(UNTITLED)

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00552R000300160003-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 16
• Document Creation Date: January 12, 2017
• Document Release Date: June 21, 2011
• Sequence Number: 3
• Publication Date: August 1, 1983
• Content Type: REPORT

Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
Directorate of See. -
Intelligence
Zimbabwe: Socialism and
the Private Sector
Sccrct
ALA 83-10126
August 1983?
Copy 2 5 6
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
' - t\ Intelligence
Zimbabwe: Socialism and
the Private Sector
This paper was prepared b Office
of African and Latin American Analysis. It was
coordinated with the Directorate of Operations.
Comments and queries are welcome and may be
directed to the Chief, Africa Division,
Secret
ALA 83-10126
August 1983
25X1
25X1
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
Zimbabwe: Socialism and
the Private Sector 25X1
Key Judgments Despite a self-styled commitment to Marxism-Leninism, Prime Minister
Information available Robert Mugabe has pursued relatively benign policies toward the Zim-
as of 20 July 1983 babwean private sector since he came to power three years ago. We believe
was used in this report.
that Mugabe recognizes the crucial role of private enterprise in the
economy and that he will continue to avoid making major disruptive moves
against the private sector at least through the three-year (1983-85) term of
the current development plan. The government's business "takeovers"-
four since independence-have involved willing sellers who were compen-
sated at fair market value. The government, moreover, has avoided
imposing centrally dictated production quotas, investment targets, or other
trappings of socialism on the private sector; it has concentrated instead on
measures to improve black welfare, such as increases in minimum wages,
hikes in spending for education and health, and land purchases to expand
black farm ownership.
Still, Mugabe has repeatedly declared an intention to move Zimbabwe in a
socialist direction. Although this has perpetuated some of the early
postindependence fears of white farmers and businessmen about their
prospects, a growing number of whites recently have expressed confidence
in the future of private enterprise in Zimbabwe. White emigration
nonetheless has continued since independence at a pace slightly higher than
during the last years of the civil war. Moreover, Mugabe's socialist rhetoric
has frightened potential investors, and there has been virtually no new
foreign investment since independence.
Economic conditions deteriorated in 1982-83, following robust expansion
during the first two years of independence. The downturn was largely a
product of import constraints (the result of foreign exchange shortages) and
a profit squeeze (caused by the government's unwillingness to ease price
controls in the face of rising wage costs). Net new domestic investment has
fallen sharply since 1982 because of a decline in the rate of return,
We believe that, so long as Mugabe is in power, Zimbabwe will continue to
tolerate a mixed economy but that his political commitment to improve the
living conditions of blacks and to expand government into mining, manu-
facturing, and farming will retard economic growth even after drought
conditions ease and world demand for minerals picks up. In our judgment;
potential foreign investors will continue to hold back, keeping economic
growth well below the rate that would be attainable if the government gave
iii Secret
ALA 83-10126
August 1983
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Secret Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
greater incentives to private enterprise and if Mugabe moderated his
rhetoric. We estimate that economic growth, which will be near zero this
year, probably will reach no more than about 3 percent in 1984, assuming
good weather and improved mineral exports.
A key indicator of a turn to more radical policies would be 'the resignation
of Mugabe's principal economic adviser, Bernard Chidzero, who has
played a large part in keeping Zimbabwe's economic policies pragmatic.
We believe any drift toward radical solutions would be encouraged by the
economic upturn that we anticipate in 1984, which could spur political
pressures for more improvements in minimum wages and for much faster
and far-reaching implementation of the government's longstanding prom-
ises of land reform.
Harare's turn to socialism-even if the slow and cautious pace continues-
creates problems for US interests in the southern African region by:
? Inhibiting opportunities for US investment in Zimbabwe.
? Increasing Zimbabwe's dependence on US and other foreign economic
assistance because of the limitations that it imposes on economic growth.
? Undermining US objectives of strengthening stability and prosperity in
southern Africa because-by keeping economic growth at substantially
less than optimal levels-it prevents Harare from realizing its potential
for regional economic leadership among black-run southern African
states. Low growth may also open opportunities for Soviet adventurism in
southern Africa if it leads Zimbabwean leaders to conclude that prag-
matic economic policies have failed.
