The Government is Forced to Step In

This, then, is the reality of the capitalist market in Zimbabwe — domination by a handful of multinational bosses.

The government has followed the prescription of those who say that capitalism is the way to economic growth. It has imposed heavy sacrifices on workers, peasants and youth in the effort to make Zimbabwe “attractive” to foreign investors. It curbs wages while prices are allowed to rise. It breaks strikes when workers take action to defend their living standards. It has brought in the Labour Relations Act to place trade unions and workers’ committees under state control.

(The government’s policy towards the working class is dealt with in Zimbabwe’s Labour Relations Act: A danger to the trade union movement, published by the Southern African Labour Education Project (SALEP) in 1983.)

And yet the results have been meagre. Total investment has dropped from a post-Independence high of 22 per cent of gross domestic product (GDP) in 1982 to 13 per cent of GDP in the years since 1985. This is not enough to maintain the existing machinery and plant, let alone expand it.

It has also made very little difference to Zimbabwe’s huge unemployment problem. In 1988-89 $278 million was invested, creating just 5,500 new jobs. This meant a new job for just one in every 15 school-leavers, with each job costing $86,000 of investment.

Chidzero, speaking at the investment conference in London in May 1989, said he hoped for $500 million of new investment over the next few years. Yet something in the region of $10,000 million per year would be needed just to create a job for each school-leaver!

And what about the existing army of the unemployed?

When we look at foreign investment the picture is even worse. US$50 million (Z$109 million) entered the country as new investment between 1980 and 1986 — on average Z$15 million per year.

And even these limited inflows of capital have been overshadowed by far greater outflows of capital. An estimated $200 million of capital was pulled out of Zimbabwe between the middle of 1987 and the end of 1988 alone.

Numerous foreign companies have sold their interests to local capitalists or to the government. For example:

* Kenning the British motor group, sold its Zimbabwe subsidiary to “local interests” in 1987;

* Legal and General Insurance sold out to TA Holdings in 1987;

* the British-owned Stewarts & Lloyds was put on the market for $5.5 million in July 1988.

Not only Zimbabwe has been affected — there has also been a wave of disinvestment by the multinationals from South Africa and Southern Africa in general. This is the problem which the government is trying to solve with its new investment policy.

Can it succeed?

It is true that the measures the government has taken to streamline its cumbersome bureaucratic procedures have speeded up the rate of investment. In its first four months the new Zimbabwe Investment Centre approved 14 projects worth $100 million.

Of this, $40 million came from outside Zimbabwe in the form of foreign exchange, machinery or loans. This is only a very small fraction of the investment that is needed to develop the economy. According to Vice-President Simon Muzenda, Zimbabwe needs at least $5 billion dollars just to import replacement machinery. (Chronicle, 15 April 1989)

With the existing projects only 1,000 new jobs would be created — in other words, $100,000 of investment per job.

However, most of these projects were part of the backlog of applications which had been bogged down on the desks of state officials before the Investment Centre was set up. It is not yet clear how much new investment is being attracted to Zimbabwe.

It is also not clear how much investment is going into the development of industry — which is the key to economic growth.

The Herald (23 November 1989) reports that “the projects approved so far include two new gold mine expansion projects as well as small to large projects such as poultry production, seed production, food processing, textiles, handtools and chemicals.”

Examples of foreign investment flowing into new industrial development, that can expand Zimbabwe’s manufacturing base, are few and far between. Often such development has to be financed by means of loans.

Art Corporation, for example, secured a European Investment Bank loan of $26 million for machinery to make paper from cotton fibre — thus adding to Zimbabwe’s foreign debt.

And of the foreign investment that does go to industry, not all is used for new plant and capacity. When Japan’s Mazda corporation invested US$2.5 million (Z$5.4 million) in Zimbabwe’s car industry, it was to buy a 25 per cent share in the state-owned Willowvale motor assembly plant — providing the state with some foreign exchange, but not providing new machinery or jobs.

Most investment, however, continues to flow into the mining and agricultural sectors which produce raw materials for export to the imperialist countries.

A good example is the British capitalist “Algy” Cluff, who has made himself a multi-millionaire from expanding gold production in Zimbabwe. He has opened two gold mines near Bulawayo since independence. Production for 1989 was estimated at 77,000 ounces, worth approximately US$30 million. Cluff has made himself a fortune — but the government could have carried out this investment and benefited working people.

Investment of this nature does not reduce Zimbabwe’s dependence on the imperialist states; it reinforces the colonial character of the economy: a supplier of raw materials to the big capitalist powers. No amount of “tinkering” by the government can change these fundamental relationships as long as they remain married to capitalism.

“We have come to the conclusion that international commodity prices will probably remain favourable for some time and we hope this will provide the opportunity for considerable Tilling expansion,” said Gavin Relly, chairman of Anglo-American, after a meeting with President Mugabe last year. (Chronicle, 15 June 1989)

Please note: Rely “hopes” that mining can be expanded while mineral prices are favourable — it is not certain. And what happens when prices become “unfavourable” again?

No doubt, by offering the capitalists more opportunities for making bigger profits the government can attract more investment than they might otherwise have done. But it will be at the expense of the masses, and it will not be enough to solve the problems of jobs, poverty and under-development. The multinationals are not interested in transforming Zimbabwe into an industrialised society — and the basic reasons for this are completely beyond the government’s control.

Why the multinationals won’t develop Zimbabwe

On a world scale the multinationals have a problem of over-capacity — i.e., they are able to produce much more than they can sell at a profit. Why invest in new production? Why build factories in Zimbabwe when the local market — and even the whole SADCC market — is only a fraction of the South African market?

