President Robert Mugabe announced yesterday that he wanted Zimbabwe to become a hardline socialist economy and warned that he would seize commercial businesses being forced to shut by tough new price controls.
Mr Mugabe told companies that did not agree with the policy to "pack up and go".
The Zimbabwe government imposed price cuts of between 5 per cent and 20 per cent on bread, milk, cooking oil, margarine, meat, maize meal and other commodities last Friday. Manufacturers, already reeling from the near-collapse of the Zimbabwe economy, responded by stopping production. This caused panic buying and widespread shortages of goods, particularly bread.
Mr Mugabe – addressing mourners at the burial ceremony of Clement Muchachi, a former cabinet minister – insisted that he would hold firm on the price controls despite pleas from manufacturers. "Let no one on this front expect mercy," he said. "We will as a state take over any businesses that are closed and reorganise them with the workers, and at last that socialism we wanted can start again."
Zimbabwe abandoned its socialist ambitions 10 years ago when it embraced IMF- sponsored economic liberalisation. Yesterday, however, Mr Mugabe declared an end to "structural adjustment" – the process of adopting free market economic reforms – saying: "It will be no more."
Mr Mugabe also repeated claims that manufacturers were unfairly increasing prices for political reasons. He accused the business sector of not supporting his drive to seize white-owned land for resettling black peasants.
Nathan Shamuyarira, the ruling Zanu-PF party's secretary for information and publicity, said the price controls had been introduced to stop manufacturers from profiteering. He accused manufacturers of unjustifiably increasing prices to rouse public discontent against the government and sabotage Mr Mugabe's campaign to be re-elected next year.
But the decision dismayed industrialists, who are already battling with Zimbabwe's tough economic climate, characterised by record inflation of 70 per cent and an acute foreign currency shortage.
The issue is also putting strain on the government. Stuart Comberbach, Secretary for Industry and International Trade, threatened to resign, saying he could not countenance the price controls.
Zimbabwe's main industrial body, the Confederation of Zimbabwe Industries (CZI), said manufacturers had no choice but to increase prices to contain soaring production costs. "The best way to contain price increases is for the government to implement sound economic policies that create a stable operating environment for businesses," Malvern Rusike,CZI's chief executive, said.
Analysts said the decision to impose price controls was the final straw for the country's economy, whichhas been in trouble since Mr Mugabe began the farm resettlement drive last year.
The land seizures have been accompanied by widespread violence. At the weekend, five farm workers were badly injured when ruling party supporters invaded farms near the town of Marondera, 35 miles south-east of Harare.