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
Secret
the Private Sector
Introduction
Since coming to power in April 1980, Prime Minister
Robert Mugabe has adopted a cautious, pragmatic
approach to what he calls the Zimbabwean "revolu-
tion." Although he has long called himself a Marxist-
Leninist, he has kept essentially intact the capitalistic
economic structure that he inherited.
The contradiction between Mugabe's commitment to
socialism and his tolerance of the private sector has
created ambivalence among white Zimbabweans and
potential foreign investors. Many of the leaders of
Zimbabwe's white business and farming communities
profess to be more confident of their future in the
country now than at any time since independence,
despite dissident violence and banditry in Matabele-
land.' White emigration has continued since inde-
pendence, however, at a pace slightly faster than
during the last years of the civil war, and there has
been virtually no new foreign investment.
In light of these contradictory trends, this paper takes
a fresh look at the future of private enterprise and
socialism in Zimbabwe. After a brief description of
the private sector, it compares the government's rhet-
oric with its economic policies and practices over the
past three years and assesses the prospects for more
rapid movement toward socialism-and the implica-
tions for the United States.
Vigorous Private Sector
Private enterprise remains the backbone of the Zim-
babwean economy, accounting for roughly three-
fourths of the country's GDP, according to our esti-
mates. All agriculture, manufacturing, mining (except
coal), construction, tourist services, wholesale and .
retail distributing, and most banking and other finan-
cial firms are wholly owned and operated by private
corporations or individuals. There are about 15,000
private commercial farms and ranches in the country,
including 10,000 small-scale operations, according to
a recent report from the US Agricultural attache for
Zimbabwe. We estimate that there are also about
1,500 privately owned manufacturing firms and 7,000
to 8,000 retail establishments, including hotels and
restaurants.'
Many of the largest private firms are owned by
foreign corporations, and some are widely diversified
throughout the economy. The British-based London
Rhodesia Company (Lonrho) owns and operates large
cattle ranches; coffee, sugar, and timber plantations;
gold, silver, and copper mines; textile, furniture, elec-
tronics, and vehicle component factories; construction
companies; and the pipeline from the port of Beira in
neighboring Mozambique that provides about 95 per-
cent of the country's fuel.
Foreign corporations such as Union Carbide (United.
States), Turner and Newall and Rio Tinto (United
Kingdom), and the Anglo American Corporation
(South Africa) dominate Zimbabwean mining and
minerals processing. Hoechst (West Germany),
Toyota (Japan), Dunlop and Leyland (United King-
dom), Heinz (United States), and many other foreign
firms participate in manufacturing. Delta Corpora-
tion, the Zimbabwean affiliate of South African
Breweries, is one of the country's largest employers,
with 8,300 workers.
Even so, most of the firms in the private sector are
owned by Zimbabweans. Some Zimbabwean-owned
firms are among the country's largest; Blue Ribbon
Foods, for example, employs over 5,000 workers in its
corn and wheat mills and its vegetable oil, soap, and
stock feed plants. Federal Bolts and Nuts Limited,
which employs just over 300 workers at its factory in
Bulawayo, is more typical. About three-fourths of
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
25X1
25X1
25X1
25X1
 Secret Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
Southern Africa
Boundary representation is
not necessarily authoritative.
Mozambique
Ocean
0 200 400 Kilometers
I I ' I i i
0 200 400 Statute Miles
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
Secret
Zimbabwean manufacturing firms and most of the
farms and wholesale and retail companies employ less
than 200 workers. Most are simply "Mom and Pop"
concerns with a few employees.
The Government's Anticapitalist Bias
The anticapitalist bias of the country's political lead-
ership is rooted in the private sector's association with
everything that the Zimbabwean liberation move-
ments-led by Robert Mugabe and Joshua Nkomo-
fought to eradicate: white rule, racism, colonialism,
black farmers and has extended government control
over the marketing of minerals through the creation
of a Minerals Marketing Corporation similar to the
agricultural marketing boards inherited from the
white Rhodesian regime. Harare has also purchased a
major or controlling interest in a handful of individual
businesses-a large bank, the country's biggest news-
paper group, a film production company, and Zimba-
bwe's only operating coal mine.'
imperialism, and South African dominance.
