By Daily Maverick
NOTE FROM THE EDITOR
Maverick Citizen is publishing this report on cartel dynamics in Zimbabwe. Sadly, it is not safe to do so in Zimbabwe at a time when freedom of expression and the press has been brutally suppressed.
Journalists and activists are being regularly arrested, imprisoned and sometimes tortured and murdered.
The findings outlined in this report emanate from local research that has been thoroughly and
independently fact checked by Maverick Citizen and trusted independent professionals. We believe the report’s analysis and recommendations can inform anti-corruption agencies, governments and human rights activists worldwide on this urgent subject of concern.
Although all the facts and allegations in this report have been published in various forms of media before, Maverick Citizen provided prior notice and the opportunity for those referred to in the report to respond to its findings before publication.
This focus of this study was to understand the extent and impact of cartels on the political economy in Zimbabwe. To achieve this, the study investigated the contributing factors that enabled cartels to thrive and the power structures behind them, and subsequently analysed their impact on the economy, service delivery
and long-term prospects of parties, academics, and wider society that cartels go against the public interest, and they are characterised by collusion between the private sector and influential politicians to attain monopolistic positions, fix prices and stifle of competition. Zimbabwe’s institutions for regulating property rights, law
and finance have been ensnared,
and are actively abused to facilitate rent-seeking by cartels.
The study finds three types of cartels: the first being collusive relationships between private sector companies; the second being abuse of office by public officeholders for self-enrichment; and the third and main type being collusive relationships between public officials and the private sector. Case studies in the transport, mining, energy and agricultural sectors are then used to show how Zimbabwe’s political patrons are at the heart of almost all cartels – enabling public officials loyal to them and private sector companies from
which they benefit to acquire illicit
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
– which leaves Zimbabweans poorer, more severely under- served by their government and disempowered to hold the state to account.
This study shows that cartels are deeply entrenched in many parts of Zimbabwean life. It is therefore vital to break the hold of the cartels over the state and its economy if Zimbabwe is to move into a more economically stable future. Under the current governing administration, the citizens of Zimbabwe and civil society can make small practical steps towards curbing cartels. To best achieve this, they would have to focus on leveraging the Constitution and Parliament, safeguarding those championing reform in the state, lobbying
continually for the independence
of key institutions, and reaching out to external actors to apply pressure on the private sector to disengage from cartels.
This will not happen overnight, but it is an essential set of steps on the road towards a more prosperous Zimbabwe.
HOW MUCH ARE CARTELS COSTING ZIMBABWE?
Cartels are, by their very nature, secretive. Whilst the social and economic cost is evident in unemployment, disease and hunger, it is rather difficult to accurately measure how much wealth the citizens of Zimbabwe have lost because of cartel activities.
Fortunately, many studies and reports give important glimpses of the sheer scale of these losses.
Illicit cross-border transactions have cost the country billions of dollars over the last decade.
Estimates vary from AFRODAD’s conservative estimate of US$570 million a year to the Chairperson of the Zimbabwe Anti-Corruption Commission placing the estimate at US$3 billion a year.
Cartels’ domestic activities have also transferred billions of dollars from citizens to corrupt
public officials and the private sector actors they collude with. Transparency International Zimbabwe notes that the cost of corruption involving state
officials, including the police, local
government, education officials and transport sector regulators, is in excess of US$1 billion every year. This report reveals that
a large corrupt payment to a crony of the President led to the devaluation of Zimbabwe’s
currency by 23% – robbing citizens of 23% of their income and savings overnight.
Estimates suggest that more than US$1.5 billion worth of gold leaves
© Report on Cartel Power Dynamics in Zimbabwe
Zimbabwe illegally each year, often ending up in Dubai.
According to a report by the Comptroller and Auditor General in 2012: “Financial records for
Treasury order transfers from the main exchequer account to the Paymaster General Account totalling
$3,499,320 653 were not availed for audit examination.”
According to the Zimbabwe Coalition on Debt and Development’s analysis of the
2018 Zimbabwe Auditor General report: “In 2018, transactions worth US$5.8 billion, EUR5 million and 319 thousand South African Rand had financial irregularities ranging from unsupported expenditure, excess expenditure, outstanding payments to suppliers of goods and services, transfers of funds without treasury approval among other issues. This constitute about 82% of government expenditure for 2018.”
