RHODESIA: ECONOMIC PROGRESS DESPITE SANCTIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001700040044-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 18
• Document Creation Date: December 20, 2016
• Document Release Date: March 30, 2006
• Sequence Number: 44
• Publication Date: November 1, 1972
• Content Type: IM

 Apprc ( 8 9: CIA-Roi Y00 W170004004 -8
Secret
DIRECTORATE OF
INTELLIGENCE
Intelligence Memorandum
Rhodesia: Economic Progress Despite Sanctions
Secret
FR IM 72-161
Copy No. November ~197
r~
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CENTRAL INTELLIGENCE AGENCY
Directorate of Intelligence
November 1972
INTELLIGENCE MEMORANDUM
RHODESIA: ECONOMIC PROGRESS DESPITE SANCTIONS
Summary
1. Rhodesia has enjoyed considerable economic success since 1965
in spite of sanctions imposed under British and UN aegis. Manufacturing
has benefited from an import replacement boom, notably in consumer
manufactures and building materials. The mining industry, led by nickel,
has expanded to partly offset the loss of foreign exchange earnings from
tobacco and sugar. And important leaks in the international controls over
Rhodesia's foreign trade have given Salisbury considerable room for
maneuver. During 1968-72, real economic growth is expected to average
more than 7% annually.
2. Prospects are for somewhat slower economic growth beyond
1972. A continuing lack of foreign development capital, transport
bottlenecks, and the probable inadequacy of export growth to finance rising
requirements for imporied machinery and equipment wil; hold down growth
rates. Even if sanctions were shortly to be removed, Rhodesia would need
several years to regain lost markets and to build up those imports needed
for long-term economic development.
3. In response to Rhodesia's Unilateral Declaration of Independence
(UDI) in late 1965, the United Kingdom imposed economic sanctions aimed
at forcing Rhodesia's resubmission to British rule. These sanctions were later
broadene,i under L'N sponsorship in 1966 and 1968 to include practically
all foreign trade, capital flows, and other economic ties with the outside
world. Meetings between British and white Rhodesian representatives in
1966, 1968, and 1971 failed to resolve the dispute. This memorandum
note: This memorandum was prepared by the Office of Economic Research
and coordinated within the Directorate of Intelligence.
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44
*SALISBURY r
~
} MOZAMBIQUE
RHODESIA
reviews Rhodesia's economic experience during seven years of sanctions and
assesses the prospects for growth over the next several years.
RHot ESIA" I,.. ,
Alllrranr ~ r?-?~`'I nJ~I
', _.'~ Ilrrnn
BOTSWANA
REPUBLIC OF
SOUTH AFRICA
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The Economy Before UDI
4. Although Rhodesia became a self-governing colony of the United
Kingdom in 1923, significant economic development occurred only after
World War II. Spurred by greatly expanded tobacco production and sales -
principally to the preferential British market - and by accelerated European
immigration and large capital inflows, the Rhodesian economy grew at an
average annual rate of about 12% during 1944-60. Growth was also fostered
by the formation in 1953 of the Federation of Rhodesia and Nyasaland -
comprised of the British colonies of Southern Rhodesia (now Rhodesia),
Northern Rhodesia (now Zambia), and Nyasaland (now Malawi) -- which
expanded the market for Rhodesian manufactures. However, economic
uncertainties ascribable to events leading up to the breakup of the
Federation in 1963 slowed annual growth to an average of less than 4%
during 1961-64. Recovery began in late 1964 and, at the time of UDI,
Rhodesia was expecting a period of dynamic growth.
5. Prior to sanctions, Rhodesia's principal commercial ties were with
the United Kingdom, Zambia, and South Africa. Trade with the United
Kingdom prospered under Commonwealth treaty arrangements, which
included a guaranteed market for part of Rhodesia's tobacco and sugar crops
as well as lower tariffs, both on Rhodesian goods entering the British market
and on British goods sold to Rhodesia. The United Kingdom purchased
half of Rhodesia's tobacco exports and was a major buyer of other primary
commodities, including beef products, sugar, and asbestos; the United
Kingdom also provided almost one-third of Rhodesia's imports, including
about half of the machinery and transport equipment and much of the
chemicals and other manufactures imported by Rhodesia.