We know from a wide variety of sources-many
unclassified-that Mugabe's personal anticapitalist
bias has a strong puritanical flavor. He regards
capitalism's emphasis on individualism as basically
selfish and immoral. He believes that natural re-
sources belong to all the people and should not be
controlled by private interests. These feelings were
demonstrated at independence day celebrations this
April when he lashed out at unnamed cabinet minis-
ters who, he said, have only a "theoretical and thus
hypocritical commitment to socialism" and have "ac-
quired huge farms and other business concerns."F-
We believe that the overwhelming majority of
Mugabe's cabinet and of the Zimbabwean House of
Assembly, the principal legislative body in parlia-
ment, share Mugabe's anticapitalist bias. Twenty-
nine of the 32 cabinet ministers-all but Minister of
Finance and Economic Planning, Bernard Chidzero,
and the two white ministers-are veterans of the civil
war, and 25 are longtime members of Mugabe's
political party. Many spent years in prison under the
white Rhodesian regime. Mugabe's election victory in
1980 gave him a solid majority of 57 seats in the 100-
seat House of Assembly; blacks from Nkomo's party
hold 20 of the 23 remaining seats not reserved for
whites.
A Cautious Approach to Socialism
The goals of the Zimbabwean "revolution" remain
fairly amorphous, however, and the government's
reform program has thus far been modest. Harare's
principal social and economic changes have included
higher minimum wages, free health care for the poor,
and free primary education. The government has
purchased unused farmland to expand ownership by
The government's "Transitional National Develop-
ment Plan" for 1983-85, which was published last 25X1
November, underlines the vagueness of the Mugabe
government's conception of socialism. The plan's ob-
jective is "to initiate processes designed to set the
stage for the transformation of the inherited socioeco-
nomic system." Nowhere does the plan say that these
processes will include the seizure or confiscation of
private property. Implicitly threatening language,
such as "increased domestic participation, ownership
and control of the economy by nationals and the
state" is offset by other phrases that advocate "realis-
tic policies toward foreign and domestic private in-
vestment." The closest to a threat of nationalization is
the statement that the "government will. participate in 25X1
the ownership and control of some enterprises in
manufacturing if this is deemed to be in the national
interest."
In our view, the plan's moderate language and, in-
deed, the government's pragmatic economic policies
to date are based largely on the advice of the
Western-oriented Chidzero. While sharing Mugabe's
socialist orientation and goals, Chidzero has reacted
to the pressure of rising budget and balance-of-
payments deficits with conservative fiscal and mone-
tary policies. His leadership has carried the day in
cabinet decisions for reduced government spending, a
wage freeze, a currency devaluation, cuts in foreign
exchange allocations, reduced subsidies for basic 25X1
foods such as corn and vegetable oil, and the publica-
tion of official investment guidelines designed to
encourage foreign investors.
' The government already owned the country's railroads, airlines,
and electricity production and distribution facilities at independ-
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Secret Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
The slow pace of land reform, long considered the
principal objective of the struggle for black rule in
Zimbabwe, exemplifies Harare's caution. Only about
32,000 black families have been resettled since inde-
pendence far short of
the government's goal of 54,000 families per year.
Rather than hurry resettlement, Harare has spent
considerable time and money in providing basic serv-
ices (water, roads, diptanks for cattle, and schools) and
training in skills required for long-term development.
