Impact of cartels unpacked in damming report

Maverick Citizen has published a damming post mortem of the cancer that killed the Zimbabwean dream of freedom and independence. The 64-page report (A Study of Cartel Dynamics) details the scale of the illicit cross-border financial transactions that cost Zimbabwe up to US$3bn a year. It is estimated that the country may lose up to half the value of its annual GDP of $21.4bn due to corrupt economic activity that, even if not directly the work of the cartels featured in the report, is the result of their suffocation of honest economic activity. And President Emmerson Mnangagwa is identified as one of the cartel bosses whose patronage and protection keeps cartels operating.

The report uncovers the ways cartels made Zimbabwean politicians and business people enormously rich, although most of their wealth is hidden and banked outside the country, as revealed in the 2016 Panama Papers. It argues that the 2017 military coup that removed Robert Mugabe left the economic system he had honed to serve the Zanu-PF elite largely untouched, with only a slight reshuffling of loyalties. In addition, the cartels have left ordinary Zimbabweans among the poorest people in the world. The report finds that the ‘law is used as a tool of political power to control citizens, rather than rule of law, whereby law is used to control the state and people in power’.

In the second part of the report, Maverick Citizen reveals that the political structures enable cartels because of the country’s non-inclusive ‘winner-takes-all approach’ to elections, accompanied by violent transitions that involve the military. The report reveals that the country’s top political leadership has patron-client relationships with the security sector, judiciary, senior bureaucrats, traditional leaders, party officials, and rural households. In addition, Zimbabwe also has extractive institutions that ‘remove the majority of the population from participation in political or economic affairs’.

Maverick Citizen notes that the publication of the report has raised some important questions about the presence and impact of cartels in Zimbabwe in particular and Southern Africa in general. It finds that there is consensus across political parties, academics, and wider society that cartels ‘go against the public interest’ and are characterised by collusion between the private sector and influential politicians to attain monopolistic positions, fix prices and stifle competition. The report finds that Zimbabwean institutions for regulating property rights, law and finance have been ensnared, and are actively abused to facilitate rent-seeking by cartels’. The cartels impact Zimbabweans in multiple ways – entrenching their patrons’ hold on power, retarding democratisation, destroying service delivery for citizens and creating an uncompetitive business climate.

One example of the collusive relationships between private sector companies relates to the under-reporting of tobacco invoicing. In 2019, China and SA reported to the UN’s Comtrade system 55 and 85m kgs of tobacco imports from Zimbabwe, respectively, at an average price of US$9.06 per kg. Zimbabwe, however, in the same year, only reported exports of 4.8m kgs of tobacco to China at an average price of US$7.46 per kg and 141m kgs to SA at an average price of US$5.34 per kg. This points to under-pricing of exports, where tobacco, which is being directly exported to China at market price, is purported to be exported to a South African middleman who receives the payment from China, retains a significant amount in SA, and remits a smaller amount to Zimbabwe as the export price.