Contents

1: Introduction

2: Arms production during the colonial period

3: Arms production during U.D.I.

4: Arms production in independent Zimbabwe

5: The Zimbabwe defence industry

5.1: Current Projects

5.1.1: The Explosives Filling Plant

5.1.2: The Small Arms Ammunition Project

5.2: Manpower issues

5.3: Financial issues

6: Defence spending and the Zimbabwean economy

7: The ZDI and the Zimbabwean economy

8: Conclusion

9: Endnotes

Appendix: Zimbabwe's Arms Imports

In developing countries, arms production has seldom been an inducement for the growth of dependent peripheral economies because arms production industries are not profitable on a small scale. Very often, political and questionable security considerations have induced developing nations to embark on local military production lines even at the detriment of the local economy. While most developing country arms production is clearly political and strategic, there are some governments which have used economic arguments to justify local arms manufacture.

In Zimbabwe the ZANU (PF) government established the Zimbabwe Defence Industry (ZDI) which went on to erect two arms production factories in the 1980s. The ZDI is also involved in a number of defence related projects that include a clothing factory and some agricultural projects. The political and security motives for these projects appear to be obvious especially in the light of the regional destabilisation policy of apartheid South Africa. However, in justifying their actions, the ZANU (PF) government professed that the economic motives for an indigenous arms production industry were just as strong, if not stronger than the political and security motives. They argued that scarce foreign currency could be saved by manufacturing rather than importing armaments, and that the arms factories would employ thousands of Zimbabweans. They also argued that the industry would be self-sustaining and would even pay for other items on the defence budget and that technological spin-offs to civilian industries would result, thereby enhancing the government's import-substitution industrialisation drive. This paper will discuss the origins, the strengths, and the weaknesses of the economic motives for an indigenous arms production industry and will analyse the prospects for the economic viability of the Zimbabwe Defence Industry.

2. Arms Production During The Colonial Period

Attempts to establish an indigenous defence industry in Zimbabwe date back to the Second World War. As part of its contribution to the war effort of the British Empire and Commonwealth, the Government of the then colony of Southern Rhodesia established the War Supplies Committee in July 1940 to co-ordinate the colony's industrial war effort. Two arms manufacturing factories were built, the Rhodesia Ordnance Factory (ROFAC) in Bulawayo and the Salisbury Ordnance Factory (SOFAC) in present day Harare. A third factory was built in Lusaka, Zambia but the administration of this also fell under the War Supplies Committee of Southern Rhodesia which later became the Munitions Production Board. ¹ The three factories produced various types of small arms ammunition, several types of aircraft bombs and a multitude of tank spare parts for the Allied Forces.

However, Southern Rhodesia's industrial war effort was tied to that of the Union of South Africa. The main objective of the War Supplies Committee was, "to examine the resources of the colony for the manufacture of munitions and civil supplies, in co-ordination with the Union of South Africa". ² The organisation of the arms production processes of the two countries were very similar and in fact most of Southern Rhodesia's production was done to fulfil orders given to the Union of South Africa by the Allied Forces. Southern Rhodesia was dependent on the Union of South Africa in the industrialisation of the economy as a whole during this period and in particular, it was technologically dependent on the Union in the field of arms manufacturing. The colony also experienced acute shortages of machine tools for arms manufacturing, and there were inadequate amounts of skilled manpower and foundry resources. ³ The arms manufacturing factories imposed a heavy financial burden on the colonial Government without any identifiable returns to the local settler economy. ⁴ All the factories were therefore closed down immediately after the war.

Zimbabwe's post Second World War history is dominated by two events: the Federation of Rhodesia and Nyasaland, 1953 - 1963; and Ian Smith's Unilateral Declaration of Independence (UDI), 1965 - 1980. The federal period saw a complete break in the manufacture of armaments. Federal defence and foreign policies were dictated directly from London and therefore dependence on the United Kingdom was total. All arms and ammunition were imported and the United Kingdom provided all military hardware including aircraft, pilots and technicians. Between 1951 and 1963 Southern Rhodesia received several tonnes of small arms and ammunition from the United Kingdom. It also received more than 150 aeroplanes, 30 Armoured Fighting Vehicles and 8 helicopters. ⁵ The net effect of the presence of this formidable Imperial arsenal was that Southern Rhodesia did not have to worry about arms production, for it was only required to provide the infrastructure for the assembly, maintenance and use of Imperial armaments.

3. Arms Production During U.D.I.

After 1965 the economy of Rhodesia was subjected to United Nations sanctions, and an arms embargo. When the guerrilla war started in 1966, the Rhodesians were forced to improvise. Claims were made that Rhodesian industry was capable of manufacturing all the war materiel vital to sustain a protracted guerrilla war. ⁶ These claims underplayed the real drama of the daring smuggling escapades of military hardware, of sanctions busting and of the dis-implementation of the arms embargo by sympathetic governments like apartheid South Africa, Israel and the United States of America.