The government also has moved slowly to avoid
impairing the operations of white commercial farm-
ers, who earn more than one-third of the country's
'foreign exchange, produce most of its food, and
employ about 400,000 black laborers. Bureaucratic
bungling caused by inexperience and confusion over
the goals, policies, and procedures of resettlement also
Similarly, the government has moved gingerly in the
process of acquiring private businesses. All of the
acquisitions have been by government purchases of
stock and have been with the full -cooperation of the
existing stockholders. In the two major cases-the
Wankie Colliery and the Netherlands Bank of Rhode-
sia-the price per share paid by the government
substantially exceeded the market value. Moreover,
Harare has permitted the private, South African-
based minority shareholders to continue to manage
these concerns. The government has even passed up
several opportunities for nationalization. Over the
course of the current recession, it might have forced
hard-pressed minerals producers to offer equity in
exchange for aid. Instead, it budgeted over $50
million in loans during the July 1982-June 1983 fiscal
year to tide mines over until better times.
The government's recent announcement that it will
take over fuel procurement was at least tacitly encour-
aged by the four foreign importers of fuel (Mobil,
Caltex, British Petroleum, and Shell). We believe
these firms want to reduce their exposure in case of a
renewal of South African-instigated guerrilla attacks
on the pipeline from Mozambique. They also wish to
cut costs that are likely to result from the govern-
ment's pressure to increase its strategic oil storage to
90 days' supply, according to US Embassy sources in
Harare. In view of the precedents established in its
previous acquisitions, we doubt the government will
confiscate the storage tanks needed to reach that goal.
Instead, we believe that it will purchase or lease
needed tanks from the companies.
White Business Confidence in the Future
As a result of the government's pragmatic economic
policies, a growing number of white businessmen and
farmers in Zimbabwe seem fairly confident about the
future of private enterprise there.
? Alan Paterson, recent president of the Confedera-
tion of Zimbabwe Industries, told the US AID
Director in Zimbabwe in May 1983 that his organi-
zation believes the Mugabe government is increas-
ingly recognizing the importance of private enter-
prise and the need to promote foreign investment.
Paterson took special note of the emphasis in the
Transitional National Development Plan on the
need for increased private investment and for formal
channels of communication between government
and industry.
? Paterson and 11 other Zimbabwean business and
farm leaders traveled to the United States and
Europe in June 1983 at their own initiative and
expense to try to refute what they saw as "bad
press" against Zimbabwe and to express their confi-
dence in the future of private enterprise there.
? The Director of Lonrho informed officers in the US
Embassy in London in May that his business situa-
tion in Zimbabwe was highly satisfactory. He cited
the regular repatriation of dividends from
Zimbabwe and the smooth operation of the oil
pipeline through Mozambique since repairs were
completed last January after the last major guerrilla
attack. He also noted that Lonrho had begun a
. number of expansion programs in the country.
The improvement in business confidence, however,
has not slowed white emigration. Sketchy data indi-
cate that the white population has declined from
roughly 200,000 persons at independence to 115,000
to 125,000. We believe that many whites-reacting to
25X1
25X1
2.5X1
25X1
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
secret
ment
In our judgment, the Mugabe government's prag-
matic economic policies have contributed to a decline
in the fear and anxiety with which the white popula-
tion in Zimbabwe greeted Mugabe's coming to power
three years ago. This change in white attitudes has
been an influence for stability in Zimbabwe. Al-
though whites comprise less than 2 percent of the
population, they still retain most of the key positions
in business and agriculture and some top jobs in the
bureaucracy.
? Calls by government ministers for the repeal of
dual citizenship (most whites hold citizenship rights
in the United Kingdom or South Africa, as well as
Zimbabwe) and for the abolition of the Senate,
where constitutionally 10 of the 40 appointed seats
are reserved for whites.
? Perceived degradation of the quality of education,
health care, and government services as these have
been extended to the black majority.
Whites, nevertheless, remain uneasy about some
trends they see or anticipate, and this sentiment has
encouraged the steady pace of emigration:
? Rhetoric by some ministers-occasionally includ-
ing Mugabe-to increase greatly the pace at which
the economy moves toward socialism.
? Calls by Mugabe and his party for a one party
state, which might lead to the abrogation of the
constitutional provision reserving, until at least
1987, 20 seats for whites in the 100-seat House of
Assembly.
