The beginning of the end…

I have had a lucky escape and narrowly avoided looking like a wally.  An online magazine had expressed a tentative interest in me writing something on Zimbabwe for them and I’d pitched the title: ‘Why there won’t be a revolution any time soon’.  You may have noted in my last postcard a certain wonderment at the alarmism churned out about the country given that business was then still booming.  I had been forming a point of view that saw the crisis here rolling along indefinitely.

 

In my defence it might not have been so far off the mark.  The western press have been shrill and this crisis has been going on for an awfully long seven and a half years.  A hyperinflationary economy tends not to be close to meltdown when there’s food on the shelves and power still flows.  Moreover, Zimbabweans usually anticipate a bit of political trouble around now, mid-winter.  The government likes to nip in the bud any grumbling unrest caused by power diverted from homes to wheat production and a spike in the dollar, but things soon return to normality.  And let’s not forget, because my consultancy job here (coming to an end in time for the start of autumn back home) gives me a good view of it, that the Harare Stock Exchange had been on an upward trend pretty consistently since January.  In one day in June it jumped 50%.

 

Naturally then, it was a bit of a shock to get a call from my boss as I was away on a business trip in Mozambique saying, “Maybe you’d better take your time in returning”.  Things had turned nasty.  Power wasn’t flowing – at least there were several blackouts every day.  The shelves were emptying.  “Damn”, I thought, “There goes that article”.

 

The cause of all this was a Eureka moment from the old man Mugabe who’d come up with a sure fire way to halt inflation.  He demanded that retailers charge less.  Forget supply and demand.  Forget the cost of your goods.  Slash your prices.  There’s a great rumour about the Price Commission (as sinister and Orwellian as they sound) turning up at a car dealer’s.  They slashed the price for Isuzu twin cab trucks to 15 million Zim dollars and promptly bought up the lot of them.  15 million Zim dollars works out as about fifty quid a car!

 

Now back in Harare it does look like this time things can’t return to normality.  Some businesses appear to have taken the attitude that if the old man is going to go down this route and force them to sell unprofitably, well, rather than duck and dive through as they have previous troubles, they’ll let their stock be cleaned out and shut up shop.

 

The result will be, and is already in the first industries to go, that supply chains collapse.  As this happens it will become evident that price-cut-by-edict doesn’t work (oh, really?!) and that the only option left will be nationalisation.  That indigenisation bill I dismissed in my last postcard?  Maybe I am looking like a bit of a wally after all.

 

All this is not a revolution.  But what it is is the crisis reaching a new stage.  It is likely now, although I’m steering clear of predictions, that this is the beginning of the end.  A period in which confidence won’t bounce back a little in the course of a general decline, but in which things will only get worse.  It might be for six months or a year, but by the end of it Mugabe will have gone.  The best case and probably likeliest scenario being a quiet shove from inside Zanu-PF (accompanied by assurances from the West via South Africa that he won’t end up in the International Criminal Court?).

 

When he does go the international community has an excuse to start lending the country money again and the inflow of dollars will stall hyperinflation.  Whether the new leader, groomed and enriched in corruption, will have the courage to effect the kind of long term change required is quite another question, but, going by the form of the higher echelons of the party so far, sadly unlikely.

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Nasty Nick and the Zimbabwe economy

Still new in my job I was a mute number two beside my boss in the second row of the Rainbow Tourist Group’s annual general meeting.  In row one sat Nasty Nick van Hoogstraten.  Nasty Nick is notorious back home in Britain for conducting his business violently (with a grenade through a window) or allegedly violently (with hired hit men committing murder).  He’d managed to get himself into a position, by stumping up a large amount of cash to underwrite a rights issue, in which he believed he was owed a portion of Rainbow Group shares that had found their way into the hands of a shady Jewish consortium who’d made their money in Romania.

 

With the votes attached to his remaining shares Nasty Nick attempted to block all but one of the motions proposed.  He called the Jewish non-executive director an illegally elected carpet bagger.  The representative holding the shares for the National Indigenisation Trust told Nasty Nick that a white man like him should jolly well pipe down and remember who’s in charge now (not, I think, implying the Jews).  Nasty Nick’s chummy relationship with the old man Mugabe didn’t appear to carry any weight this time, because in an easily won proxy vote the government’s block of shares went with the Jewish director and the rest of the board and against van Hoogstraten.  Nasty Nick vowed to see them all in court.