Reports suggest that in Zimbabwe’s diamond sector, “billions of dollars’ worth of the
precious stones still unaccounted for”, the value of which is possibly as high as $15billion.
These examples, drawn from different sectors of the economy, give an indication of the real cost of cartels. However, determining their precise cost is necessary, and is also something that will only be possible if the recommendations in this report are implemented, and if illegal cartel activity and political patronage is halted.
Zimbabweans do not trust many of the key institutions in the country. They do not trust in the money issued by their Central Bank, or the electoral process that bestows power on their leaders. They also do not trust their leaders to serve the interests of citizens, and there is no trust in the courts, the military or the police to serve them well.
The Afrobarometer surveys have found that three in five Zimbabweans believe officials who commit crimes go unpunished and a third believe the President ignores the country’s laws.1
At the heart of this distrust lies the perception of many Zimbabweans that corruption in the country is endemic and increasing – 60 per cent of Zimbabweans think corruption increased between 2018 and 2019.2
is the problem of cartels who affect every sector of the society. We have got sections in the judiciary, the Zimbabwe Republic Police, the National Prosecutors Authority [sic] and even from the Zimbabwe Anti- Corruption Commission (ZACC) who are controlled by cartels and manipulate investigations, and this is pulling the country’s economy down”.7
Anecdotal coverage of these cartels and corruption in press reports point to a high incidence of abuse of power by officeholders as a means to generate ill-gotten profits for themselves and their cronies. This comes at a cost to ordinary citizens who are faced with high inflation, eroded incomes, food insecurity, shortages of fuel and water, and an outbreak of COVID-19.
Zimbabwe is a landlocked, lower-middle-income8 country located in Southern Africa with a population of 15 million.9 The majority of Zimbabwe’s citizens live in rural areas (69 per cent)10 and in poverty (67 per cent).11
Zimbabwe is facing its worst economic crisis in a decade – it is in the second recession in 20 years, which has been worsened by the COVID-19 pandemic. The country has also experienced
decades of food shortages, which left more than 27 per cent of rural inhabitants facing high levels of acute food insecurity by the end of 2020, a number projected to rise to 35 per cent in early 2021.12 Meanwhile, the proportion of Zimbabweans living in extreme poverty now two million people.13
Corruption and poorly implemented economic reforms since 2018 have triggered another cycle of hyperinflation, eroding the capacity of the already
fragile public health, education and social protection systems on which the majority of the
population depends. The recently created local currency has been successively devalued, with inflation officially reaching 838 per cent in July 2020.14
According to the IMF, Zimbabwe has the largest informal economy on earth,15 as only a small
proportion of Zimbabweans hold jobs in the formal sector, with the majority in informal employment who derive their livelihoods
from agriculture,16 artisanal and small-scale mining (ASM), and cross-border trade, among other informal activities.
A significant proportion of the country’s population has migrated to neighbouring countries such
as South Africa, Botswana and Namibia, and overseas to the UK, Australia, Canada and the U.S, among others. This diaspora is an important source of remittances which amount to 10 per cent of the country’s foreign currency receipts.17
In Zimbabwe, the COVID-19 pandemic and regressive policy responses to it are expected
to significantly affect economic
sectors, including tourism, mining and manufacturing, which were previously resilient to the economic crisis. Remittances from Zimbabwe’s large diaspora are likely to decline substantially
as the diaspora’s earnings fall and as currencies in countries such
as South Africa, home to most Zimbabweans abroad, potentially lose their value against the
U.S. Dollar, against which most prices of goods and services in Zimbabwe are assigned. ■
The focus of this study was to understand the extent and level of impact of cartels on the political economy in Zimbabwe. To achieve this, the study investigated the factors enabling cartels to thrive and the power structures behind the cartels. It also analysed the impact
of cartels at the macroeconomic and household levels, and on the long-term prospects of democratisation in Zimbabwe.
The research was framed around the following key research questions:
What types of cartels exist in Zimbabwe?
Who benefits from them and who loses to them?