Mugabe's socialist rhetoric-still doubt that private,
white-owned business will be able to thrive in
Zimbabwe over the longer term. For these whites, the
improvement in business confidence is not sufficient
to offset fears that political and social conditions will
become unacceptable for whites.
Prospects
We believe the government remains far from reaching
any clear consensus in its own councils about what the
substance of "socialism" in Zimbabwe should be.
There is no doubt that Mugabe is personally commit-
ted to achieving a socialist state eventually and that
some of his cabinet ministers strongly favor a more
rapid move toward socialism. Several probably would
opt for nationalization of commercial farms and at
least the larger foreign-owned enterprises, such as the
mines, if given free rein
Whites are also concerned that the government is
abusing the emergency powers that it inherited from
the regimes of Ian Smith and Abel Muzorewa.
We believe Mugabe is not inclined toward radical
measures, however, because of his recognition of the
crucial role of the private sector in the economy, his
respect for Chidzero's judgment, and his willingness
to leave private enterprise alone so long as the econ-
omy is functioning well enough to support the govern-
ment's social programs for blacks. Mugabe is aware
that the rapid flight of all but about 10,000 of
Mozambique's 200,000 to 250,000 whites during that
country's transition to independence caused major
dislocations in its economy. To prevent the gradual
but steady white exodus already under way in
Zimbabwe from snowballing on that scale, Mugabe
will probably avoid making major disruptive moves
against the private sector at least through the three-
year term of the development plan.
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Secret Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
Over the next several years, however, we believe the
government will probably purchase shares in numer-
ous firms, with foreign-owned mining companies re-
ceiving priority. This approach would be consistent
with the development plan's objective of "increasing
the degree of domestic, particularly state participa-
tion, ownership, planning, and control" in the mining
industry. A $6 million government loan extended in
April 1983 to Zimbabwe Alloys Limited-Zimba-
bwe's largest producer of low-carbon ferrochrome and
an affiliate of South Africa's Anglo American Corpo-
ration-includes clauses giving Harare the right to
convert the loan to ordinary shares at par value at any
time until repayment is completed in December 1987.
Individual manufacturing firms are also likely to be
singled out for purchase by the government, particu-
larly if the regime judges their behavior to be incon-
sistent with its commitment to the "general welfare."
Mugabe threatened to nationalize the corn milling
industry in April, for example, when two firms that
comprise 80 percent of the industry threatened to
close down because of a profit squeeze resulting from
the government's removal of subsidies on corn meal.
The program of land resettlement, furthermore, is
bound to accelerate and could reach targeted annual
levels of 54,000 families during the next few years as
experience enables officials to overcome bureaucratic
problems. The number of new families resettled dur-
ing May 1982-April 1983 (21,000) was more than
double the number resettled in the 12 months up to
May 1982 he govern-
ment already owns about 1 million hectares of land
for future resettlement and has additional offers-
particularly from white farmers in Matabeleland-of
more land than it is willing to purchase, according to
a press statement by the President of the Commercial
Farmers Union of Zimbabwe.
Mugabe's socialist leanings and the current squeeze
on profits will continue to forestall foreign investment,
in our judgment. Even though Harare officially en-
courages foreign investment, the radical rhetoric of
Mugabe and other ministers in speeches to local
audiences often prejudices the perceptions of foreign
investors when such statements are headlined in the
Western press. Mugabe has refused to sign an agree-
ment with the US Overseas Private Investment Cor-
poration (OPIC) on the grounds that Zimbabwe's own
constitution and body of law provide sufficient protec-
tion of foreign assets.
Although a deterioration of security conditions in
Matabeleland might divert Mugabe, at least tempo-
rarily, from pursuing the socialist path, we believe
that the government will continue to contain dissi-
dence there. The fighting has not seriously damaged
the economy, even though Zimbabwe's two rail links
to South Africa and the one north to Zambia cross the
region.
