Sunday, 15 June 1986: Challenges & Rewards of the Zimbabwean Businessman

Friday, June 20, 3:15 PM, Emissary Community, Harare, Zimbabwe 

Running a business in the USA can be a challenge given competition, taxes, creditors, employee problems, and assorted government red tape.  However, it’s nothing compared with trying to earn a buck in Zimbabwe.  I got an earful while on a roughly 800-mile road trip with George through eastern Zimbabwe last week.  George (I’ve given him an alias because of the quasi-legal and illegal information he shared with me) is the managing director for a rapidly-expanding Zimbabwe corporation that’s into all sorts of business ventures.  He’s white, of British ancestry, and grew up in Northern Rhodesia (now Zambia).  He is a jovial, talkative fellow a couple years younger than I.  

I learned a good deal about the pitfalls and opportunities of being a businessman in Zimbabwe.  First of all, foreign exchange is generally unavailable because the country exports very little.  Furthermore, high officials in the government and their cronies have access to all the foreign exchange they would ever need. Without foreign exchange, it’s very difficult to import foreign equipment as no one outside Zimbabwe wants Zim dollars.  It’s not possible to have much of a business (especially in manufacturing) without foreign equipment because very little equipment (even slightly sophisticated) is produced here.  For example, George had to do some fancy money laundering to get a computer system for his office. 

George told the story of one black businessman who has gone bankrupt twice and would be a three-time loser if George wasn’t now helping him straighten out his mess.  Plus, the businessman has friends in high places.  George says that if he had access to all the foreign exchange that this businessman has had, he could have created hundreds of new jobs by now.  Instead, guys like this get it and waste it and so do government officials who keep their liquor cabinets filled with expensive foreign brandies and go on shopping sprees in London and New York.  However, the ordinary Zimbabwean doesn’t have such opportunities because foreign exchange and expenditures outside the country are tightly controlled by the government.  They are limited to Z$450 (US$25) per year for foreign travel (excluding plane tickets which have a limit of Z$2000 per year).  I was reminded of the Zimbabwean fellow on my train a couple of weeks ago who was hassled by customs officials for bringing in a new radio from Botswana without an itemized receipt. 

Front and back of the attractive Z$20.00 bank note in use in 1986 (officially worth about US$12.00).  Zimbabwe currency can’t legally be taken out of the country and anyway, no one outside Zimbabwe wants Zim dollars. 

 

Sometimes, the government will permit a business to acquire foreign exchange in order to start a venture which seems critical to Zimbabwe’s economy.  George is in the process of acquiring several hundred thousand US dollars in order to start a business which will utilize local raw materials, produce a product not currently available in the country, and create a number of semi-skilled jobs.

Since the Zimbabwean dollar is not a “hard” currency that can be traded on the international exchange market, even illegally smuggling business profits out of the country in Zim dollars would not be worth the effort.  This reality provided George and me with a small-scale, mutually beneficial opportunity.  I needed some Z$s for my travel expenses in Zimbabwe. I had hidden several US$50 bills in my luggage before leaving the States.  It had been my intention to get cheap local currency by changing some 50s with Indian traders in the countries I was visiting.  However the South African rand and Botswana pula are hard currencies and there is less black marketeering in those countries than in Zimbabwe or Zambia. 

Instead of trading my 50s on the black market, I decided to be a friend to people like George by offering to trade my 50s for Z$s at the official rate of exchange.  George eagerly accepted my offer to do an exchange and gave me Z$90 for one of my “President Grants”.  It turned out to be a good deal for both of us.  The following day I cashed a US$50 traveler’s check at the bank and received only Z$84.64 after commissions.  The worst part of my bank visit was spending 30 minutes to cash a lousy $50 traveler’s check and filling out all the bullshit government forms to do so.  However, I had to do at least a couple of these legal exchanges to be able to produce receipts showing Zimbabwean customs, upon leaving the country, that I had done some legit money exchanges.  Otherwise, they would have questioned how I could have been in the country for three weeks without spending any Zimbabwe dollars.  Couldn’t I have just used my credit card?  Only the big hotels (beyond my budget) accept them.