How do cartels impact democratisation and prospects of economic development in Zimbabwe?
What are the underlying drivers of cartel formation and operation, and what are the potential opportunities for addressing these influences?
A more detailed set of research questions is presented in the semi-structured interview guide found in Annexure 1.
Data Collection Methods and Sources
The study utilised desktop review to conduct the study, and made use of available media reports, journal articles, secondary resources, government documents, parliamentary records and relevant laws, websites and sector assessments. This was supplemented with eleven interviews with experts in governance, health, journalism and political economy. Interviewees were required to provide written or verbal consent after the aims and objectives of the study had been explained to them.
Data Analysis and Management
Qualitative data was analysed using MaxQDA, a qualitative data analysis software, while quantitative data was analysed using Microsoft Excel. MaxQDA allowed for coding of the data collected from key interviews. This study traverses a range of sensitive topics, some of which affect powerful individuals and institutions.
Given the repressive nature of the state, the study protects the identity of all interviewees, and notes taken from the interviews have been destroyed. Alphanumeric codes will be used to identify the interviewees, and any descriptions of them will be made generic enough to show how their expertise and experiences are critical to the study without being specific enough to allow them to be identified.
The limitations encountered in carrying out this study arose from the COVID-19 pandemic and the sensitivity of the study’s scope. The COVID-19 pandemic limited mobility and all key interviews were conducted remotely. A few individuals were
reluctant to engage in a remote-interviews, primarily because of fear that the conversation would be intercepted by state security agents, and therefore declined to participate or committed to meeting in person when it was safe to do so. Unfortunately, such conversations could not be conducted before completion of this study. Some government
officials noted they were working from home and
were consequently unable to obtain the necessary clearance to participate in the study. ■
Zimbabwe, while describing the context and factors that enable them to exist. The findings
also present a typology of the cartels existing in Zimbabwe, the beneficial owners of these cartels, and how power dynamics play out among the various cartel actors. This chapter explores these ideas,
with notable cases illustrating the findings.
The chapter begins with a brief overview of what a cartel is and why they chase economic rents. It also provides an outline of the factors that enable cartels to operate in Zimbabwe, conducted through an in-depth analysis of these issues. Readers who would like to understand these issues in much deeper detail can refer to Annexure 2.
“Cartel” is defined differently by different stakeholders. However, common themes can be found
in the diversity of definitions. Zimbabwe’s legal framework does not mention the word “cartel”, although classic cartel behaviour is described by paragraph 7 of Schedule 1 to the Competition Act (Chapter 14:28).
corrupt business practices with the collusion of political leaders.
It has been used in this sense by a wide range of stakeholders
from President Mnangagwa18 and the Minister of Finance19 to the President of the largest opposition party, Advocate Nelson Chamisa.20
The media, academia and civil society have used “cartel” to describe “crookedness by
selfish individuals, social classes,
or groups and institutions to fleece an already sorry population without caring too far about
it”;21 state capture;22 and “the complicity of the state elite and the business community for the purpose of self-enrichment”.23 One journalist said, “cartels and the ruling elite are one and the same thing”.24
Cartels are formed to transfer wealth from consumers and public funds to participants in the cartels (i.e., rent-seeking).25 The undeserved or unearned profit that rent-seekers gain is defined by economists as an “economic rent”.26 Economic rents in Zimbabwe fall into two categories
– natural economic rents and man-made economic rents.27
Natural economic rents arise from the differences in naturally- occurring factors such as the
of mineralisation on mineral claims. These allow some market players to be more profitable than others without the use of more capital, labour or entrepreneurial prowess.
In contrast, man-made economic rents arise from 1) policy decisions that give rise to, for example, monopoly positions for some market actors, provision of publicly-funded subsidies which artificially reduce costs
of production for some market actors and cheap foreign currency;
illicit activities by private market players which include tax evasion and trade misinvoicing; and 3) illicit activities such as bribery and corruption.
A man-made economic rent, therefore, is the unnecessary portion of a payment that is made for goods or services, simply because the producer has the market power to charge it. This economic rent is also a social welfare loss, as Zimbabwean society could have gained the same goods and/or services without paying as much.