A good example is the Israeli arms connection. In 1976, Israel supplied large quantities of the UZI submachine gun to Rhodesia. The Rhodesians were later granted a licence to assemble the UZI which the local press claimed was 100 percent made in Rhodesia and which was locally called the LPD/RHUZI. ⁷ In 1978 eleven Bell 205 helicopters which had been sold to Israel by the United States were shipped to Rhodesia via South Africa. Also, it was an Israeli corporation which built Rhodesia's notorious 500 mile landmine belt along the country's north eastern border. ⁸ Furthermore, the armoured fighting vehicles and the landmine protected vehicles that Peter Stiff attributes to the Rhodesian engineering genius were not manufactured in Rhodesia. The Rhodesians had no facilities to manufacture any type of vehicle chassis even for small cars. ⁹ What they managed to do with the help of South Africa's Armscor, was to bend iron sheets to provide a V shape to smuggled British Bedford lorries to deflect mineblast. Their "greatest" achievement was the manufacture and the spreading of anthrax, cholera and other poisons in the Rhodesian version of chemical and biological warfare. But even though these substances were produced in a small laboratory at the University of Rhodesia, they could not manage industrial production. ¹⁰

4. Arms Production In Independent Zimbabwe

The 1981 Zimbabwe Conference on Reconstruction and Development (ZIMCORD) was generally viewed in military circles in Zimbabwe as having ignored the material requirements of the newly constituted Zimbabwe Defence Forces (ZDF) in terms of defence equipment procurement and production. Politically, the ZDF were required to maintain a large integrated force that had to be equipped with modern weapons. However, this was not possible because the new ZANU (PF) government was not able to raise the necessary foreign exchange to buy any modern defence equipment. A number of options were explored and it was suggested that the defence forces must be involved in agricultural projects to make them self sufficient in rations. ¹¹ This "Defence With Production" idea was borrowed from the socialist allies of the ZANU (PF) Government. It was noted that in the early 1980's, rations constituted the second largest item on the defence budget after salaries. If the forces could produce their own food, then a substantial amount of money from the defence budget could be diverted to purchase the much needed modern defence equipment. However, the defence with production project hit some problems when it was realised that the savings from the defence budget on the rations vote could not be easily converted into the required foreign exchange to purchase military hardware.

When military minds shifted their focus to the industrial sector, some factors appeared to be in favour of a military industrial initiative. The relatively large army which depended on imported military hardware and the regional skirmishes fuelled by the destabilising activities of apartheid South Africa all pointed towards a high regional demand for military hardware. These perceived levels of demand made an import substitution industrialisation strategy reasonable and attractive. More important, after consuming Rhodesian industrial wartime propaganda it was believed that the firms which had previously "manufactured" military hardware for the Rhodesians still existed and could be used by the new government. However, as noted earlier, the much talked about Rhodesian engineering genius did not exist, and in fact has been described as, "one of the many minor hypocrisies of the international trade in arms". ¹² Sadly, this myth of Rhodesian arms manufacturing was the strongest factor on which the Zimbabwean arms manufacturing dream rested.

It was in the light of this misinformation that the Prime Minister who was also the Minister of Defence ordered a study into the feasibility of establishing local Zimbabwe arms industry. The study team confirmed, though without proof, that a variety of military equipment could be produced locally by firms which were previously engaged in such kind of production. ¹³ Eight such firms were identified: Zambezi Coachworks Ltd, Tandem Coachbuilders, Morewear Industries Holdings, Kew Engineering, Brockhouse Engineering, Tinto Industries Ltd, Salisbury Industries and Cochrane Holdings.

With regard to the possible organisational and controlling methods for the proposed industry, the study team recommended government control. They argued that government could direct the development of the industry to suit the strategic and political needs of the country. It was also argued that the industry would not only be used to test and develop equipment for the ZDF but that it could also finance the development and acquisition of external military hardware. The other argument was that the profits would accrue directly to the government. Thus, conflict between political and financial or economic goals would be more easily resolved without the complications of involving a third party.

5. The Zimbabwe Defence Industry

The Zimbabwe Defence Industry (ZDI) was created on 2 July 1984 by the Ministry of Defence (MoD). However, the MoD had no legislative authority to register a commercial company. In October 1985 the MoD therefore approached the Industrial Development Corporation (IDC) to register the ZDI as a private commercial company and as a subsidiary of the IDC. The IDC was reluctant to become the nominal owner of a company in which they did not hold a single share, but with pressure from Government, the IDC agreed to register the company. Four cabinet ministers participated jointly in the formation of the company. These were the Minister of State for Defence; the Minister of Finance, Economic Planning and Development; the Minister of Trade and Commerce and the Minister of Industry and Technology. The ZDI was registered under the Companies Act with an authorised capital of 32 000 Z$1 shares. The issued share capital was $3 issued in the names of Ministry of Defence staff. This gave the company a poor capital base to undertake any operations. However, after pressurising Treasury to increase the company's share capital, ZDI was allocated Z$17.5 million as a grant to the company. ¹⁴ The share capital was then increased to Z$15 million.

The ZDI was placed under the Ministry of Industry and Technology for the channelling of funds and under the Ministry of Defence for administrative and policy issues. ¹⁵ A Board of Directors was established for the company comprising the Heads of the above-mentioned Ministries with the Secretary for Defence as the Chairman of the Board of Directors. The Commanders of the Zimbabwe National Army and the Air Force of Zimbabwe were also nominated as members of the Board of Directors. In 1987 the MoD transferred its nominal 3 shares to the IDC, effectively making the IDC a shareholder in the ZDI and the IDC had to nominate a member to the Board of Directors. ¹⁶ The involvement of the above-mentioned Ministers seems to have ended at the inception of the Company, as there are no records of any directives from the Ministers to the Board.

Over the years, the ZDI has suffered from its dual status of being both a private company and a state enterprise. It has also suffered from its accountability to two ministries. This has created problems of unclear funding and capitalisation policy and confusing policy directives. This has also led to erratic funding from government and unpaid bills to both local and foreign contractors. ¹⁷ Recommendations were therefore made that the ZDI should be moved from the IDC to operate again directly under the Ministry of Defence. This would make the Board of Directors accountable to only one Minister, the Minister of Defence.

