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Thursday, 12 August 2010

Quick notes

Lobby group Global Witness is planning to take the UK government to court for failing to refer companies trading in Congo 'conflict minerals' to the U.N. sanctions committee.

Sir Bob of Harare recently threatened to close 9,000 foreign owned firms after they ignored a deadline to submit plans on how they intend to release some of their shareholding to locals.

FAO, a specialised arm of the United Nations,  has warned  developing countries to avoid buying blindly into the ‘jatropha for biodiesel’ argument.

Meanwhile, a leaked World Bank report to the FT reveals that investors in farmland are targeting countries with weak laws, buying arable land on the cheap and failing to deliver on promises of jobs and investment.

Women in Madagascar resort to forming their own political parties, in an effort to level the political ground ahead of the November elections.


  1. Cho,

    You're an economist, and I think you will appreciate this.

    The fall in tobacco output, the destruction of the export surplus and the collapse of the Zimbabwe Dollar did not coincide in time with land reform.

    Land reform started in 1997, and excellerated in 2000. And yet, the trade surplus did not collapse until the year 2002. The same for the decline in tobacco exports 2002. The same for the excelleration in the decline of the Zimbabwe Dollar - it declined more in 2002 than it did during the previous 8 years.

    So what happened in the year 2002? In 2002, the Zimbabwe Democracy and Economic Recovery Act of 2001 came into force.

    So what did ZDERA do? It put the Zimbabwean government on a credit freeze, by freezing it's lines of credit and budget support at International Financial Institutions (IFI's).

    ZDERA Effects:

    Tobacco Exports (in millions of US Dollars, by year):

    2000 2001 2002 2003 2004 2005 2006
    548.8 594.1 434.6 321.3 226.7 203.8

    Notice that years into land reform, tobacco output even rose, but that it started a dramatic decline in the year 2002, the year ZDERA came into force.

    Trade Deficit (a negative number means a surplus)

    2000 2001 2002 2003 2004 2005 2006
    -295.6 -322.5 18.2 108.3 305.2 387.9 231.3

    Again, notice that the trade surplus rose from $295.6 million in 2000 to $322.5 million in 2001. Notice the spectacular decline from the $322 million trade surplus in the year 2001 and the crash into a trade deficit of $18 million in the year 2002.

    Source: FAO/WFP Crop and Food Supply Assessment Mission to Zimbabwe, 5 June 2007
    Table 1: Zimbabwe - Key economic indicators, 2000–2007

    This means that something spectacular happened in the year 2002. Something that had a far greater effect on the economy of Zimbabwe than the all the farm invasions in the years 1997, 1998, 1999, 2000 (and 2001) combined.


    So what does ZDERA do? It put the Zimbabwean government on a credit freeze in the year 2002, the first full year it came into force (it was signed by President Bush in December 2001). In Section 4C, titled Multilateral Financing Restriction, the action taken on the signing of this document is spelled out.


    (c) MULTILATERAL FINANCING RESTRICTION- Until the President makes the certification described in subsection (d), and except as may be required to meet basic human needs or for good governance, the Secretary of the Treasury shall instruct the United States executive director to each international financial institution to oppose and vote against--

    (1) any extension by the respective institution of any loan, credit, or guarantee to the Government of Zimbabwe; or

    (2) any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any international financial institution.


    This section lists the IFIs which are directly applicable under this law. They include the IMF itself, and the African Development Bank, Asian Development Bank, etc.


    In this Act:

    (1) INTERNATIONAL FINANCIAL INSTITUTIONS- The term `international financial institutions' means the
    multilateral development banks and the
    International Monetary Fund.

    (2) MULTILATERAL DEVELOPMENT BANKS- The term `multilateral development banks' means the
    International Bank for Reconstruction and Development, the
    International Development Association, the
    International Finance Corporation, the
    Inter-American Development Bank, the
    Asian Development Bank, the
    Inter-American Investment Corporation, the
    African Development Bank, the
    African Development Fund, the
    European Bank for Reconstruction and Development, and the
    Multilateral Investment Guaranty Agency.


    If you believe that extraordinary effects are more likely to come from extraordinary events, rather than mundane events, the conclusion is inescapable that it was the artificial credit freeze the Zimbabwean government was put on in the year 2002, which created worldrecord hyperinflation in Zimbabwe. Not the collapse of one economic industry.

    Single economic sectors like tobacco decline all the time, and yet they never lead to world record hyperinflation.

    It is the freezing of all of the government's credit lines, which led to the need to 'print money', and inflate the national currency. Not land reform, not 'mismanagement by Mugabe', not 'lack of democracy', not anything else, except economic sanctions.

    Their timing proves it.

    Further reading on Land Reform in Zimbabwe:

    Fast Track Land Reform and Agricultural Productivity in Zimbabwe
    Precious Zikhali
    October 2008

    " This paper uses data on beneficiaries of the programme and a control group of communal farmers to investigate the programme’s impact on the agricultural productivity of its beneficiaries. The data reveals significant differences between the two groups, not only in household and parcel characteristics but also in input usage. The results suggest that FTLRP beneficiaries are more productive than communal farmers. "

    * A new start for Zimbabwe? by Ian Scoones
    Ian Scoones, Challenges the myths about Zimbabwean agriculture and land reform
    15 September 2008

  3. The lesson is clear - with even a little support by the State for small scale farmers, productivity takes off. Not monster projects, not large scale commercial farms, but smallscale farms are the most efficient, and distribute labour and income over most of the population. From Kenya's Citizens TV:

    (YOUTUBE) Lessons from Malawi

    (YOUTUBE) Malawi's Irrigation Tactics


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