Contingencies
Certain contingencies could prompt Harare to adopt a
much more rapid and destructive pace toward social-
ism than the measured one that we anticipate. Chid-
zero's resignation, for example, could signal a sharp
turn in policy, in our view. Although a number of
other Zimbabwean ministers have Western training
and experience, his successor might lack the political
clout and convictions to push through unpopular
policies. Chidzero has often expressed frustration with
lack of cooperation from other ministers and with
what he sees as their uncontrolled and uncoordinated
government spending. Chidzero threatened to resign
last year, but Mugabe convinced him to stay. The
strong support Chidzero received from the Prime
Minister seemed to strengthen his position considera-
Even Chidzero's presence does not guarantee contin-
ued economic pragmatism. His influence with
Mugabe has made him and his pragmatic economic
approach vulnerable to criticism if economic recovery
is not achieved fairly quickly. Many in the govern-
ment who are uncomfortable with private enterprise,
including Mugabe, are impatient with the normal
vicissitudes of the business cycle and could blame the
economy's ills on the private sector. One of the more
outspoken critics might be Home Minister Herbert
25X1
25X1
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
Boom in 1980-81
The outstanding recovery of the private sector after
the disruption of the civil war years led the Zimbab-
wean economy to unprecedented real growth rates of
roughly 12 percent each in 1980 and 1981. In 1980 a
30-percent real growth in retail spending provided the
major impetus for the boom. It was spurred by sharp
increases in minimum wages, a reduction from 15
percent to 10 percent in sales taxes, and the assump-
tion by the government of tuition fees for primary
schooling.
In 1981 the.growth surge was led by a sharp rise in
agricultural production as a result both of excellent
weather and of increases in government-controlled
producer prices. Harvests of corn for marketing more
than doubled to a record 2 million tons, and produc-
tion of wheat, cotton, sorghum, and groundnut crops
also increased. Further increases in minimum wages
continued to stimulate retail spending in the early
months of 1981.
The quick economic recovery during 1980-81 severely
strained the balance of payments. Demand for im-
ports of consumer goods, raw materials and compo-
nents for assembly in Zimbabwean factories, and
capital equipment and machinery pushed imports up
by more than 50 percent in 1980 and by 14 percent in
1981. Renewed demand for tobacco was not enough
to offset the jump in merchandise imports, and
Zimbabwe's current account deficit expanded more
than fivefold during 1980-81 to $633 million.
Stagnation in 1982-83
A continued decline in mineral earnings, rising infla-
tion, and drought curbed private-sector expansion in
1982, reducing economic growth to about 2 percent
despite a 28-percent increase in government spending.
The volume of manufacturing and mining production
dropped by about 2 percent each. Increased tobacco
harvests and beef cattle deliveries, as ranchers re-
duced herds threatened by a drought-induced reduc-
tion in pasture, barely offset lower sales of corn,
sugar, cotton, and other crops.
The government was forced to cut foreign exchange
allocations to travelers and importers in each succes-
sive quarter in 1982 and to devalue the currency by
20 percent in December 1982 in an attempt to reduce
the balance-of-payments deficit. Sketchy data indi-
cate that, despite some success in reducing imports,
the continued fall in exports widened the current
account deficit in 1982 to about $730 million. More
short-term borrowing was required in 1982 to main-
tain foreign exchange reserves. By September 1982
the central government's foreign debt had almost
doubled compared with two years earlier to $900
million.
The economy is continuing to stagnate this year. Net
new domestic investment has fallen sharply because
of a decline in the rate of return,
The drought has again
cut farm production, and corn output is projected to
total only about one-third of the 1981 crop. A year-
to-year decline of foreign exchange allocations by 25
percent is limiting manufacturing output, according
to press reports. High prices, a continuing wage
freeze, and shortages of consumer goods because of
the stringent foreign exchange allocations to the
manufacturing sector are restraining consumer
spending.
The near-term outlook is not entirely bleak, however,
as we expect a moderate economic upturn next year.
The world economic recovery should begin to stimu-
late mining exports later this year. World Bank loans
totaling $175 million for electric power expansion
and for capital investment will bolster capital inflows.
A $325 million IMF standby agreement signed in
March 1983 and $60 million from the IMF s Extend-
ed Fund Facility also will ease balance-of-payments
constraints. If rains return to normal, we estimate
that improved harvests, together with increased min-
ing and manufacturing production, will push econom-
ic growth up to about 3 percent in 1984.