5.1 Current Projects

Initial proposals had envisaged the local manufacture of a range of defence products. These products were categorised as follows:

1. Mine protected and armoured combat vehicles.

2. Camouflaged combat clothing and webbing equipment.

3. Explosives and pyrotechnics.

4. Small arms ammunition.

5. Mine detection vehicles and equipment.

6. Anti-personnel and anti-tank mines.

7. Aerial bombs.

8. Light mortars, rifles and rocket launchers.

9. Light carrier and training aircraft. ¹⁸

By 1990 however, only four of these projects had been implemented: the Explosives Filling Plant, the Small Arms Ammunition project, the Darweendale Clothing Factory and the upgrading with the help of Lonrho Motor Industries of the vehicle repair Harare Base Workshop at Masasa. Another project, which was implemented but which was not on the ZDI final list, was the Agricultural Project in Masvingo. These pilot projects have already had a number of serious problems even though they enjoyed the political backing which future projects are not likely to get. Two of these projects will be analysed below to highlight the extent of the problems that the ZDI has encountered so far.

5.1.1 The Explosives Filling Plant

Calculations made in 1984 by the Directorate of Research and Development of the Ministry of Defence revealed that the largest part of the Zimbabwe Defence Force's annual ammunition expenditure goes to explosives ordnance, largely mines, mortar bombs, artillery shells, grenades and demolition devices. Studies were conducted in these areas with a view to establishing and developing the local production of explosive ordnance. Three major problems were encountered. First, although it appeared as if the ordnance bodies to be filled could be made available in Zimbabwe, there was no local firm capable of filling the bodies with explosives. Secondly, the technology gap between the filling of a mine and that of filling artillery shells was so wide that any firm that attempted to do both would have to focus solely on ordnance filling operations and little else. No firm or factory had the capacity nor the willingness to attempt such a hazardous venture. Third, even if ordnance bodies were made available and filled locally there was no firm with the infrastructure capable of manufacturing the all important detonation devices and propellants. ¹⁹

These problems finally convinced the Ministry of Defence that the Rhodesian engineering genius, which they thought they had inherited and on which they had based their initial recommendations, was not available. Some have argued that ‘white-owned businesses’ deliberately withheld their support as a form of resistance to the new government's initiatives. Whichever argument one follows, the effect is the same, there was no local firm capable of manufacturing explosive ordnance. But, for the new government there was no turning back. The ZDI was already established and the company had to be made operational. The company was then forced by circumstances to look to foreign countries for help. Already, the greatest contradiction became apparent. Outside help meant the use of scarce foreign exchange which the Government had hoped to save and it also meant more technological dependence on outsiders which the government had hoped to reduce.

As it turned out, the Directorate of Research and Development of the Ministry of Defence dispatched a fact-finding team to various countries to get ideas on how to overcome the above problems. The team visited the LUCHAIRE Explosive Munitions Plant at Bourge in France, the Valsella Mines at Brescia and the SNIA BPD at Fugia in Italy, the Hertenberge Ltd in Austria, the Companhia de Explosivos Valporaiba of Brazil and Defex of Spain. It was LUCHAIRE of France who won a contract to set up an explosive filling plant in Zimbabwe similar in structure and operation to that at Bourge in France. ²⁰

The construction of the building at Elphida Farm in Domboshawa and the installation of the machinery were delayed because of the unavailability of funds. The situation was rescued only in 1987 by the French Government which offered a financial package to the ZDI for the deal. A loan of FF 31million was facilitated through a syndicate of French Banks. ²¹ The civic buildings were erected by Henks Construction, a local company that had also erected the Mazoe Earth Satellite Station. The cost of erecting the buildings escalated from Z$3.6 million to Z$10 million within one year. ²² The machinery and equipment mounted in the plant were brought from France accompanied by three French expatriates to train ZDI staff on the job. These were paid by the ZDI at the rate of FF 194 000 per month. ²³ Three ZDI staff attended a course in France for the posts of Plant Manager, Pyrotechnician and Quantity Control Manager.

The Explosive Filling Plant became operational in 1990 and stocks of bombs began to pile up. There was ordnance ranging from 60mm mortar bombs to 155mm artillery shells. The biggest problem however, was the marketing of these bombs. The Zimbabwean Defence Forces did not have the money to buy all this equipment now that it was available. Yet, a major assumption at the formation of the ZDI was that the local armed forces would provide the largest market for ZDI products. By 1990, however, Treasury was refusing to allocate any money to the Defence Forces for the purchase of any new equipment. Treasury was only willing to fund recurrent expenditure because according to intelligence reports, the ZDF was not likely to use any of the equipment as regional conflicts were being resolved through negotiations. ²⁴ Further, the ZDI had not yet made any impact on the export market and any projected demand in that area was in any case speculative. The increased regional political will to open up trade with South Africa increased competition within the regional market and it was recognised that South Africa's defence industry had far better ordnance to offer the ZDF than the ZDI.

5.1.2 The Small Arms Ammunition Project

Although the Explosives Filling Plant got off the ground first, the formation of the ZDI was greatly facilitated by the need for the local production of small arms ammunition. Because of the precariousness of regional peace in the early 1980s, the ZDF had a recurrent requirement for small arms ammunition, all of which was procured from foreign sources. Of special note is the fact that the ZDF possessed small arms from both NATO and Warsaw Pact countries. It was therefore necessary to have the capacity to produce 7.62mm ammunition for both the AK47 and for the FN rifles, both of which were regarded as standard. It was also important to be able to produce the modern 5.56mm ball type ammunition which was regarded as the most practical alternative to the 7.62mm ammunition. ²⁵

Several manufacturers were approached and several proposals were received from such companies as Fritz Werner of Austria, Manhurin of France, NORINCO of China and from the Governments of Yugoslavia, Romania and the German Democratic Republic. In 1986 NORINCO of China was awarded the contract to build a small arms ammunition factory in Zimbabwe for the ZDI. The Prime Minister (Robert Mugabe) who was also the Minister of Defence was not favourably disposed to funding the project with off-shore finance and he suggested that the Chinese Government give the ZDI a line of credit or a loan to finance the project. It was noted that Treasury held some 100 million remnibi in Chinese protocol of which 50 million remnibi could be made available to the ZDI. ²⁶ When it was realised that the existing Chinese credit line applied only to civilian items and could not be used to finance military ventures, NORINCO offered a loan. However, the ZDI was required to come up with a 25% down payment with a 4-year repayment period at 4% interest and a grace period of 3 years.