6. Zambia was nearly as important a market as the United Kingdom,
taking more than one-fifth of Rhodesia's exports, mostly manufactured
goods. The dissolution of the Federation in 1963 and Zambia's subsequent
tariff on Rhodesian goods failed to dampen this trade. South Africa provided
almost one-fourth of Rhodesia's imports, largely manufactures, and bought
about one-tenth of its exports. The United States, principally a supplier
of machinery and a purchaser of minerals, accounted for just 4% of
Rhodesia's pre-UDI trade.
The Application of Sanctions
7. In retaliation to UDI, the United Kingdom attempted to force
Rhodesia's recantation through a program of economic sanctions. The initial
move consisted of a British-imposed embargo on trade with Rhodesia,
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voluntarily supported by the United States and a few other countries. When
this effort failed, Britain requested the UN Security Council to act, and
in December 1966 the United Nations voted mandatory sanctions on
Rhodesia's major exports and a few strategic import s. In May 1968, UN
sanctions were extended to virtually all of Rhodesia's foreign trade, capital
flows, and other economic ties with the outside world.
8. The effects of sanctions on Rhodesia's economy have been
blunted by the failure of all but a few countries to enforce the sanctions.
most, governments other than those of the United States, the United
Kingdom, and Canada have paid mere lip service to sanctions, doing little
or nothing to enforce compliance. Strong foreign demand for Rhodesia's
minerals and Salisbury's willingness to cut export prices and to pay premium
prices for imports have encouraged traders to operate under the guise of
trading with South Africa and Mozambique. Furthermore, South Africa has
ignored restrictions on capital movements, in view of Rhodesia's inviting
post-UDI investment opportunities.
General Economic Trends Since UDI
9. T!ie economy, slowed by sanctions in the early post-UDI period,
has sustained an impressive growth record since 1968. Highlighted by
excellent agricultural years in 1969 and '.971, real gross national product
(GNP) increased at an average annual rate of more than 8% during 1969-71
(see Table 1). The substitution of domestically produced goods for foreign
products caused manufacturing output to soar; average annual growth
increased 13% during 1967-71 (see Figure 1). During the same period,
construction activity nearly tripled because of increased commercial and
residential demand. Mineral production, led by a boom in nickel output,
rose 30% in 1969, but depressed metal prices slowed expansion in 1970
and 1971. Gross fixed capital investment, increasing at an average annual
growth rate of 21% during 1967-70, was stimulated by the high level of
activity in manufacturing and mining.
10. Government spending has played a key economic role since UDI
in the maintenance of agricultural income and in the promotion of exports.
Salisbury nearly doubled expenditures during the period covered by fiscal
years (FYs) 1965-72,11) to an estimated level of $470 million. Agricultural
assistance - accounting for more than one-tenth of post-UDI government
spending - has taken the form of subsidies, loans, drought relief, production
1. The Rhodesian fiscal year ends on 30 September of the stated year.
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Rhodesia: Composition of Gross Domestic Product by End Uses
1965
1966
196'
1968
1969
1970
1971
Private consumption
686
699
764
823
878
975
N.A.
Gross fixed capital
formation
133
111
143
193
216
237
N.A.
Government current
expenditure
129
128
139
148
160
170
N.A.
Net increase
in stocks
13
53
46
62
52
62
N.A.
Net exports of goods
and services
78
23
-7
-50
35
9
N.A.
Gross domestic product
(GDP) at current
market prices
1,038
1,015
1,085
1,175
1,341
1,455
N.A.
Net income paid abroad
-35
-22
-16
-19
-24
-27
N.A.