Changing money illegally with George became our little joke:  “Hey George.  Can we do a couple of President Grants today?”  George told me he puts each President Grant in a brown envelope and mails it without a return address to an in-law in another country.  Every once in a while, the government intercepts one of these envelopes but most get through.  He plays this little game with other foreign visitors.  Thus, he has some stashes of US dollars outside the country to use on trips for him and his family.  I imagine that a number of other Zimbabweans do the same.  Maybe I should feel guilty but I don’t.  Despite the fact that George is, in some ways, a conniving right-winger, I figure his business expertise contributes a great deal to the local economy.  And he employs hundreds of local Zimbabweans.  Therefore, I believe he deserves a few perks. 

Our little transactions are, however, chicken feed compared to what George has in mind.  He has a plan in the works to get $100,000 per year into a foreign bank account.  I didn’t ask for details but I worry a bit about George.  He seems to have a “big mouth” tendency which could get his ass in very hot water with the authorities.  I hope he’s careful. 

As we were driving through farm country, George pointed out the differences between the conditions of black communal lands in comparison with farmland owned by whites.  The former were overgrazed and, in some cases, almost totally devoid of trees and grass.  The latter appeared well-cared-for.  That got me thinking about foreign investment and I proposed a hypothetical example to George:  Suppose a foreign agri-business concern wanted to buy up a number of contiguous farms that were open to white purchase (whites cannot buy land in the black communal areas).  They would buy the land with foreign capital, bring in the latest in American or European agricultural equipment, and employ local labor.  Would Zimbabwe’s socialist-leaning government allow them to do it?  George guessed they would but suspected this was not happening because of the risky investment climate in Zimbabwe under the Mugabe government.  Despite Zimbabwe having a sizeable (for Africa) capitalist industrial structure left over from the days of white-ruled Rhodesia, Mugabe’s communist rhetoric scares off foreign investment. 

Given this shaky investment climate, I wondered why George’s company was making such a sizeable investment in the local economy.  In addition to starting new businesses, they have picked up several existing companies at bargain prices, especially a few years ago when whites were deserting what they thought was a sinking ship after Zimbabwean independence.  George admitted his company was making a big gamble, but if the country ultimately does sort out its problems and capitalism is allowed to flourish, they will have the last laugh, coming out fabulously rich.  And if he loses everything, George feels it’s been fun.  He’s prepared to start all over again with nothing.  What a gutsy guy!

In addition to their foreign exchange problems and the Marxist rumblings from Comrade Prime Minister Robert Mugabe, Zimbabwe businesses are hampered by some of the highest taxes in the world (something like 60-65% on corporate profits) and numerous government regulations.  For example, businesses are required to have at least 60% black managers.  It is also very difficult to fire bad employees.

George talked about foreign aid.  He thinks that it is a joke.  Let’s say the U.S. or Britain gives Zimbabwe US$3 million for a proposed business venture.  The Zim government then turns around and loans that money to a company at a low interest rate enabling the company to get needed foreign currency.  The company can pay off the loan in Zimbabwe dollars which goes into the Zimbabwe government coffers.  So while foreign aid enables local businesses to get foreign currency it also pays the bills of a government that turns around and throws mud at the countries that give them aid.  George thinks that if the U.S. government is stupid enough to continue giving Zimbabwe money, he is more than happy to reap the bennies.  “You mean I pay taxes for this bullshit?” I replied.

George’s ultimate dream is to find a way to get into the United States with his family.  Apparently, it’s tough for white Zimbabweans to immigrate to the U.S. because of their tarnished ties with the former white racist government.  He drools over the huge American marketplace and the potential millions to be made in business there.  “The grass is always greener…” I point out to him and cite an example.  I was sitting around having a beer with George and some of his cronies in Harare after work.  They were talking about buying out a company that makes bathtubs and sinks.  The price may be right and there is no other real competition in the country.  They were laughing about the primitive methods the present owners use for glazing sinks and tubs and how they can do better. 

“It would be much harder to come across an opportunity like this in the U.S.,” I advised.  “In America, if you’ve got a good idea, odds are that some other fucker has already thought of it.  And, it would be much tougher to have a corner on the market.  In this case, there are already several bathtub companies putting out good products.”  George knew this but maybe it dampened some of his enthusiasm.