There were initial problems with regard to where the ZDI would get the foreign exchange for the 25% down payment, as there was no such allocation on the Defence Budget. In the event, the ZDI applied direct to the Reserve Bank taking advantage of the political backing the project was still receiving, and authority to remit the funds was granted. The construction of the small arms ammunition plant started in January 1988. The factory buildings were erected at Elphida Farm next to the Explosives Filling Plant although reservations were expressed as to the wisdom of siting two high-security projects on the same farm and within striking radius of one aerial attack. NORINCO erected the civil buildings and installed the machinery at a cost of Z$32.7 million. Production of small arms ammunition of various calibres started in March 1993. Five Chinese experts were permanently assigned to work on the plant while 14 ZDI technicians attended a 3-month training course in China.

Even before the factory started to operate, the main contractors became sceptical about the credit standing of the ZDI following previous breaches of contract by non-payment of work already undertaken. The contractors therefore insisted that ZDI establish a Trust Fund to be managed by legal representatives who would then ensure that priority was placed on payment for work already completed. This arrangement reverberated throughout the creditor circles of the ZDI sending shock messages of the company's inability to fulfil commercial transactions. ²⁷ But the Chinese were patient, for they had an interest in making sure that the plant would become operational. A similar plant, which the Chinese had built earlier at Ginja in Uganda, become redundant because the Ugandan Government failed to sustain the factory's operations. The Zimbabwean experiment was the only hope for the Chinese to service the whole of Southern, Eastern and Central Africa.

5.2 Manpower Issues

Section 1.1.4 of the initial proposal for the establishment of the ZDI envisaged the creation of "Employment for several hundred Zimbabwean nationals". However, by 1992 the ZDI employed only 45 people at its Headquarters at Trustee House and in the two factories at Elphida Farm. ²⁸ But, there was hope that by the end of 1993 the Small Arms Ammunition Plant would employ 250 people. The ZDI is however in direct competition with the private sector engineering industry in attracting the best qualified and most experienced technical people available. Yet, the remuneration and conditions of service of the company are far below those of the private sector. This was perpetuated by the linking of salary increments over the years to the rates awarded to civil servants and the Zimbabwe Defence Forces. For example, by 1992 when the average salary of industrial technicians was $3600 per month, the ZDI was still paying its technicians $1600 per month. ²⁹ This situation encouraged a high rate of staff turnover. This is not good for a security sensitive industry whose personnel have to undergo long periods of in-house orientation training before becoming productive.

In attempting to solve the manpower problem the ZDI gave preference where possible to the employment of ex-servicemen who had retired from the Zimbabwe Defence Forces mostly on medical grounds. ³⁰ The idea was that this group of people would not complain about low salaries and adverse conditions of service. Also, they would be used to low salaries from their service with the uniformed forces and they would already be trained to keep military secrets.

The projects which employ a greater number of people are the Harare Base Workshop, the Darweendale Clothing Factory and the Masvingo Agricultural Project. However, the personnel establishments of these projects do not fall directly under the ZDI. They are part of the Zimbabwe National Army and have separate budget allocations administered by ZDF Headquarters under the subhead "Projects". By December 1995 efforts were still being made to incorporate the administration and budget of these and other ZDF "projects" under the direct control of the ZDI. But, even with the incorporation of these larger projects, the ZDI would still not achieve manpower levels of more than 2 000 workers by the year 2000, a far cry from the employment miracle that was expected by the Zimbabwean Government. Yet, if this incorporation of ZDF "projects" into the ZDI could be achieved, it could go a long way towards helping with the downsizing of the ZDF which everyone is demanding and yet no one has suggested any alternative employment for the thousands of soldiers that will be demobilised.

5.3 Financial Issues

As a private company the ZDI was initially run by a Board of Directors who were appointed to represent the Ministries that were instrumental in forming the company with representation from the IDC. The Directors were assumed to represent the shareholder, that is, the inter-Ministerial Committee that was tasked by Government to ensure the effective implementation of ZDI projects. By 1990, the inter-Ministerial Committee was no longer functional, therefore it was no longer clear to whom the Board was accountable. This situation had grave financial consequences as sometimes the Board resolved to implement a project and then the Ministry of Finance would oppose it citing the unavailability of funds. ³¹

When the ZDI identified their priority projects in 1985 there was no infrastructure to facilitate the implementation of these projects. The ZDI therefore had to purchase capital equipment and technology and construct the factories. Since Government had other pressing financial commitments, the company had to depend on annual grants and external loans. Although the Board of Directors was fully aware of how much the company wanted to fully capitalise the ZDI, it was not possible for Treasury to inject the necessary equity capital required to sustain the company. This under-capitalisation was central to the financial problems that the company has experienced since its inception.