Gross national product
(GNP) at current
market prices
1,003
993
1,069
1,156
1,317
1,428
1,628b
GNP at constant 1965
prices
1,003
958
1,015
1,077
1,192
1,241
1,365b
Annual changes
in real GNP
--
-4.5
+5.9
+6.1
+10.7
+4.1
+10.Ob
a. Because of rounding, components may not add to the totals shown.
b. Provisional.
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Rhodesia: Production in Agriculture and
Selected Industrial Sectors
Million us
1000 r--
Figure 1.
Manufacturing
'riculLure ,,,~?""'-?_~'-"?".~'??
Construction
quotas, and price supports, all designed to encourage diversification into
crops previously imported.
11. The promotion of exports has taken the form of tax relief (to
permit price cutting) and expenditures to build up the capacity of new
export industries and related service industries. Post-UDI spending for
railroads totaled about one-sixth of domestic capital expenditure through
FY 1970, and this share subsequently has been increased on a priority basis
to more than one-third. This domestic effort has emphasized thp, production
of rolling stock and line improvement. Nonetheless, sanctions have prevented
Rhodesia from acquirii,g as many new locomotives as it needs, and the
capacity of the rail system is an important constraint limiting the expansion
of mineral and agricultural exports, all of which are dependent on rail
transport. Finally, Salisbury has encouraged a high degree of private
investment in sectors earning foreign exchange, principally mining,
manufacturing, and tourism.
Production
Manufacturi
12. With the rapid growth in output of import substitutes.
manufacturing has displaced agriculture as the principal contributor to
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domestic income, gencrating almost one-fourth of gross domestic product
in 1971. Although stagnant in the imn'ediate post-sanctions period,
manufacturing was soon spurred by the; government's imposition of controls
over imports. More than 1,000 new industrial ventures (most of them quite
small) have been established since UDI. During 1969-71, gross manufacturing
output increased by more than 50%, to a record level of $947 million.
The industrial boom was concentrated on light consumer goods (such as
cigars, synthetic yams, clothing, watches, and sporting goods) and building
materials (such as concrete roofing tile and irrigation pipe). In contrast,
growth in the output of capital equipment such as ore-processing machinery
has been slight. During 1965-71, metal processing increased 150%, output
of non-metallic mineral products nearly tripled, textile production more
than doubled (largely as the result of expanded sales to South Africa), and
production of clothing and footwear rose about 80%. In the first seven
months of 1972, manufacturing continued to expand at the rapid 1971
pace.
Agriculture
13. Rhodesia's agricultural sector has continued to expand despite
sanctions, although agricultural exports remain substantially lower than
pre-UDI levels. Cotton, corn, and wheat have led the expansion in
agricultural output of nearly 50% between 1965 and 1971 - to a level
of $377 million in 1971.
14. Tobacco has been crippled by the loss of foreign markets. Before
UDI, Rhodesia was the world's second largest producer of flue-cured
tobacco, supplying about one-fourth of the world market. Since 1967,
production has been maintained at less than 50% of the pre-sanctions level
of 125,000 short tons per year. (For changes in the level of post-UDI
production quotas, see Table 2.) Foreign sales since 1966 are down more
than $100 million a year, or more than three-fourths. Salisbury has kept
tobacco growers' income at a high level relative to foreign sales revenue
at the cost of extensive stockpiling. Annual surpluses since sanctions have
amounted to about one-third of production. Rhodesia's stock of flue-cured
tobacco in 1970 was about 160,000 tons, worth an estimated $100 million
at cost - equivalent to almost one-third of the value of total agricultural
output for that year. Additions to the stockpile from the 1972 and 1973
crops will probably be larger than normal because production quotas were
raised in anticipation of a settlement with Great Britain. Government
expenditures to cover tobacco trading losses have been heavy, amounting
to some $75 million - more than 5% of total expenditures - during
FYs 1969-72; an additional $28 million has been budgeted to cover losses
in FY 1973. Furthermore, the storage of unsold tobacco has cost Salisbury
an estimated $65 million since independence.
