollar against foreign currencies, especially the American dollar and the British pound.

This analyst noted at the same time that the business sector could be construed as having acted in bad faith on the June 1 social contract. While the agreements signed as part of the contract required business to maximise productivity and avoid wild price fluctuations, retailers appeared to have acted “unilaterally and with a common intent”, he said.

“Nobody denies that the costs of production are going up every day.But why so suddenly and so soon after the signing of the Incomes and Prices Stabilisation protocols? Obviously there is something wrong. Whether government’s reaction is right or wrong is not the issue. Business says it is increasing prices to be able to restock because of high inflation but it is equally guilty of stoking inflation.”

When Reserve Bank governor Gideon Gono first mooted the social contract and spoke of a temporary price freeze in January this year, business reacted by hiking the prices of most commodities.

The same appears to have happened after the social contract was signed. The analyst said business was behaving irresponsibly as if it were at war with government.

Turning to Zimbabwe’s mining companies and manufacturers, Mugabe warned that the state might seize control of them if they continued to raise prices.

“Take note, we will nationalise them - all companies. We will take them if they continue to externalise our resources,” he said.

Mining companies were “playing dirty games” and siphoning foreign currency out of the country.

Parliament is already working to approve the Indigenisation and Economic Empowerment Bill, tabled last week, which stipulates that no company restructuring, merger or acquisition will be approved unless 51 per cent of the stock goes to indigenous Zimbabweans.

A veteran Harare-based journalist said while nationalising factories and mines would be suicidal, it was not beyond the government to take such a step.

“The same thing happened with the farm seizures which people said could not be done. Mugabe can do anything so long as it gives the illusion that he is in charge. Moreover he is never the direct victim of the consequences of his actions,” he said.

The president did at least have one piece of good news in his speech on June 27 - the same day, the man he sees as his arch-enemy, British prime minister Tony Blair, left office.

“He is gone,” said Mugabe in celebratory tones.

The Zimbabwean president blames Blair’s government for orchestrating the wave of bad publicity and sanctions against his government after he seized white owned commercial farms beginning in 2000 - a policy decision many blame for the parlous state of the economy.

Mugabe said he hoped the new Labour government would take a different view of Zimbabwe and “improve past policy”.

“We have no enemies of our own making,” he said, referring to all the states he views as pitted against Zimbabwe’s national interest. “Who are they to decide our destiny, the route we should take, who our rulers should be?”

Edison Ngomahuru is the pseudonym of a reporter in Zimbabwe.

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