The ZDI was incorporated as a private company also because the Ministry of Defence did not have the legislative power to establish a defence manufacturing company. By opting to form the company under the Companies Act, the true status of ZDI became ambiguous and confused. The result of such a status was that whenever it was convenient the ZDI was treated as a private company and whenever necessary it was treated as a government enterprise. The equipment and machinery required for both the Small Arms Ammunition Plant and the Explosives Filling Plant projects had to be imported. Because the ZDI was registered as a private company, customs officials demanded that the company pay $29 million in duty for the two projects by the end of 1990. ³² But, the factories were not yet fully operational and the ZDI could not raise that kind of money. Also, by 1990 both the French and the Chinese loans were due for repayment.

A financial crisis developed in the 1990/91 financial period. Previously, funding for ZDI projects was topped up annually through Public Service Investment Programmes (PSIP) allocations depending on the envisaged payout pattern for each financial year. As a means to defer part of the heavy capital requirements necessitated by the purchase of capital equipment, ZDI borrowed a lot of money on the strength of government guarantees. The interest payment and capital repayment terms of these loans were not linked to the planned commercial production of the factories but to the best terms that could be obtained at that time. Because of this policy each project could not be fully capitalised. The amount that was required to pay for construction work as well as servicing of loans was provided to the company on the basis of the amounts due within each financial year.

In the 1990/91 financial period the ZDI was not allocated any funds under PSIP. To meet its requirements, Government provided guarantees to enable the ZDI to borrow on the local money market at a time when the revenue earning capacity of the company was not sufficient to cover external loan servicing, the costs of construction and work in progress. An overdraft facility of $20 million was however arranged with Zimbank. However, by the end of the Government Guarantee period in August 1991 Treasury was refusing to advance any funds to the ZDI. The overdraft facility with Zimbank had to be renegotiated and it was strengthened by a $20 million loan from Old Mutual payable over 5 years. ³³ The snowballing effect of ZDI indebtedness was exacerbated by the liquidity position within the country which was very tight resulting in interest rates being pushed to unprecedented high levels. For example, when the Zimbank overdraft was renegotiated with an extra $3 million Government Guarantee to cover interest, the interest rates jumped from 15% to 27%, thus almost doubling within one year. There was no way that the ZDI was going to get out of the financial quagmire and a state of financial emergency was declared.

It was in the light of these and other problems facing the ZDI that a committee was tasked to make a diagnostic study of the company and make recommendations to Government. In proposing the formation of this committee, the Senior Secretary for Finance, Economic Planning and Development emphasised the serious financial difficulties being faced by the ZDI which, "may as a result represent a constant drain on the fiscus unless the decline is arrested now". ³⁴ The committee comprised members from the Accountant General's Office, the Ministry of Industry and Commerce; the Ministry of Finance, Economic Planning and Development; the Public Service Commission and the ZDI.

The committee’s terms of reference were, among other things,

To examine the viability of the enterprise taking into account past and present investment - by state, local and external loans, the actual and projected demand for sales of the products, with specific reference to the export market, the working capital requirements including foreign currency requirements and project earnings. ³⁵

After an in-depth analysis of the status of the company, its operations and its financial prospects the Committee posed two crucial questions. The first was, "Will the company make money during the next five years?" The answer to that question was, NO. It was emphasised that the ZDI was not likely to operate profitably for the foreseeable future, at least not with its current projects. The company itself had forecast loss-making operations for the first three years and a reasonable surplus in year 5. The Committee found no reason to accept the company's forecast for any of the company's projects.

The second question was, "Is the Company a net foreign currency saver?" Again the answer to that question was, NO. In the opinion of the committee the ZDI was not likely to become a foreign currency saver even if it managed to break into the highly competitive international arms market. On the basis of their analysis of all aspects of the ZDI and especially of its poor financial prospects, the Committee concluded that the ZDI must be liquidated. They wrote that:

We recommend that ZDI be liquidated and all loans guaranteed are written off to save further losses and subsidies by the state. The assets of the Company should be disposed of to best advantage. The state will only be involved in supporting research and development for private industries and controlling sales of military hardware through legislative controls, as is the case in most developed countries. During the period before disposal, the plant must be kept on a care and maintenance basis. ³⁶

As it turned out however, the Ministry of Defence refused to liquidate the ZDI. They proposed a restructuring of the company and pressurised Treasury to pay off all ZDI existing loans and free the company so that it could make a fresh start. The Ministry of Defence further proposed the formation of an inter Ministerial Defence Procurement Board to act as the "think tank" for the ZDI and to take over the ZDI shares held by the IDC. The General Manager found himself increasingly isolated for having supported the recommendations of the Committee for the liquidation of the ZDI. He resigned and was replaced by a retired army colonel.

6. Defence Spending And The Zimbabwean Economy

In order to place ZDI expenditure in its proper perspective, it is important to understand the trends in the Zimbabwe Defence Budget for the period under study (see table 1).
 

TABLE 1. Zimbabwe's Defence Budget, 1980 - 1995
Figures are Zimbabwe $ in current prices
Year	Ministry of Defence	Army	Airforce	TOTAL
1980 - 1981	767 000	194 414 000	38 095 000	233 276 000
1981 - 1982	779 000	216 885 000	62 797 000	280 461 000
1982 - 1983	1 268 000	234 012 000	55 952 000	291 232 000
1983 - 1984	1 750 000	331 450 000	44 200 000	382 400 000
1984 - 1985	1 289 000	313 215 000	37 000 000	351 504 000
1985 - 1986	1 953 000	403 266 000	52 590 000	457 809 000
1986 - 1987	2 485 000	501 603 000	135 433 000	639 521 000
1987 - 1988	10 749 000	521 296 000	187 831 000	720 091 000
1988 - 1989	14 031 000	556 126 000	198 097 000	768 254 000
1989 - 1990	16 202 000	646 547 000	177 620 000	840 369 000
1990 - 1991	19 031 000	833 976 000	178 063 000	1 031 070 000
1991 - 1992	19 980 000	848 946 000	276 056 000	1 145 000 000
1992 - 1993	22 640 000	952 600 000	350 305 000	1 325 245 000
1993 - 1994	26 950 000	1 099 040 000	406 190 000	1 532 180 000
1994 - 1995	31 620 000	1 308 700 000	358 880 000	1 699 200 000