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Rhodesia: Quotas, Production, Sales, and Stockpiles
of Flue-Cured Tobacco by Crop Yeara
1967b
1968
1969
1970
1971
1972
1973
1974
Production
quotas
100
66
66
66
66
72
73c
60c
Productiond
93
59
60
63
N.A.
N.A.
-?
Volume of
salesd
40
44
39
55
N.A.
N.A.
Accumulated
stockpile, at
end of crop
yeard
118
133
154
162
N.A.
N.A.
a. Crop years ending 30 June of stated year.
b. Production quotas were initiated in the 1967 crop year.
c. Scheduled quotas.
d. Estimated.
15. Sugar sales to Western Europe have kept this important industry
alive. The second most important export crop prior to sanctions, sugar was
stockpiled after the loss of major markets in the United Kingdom, Canada,
and Zambia. Since 1967 the stockpile has been largely drawn down as the
result of reduced output and expanded sales, especially to Portugal.
16. With the cutbacks in tobacco and sugar, emphasis has teen
switched to products less vulnerable to sanctions, principally cotton, corn,
wheat, and meat products. Cotton has become one of the most successful
crops since independence, its output increasing more than seven-fold to an
estimated 175,000 tons in the 1971 crop year. Cotton exports go primarily
to South Africa. Corn production has also spurted, from 290,000 tons in
1965 to an estimated 1.3 million tons in 1971. Domestic needs are about
500,000 tons per year, leaving most of the crop available for export, largely
to Japan. Almost entirely dependent on imports for wheat prior to
sanctions, Rhodesia increased domestic wheat production more than twenty
times from 1965 to 1971 to a level of 90,000 tons, equivalent to
three-fourths of domestic consumption. Diversification away from tobacco
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and sugar has also benefited cattle raising - the number of cattle increased
from 1.6 million in 1965 to 2.7 million in 1971. Foreign sales of beef,
? to markets in Africa and Western Europe, are substantially above the
pre-UDI level.
Minin
17. Mineral production was relatively stagnant for a few years after
UDI, growing less than 2% annually during 1966-68. However, the decline
in earnings from agricultural exports stimulated the search for new mineral
resources, and much of Rhodesia's capital inflow in the late 1960s went
into expansion of the mining industry. Led by increased nickel production
and by buoyant world mineral prices, the value of mineral output increased
about 30% in 1969. Since 1969, depressed prices have slowed expansion
and forced the delay of potentially lucrative extractive operations. Mineral
production was worth $142 million in 1971, almost 60% above the
pre-sanctions level.
18. Since 1965, investment in nickel extraction and processing has
amounted to $40 million, including $28 million by the Anglo-American
Company of South Africa in the development of two mines, a smelter,
and a refinery. This investment has increased Rhodesia's nickel productive
capacity more than ten times since sanctions, to about 10,000 tons of
metallic nickel per year. Production, exported in the late 1960s
through South Africa as unrefined nickel matte valued at about $8 million
annually, is now being shipped to a wider market as refined metal. The
potential value of annual nickel exports at full-capacity production levels
and at mid-1972 world prices is more than $25 million. Slackening of world
nickel demand has forestalled further significant investment in extractive
efforts; a $28 million expansion had been planned by South African
interests.
19. Foreign demand for Rhodesia's other major mineral exports -
asbestos, copper, gold, and chromite - has kept production and export
volume at high levels. Prior to UDI, asbestos was the most valuable mined
product. Production apparently has been reduced somewhat from the 1965
level of about $20 million. Nonetheless, one of the country's principal
producers has been successful enough since UDI to begin a $35 million
expansion program, financed largely from blocked profits.
20. High world copper prices in the late 1960s stimulated the further
development of Rhodesia's copper industry. Capacity now is more than
50% above the pre-sanctions level. Foreign sales have generally increased
since sanctions, although sales have lagged sin( a 1969 in the face of the
soft world copper market. At full production and at current world market
prices, copper sales would be worth almost $30 million annually.
