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Sunday, 1 July 2007

Mugabe plays risky game with Zimbabwe economy!!


Mugabe plays risky game with Zimbabwe economy
Published Date: June 30, 2007
By MacDonald Dzirutwe

President Robert Mugabe's new push to get tough on the economy may bring short-term political benefits but is likely to leave Zimbabwe in even worse straits as its economic infrastructure collapses. Mugabe - facing the highest inflation rate in the world and simmering political troubles - this week warned that he was ready to nationalize firms accused of "dirty tricks" against his rule, sending fresh jitters through the country's beleaguered business community.

Any move to follow through on the threat could push out Zimbabwe's few remaining foreign investors, deepening its pariah status, and could see more Zimbabwean products shut out of international markets as buyers look for suppliers unhampered by political problems, analysts say. Mugabe made his comments the day after his government tabled a bill which seeks to hand majority holding of all businesses - including banks and mines - to local Zimbabweans, and ordered a price freeze in an effort to fight inflation, now nearing 4,000 percent.

Political analysts said Mugabe's moves appeared aimed at mollifying an increasingly restive population, but warned that his actions could have disastrous results. Mugabe, Zimbabwe's sole ruler since independence in 1980 who is seeking re-election in 2008, could also use the planned empowerment law to enrich supporters and consolidate ranks before next year's general elections, analysts said.

Leading political commentator Eldred Masunungure said the announcements were designed to assure voters that Mugabe's government was in full control of the economy and had their interests at heart. "The government has exhausted all other alternatives (to manage the economy) and all this is an expression of failure and inability to control or manipulate the economy," he said. "But they cannot just remain aloof. They have to be seen to be doing something, even though it is not addressing the fundamental problems afflicting the economy," Masunungure said.

Some economists say the threats should be taken seriously, noting that Mugabe has done this before. They point to his pre-election seizure of white-owned farms in 2000 that critics say has worsened the economic crisis and food shortages. While Mugabe won the 2000 election, the country he rules is in far worse shape than before.

Once the bread basket of the region, Zimbabwe has endured a punishing recession that has squeezed consumers with skyrocketing inflation, left four out of five people without jobs and resulted in shortages of foreign currency, food and fuel. Mugabe says the economy has been sabotaged by his Western foes and branded company executives "serpents" drafted by former colonial power Britain to help topple him by raising prices, cutting production and stashing foreign earnings abroad.

In the past week alone, prices have gone up threefold, further squeezing consumers, especially urban workers who have to live with severe water and power cuts, burst sewer pipes and a suffocating political environment. Authorities have set up a police crack unit to arrest business people who defy an order to roll back all prices to June 18 levels. Some goods have already disappeared from shops after the directive. Analysts said price controls would drive the economy even further underground - making it all but impossible for the authorities to regain control despite Mugabe's vows that both his government and the economy will ride out the storm, thanks to widespread popular support.

"Things will get a great deal worse," said Anthony Hawkins, professor of business studies at the University of Zimbabwe. "It's a sign of desperation, casting around for extreme solutions." Masunungure agreed, saying Mugabe's proposals were likely to hasten the economic meltdown. "This is a symbolic reaction to something beyond government's control but more importantly, it is a boost to the black market and we will see even more vicious price increases." - Reuters

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