The trends in Zimbabwe’s defence spending in the 1980s and 1990s were influenced more by regional and local political factors than by the need to fund local arms production. The decrease in defence expenditure in the 1980-81 period was due to the end of the guerrilla war against the white minority government of Ian Smith, which ended in 1979. In the following years defence expenditure increased because of the activities of the Fifth Brigade against "dissidents" in Matebeleland. At the same time the defence budget increased with the expansion of the Zimbabwe National Army (ZNA) whose infantry brigades increased from four in 1980 to six in 1990. This expansion of the ZNA was largely a response to external threats and especially to Zimbabwe's involvement in the Mozambican war against the Mozambique National Resistance Movement (RENAMO). In the 1984-85 period defence spending declined because there was a hope for decreased RENAMO activity following the Nkomati Accord between Mozambique and South Africa . However, the expected peace did not materialise and Zimbabwe defence expenditure went up again from the 1985-86 period when the Zimbabwe Defence Forces started raiding RENAMO bases inside Mozambique. Most of the increases in the defence budget after 1990 were due mainly to the increases in inflation in Zimbabwe, which by 1995 had reached 22.6 percent.

7. The Zdi And The Zimbabwean Economy

Table 2 shows the trends in Zimbabwe's military expenditure as a share of total government expenditure and GNP between 1981 and 1994. This table also shows the trends in the size of the armed forces.
 

TABLE 2. Zimbabwe's Military Expenditure and Armed Forces, 1981 - 1994
Year	Military Expenditure Current US$m	Armed Forces Thousands	Military Exp/Total Govt.Exp (%)	Military Exp/GNP (%)	Armed Forces per 1000 people
1981	181	74	19.2	6.2	9.8
1982	202	50	15.6	6.5	6.4
1983	207	46	16.7	6.3	5.7
1984	186	46	15.0	6.7	5.5
1985	178	46	14.4	5.7	5.3
1986	204	45	15.6	6.4	5.0
1987	250	45	16.1	7.5	4.8
1988	236	45	15.0	6.3	4.7
1989	255	51	15.0	6.1	5.1
1990	235	45	13.0	5.3	4.4
1991	262	45	14.0	5.6	4.3
1992	250	48	11.9	5.5	4.5
1993	209	48	15.0	4.3	4.4
1994	188	43	N/a	3.7	3.9
Source: World Military Expenditures and Arms Transfers (United States Arms Control and Disarmament Agency, various years)

Although it hopes to rise to that position, the ZDI is not yet the main procurement agent for the Zimbabwe Defence Forces. The Ministry of Defence conducted the biggest arms deals up to 1995 with advice from the Army or Air Force and with payment being effected directly from Treasury. Annex A to this paper shows Zimbabwe's most recent arms procurement deals in which the ZDI did not take part. ³⁷ The main reason of course being that the ZDI was not yet established when most of these deals were negotiated. Also, procurement for the Zimbabwe Defence Forces was not among the terms of reference of the ZDI at its inception.

Since 1995 however, the ZDI has begun to play the role of an arms broker for regional purchasers and international arms dealers. The ZDI has sold surplus G3 guns and ammunition from the Zimbabwean Defence Forces to some United States collectors ostensibly for use in sporting activities. ³⁸ Botswana has bought large quantities of ammunition and has ordered some military vehicles through the ZDI. There have been reports of various Chinese, Israeli and French weapons being sold to Angola, Uganda and the Democratic Republic of the Congo, the deals being brokered by the ZDI. ³⁹ In these cases the dual status of the ZDI becomes an advantage. Being a private commercial company these brokerage deals would not attract too much criticism of the Zimbabwean government, but the ZDI being wholly owned by the government would enjoy the stability, security and protection of the government. Both the buyers and the sellers are aware of this fact and they are not afraid to risk their money. ⁴⁰ The ZDI hopes that the role of arms broker could well be the answer to their hopes of breaking into the international arms market. A recent report suggests that the ZDI supplied arms, ammunition, uniforms and other military suppliers to Kabila's forces during and after their war to overthrow Mobutu. ⁴¹ It is also alleged that the ZDI has acted as a broker for arms supplied by countries such as the United States of America and South Africa.
 

TABLE 3. Value of Zimbabwe's Arms Transfers, 1981-1994
Year	Arms Imports Current US$m	Arms Exports Current US$m	Total Imports Current US$m	Total Exports Current US$m	Arms Imports/ Total Imports (%)
1981	70	0	1696	1268	4.1
1982	90	0	1639	1276	5.5
1983	20	0	1205	1135	1.7
1984	100	0	1098	1154	9.1
1985	0	0	1031	1113	0
1986	120	0	1132	1302	10.6
1987	90	0	1205	1427	7.5
1988	10	0	1304	1406	0.8
1989	60	0	1633	1542	3.7
1990	60	0	1847	1726	3.2
1991	50	0	2055	1532	2.4
1992	90	5	2220	1445	4.1
1993	10	0	2022	N/a	0.5
1994	5	10	N/a	1800	N/a
Source: World Military Expenditures and Arms Transfers (United States Arms Control and Disarmament Agency, various years).