25X1
25X1
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Secret Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
Ushewokunze, who generally advocates much more
rapid and radical change and is emerging as a popular
spokesman among the ruling party's rank and file.F_
There is also no guarantee that a moderate economic
upturn of the kind we anticipate in 1984 would ease
the frustration of those who want to move ahead with
the Zimbabwean "revolution." As recovery gets under
way, Mugabe might feel politically compelled to
hasten wage increases, land transfers, and acquisitions
of corporate shares to deflect criticism from those
within his party demanding more radical change.
Implications for the United States
In our view, US and other foreign investors will
continue to be put off by Harare's socialist rhetoric
and by the squeeze on profits caused by Mugabe's
drive to improve the well-being of blacks. This will
keep Zimbabwe's economic performance at less than
optimal levels and increase-or at least stretch out-
Harare's need for foreign economic assistance.
The moderate economic pickup that we anticipate by
1984 in Zimbabwe is unlikely to assuage the fears of
potential foreign investors enough to induce them to
increase investment. Union Carbide, Amax, and most
of the other foreign mining and minerals processing
companies that have large stakes in Zimbabwe also
have facilities that produce the same minerals in
South Africa. If the pickup in international demand
for minerals is strong enough to justify mine expan-
sion, they are likely to find Pretoria's policies encour-
aging foreign investment more attactive than
Harare's. Although we believe that Chidzero will
manipulate prices to increase profit margins in manu-
facturing, these are unlikely to be great enough to
induce investors to disregard their fears about
Mugabe's socialist intentions.
Poor economic performance could keep Zimbabwe
from living up to its potential for leadership in the
Southern African Development Coordinating Confer-
ence (SADCC),? the organization of black-run coun-
tries dedicated to reducing South Africa's position of
economic dominance in the region. To the degree that
Harare fails to capitalize fully on its economic poten-
tial, it will also be that much easier for Pretoria to
keep Zimbabwe economically dependent.
Equally worrisome is the prospect that poor economic
performance by Zimbabwe might open opportunities
for adventurism in southern Africa by the Soviet
Union. Continued low growth could lead Zimbabwean
leaders to conclude that pragmatic economic policies
had failed. Radicals within Mugabe's party would be
less tolerant than he is of the private sector and more
likely to encourage ties with the Soviet Union.
25X1
25X1
25X1
25X1
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
secret
Appendix
Zimbabwe's Private Sector
Manufacturing
Manufacturing in Zimbabwe, the largest nonfarm
source of employment, comprises about 1,500 individ-
ual companies that produce over 6,000 separate prod-
ucts. Many of these establishments are small because
they were founded solely to serve the domestic market
during the period of economic sanctions against Rho-
desia, from 1965 to 1979. About half of all manufac-
turing takes place in Harare, one-fourth in Bulawayo,
and most of the rest in Gweru and Kwekwe.
We estimate that the gross value of manufacturing
production totaled over $3 billion in 1982. The food,
beverage, and tobacco industries, which accounted for
almost one-third of the total, are made up of a large
number of small local enterprises, particularly meat
packing and dairy plants, canning factories, brewer-
ies, and grain mills. Most of the more than 200 textile
and clothing factories and establishments are also
small. The Zimbabwe Bata Shoe Company in
Gweru-with an annual capacity of more than
6 million pairs of shoes in 600 types and styles-is,
however, one of the largest in Africa. The most
important rubber manufacturing plant in Zimbabwe
is the British-owned Dunlop factory at Bulawayo,
which employs more than 1,000 workers. Zimbabwe's
metal and metal fabricating industries make a wider
range of products than those found in any African
country except South Africa, using raw materials
provided by the Redcliff iron and steel plant near
Kwekwe. Two car assembly plants get many compo-
nents such as batteries, safety glass, radiators, and
paint from local producers.