9
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21. Gold production, tenth highest in the world, has been maintained
at high levels since sanctions by a program of government aid to mines.
Salisbury, which has bought all mined gold since 1965, has had little
difficulty in finding foreign purchasers. Annual gold sales normally amount
to about $18 million, but higher prices are likely to increase earnings
substantially in 1972.
22. Rhodesia's chromite industry, initially hurt by sanctions, has
probably returned to pre-UDI levels of production and sales. Production
most likely exceeds 600,000 tons per year - worth more than $20 million
at current world prices - placing Rhodesia fourth among world producers.
23. US purchases of Rhodesian minerals, halted in 1966 in compliance
with UN sanctions, were allowed to resume with the passage of the Byrd
Amendment in late 1971.(3) Importers have shown considerable interest
in Rhodesian chromite, chromium alloys, and nickel. The United States
traditionally was the major buyer of metallurgical grade chromite, importing
$5 million of Rhodesia's $11 million worth of chromite exports in 1965.
The value of Rhodesian chromite imported into the United States in seven
months of 1972 was $2.7 million, more than half of the 1965 imports.
Shipments of ferrochromium and ferrochromium silicon, imported into the
United States from Rhodesia for the first time in 1972, were worth $1.4
million through July. Nickel purchases, another new export to the United
States, were valued at $1.4 million in this period. Small quantities of
asbestos fiber and beryllium ow have also been imported in 1972.
24. Rhodesian mineral producers, spared the high cost of evading
sanctions, offered lower-than-market prices to US importers. Recent sales
of Rhodesian chromite to the United States were at prices more than 20%
below those of Soviet chromite of comparable grade, even at the reduced
prices now offered by Soviet sellers.(4) Discounts of about 8% have made
Effective 1 January 1972, the United States lifted its sanctions on importing certain
"strategic" materials, including all of Rhodesia's major mineral exports; all other
sanctions remained in effect.
4. Since the implementation of the Byrd Amendment, prices for metallurgical grade
chromite from the USSR have fallen about 18% below 1971 levels. Previously, the
USSR -- the principal source of US imports of this grade of chromite .. had nearly
doubled its prices after Rhodesian chromite was removed from the world market.
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Rhodesian nickel popular with US buyers in the current soft world market.
US importers apparently received little, if any, discount on purchases of
chromium alloys.
25. Rhodesian asbestos and copper are not likely to become popular
with US importers even at prices shade. below world market prices.
Pre-sanctions sales of chrysotile asbestos to the United States, worth more
than $2 million, represented less than 2% of total US imports of this type,
and, since sanctions, Canadian producers have developed the capacity to
supply all US asbestos needs. The $200,000 of Rhodesian copper sales in
1965 was a trifling part of US copper imports for that year, and current
US requirements for copper imports are likely to be filled by present sources
of supply, mainly Canada.
Tourism
26. In 1971, foreign earnings from tourism were probably double the
1965 level of $15 million. Almost all visitors are from neighboring countries,
principally South Africa, although travelers from outside Africa are arriving
in increasing numbers. Investment, mostly from private domestic sources,
continues to expand hotel facilities.
Foreign Trade and Payments
27. At first a major casualty of sanctions, exports recovered to within
9% of their pre-UDI level by the end of 1971. Exports fell more than
one-third in the first year of sanctions; by 1968 they had declined about
40% below the 1965 level of $460 million (see Figure 2). Foreign sales
of Rhodesia's high-quality tobacco - the principal export, accounting for
almost 30% of foreign earnings in 1965 - suffered most, with sales falling
from $132 million in 1965 to less than $30 million annually since 1966.
Tobacco was particularly affected because of extensive links with the UK
market. Lust sales have not been regained on other markets, because
Rhodesian tobacco is easily identified and because consumer preferences
discourage changing tobacco blends.
