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Zimbabwe’s Economy: Can It Restore Its Splendour?

 10 min read / 

These days, when people think of Zimbabwe, they think of this failed third-world state until a few days ago was run by a brutal dictator. Little do they know that this nation was, until the mid-1990’s, one of Africa’s better-performing economies.

Former Tanzanian Julius Nyerere, not long after Zimbabwean independence, is reported to have told Robert Mugabe that “You have inherited a jewel, keep it that way”. Needless to say, this advice was not kept. As the world has seen, this jewel was allowed to be scratched, dropped, then left to collect dust.

There are serious problems that require serious investment and economic reform to allow Zimbabwe to prosper. Infrastructure needs serious investment, with the Kariba Dam in danger of collapsing, the transport network likewise has been neglected with poorly paved roads and trains from the colonial era being brought back into service.

But the biggest problem, alongside corruption, has to be government interference with the economy as a whole, with centralised economic planning and state ownership proving to be a disaster. But while there is doom and gloom, there is hope.

The Case for Optimism

This jewel, as badly damaged as it is, is still a jewel. It just needs tender love and care. When it comes to mining, the nation is rich in raw resources, particularly gold, platinum, diamonds and coal.

The education system, one of Mugabe’s few positive acts, is one of the best in Africa. Agriculture is an area with a future, with history proving it can be one of the strongest economic sectors in the country. Furthermore, there is an opportunity to kickstart the tourism sector, with promising growth in recent years. It is worth identifying strengths to build on, and weaknesses to repair if Zimbabwe wants to recover.

Left to Rot

The Kariba Dam was once the showpiece of the white minority government, with the artificial lake behind it becoming a tourist and recreation attraction in its own right. However, this dam, constructed in the 1950s, has been neglected over the decades, so much so it has been likened to Mosul Dam in Iraq.

Although not at immediate danger just yet, due to drought and overuse culminating in a regional water crisis, it is feared as sudden flood, of which the Zambezi Valley region is known for, could spark a cascading tsunami. The BBC argues that, should the dam collapse and cause a tsunami, it would destroy the downstream Cahora Bossa Dam in Mozambique, which would have a serious impact on Southern Africa’s hydroelectric capacity as well as put up to 3.5 million lives at risk.

It is a similar story across the country. While not threatening to cause a regional catastrophe, Zimbabwe’s infrastructure all round is in a serious state of disrepair. The national road network has itself become a death trap. 21 people were killed when a truck carrying mourners collided with a tanker in October 2013.

In July 2014, a collision between a truck and a minibus killed 16. In June 2017, 43 were killed when a bus crashed into a tree. It may seem horrific, but when the conditions of the roads are examined, such accidents are waiting to happen. The state newspaper, The Herald, acknowledged that the lack of funding was of a serious concern in 2012.

It is a similar story when it comes to rail. Zimbabwe is lucky as it is situated in a choke point between South Africa and the rest of Eastern and Central Africa. However, little investment has been made, with only 3077km of rail tracks, of which all but 313km is electrified and all but 28km is dual track.

Whilst it is argued that this is sufficient as long as it is well maintained, this has not occurred, with the Railway Association of Enginemen referring to the rail network as a ‘death trap’. Diesel shortages have also seen the return of steam engines, primarily for safari excursions and shunting in the railyards of Bulawayo. The government-owned operator, National Rail Zimbabwe, was close to collapse in 2010, with salary cuts of 50% in 2016, displaying that the situation is still precarious.

The Problem

The root of this rail calamity, as is with much of Zimbabwe’s critical infrastructure, is government interference and bureaucracy. Now considering that the governing party, ZANU-PF, is a strong advocate of nationalisation, this is no surprise.

However, its application has proven to be disastrous. The Land Reform programme was such a debacle that even Mugabe himself admitted it was poorly orchestrated.

Indigenisation, the policy where 51% of a foreign business in Zimbabwe must be owned by a local partner, is said to be scaring away much needed foreign investment. Parastatals such as NRZ are said to be seriously mismanaged, causing friction with the workers, while haemorrhaging its budget.

All this begs the question, if, as the government line has been consistently, nationalisation has been implemented to redistribute wealth to ordinary Zimbabweans, why are they not receiving the benefits, instead dealing with failing infrastructure? The answer to that is clear – corruption, fed by mismanagement and patronage.

On the issue of opulence, for a president who was claimed by his supporters to be one of the worlds poorest, Mugabe lived a life of extravagance while in office. The Land Reform programme was abused by the ruling class – by 2010, The Guardian estimated that 40% of land seized from white farmers had been distributed among Mugabe and fellow cronies.

Considering its financial woes, NRZ has ordered a forensic audit to examine the extent of embezzlement. Corruption has become such a problem it is considered the norm, creating a two-tiered system. Its been argued that Zimbabwe loses $1 Billion annually from corrupt practices, though that figure could be higher.

Can Zimbabwe Rebuild?

