THE potholes on Melbourne Road in Southerton, an industrial district of Harare, Zimbabwe’s capital, are bone-jarring. A van outside the J. Lyons factory, a surviving outpost of a once-grand British company, is being loaded with jars of processed food. Otherwise the street is quiet. The offices next door have whitewashed windows; the gates of the factory opposite are firmly shut. The empty buildings belong to Reckitt Benckiser, an Anglo-Dutch company whose brands, including Dettol disinfectant and Nugget shoe polish, span 60 countries—but no longer Zimbabwe. The Reckitt factory there closed before Christmas and has not reopened. Many other local firms have done the same.

The closures are just one sign that the economic recovery is stalling. This began in 2009 when the worthless Zimbabwe dollar was replaced by a multi-currency system based largely on the American dollar. But in the run-up to Christmas some banks were forced to put limits on cash withdrawals. SABMiller says lager sales tumbled by 25% in the year to the fourth quarter, as beer-drinkers switched to cheaper brews based on sorghum. Consumers started to feel the pinch in the second half of last year, says Albert Katsande of OK Zimbabwe, a big retailer. Prices are being cut to encourage shoppers to spend more. A country ravaged by hyperinflation, which officially reached 500 trillion per cent in 2008, may soon have deflation.

The rot set in around the time of elections, in July, which gave a thumping victory to Robert Mugabe’s Zanu-PF party and brought an end to its four-year coalition with the Movement for Democratic Change (MDC). Observers reckon that the result was largely achieved by a massive but cleverly contrived fraud, in particular through the manipulation of the voters’ roll to exclude people likely to back the MDC. But factory closures, angry queues at banks and wilting sales offer a harder-to-rig verdict on the new government.

Most harmful is its pledge, under the rubric of “indigenisation”, to force all foreign- and white-owned businesses to cede a 51% stake to black Zimbabweans. This is chasing away foreign capital. A 26% pay rise for civil servants will further strain public finances already stretched by dwindling tax revenue. And the government’s growing list of unpaid bills is restricting the precious cash-flow of private businesses.

Nor is there much faith in policymakers. Mr Mugabe appointed a cabinet in September after a delay of six weeks. Its make-up was shaped more by a need to balance factions within Zanu-PF than by the needs of the country. The new finance minister, Patrick Chinamasa, delayed his annual budget until December, then jauntily forecast growth at 6.1% of GDP in 2014 after a 3.4% increase last year. Yet in reality the economy was probably flat in 2013 and is unlikely to do much better, says John Robertson, an independent local economist. Moreover, it seemed clear from the budget statement that, despite the pleas of local businessmen, there would be little flexibility in the application of the indigenisation laws.

In any case, the legacy of hyperinflation limits Zimbabwe’s choices. The factories in Southerton have out-of-date machinery because industry could scarcely invest for the long term when its costs were spiralling upwards. The switch to the American dollar brought stability, but at a cost. As the dollar rises in value against other currencies in the region, such as South Africa’s rand, it makes Zimbabwean business less competitive. Banks have no reliable backstop because Zimbabwe no longer prints the money it uses. Savers will commit their money to deposits of 90 days at most. Banks can safely lend for long enough to finance a grocer’s turnover, but not to retool a factory or build a hotel.

The supermarket shelves are still full, but two-thirds of goods are imported. Export revenue does not come close to covering the import bill. The current-account deficit last year was around 23% of GDP, according to the budget statement, and was funded by a mix of remittances, foreign aid and hot money lured by the high interest rates offered by some banks. Dollars have become scarcer, in part, because those sources are less forthcoming. Remittances from the millions of Zimbabweans who work in South Africa are likely to shrink because of the stagnating economy down there. Western governments are charier about dishing out aid that goes through a government they cannot trust. And the flow of hot money has slowed because of bad debts in locally owned banks.

Zimbabwe needs long-term capital to upgrade its factories, roads and power stations. Meagre local savings means this must come from abroad. A group of businessmen recently toured Europe to woo investors. “In all locations, indigenisation is the number one issue,” says Charles Msipa, head of the Confederation of Zimbabwe Industries, who led the delegation. Companies, he says, are loth to invest in ventures they cannot control. Foreign businessmen fear they will not be able to claim an adequate share of the profit.

A stamp of approval from the IMF would make foreigners more comfortable, says Mr Msipa. But a staff-monitored programme has already had to be extended by six months because of missed deadlines by the government, including a promise to account more clearly for revenue from state-owned diamond mines. A deal to clear Zimbabwe’s huge foreign debts, including money owed to the World Bank and IMF, seems impossibly distant.

But without it there can be no large-scale official borrowing by the government. Mr Chinamasa recently went to China to drum up cash, but returned empty-handed. China, on the business front, is proving no softer a touch than the West. Fears are growing of a new fiscal crisis and even of a return of the Zimbabwe dollar, if the government can find no other way to keep itself going than printing money.

So Mr Mugabe and his government are stuck. Tendai Biti, who was the MDC’s austere and widely respected finance minister in the coalition government, says there are easy fixes for the economy’s troubles: “Talk to the West; balance the books; and manage expectations to instil confidence.”

But such strictures are unlikely to be accepted by Mr Mugabe, who turns 90 this month and whose health is again a source of frenzied speculation. He has been little seen in public at home in the past few months, but is often in Singapore, where he is thought to receive medical treatment.

Waiting for the old man to go

His death may open a path to reform. But the infighting that is likely to ensue could be bitter and disruptive. Joice Mujuru, the vice-president, and Emmerson Mnangagwa, the justice minister who served for many years as head of security, are the leading contenders for the crown, but others may join the fray. Mrs Mujuru is considered more amenable to an opening to the West and to reconciliation with the MDC, which is why it is widely assumed that the death of her husband, Solomon Mujuru, a former head of the army, two-and-a-half years ago in a fire was at the hands of a hardline Zanu-PF faction.

Diplomats and businessmen now tend to rule out any real political or economic progress until Mr Mugabe dies. “We are just waiting for him to go,” says one of them. “Until then, everything is on hold.” Meanwhile, the country is in danger of sliding even further into penury.