Table 4: ZDI Expenditure, 1985-1990
Year	Total Defence Expenditure	(a) Z$ m ZDI Expenditure	(b) Z$% of ZDI Expenditure to Total Defence Expenditure
1985	377	256 101	0.06
1986	507	48 696	0.009
1987	649	2 842 644	0.4
1988	726	22 446 871	3.1
1989	768	23 518 070	3.1
1990	840	52 338 812	6.2
Sources: (a) Ministry of Defence Estimates of Expenditure (Blue Book) (b) Z.D.I. Financial Statements

8. Conclusion

The Zimbabwe Defence Industry with its factories at Elphida Farm and its various other projects is Zimbabwe's first indigenous arms manufacturing industry since the days of the Munitions Production Board of the Second World War. Although the Rhodesians flirted with the idea of a domestic arms industry during U.D.I., it was left to the ZANU (PF) government to erect factories that are solely dedicated to the production of military hardware, and the selling of arms in the regional and international arms market. The question is whether it was necessary for Zimbabwe to embark on such a costly programme whose economic viability is so uncertain.

It is important to realise that Zimbabwe's defence industry dream was conceived during the cold war era and in direct response to apartheid South Africa's regional destabilisation policy of the 1980s. The reality of the situation was that Zimbabwe's independence had to be guaranteed and protected by force of arms. In the early 1980s when Zimbabwe was flirting with a socialist experiment there was no guarantee that arms and ammunition could be made readily available for the defence of the country's newly won independence. In such circumstances the establishment of the ZDI was a matter of national survival, it was a political and strategic necessity. But, apartheid regional destabilisation methods made no distinction between the political, strategic and economic positions of their neighbours. Therefore, Zimbabwe's response had of necessity to be also a blend of the political, strategic and economic.

However, with the end of the cold war and the demise of apartheid in South Africa, the political and strategic imperatives for an indigenous arms manufacturing industry must be reconsidered. Thus, what is to be done with Zimbabwe's cold war inspired defence industry in the light of a relatively peaceful Southern Africa? There are several possibilities. The company could be liquidated and its assets disposed of as recommended by the diagnostic study of 1991. The ZDI could be privatised in the spirit of the Economic Structural Adjustment Programme and thereby allow profit-making organisations to run the country's arms manufacturing programme. The Zimbabwean government could also decide to convert the arms manufacturing factories to civilian production. Finally, the government may decide to retain control of the ZDI and allow it to continue its existence as a state enterprise. Whatever the course of action that might be chosen there is no easy solution to the problems highlighted above.

In order to be able to make the correct decision on what course of action must be taken there must be much greater transparency as far as defence programmes are concerned. The subject of indigenous arms manufacture should be presented in a public national forum where critical and appropriate questions can be asked in order to develop a more realistic defence policy. The culture of secrecy and silence which is characteristic of the present ZDI operations is out of step with current international trends and democratic practice. Transparency and freedom of information is essential so that taxpayers and their parliamentary representatives know what proportion of national resources is being allocated to indigenous weapons production. Only then will they be able to decide whether they want the ZDI's efforts to continue or not.

ENDNOTES
1. S.1952, "Brief History of the Activities of the War Supplies Committee and Its Successor the Munitions Production Board", n.d., 1948? (National Archives of Zimbabwe, NAZ)
2. S.811(2), File No 1, Index 1, Treasury Instruction to War Supplies Committee, 18 November 1940 (NAZ).
3. S.482/22/40, "Preliminary Report by the Rhodesia Scientific Association on the Resources of Southern Rhodesia with Particular Reference to its War Effort, n.d., 1939? (NAZ)
4. S.1539/A117, War Expenditure: Rofac and Sofac - Auditor General's Report, 1942 - 1946 (NAZ).
5. S.I.P.R.I., Arms Trade Registers: The Arms Trade With the Third World, The M.I.T. Press, Cambridge and London, 1975, pp 83-84.
6. P. Stiff, Taming the Landmine, Galago Publishing, Alberton, R.S.A. 1986, pp 39-85.
7. P.G. Locke, "Pistol-Carbines and Submachine Guns Manufactured in Rhodesia, 1975-1980", Heritage, No 8, 1989, pp 45-74.
8. B. Beit-Hallahm, The Israeli Connection: Who Israel Arms and Why, Pantheon Books, New York, 1987, pp 38-75.
9. P. Stiff, Taming the Landmine, p 75.
10. D. Martin, The Use of Poison and Biological Weapons in the Rhodesian War, SARDC, Harare, 1993.
11. Zimbabwe Defence Forces Farm Projects: A Policy Guideline, Ministry of Defence, n.d. 1984?
12. C. Cocker, South Africa's Security Dilemmas, Praeger Publishers, New York, 1987, pp 55-62.
13. DEF 39/63/R & D 1/4 n.d., 1982? (Ministry of Defence – Zimbabwe)
14. ZDI 1/1/87, Zimbabwe Defence Industries (Pty) Ltd: Policy Paper, Minister of Industry and Technology, 1987.
15. DEF /39/63, Status and Funding of Zimbabwe Defence Industries, Ministry of Defence, 24 July 1991.
16. ZDI 1/87, Circular No 2, 1987, 13 August 1987.
17. Minutes of a Meeting held at the Office of the Senior Minister of Finance Economic Planning and Development on 25 September 1991.
18. This is a summary of (i) Item 8 of the Initial Report, (ii) Item 3 of the 1982 Proposals and (iii) Appendix B to ZDI paper of September 1983.
19. R & D /3, March 1985 (Ministry of Defence – Zimbabwe).
20. R & D /3, March 1985 (Ministry of Defence – Zimbabwe).
21. ZDI, Third Meeting of 1987, 30 April 1987.
22. ZDI Board of Directors - Minutes of 20th Meeting Held in Harare on 11 October 1988, Annexure C.
23. ZDI/8/87 Report on the Visit to Luchaire - France, 1987.
24. Appraisal Report: Zimbabwe Defence Industries 17 May 1991, Section 3.2.1.
25. DEF 39/63 8 December 1983. DEF 39/63 22 March 1984.
26. ZDI Board of Directors, Minutes of First Extraordinary Meeting of 1987, 6 March 1987.
27. ZDI Board of Directors, Minutes of 32nd Meeting, 10 November 1992.
28. ZDI Re: Schedule of Staff Salaries, 12 November 1992.
29. ZDI Board of Directors, Minutes of 32nd Meeting, Annexure B, "Salary Increments for 1992", 10 November 1992.
30. ZDI Corporate Plan, item 6.3 (1), 1988.
31. W.E.N./dm/1/7, 22 July 1991 (ZDI).
32. W.E.N./dm/1/7, 1991 (ZDI).
33. ZDI Board of Directors, Minutes of 30th Meeting, 4 August 1992, Annexure A, "General Managers Report".
34. S/752/116, 5 February 1991 (National Archives of Zimbabwe).
35. Appraisal Report: Zimbabwe Defence Industries 17 May 1991, Section 1.3.
36. Appraisal Report: Zimbabwe Defence Industries 17 May 1991, Section 8.1.
37. The original list from the Southern African Military Information Centre at the Centre for Conflict Resolution of the University of Cape Town contains more items than those listed on this Annex. Some items were removed because they could not be confirmed.
38. John Stewart, Quaker Society of the U.S.A. Interview, Harare, August 1997.
39. Africa Confidential, Vol 38 No 8 of 11 April 1997.
40. This customer confidence was shaken when a shipload of ZDI arms destined for the Sri Lankan army disappeared in the Indian Ocean in July 1997. However, international support for the ZDI was shown by the quick involvement of the International Police Organisation (INTERPOL) in investigating the matter. See story in, The Financial Gazette, 4 September 1997.
41. ‘Zim sells military hardware to Kabila’, Zimbabwe Independent, 11/4/97
 