28. Sales of sugar, the second most important export, also dropped
sharply; they now have almost recovered to the pre-UDI level. Exports of
high-grade chromite also declined, falling to about 80% of pre-UDI levels,
but sales have recently -ecovered to the old level. Other important export
commodities, such as asbestos, copper, gold, and meat products, have been
little affected by sanctions. The overall fall in exports bottomed out in
1968, and they have since risen to within $40 million of their 1965 level.
29. Although imports dropped sharply immediately after sanctions,
they bounced back after 1966 and now are more than 20% above the
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Million US $
500
Rhodesia: Balance of Trade
1965 66 67 68 69 70 71
Figure 2
f xports
urpus, a icit Imports
pre-UDI level, as indicated in Table 3. A British oil embargo in late 1965
cut off supplies to Rhodesia's petroleum refinery and necessitated the
import of refined petroleum products through Mozambique and South
Africa. Petroleum consumption fell 24% below normal levels in 1966, after
supplies were rationed by the government. Rationing was formally ended
in 1971. Imports of machinery, transport equipment, and other
manufactured goods, traditionary supplied largely by the United Kingdom,
were sharply curtailed in the early post-UDI period. With the post-1968
expansion of foreign earnings and with the reorientatio;i of trade patterns,
however, imports recovered rapidly, increasing $120 million in 1970-71.
Ex--.pt for a few luxury items and some important types of capital
equipment, import requirements are now being met.
30. By 1968 the net deficit on foreign payments for services,
investment income, and transfers had fallen to less than half the 1965 level
of $75 million. The drop stemmed from a halt in interest and dividend
payments on the more than $200 million in British investments in Rhodesia
and from a decrease in freight and insurance costs resulting from reduced
trade. The rapid upturn in foreign investment in 1968 and the post-1968
expansion of foreign trade brought the net deficit on transfers, net foreign
investment, and serv"ce payments back to a level of $62 million.
31. Net capital inflows have been unusually high since independence
mainly because of sharp cutbacks in capital outflows. In response to curbs
imposed by tie United Kingdom and Zambia on transfers of capital to
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Rhodesia: Balance of Payments?
Million US $
1965
1966
.1967
1968
1969
1970
1971
Trade balance
117
49
27
-37
39
33
2
Exports
460
300
297
271
337
383
420
Imports
-343
-251
-270
-308
-298
-349
-418
Services (net)t'
-30
-19
-28
-13
-4
-21
-28
Investment income
and transfers (net)
-45
-27
-20
-21
-30
-3i
-34
Net on current
account
42
3
-21
-71
5
-19
-60
Net on capital
account
12
-5
36
55
14
25
34
Overall balance
54
-2
15
-15
19
6
-26
a. Because of rounding, components may not add to the totals shown.
b. Including freight, insurance, and travel.
Rhodesia, Sa1iEbi ry ceased servicing its UK debt and defaulted on its
long-term obligations. These included payments on a $154 million loan from
the International Bank for Reconstruction and Development (IBRD), which
the United Kingdom as guarantor was forced to pay. Salisbury also clamped
limitations on purchases of foreign securities by its citizens. These measures
blocked practically all capital outflows, which had amounted to about $20
million annually.
32. Foreign investment since independence has been fairly large. Most
investment has come from South Africa and has been the result of attractive
opportunities in mining and manufacturing. Much of the investment
occurred in 1968-70, when gross fixed capital formation averaged more than
60% above; pre-UDI levels. However, because of its divorcement from
traditional international capital markets. Rhodesia has been unable to meet
post-UDI capital needs in the public sector, primarily in transportation,
where the need for locomotives is particularly acute.
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Consumption and Living Standards
33. Living standards for Rhodesia's whites have improved only slightly
since UDI, while living standards for bl', k Rhodesians have remained the
same. Since 1965, employment of whites has increased at about the same
pace as the white population, aid the whites' real per capita wages have
risen an average of less than 1% annually. The benefits from this increased
purchasing power have been limited, however, by the drop in imported
luxury goods. Rhodesia's 5 million blacks live largely in traditional
subsistence patterns. Less than one in aix earns wages, mainly in unskilled
jobs.