The findings show that a complex mix of political, economic and social factors create an enabling environment for cartel- based corruption, and that some
of these factors have been part of the fabric of Zimbabwe for over a century.
Political structures that enable cartels include a non-inclusive “winner-takes-all approach” to elections; 28 the top leaderships’ patron-client relationships with the security sector, judiciary,
senior bureaucrats, traditional leaders, party officials
and rural households;29 violent transitions that involve the military; 30 extractive institutions that “remove the majority of the population from participation in political or economic affairs” (Acemoglu & Robinson, 2012);31 and the repeated use of “violence to silence political dissent and peaceful protests” (U.S. Department of Treasury, 2020).32
Economic structures that enable cartels include: a notoriously unstable macro-economic
framework; 33 dependence on finite resources such
as land and minerals; Zimbabwe’s predominantly informal economy;34 the state’s significantly large role in the economy in which one out of every
two dollars spent comes from the state; 35 and Zimbabwe’s position as a key node in the region’s infrastructural network, which makes Zimbabwe vulnerable to cross-border illicit financial flow.36
revenues and savings by, for example, externalising foreign currency or colluding with public officials to guarantee access to scarce foreign currency from the RBZ. These economic structures create unfair enabling conditions for cartel activity.
Social structures also serve to enable cartel behaviour through the co-option of traditional leaders and the largely neutral stance of churches on politics, which has weakened society’s response to the excesses of the power of the state.37,38 Zimbabwean society has been described as “fractured and broken” as a result of successive
waves of violence and human rights abuses,39 whose victims have been targeted on the basis of their ethnicity, social class and political affiliation.
A key interviewee described Zimbabwe as having “limited social cohesion, which means as citizens, Zimbabweans can’t coalesce around a common interest”.40 There is a shared understanding across a significant proportion of Zimbabwe’s society that national dialogue is sorely needed, and that citizen agency is limited.
The institutions that most affect cartel behaviour in Zimbabwe are those that relate to property rights, law and finance. “Institutions” is used in this chapter to describe the formal and informal rules that
organise social, political and economic relations41, and not brick-and-mortar organisations, to which the word commonly refers.
Property rights are generally weak in Zimbabwe because, over time, a larger proportion of resources have been expropriated from private ownership to state ownership, as is shown in Figure 1. This makes property rights worthless 42 and creates a centralised, corruptible allocation of property rights by public officials – a power that those officials and private sector entities can exploit to extract rents.
Zimbabwe’s governance is characterised by rule by law, 43 whereby law is used as a tool of political power 44 to control citizens, rather than rule of law, whereby law is used to control the state and people in power. This is the case in Zimbabwe,
for example, where anti-corruption laws are used selectively against political opposition, while those
in power and their associates enjoy impunity from
accountability, 45 avoiding prosecution for human rights violations, corruption and other crimes.
When both state and private actors are not held accountable under the law, cartels can operate with
These structures create a perfect storm in which the private sector is highly incentivised to target public expenditure (public tenders) as its source of income by colluding with public officials;
outcompete the informal sector’s prices by avoiding taxes and statutory fees; and seek ways to avoid the impact of macroeconomic instability on its
The management of money supply and interest rates in the economy weakens the ability of the private sector to legitimately access finance, and thereby incentivises cartel behaviour as a means of profit-making.
» Cartels are deeply entrenched in many parts of Zimbabwean life and breaking their hold over the state and its economy will be vital «
democratisation in Zimbabwe.
The study was conducted at a time when the world is grappling with the global pandemic
of COVID-19. At the time of writing, there were almost 73 million confirmed cases and
1.6 million coronavirus deaths. Zimbabwe has recorded over 11 000 cases and over 300 deaths. The COVID-19 pandemic is overwhelming health systems and leading the world into a global recession. The pandemic restricted mobility, and desktop review was utilised to conduct this study. Secondary data
was supplemented by eleven key interviews with experts in governance, health, journalism, and political economy, as well as government officials.
The study’s findings define cartels as observed in the Zimbabwean context and explain their origins and motivations. The findings also present a typology of prevailing cartels in Zimbabwe, descriptions of their beneficial owners and the power dynamics amongst the various actors in the cartels.
From this study we find that there is consensus across political
To be continued