Appendix: ZIMBABWE'S ARMS IMPORTS
Seller	Category	Weapon Designation	Year Ordered	Year Completed	Number Ordered
Brazil	Armoured car	EE-9 Cascavel	1983	1984	90
China	Fighter	F-6	1984	1987	15
China	Fighter	F-7M Airguard	1984	1987	15
China	Fighter	MiG-17F Fresco C	1987	1987	12
China	Light tank	Type 53	1983	1984	20
China	Main battle tank	T-34/85	1981	1981	10
China	Main battle tank	T-54	1981	1981	10
China	Main battle tank	Type 59	1984	1986	35
France	Troop Carriers	ACMAT APC	1996	1996	21
France	Helicopter	AS-332L Super Puma	1994	1995	2
France	Helicopter	SA-316B Alouette	1987	1988	6
France	Utility aircraft	Cessna 337G	1976	1977	14
Israel	Helicopter	Bell 205A-1	1978	1978	11
Italy	Helicopter	Bell 412/AB-412	1983	1983	2
Italy	Helicopter	Bell 412SP/AB-412	1985	1987	10
Italy	Trainer	SF-260W Warrior	1977	1978	30
Italy	Trainer	SF-260W Warrior	1982	1983	5
North Korea	APC	BTR-152	1983	1983
North Korea	Main battle tank	T-55	1981	1981	12
North Korea	Scout car	BRDM-1	1984	1984	20
South Africa	APC	Buffel	1978	1979
South Africa	APC	Casspir	1976	1978
South Africa	APC	UR-416	1975	1975
South Africa	Armoured car	AML-60	1966	1967	12
South Africa	Armoured car	AML-60	1970	1971	7
South Africa	Armoured car	AML-60	1971	1972	30
South Africa	Armoured car	AML-60	1975	1976
South Africa	Armoured car	AML-60	1974	1975	30
South Africa	Bomber	Canberra B Mk-2	1975	1976	1
South Africa	Fighter/trainer	Mirage IIIB	1975	1976	6
South Africa	Helicopter	SA-316B Alouette	1965	1967	4
South Africa	Helicopter	SA-316B Alouette	1975	1977	45
South Africa	Helicopter	SA-330 Puma	1971	1973	2
South Africa	Lightplane	AM-3C	1970	1974	20
South Africa	Lightplane	Cessna 185	1976	1977	12
South Africa	Transport	C-47	1976	1978	10
Spain	Transport	C-212-200 Aviocar	1982	1983	6
Spain	Transport	C-212-200 Aviocar	1987	1989	6
USSR	Scout car	BDRM-2	1980	1980
UK	Bomber	Canberra B Mk-2	1981	1981	1
UK	Bomber/trainer	Canberra T Mk-4	1981	1981	1
UK	Fighter/ground attack aircraft	Hunter FGA Mk-9	1981	1981	4
UK	Fighter/ground attack aircraft	Hunter FGA Mk-9	1983	1984	5
UK	Fighter/ground attack aircraft	Hunter FGA Mk-9	1987	1987	4
UK	Fighter/ground attack aircraft	Hunter T Mk-7	1981	1981	1
UK	Jet trainer	Hawk	1980	1982	8
UK	Jet trainer	Hawk	1990	1992	5
UK	Transport	BN-2A Defender	1979	1977	4
Source: Southern African Military Information Centre, Centre for Conflict Resolution, University of Cape Town

The Southern African Centre for Defence Information (SACDI) is a joint project between the Centre for Conflict Resolution (CCR) and the Institute for Democracy in South Africa (IDASA).