Capitalists who invest in Zimbabwe were getting an average return of 14 per cent in 1989, compared with 12-13 per cent in Britain. Is this difference enough for capitalists to want to expand operations in Zimbabwe, with all the long-term uncertainties in a sub-continent faced with revolutionary upheaval, and the problems of shortages and foreign exchange restrictions?

If sanctions against South Africa were to be lifted, and the South African capitalists could once again compete freely on African markets, there would be even less reason for the multinationals to build factories in Zimbabwe. They would be attracted by the far more powerful and competitive industries in South Africa, which could capture many of Zimbabwe’s existing markets.

For historical reasons it is mainly the South African capitalist class who have had a long-term interest in Zimbabwe. In the past they treated the Rhodesian economy as a spare wheel, looked after by “reliable” settler regimes. But independence confronted them with a new situation — a black government brought to power in the course of a revolutionary war under mass pressure to carry through radical reforms.

Most SA capitalists have been filled with deep hostility towards independent Zimbabwe. The managing director of a South African-owned company in Zimbabwe summed up their feelings:

“Even if they criticise racial policies inside South Africa, businessmen there are convinced that blacks can’t make a go of it — so in their mind it’s foolish to invest or expand.”

In recent years, with the price of gold stagnating, SA capitalists have faced a shortage of foreign exchange for the first time in many years. This has added to the pressures for disinvestment from Zimbabwe. If they sell their companies in Zimbabwe, these capitalists can “remit” (send out of Zimbabwe) the foreign exchange they are paid and concentrate on their SA operations.

A few big corporations — such as Anglo-American, experienced in dealing with African states have been prepared to stay in Zimbabwe. Anglo chief Harry Oppenheimer paid a personal call on Prime Minister Mugabe in 1980, described in the press as “friendly”. There have been many “friendly” contacts since then (see Chapter 4).

But Anglo, too, was taking no chances with black rule. Its policy was to persuade the government to become its “junior partner”. On that basis the government would have a vested interest in defending Anglo’s exploitation of Zimbabwean workers.

In 1982, for example, Anglo offered the government 40 per cent of shares in Hwange Colliery. In 1987 the government agreed to buy 31.5 per cent of shares in Delta Corporation. Its share would eventually be increased to between 51 and 60 per cent.

Technically, these moves by Anglo amounted to partial disinvestment — selling a share of their companies to the state. (In the next two chapters we will look more closely at the question of state ownership of production, and the conditions under which it can serve as a basis for socialist transformation.) Yet, as we shall see, state participation has made little difference to Anglo’s activities in Zimbabwe. The net result has been a transfer of foreign exchange by the government to Anglo, adding to the outflow of capital.

Swindles

For the South African capitalists in particular, disinvestment opened up a whole world of new swindles.

In some cases they have sold companies to their local white managers — who then “take the gap” down south to become “external owners” themselves! As a result, remittances in precious foreign exchange are paid to both the “owners” and “ex-owners” of the same company!

In 1988 dividends of over $100 million were paid by Zimbabwean companies to capitalists in South Africa (plus another $40 million to white pensioners who prefer life under apartheid). With the economy crippled by shortages of foreign exchange, the government has been forced to tighten control on the stream of remittances to South Africa and Europe. But it is still possible to remit up to Z$5 million in 18 months, and larger amounts over longer periods. The government is under constant pressure from the capitalists to relax the limits further.

And so the government’s policy hasn’t turned out quite the way it was intended.

Instead of receiving foreign exchange in the form of new investment, it has been forced to pay out foreign exchange — buying up companies threatened with closure because the multinationals were pulling out. Aiming at the growth of the private sector through an inflow of foreign investment, it is faced instead with … an ongoing outflow of foreign investment, and a growing public sector!

The following are just a few examples:

* In 1984 the government took over Lomagundi Smelting and Mining Co, which operates the Alaska Mine near Chinhoyi. The reason: the South African owners were intending to close it, making 1,300 workers unemployed.

* In 1987 Astra Corporation, owned by South Africa’s giant Barlow Rand corporation, was sold to the government for $25.5 million.

* In 1988 the government bought up Bestobell engineering. This British multinational was in the process of withdrawing from Southern Africa and also sold its interests in South Africa, Malawi, Zambia and Botswana.

* In February 1989 the government backed workers at Industrial Steel and Pipe Ltd. (owners of Stewarts & Lloyds) in a $4.9 million take-over from the South African parent company which was pulling out of Zimbabwe. (See Chapter 6 for what happened afterwards.)

A “socialist” strategy?

Faced with these contradictory results, party leaders have come up with wildly contradictory “explanations” of what they are trying to achieve.

To the capitalists they say that their only desire is to see the state sector working in “partnership” with the private sector. But at May Day rallies they tell us that the state sector, together with the co-operatives, will one day overtake and replace the private sector.

Buying up companies, they suggest, is part of a grand strategy for achieving “socialism”!

But the government has not been investing in new factories, mines etc. in order to control and expand production. It has only been buying up existing companies which were being abandoned by the multinationals — often paying them inflated prices. This has not been a conscious policy. It has been a series of emergency measures to prevent big losses of jobs and production.

The government’s real “strategy” was summed up by President Mugabe in last year’s Independence Day speech: more concessions to the multinationals in the hope that the leopard will change its spots.

At the same time the Zanu(PF) leaders tell us to work hard for the bosses, and they spend more time denouncing “laziness” than denouncing exploitation. No wonder workers find it increasingly hard to greet this “socialist” message with “Pamberi!”

Continue to Chapter Five