34. Living standards have been suppressed because rapid population
growth and inflation have largely offset rises in consumption. Rhodesia's
population - which has one of the fastest growth rates in Africa - increased
3.4% annually from 1965 to 1971. Cost-of-living increases were at lean
4% per year in this period, although the government's consumer price index
indicates an annual rise of less than 3%. These factors have limited increases
in real per c Oita GNP to 2% annually.
Prospects for the Economy
With Continued Sanctions
35. Rhodesia's post-1968 economic boom is continuing, with real
growth in 1972 exceeding 5%. The rapid expansion of manufacturing shows
no sign of abating. Agriculture is headed toward a favorable year and should
produce substantial exportabie surpluses. Earnings from mineral exports will
probably rise with higher gold prices and the opening of the US market
to Rhodesian minerals. Nevertheless, the overall expansion of exports almost
certainly is not keeping ab:?east of the pressure for additional imports.
36. After 1972, economic growth is likely to be limited by
balance-of-payments constraints. The growing need for machinery and parts
to replace the aging pre-UDI stock will intensify pressures to import.
Furthermore, because the possibilities for labor-intensive import substitution
have largely been exhausted, further expansion in manufacturing and
agriculture will require increasing inputs of machinery and equipment, most
of which would have to be imported. Import growth, however, is likely
to be constrained by the less rapid expansion of exports. Growth in exports
after 1972 will be limited by difficulties in the transport sector and,
probably, by continued low world market prices for key minerals. Moun`,ing
service payments will probably put added pressure on the balance of
payments. With foreign exchange reserves at a low level, the effects would
quickly be felt. Salisbury will have to impose str?ter curbs on imports
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SECRET
if the demand for macIdnery, raw materials, and spare parts outstrips the
growth in exports. In any event, the outlook is for retardation of growth
after a s'iccessful period of makeshift expansion,
37. Longer term development, especially in the public, sector, will
likely suffer from a continuing scarcity of foreign capital. Export earnings
and South African capital will continue to be insufficient to cover all of
Rhodesia's needs. Furthermore, as long as sanctions are enforced, the large
budget support for agriculture will limit assistance to other productive
sectors such as mamu`acturing and mining.
Without Sanctions
38. The lifting of sanctions - not a likely prospect in the near
future - would bring Rh adesia net long-term gains. Short-run benefits
would be offset by resumption of payments on foreign debts and the
transfer abroad of accumulated profits. Recovery of tobacco sales to
pre-UDI levels could take several years. The United Kingdom, the major
pre-sanctions buyer, is unlikely to return to its former dependence on
Rhodesian tobacco, so new markets would have to be found. Long-term
development, however, would be accelerated by capital from the
international markets, especially for Rhodesia's mining and transport sectors.
39. If sanctions were ended, Rhodesia would return only in part to
pre-UDI economic patterns. Rhodesian exports would re-enter UK markets
but at less than pre-UDI levels because of changed consumer preferences
and the loss of Commonwealth preferential treatment. Zambia, a major
pre-sanctions purchaser of Rhodesian manufactures, most likely would
continue its politically motivated ban on imports from Rhodesia. Rhodesia
would probably import largely from pre-UDI suppliers, mainly in the United
Kingdom and South Africa. Capital flows most likely would resume
pre-independence patterns, principally with the United Kingdom and South
Africa. Pre-UDI agricultural patterns would be restored in the lcnger run,
as growers of corn, cotton, and wheat would be encouraged to return to
production of the more lucrative tobacco. The eventual recovery of tobacco
sales would eliminate the need for most of the agricultural assistance
currently provided, permitting g )ve.rnment spending to be shifted to more
productive uses. Most of the manufacturing industries developed since UDI
probably would survive, although requiring continued import controls to;
protection against foreign competition.
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