 

It begs the question quite what is going on in Zimbabwe when such corporate shenanigans generate such heat.  I mean, I thought this was a country with no economy left.

 

It clearly isn’t.  At a lunch a week before with some financial friends the announcement in the Herald, the propagandist government paper, that an ‘indigenisation’ bill was on its way caused a ripple of concern.  But a ripple only, because talk of such a bill has come to nothing before.  This time, though, word was that it had gone through parliament and was just awaiting the old man’s sign-off, or had got his sign-off and was just waiting to go through parliament…With no idea whether the Herald was on this occasion the voice of Zanu-PF, or exercising its well honed ability for utter fabrication, this bit of news was after all still a rumour.  What ‘facts’ there were amounted to the probable requirement that all companies would have to be 51% indigenously owned.  There was confusion over definitions.  Whilst, as far as it could be fathomed at all, the bill was explicit in its use of the term ‘indigenous’, the word ‘local’ had also been bandied about.  For the white Zimbabweans I was having lunch with, although not for Nasty Nick, this, of course, would make the world of difference.  The point was made, not for the first time, that when in such cases the word indigenous is employed, what it really means is black.  Historically shifting populations anywhere render the word indigenous pretty defunct.

 

A certain amount of satisfaction was evidently taken in accusing Mugabe’s men of racism, but the conversation quickly moved on to practicalities.  Would ‘51% of companies’ end up being expanded to include trusts, what about property?  One of my lunch companions, to avoid some previous piece of legislation or the threat of it, had established a company, as a ‘front’, which owned all his property.  Would he need to make plans to install a dummy team to take over 51%?

 

What struck me over lunch then, and observing the Rainbow Group hoo-ha, was that among an awful lot of Zimbabweans the economic and political situation as written about in the west is regarded completely without dramatic sensation.  Of course, I’m in the capital, and in the case of that lunchtime and that AGM my companions were Hararean money men – stock brokers and deal makers for whom the current bull market is reaping rewards.  (The stock market is for many the preferred form of investment since saving cash is clearly crazy and for other assets, like property, you need US dollars and anyway will probably be outbid by an aid worker or expat.)  But they were not all party men, nor callous profiteers (except maybe Nasty Nick), nor the kind of people who if the country was about to enter its self destructive apogee you’d expect to remain ignorant.  Despite the economic situation and the indigenisation rumblings, business in Harare is not in a state of panic.

 

It remains to be seen if Nasty Nick will have his way with those Rainbow Tourist Group shares.  But interesting, nonetheless, that in a country whose economy is reportedly on its knees there should be such an impassioned fuss over who owns a small portion of shares in one of its hotel chains.

Just the latest postcard from Africa

It’s fairly typical of the last month that this postcard comes from two sofa cushions propped up outside the volunteer house.  The sun’s set.  At least it’s dropped below the hedge around the garden.  Birds darting between the bushes in the flower patch skirting the veranda.  When I’m lying here listening to the ipod with eyes half open, five or six birds dive in, perch, skip around no more than a metre from me.  A score more are settling into the hedge.  A metallic sheen on the wing, or sometimes a startling red, reminds you you’re in Africa.  Just above the spiky fronds of a palm next door that’s still catching the evening light, single, white, oddly rectangular birds, fly past.  Then larger formations of black-topped, light-bellied ones.  And swallows high up, gliding and swooping between each burst of rapid thrashing of the wings.  Even some kind of hawk is hovering with its two curled coiled-spring claws tucked up and its head down.  During the day, oversized, immobile stalks add an extra gargoyle-like few feet to telegraph poles and street lights around the city.