Mining
Mining and minerals processing are highly developed
to exploit Zimbabwe's rich mineral resources. In total,
Zimbabwe has commercially exploitable deposits of
40 different minerals. Besides chrome and asbestos,
Zimbabwe's most important minerals are gold (which
competes with tobacco as the country's principal
foreign exchange earner), nickel, copper, coal, and
iron ore. Zimbabwe has the world's largest reserves of
high-grade chrome and is the world's second-largest
chrome exporter, after South Africa. The Shabani
Mine in Matabeleland is the largest asbestos mill in
Africa, with a capacity of over 200,000 tons of ore per
month.
Foreign companies based in South Africa (the Anglo
American Corporation and the Messina Transvaal
Development Company), the United Kingdom (Turner
and Newell and Rio Tinto), and the United States
(Union Carbide and Amax) dominate the mining
industry. In 1982 less than 30 mines-mostly foreign
owned-out of the nearly 200 in operation produced
about 90 percent of gross mining output in Zimba-
bwe. About 90 percent of the country's mineral
production is exported. Raw and semifinished miner-
als accounted for over half of total exports in 1982
Agriculture
Zimbabwe is one of only three Sub-Saharan African
countries (the others are South Africa and Malawi)
that is a net food exporter when weather conditions
are average or better. Agricultural land is divided
almost equally between crowded, communal lands on
which about 5 million blacks subsist and commercial
farms and ranches owned and operated mainly by
about 5,000 white farmers. About three-fourths of
Zimbabwe's population depends directly on agricul-
ture for a livelihood.
The commercial farms and ranches average almost
2,500 hectares each and account for over 90 percent
of all marketed food and nonfood agricultural prod-
ucts (such as cotton and tobacco). Only about 500
farms produce 90 percent of Zimbabwe's food, ac-
cording to open sources. By value, the leading crops
are tobacco, sugar, corn, cotton, beef, and dairy
products. Tobacco is the country's leading export,
accounting for an annual average of 15 percent of
total export earnings in 1978-81
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Secret Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
Although commercial farms and ranches are privately
owned and operated, the government exerts tight
control on farm pricing and marketing. Powers to fix
producer prices and to channel sales through state
marketing boards were inherited from the white
Rhodesian Government. Marketing boards handle
about 60 percent of all agricultural produce. Major
crops not marketed through boards, such as tobacco
and sugar, also are subject to price regulation by the
Ministry of Agriculture.
Banking
Zimbabwe has a well-organized, flexible money and
credit system. Subsidiaries of Britain's Standard
Bank and Barclay's Bank dominate commercial bank-
ing, accounting for over 70 percent of credit. Since
independence, the government has purchased a con-
trolling share in the Netherlands Bank of Rhodesia
(now known as the Zimbabwe Banking Corporation,
or "Zimbank") from its South African parent and has
acquired a 47 percent share of the new Bank of Credit
and Commerce. Citibank of the United States owns
40 percent of the London parent of Zimbabwe's fifth
commercial bank, Grindlays Bank, Ltd.
Zimbabwe has many other credit institutions. Chief
among them is the government-owned Agricultural
Finance Corporation, which is the principal source of
credit for commercial farms. Three privately owned
"building societies" provide services similar to savings
and loan associations in the United States. A number
of corporations, including the government-owned In-
dustrial Development Corporation, are designed to
finance new projects in all sectors of the economy.
Large private retail institutions have their own install-
ment credit arrangements. More than 60 local compa-
nies are listed on the Harare stock market.
Distribution
Zimbabwe has a modern, well-developed commercial
sector. Retail outlets include department stores, gen-
eral stores, chain stores, and stores specializing in the
usual sorts of household goods found in developed
countries, such as furniture, electronic equipment,
clothing, groceries, and liquor. Consumer durables
such as motor vehicles and farm equipment are sold
mainly by franchise holders with branches in the main
cities. In total, about 7,000 to 8,000 retail establish-
ments, including hotels and restaurants, employ about
80,000 workers, according to our estimates.
25X1
25X1
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
 Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8
Secret
Secret
Sanitized Copy Approved for Release 2011/06/21: CIA-RDP84SO0552R000300160003-8