Global Policy Forum

By Rachel L. Swarns

The ministers tending Zimbabwe's ailing economy have proposed a quick-fix remedy of price controls, wage freezes and the creation of collective farms - even though price controls are exacerbating food shortages, and a chaotic land redistribution program has devastated commercial agriculture.

Meanwhile, hundreds of companies have gone broke, unemployment is soaring, and the country is teetering at the edge of famine.

So, with the economy in shambles, why is business booming at the Zimbabwe Stock Exchange?

In recent months the market has reached record heights. This year, while the economy was contracting by about 12 percent, the market capitalization of the stock exchange was doubling, surging to its highest level since it was established in 1896 as people poured money into stocks.

What is more, sales of middle-income and luxury houses in the country's wealthy suburbs are surging, and people with cash are snapping up televisions, luxury cars and stereos.

The paradox stems from distortions in the controlled economy. With inflation at more than 144 percent and currency values plummeting, Zimbabweans are putting their money into assets they believe will increase in value - stocks, real estate, foreign currency, even refrigerators - rather than bank accounts.

The government has kept interest rates low, so borrowing has been relatively cheap. These days, many Zimbabweans are buying whatever they can, betting that they can sell the items later at a higher price, often on the black market.

"It's unbelievable, absolutely unbelievable," said Emmanuel Munyukwi, the chief executive of the Zimbabwe Stock Exchange. "People think there's no economy in Zimbabwe. It's actually embarrassing when you have to tell them that we're doing very, very well."

The contradictions abound. While supermarkets routinely run out of bread, milk and sugar, the city's most expensive restaurants are packed, offering imported seafood and wines. Houses on prosperous, tree-lined streets are selling quickly, and real estate brokers are scrambling to keep up with the demand.

"People are not necessarily buying houses to live in," said Patson Mtare, a broker whose company has sold about 200 houses this year, compared with 100 houses in a normal year. "People are buying to sell."

People with access to foreign currency are buying even more. The government insists that $1 is equivalent to 57 Zimbabwe dollars, even though $1 goes for as much as 1,600 Zimbabwe dollars on the black market these days. Even some government officials ignore the official exchange rate and change money on the street to make huge profits.

Callisto Jonkonya, who manufactures and exports refrigerators, has bought a new house and several apartments. Raymond Chamba, who runs an employment agency in the United States, bought one 52-inch (130-centimeter) television, three 43-inch flat-screen televisions and a DVD player all in one day.

He carried his cash in a suitcase.

"Serious money you don't keep in the bank in Zimbabwe," said Chamba, who has spent the past six months with family in Zimbabwe. "My televisions, they're my bank here."

Most Zimbabweans, however, are too poor to hoard televisions or cars. Over the past three years, the economy has contracted by more than 20 percent. More than 500 companies have closed. Unemployment stands at 60 percent. Most struggling citizens wait for hours in long lines to buy scarce gasoline or bread.

The combination of drought and land reform has left about 6 million people, roughly half the population, in need of emergency food aid. Foreign donors have contributed food but refuse to offer financial assistance to the government, which has condoned violence and land seizures.

Despite this, President Robert Mugabe insists the controlled economy will remedy the problems. He has called on the police to crack down on hoarding and the black market.

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