Because of the red roofs, visible on a patch of hill from the house, the mosques, and then at night the pavement bars which we race between until the early hours on the back of mopeds, and I suppose the freshness that the arrival of the rainy season has brought, the city has an air of the Mediterranean.  Which is appropriate; it’s been a Mediterranean kind of existence.  I’ve been doing a lot of reading, learning French (perhaps in anticipation of West Africa) and writing my report with cups of coffee on our sun-drenched front step.  Last Friday I was eating steak and chips and a vinaigrette dressed side salad on a red checked tablecloth looking out from the side of the road.  On one side minibuses and lorries were chugging up the hill, on the other mopeds free-wheeling down to save petrol.  Like the coffee table photo books on Africa, or Edwardian England, a child actually ran past downhill with a hoop and stick.  Two boys cross the road in long white Islamic shirts.  There’s a man with a crackling radio.  (Which technology has really had a mass impact on Africa?  The radio, the bicycle, the mobile phone, the matatu minibus, the bodaboda moped, soon the hundred dollar laptop?)  A man in khaki trousers and a Ferrari polo shirt sidled up to me, glancing over my shoulder wary of the management, and asked me for a job.  The colour of my skin, the shape of my nose, marks me out as a piece of the culture and affluence of the West.  I am invested with that aspirational possibility that MTV and the beer and mobile phone billboards here give a glimpse of.    On my way to raft the Nile, a man shouted at me, ‘Hey muzungu, how is America?’

I dislocated my shoulder on the Nile.  Clutching at our turned-over raft just as a wave snatched it away.  The guide and a doctor in our party snapped it back in and in the bus on the way to get an antique X-ray, sipping a Nile Beer, I felt as contented as I have on this continent.  It must have been washing day because faded charity distributed clothes lay drying all along our route, often sagging between kasava mounds.  Huge-horned cattle, dangling a rope from a hind leg, wandered amongst them.  Romantically, anthropologically probably, with western sentimental speculation certainly, these cattle mark out the modern day Ugandans on the shores of Lake Victoria and the Nile as the ancestors of the people Henry Stanley encountered and described in ‘Through the Dark Continent’, after he’d found Livingstone and returned to Africa.  (He was to go on to do King Leopold’s dirty work in the Congo, prompting Conrad to write ‘Heart of Darkness’.)  If I’d hurt my shoulder a week earlier I could have got cured by Pastor Benny Hinn.  The New Vision proclaimed miracles.   ‘The lame walked, the blind had their eyes opened, the deaf heard and the sick recovered at the first ever Pastor Benny Hinn crusade in Uganda’.  It was held at the Mandela National Stadium and the place was packed; roads were closed all weekend.

I won’t be watching the birds here much longer.  I’m on my way to Zimbabwe via Kenya, and anyway this evening Moses our guard is out with a car inner tube catapult shooting them.  He got a couple of big ones yesterday which he ate, but so far today they’re all too small so he’ll sell them to the boys next door.

Latest postcard: People-sized solutions

In previous postcards I’ve talked about how with capital and an entrepreneurial outlook the inherent inequalities in
Malawi might begin to be tackled.  And, although it sometimes seems like a drop in the ocean, the formula works.  Lend small amounts of capital to individual women (whose life on the poverty line consists already of a fair bit of careful budgeting and making ends meet) and support them with business training and ongoing mentorship.  Lend only to individuals who form a group with around 18 other borrowers and who agree to guarantee each other’s loans.  Ensure the group has the full support of the traditional authority structures within their village.  If the organisation supplying the loans has effective backroom procedures and doesn’t splash out on shiny white Land Rovers, within a short amount of time the interest rates it charges will allow it to be self sustainable, not dependent on constant western fundraising.  Its repaid loans (the MicroLoan Foundation has a typical repayment rate of 95% – compare that to any
UK lender, or even better to the repayment rate for credit cards) can be ‘turned over’ and lent out again and again.

It seems to me that the reason for the success of microfinance, or at least of the MicroLoan Foundation here in Malawi, is that it follows the principal tenet of any social entrepreneur – to observe the situation before transferring resources to meet a need.  It offers a solution on a scale designed to bring the best out of the people involved.

E F Schumacher is probably the grandfather of such people sized solutions.   In his most famous book, ‘Small is Beautiful’ (misleadingly titled because he’s not advocating a return to cottage industries, just that the size of a production unit should match its purpose), Schumacher says, ‘…people can be themselves only in small comprehensible groups.  Therefore we must learn to think in terms of an articulated structure that can cope with a multiplicity of small scale units’.

Anybody who has heard me discussing the state of the
UK education system may chuckle now as they observe me trying to crowbar into this postcard a cause I’ve been ranting about for a little while now.  The average
UK comprehensive school strikes me as manifestly the most absurd and serious example of a unit size being utterly unfit for its purpose.

