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Monday, March 1, 2010
Great house of sand

It is estimated that approximately three million Zimbabwean refugees live in South Africa and whilst most South Africans have, with interest, observed the degradation of our north eastern neighbour; it is difficult to appreciate the plight of this land or its people, says Adrian Clayton of Alphen Asset Management. What follows is one brief chronology of the unfolding catastrophe which has taken place in this once stunning land.

Zimbabwe's pedigree and heritage is unquestioned. Dating back to the Middle Ages this country was inhabited by the savvy Shona and Ndebele tribes known for their architectural prowess in using dry stone, hence the country's name, 'Dzimba dza Mabwe' (great house of stone). They were active traders in gold, ivory, copper, cloth and glass; predominantly with Arabs and then later with the Portuguese.
The Portuguese tried to colonize Zimbabwe and failed but the British did manage to overpower the resilient indigenous tribes, and a British Colony was formed in 1923. This lasted until 1965 when Ian Smith's government made the Unilateral Declaration of Independence and the Republic of Rhodesia was formed in 1970. South Africa was the only country that recognised Rhodesia as a sovereign state. Smith's UDI triggered a civil war with Robert Mugabe's ZANU and Joshua Nkomo's ZAPU patriotic fronts operating against Smith's Government. Patriotic victory resulted in Zimbabwe achieving its independence from colonial and white domination in 1980.
“Initially, Mugabe seemed a conciliatory figure,” comments Clayton, “but as early as 1982 his lack of tolerance for any form of dissent was horribly etched into the history of the country when his feared North Korean-trained Fifth Brigade allegedly massacred 20,000 Matabele, many of which were allegedly forced to dig their own mass graves.”
In 1990 Mugabe 'won' another election, independent electoral officials claimed it to be not free or fair. What followed was rolling mass action by ZANU opponents and most notably the union movement. Sensing ailing support, Mugabe turned to an old election promise: land redistribution. At the time of independence in 1980, the ZANU-PF Government claimed that 70% of the country's commercially viable arable land was held by whites and whites represented only 1% of the country's 12 million inhabitants. In 2000, land redistribution was actively pursued, 4 000 white farmers were evicted and what followed was economic collapse.
After independence, the Zimbabwean economy had a decade of annual GDP growth that exceeded 5% and in the 1990s good growth of approximately 4.5% per year was sustained. A turning point occurred in 2000 when economic growth turned negative and falling exports depleted foreign reserves. A weakening currency also caused the cost of imported products to skyrocket and hyperinflation followed. Even the staple food, maize, an abundant commodity which was actively exported before 2000, became an import for the previously agriculturally rich nation. Inflation in Zimbabwe is said to be the second worst ever recorded, beaten only by Hungary in 1946. In 2008, prices doubled every 1.3 days and in January 2009 the monetary authorities introduced the Z$100 trillion bank note.
Government policy also included 'Operation Murambatsvina' in 2005 - the physical destruction of informal markets and low cost housing in urban areas, referred to as slums by the Zimbabwean Government. Whilst the official reason for this policy was to rid the cities of crime, it was widely reported as political intimidation designed to undermine support for opposition parties, particularly in urban areas where the ZANU-PF was losing power.
In March 2008 Zimbabwe once again held elections, both Presidential and Parliamentary. These were widely acknowledged as having been won by Morgan Tsvangirai and his MDC party. Mugabe again refused to accept defeat, the ZANU-PF held onto power and it was only in early 2009 that a power sharing transitional government was formed.
The following facts paint a grim picture of a devastated country, one which is unable to sustain its own people:
• Male life expectancy, which was 60 in 1990, is now 37. For women, current life expectancy is 34.
• It is estimated that 1.3 million people have HIV or Aids - the 7th highest in the world. In 2007 approximately 140,000 people died of Aids related illnesses - 5th highest in the world.
• The infant mortality rate is 81 deaths per thousand - this was 53 a decade ago.
• Formal unemployment is approximately 80% - ranked 198th out of 266 countries.
• Tourism, predominantly wildlife orientated, is the second largest generator of foreign exchange. This is under severe threat due to dwindling animal numbers. The Zimbabwean Conservation Task Force report of 2007 estimates that 60% of Zimbabwe's wildlife has died since 2000.
• A negative 14.8% GDP growth rate placed Zimbabwe 217th in the world in 2008.
• GDP per capita at $200 places Zimbabwe 229th in the world.
• Public debt of 260% of GDP makes Zimbabwe the worst in the world on this measure.
• The commercial lending rate in 2008 was 1,175% and ranked as the highest in the world.

“Against these statistics,” notes Clayton, “this is a nation with a literacy rate of 90%, enjoys incredibly fertile land and boasts some of the most diverse wildlife on the planet with stunning natural scenery highly suited to ecotourism.” Zimbabwe has also attracted the sympathy of world leaders; and donor nations seem ready to inject foreign capital for reconstruction once there is a demonstrable degree of stability in the transitional government. It seems that political will is the last obstacle to what must be an inevitable degree of recovery.
“If Zimbabwe were a company, it would be practically insolvent and its shares almost valueless. It is often during the darkest days that best opportunities present themselves. A Zimbabwe with a new management team may well be a deep value buy,” concludes Clayton.

• Central Intelligence Agency - the world fact book.
• Wikipedia
• Discussions with various Zimbabweans
© 2009 Alphen Asset Management (Pty) Ltd in its ‘Alphen Angle’ electronic newsletter. To read more about Alphen please go to AlphenAM.co.za.

Copyright © Insurance Times and Investments® Vol:23.3 1st March, 2010
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