Tongaat Hulett, Zimbabwe and Alice in Wonderland

All this was reminded to me recently by the drama Tongaat Hulett. My guess is that South Africans don’t want to think about Zimbabwe because its history is SA’s possible trajectory.

The peculiarity of Zimbabwe is that if you read the Zimbabwean press, you would think that people live in paradise. The January 20 Zimbabwe Mail lead article spoke of Zanu-PF “retaliating at the US Embassy” to “poke its nose into the country’s democratic and electoral processes”. That’s Zanu-PF for you: belligerent, arrogant; a confusing set of double standards and self-justifications, all wrapped up in an Alice in Wonderland version of complacency. Hello Lindiwe Sisulu.

Another story claims that Zimbabwe’s economic reforms are gaining “global recognition”, but a short statistical economic comparison puts an end to that pretty quickly.

Zimbabwe’s GDP is currently, according to IMF figures, about $28 billion.

GDP per capita is now $1,760, meaning the average annual income of the average Zimbabwean is about the same as two iPhones.

Just compare it with Botswana. Botswana is now just a little smaller economically than Zimbabwe with a GDP of $19 billion, despite having a quarter of the population. But its GDP per capita averages $7,700, about 600% higher than it was in 1980 and four times higher than the average Zimbabwean.

You can also add Namibia into the mix, and the numbers are roughly comparable. But the fact is that these are all countries with exactly the same historical and economic heritage as Zimbabwe; they are also small countries far from major markets; but their performance was stellar, easily surpassing some “Asian Tigers”.

The reason for Zimbabwe’s failure is obvious: economic mismanagement on a gargantuan scale. The blame lies squarely with Zanu-PF, who used the oldest trick in the book – blaming all his self-inflicted wounds on a racial minority. Sure, there was a colonial legacy that was hard to deal with, but destroying the only part of the internationally competitive economy is such obvious stupidity that one has to question their common sense.

Let’s say, for argument’s sake, that you agreed with the seizure of land from white farmers in Zimbabwe as necessary to right historical injustice. You would still have to explain why the Zimbabwean economy continues to be a stutter long after this problem has been ‘solved’. What happened between the settlement of the land question and now?

What happened was that the Zanu-PF had to adjust her sails a bit to the wind. There were vague promises to return some land to white farmers or at least compensate them for their construction. But there remains a backsliding, commandist administration whose arrogance in the face of its cataclysmic failure as government is disconcerting.

The key to all of this is the Zimbabwe dollar. Why was it reintroduced when dollarization worked seamlessly to contain inflation? The answer is control. By controlling access to foreign currency, the government retains some of its grip on businessmen of all persuasions, handing out foreign currency conditionally to party favourites. The result was the creation of an oligarchic state with a set of government-favored businessmen modeled on Russia.

Or, there is another option: set up a money laundering operation, smuggling Zimbabwean gold into the UAE, buying, say, cigarettes and selling the cigarettes in South Africa.

Which brings us to Tongaat Hulett. Under enormous pressure from Standard Bank, which did not want to declare huge write-offs to its shareholders, Tongaat was forced to rush and find a big investor. Step into the Rudland family, they of Gold Leaf Tobacco fame, who pulled off a bold takeover of a century-old South African company that employs around 30,000 people at a fabulous price last week with the help of Standard Bank, PSG Asset Management, Rothschild, PwC auditors and, unsurprisingly, that stalwart guardian of the public trust, the Public Investment Corporation.

Sometimes you think you’ve seen everything in SA, but in reality you haven’t. DM168

This story first appeared in our weekly newspaper Daily Maverick 168 which is available for R25 from Pick n Pay, Exclusive Books and airport bookstores. To find your nearest retailer, please click on here.

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