In education, if nowhere else, effective, subtle and complex human interactions constitute the most important process.  Yet we cram the kind of numbers together which can only result in unsubtle, often brutal, certainly unproductive interactions occurring.  As a deputy head of year and history teacher I had indirect responsibility for around 400 pupils.  I didn’t know all of their names.  Give me a couple of classes of 25 and I will call every child’s parents every week, actually implement differentiated lesson plans, and take them all out bowling every other weekend. (The reality in a good number of the charter schools I visited in New York and
Washington DC last summer.)  A federalised small school structure is probably best.  One school of 1000 pupils is divided into five units of 200 each with their own structure and leadership, but retaining the head teacher’s team to oversee whole school issues.  The charity ARK is, I believe, currently working on such a model in
London.  I’ve got more discussion on the benefits of small schools on my blog, and an article on innovation in the education system.
https://jacobkestner.files.wordpress.com/2006/10/innovation-article-the-wright-bros.doc

Such small schools, I suggest, would be easily affordable within the existing education budget.  But if the treasury was looking for extra cash I can think of no better way than (to crowbar in another favourite cause) to fund these schools from an annual land value tax. 

When government spends taxpayer money on infrastructure, land values often rocket.  Instead of putting this taxpayer cash into property owners’ pockets, capturing a percentage of the increase would finance the treasury without harming the economy. (It is not a tax, after all, on things we want to encourage, like employing people or buying things.)  An annual land value tax would be paid by the landowner and exclude any capital investments he’s made (so, the value of the building on the land isn’t taxed).  The use of an annual land value tax to fund school building seems particularly suitable.

The lesson of microfinance in
Malawi is that even in the coldest of transactions (it’s not often you think of money lending as affirming your faith in the human race) it pays to recognise the conditions under which individuals excel.  I wonder if small, federalised schools funded by an annual land value tax could put a little more   people-sized humanity into the
UK – no crowbars needed.

Latest Malawi postcard – entrepreneurialism in response to volatility

I was reminded me of an Economist article I’d read discussing Jacob Hacker’s The Great Risk Shift.  Hacker argues that in the US (although not confined there) over the last thirty years income instability has been rising whilst the ‘social safety net’ has been wearing thin.   Hacker explains this situation as caused by a shift in economic risk from government and companies to families.  Whilst Hacker is pretty downbeat about this increasing volatility for ordinary people, the Economist reminded readers that one person’s volatility is another’s dynamic, mobile society.  It is probably good for most of us that there are more jobs in Tesco than on ships.

The effects of volatility in Malawi are, of course, far greater than in the US, although the causes are different.  For the last two years lack of rain led to famine.  This year we’re lucky that the rains have fallen heavily, but at the moment people are still poor until the tobacco and maize harvest can be sold in the spring.  I was interested in how people respond.  There’s a ‘booze pub’ in Kasungu that encapsulates a couple of responses.  One is that of the customers drowning their sorrows.  Another is the owner’s.  He serves cheap ‘shake-shake’ beer and vicious spirits – not much profit on each sale, but the bar is packed seven days a week, all day.  And he’s diversified.  There’s a brothel out the back which makes a tidy profit minus a bribe for the police, but that’s recouped in the bribes he receives as one of the only people in Kasungu licensed to issue MOT certificates.  The owner’s response to volatility has been to recognise opportunities and to diversify and insure against the future. 

It is a little facetious to use the criminal bar owner as a positive example of how to cope with an uncertain world.  But he highlights the way that many Malawians I’ve come across use entrepreneurialism to manage economic risk.

However, the poorest Malawians, who could most benefit from such a response, are often the least able to engage in anything other than subsistence (or near-subsistence) agriculture.  For them, accumulating any assets is practically impossible.  One reason for this is that the majority of crimes in Malawi are crimes of need – poor people robbing poor people, causing a cycle of crime and poverty.  Added to this is the fact that, as the 2004 ‘Malawi National Crime Victimisation Survey’ says, ‘poverty is characterised…also by an inability to devise an appropriate coping or management strategy in the face of shocks and crises’.

The ideal way to manage economic risk is through a dynamic and mixed economy of the kind I witnessed in Cape Town.  We’re a little way off that in Malawi, but the MicroLoan Foundation, where I’m working, is perhaps helping the country take a tiny step in that direction.  Through the provison of capital and business education the charity helps the poorest to set up the kind of enterprises that give them at least a chance to take the initiative and prepare for what is, at the moment at least (and probably always will be as the modern world increasingly extends its reach), inevitable economic volatility.