It might be argued that Zimbabwe lacks a bright future, that it is stuck in an endless cycle. However, that would be ignorant of its many strengths. One of the reasons NRZ has been keen on using steam locomotives is the abundance of coal. There is reportedly estimated to be up to 26 billion tonnes of coal reserves.

Although this claim is contradicted by international organisations who argue it is only half-a-billion, it is still a significant amount for a small economy. With extraction per annum around the 3 million tonnes mark, the market is prime for a sustainable increase. Likewise, gold, diamonds and platinum are ripe for exploitation.

Considering the rise of the burgeoning Asian middle class, these are areas worth exploring however, there are several handicaps. With gold, there is a culture of small-scale mining.

Despite gold-mining being the third-biggest market, a lack of ability for these small miners to explore, as well as the amount of unused mine claims, hampers development. As for platinum, it is known the nation has the second largest reserves on earth, and the Marange Diamond fields are said to be one of the worlds largest.

Despite this opportunity, state-ownership has restricted the ability for Zimbabwe to encourage mining. The market is heavily politicised, with the Parastatal organisation the Zimbabwe Mining Development Commission unable to rehabilitate older mines due to the cost. Accusations of plundering by the ruling elite and the ever-present threat of nationalisation contribute to foreign investors’ fears.

Education-wise, the primary, secondary and tertiary systems are a source of pride for Zimbabweans. While the colonial-era private school system still educates the nation’s elite, the decision by Mugabe to invest in the education system has contributed to a well-educated populace, with a literacy rate of 87%, putting it among the top-20 bracket in all Africa.

Some concerns do linger, however. There has been a decline in standards in recent years, no doubt tied to the enduring financial crisis, to the point it is claimed that 51% of men have never had a formal education. And while the education system is by principle free and compulsory, tuition and other material fees are an obstacle for many.

However, by African standards, Zimbabwe’s progress is remarkable. While in the colonial era there were only two universities, today there are fifteen. But this creates its own challenges. Because of the high unemployment rate, there is a mass exodus of graduates across the Limpopo in search of better opportunities. Since 1996, students at
university have to pay tuition fees – around $500.

This may sound a pittance to western readers, but considering the unemployment rate and the fact that Zimbabwe’s average salary is $253 per month, this is a lot. For many Zimbabweans, even being well educated does not even come close to guaranteeing a future.

Other Sectors

It would be silly to conclude without mentioning the agricultural and tourism sectors. Tobacco is a cash crop, with the industry being the second largest in Africa.

Despite a drastic collapse resulting from land reforms, the industry recovered to achieve its third highest harvest in 2014. China is by far the largest market, with 54% of all exports headed to Chinese consumers.

However, this is just one bright spot. Maize has not recovered from land reforms, with an annual yield of 400,000 tonnes well short of the estimated 2.2 million needed to keep the nation’s stomachs full. As for tourism, this is one of the big earners. Blessed with sites such as Matopo National Park, Hwange reserve, Victoria Falls and Great Zimbabwe, this is a tourism mecca.

However, this industry naturally declined with the rest of the nation once the economy began to decline. Despite the industry boosting the economy by $890m in 2016, it needs improvement. Overpricing and the behaviour of the police are said to be major contributors toward scaring tourists away, combined with the general confidence, public perception and a fragile hospitality sector.

Overall, this is a country with endless opportunity. There are underutilised sectors which, if utilised to their fullest extent, can rebuild the nation. However, the story is the same. Corruption and government mismanagement are causing major headaches. The decision to ditch the Zimbabwean Dollar in favour of foreign currency stabilised the economy after hyperinflation, but the creation of ‘bond notes’ on par with the USD only just restarted the panic.

This sort of government interference, as is the case with almost every industry, is hampering Zimbabwe’s development. And while Zimbabwe is hardly ready for a laissez-faire economy which would likely increase the gulf between rich and poor, the government needs to be more receptive to free market concepts.

Foreign investment is needed; policies such as nationalisation and indigenisation do nothing but scare it away. As for corruption, cleaning up an ingrained practice is extremely difficult. It is a well-known fact that nations with the least corruption are the most successful, but it is easier said than done. It can be done – Singapore eradicated corruption after independence, emerging as a leading financial destination. But it requires a collective will, and the total removal of the corrupt.

Conclusion

As said earlier, Zimbabwe may be a battered, neglected and dust-collecting jewel, but it is still a jewel. The question, however, is whether this jewel will shine again.

Zimbabweans want a brighter future than the one they have endured for the past two decades. However, government policy, enacted on the premise it would benefit the masses, has only made life harder.

Furthermore, leaders making these decisions have engrossed themselves at everyone else’s expense. A bright future, whilst always within grasp, requires the focus and determination of all Zimbabweans not just to grasp, but to hold on and rebuild.

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Africa

Oscar Pistorius’ Sentence Extended to 15 Years

 1 min read / 

Pistorius Sentence

The former South African athlete’s sentence has been increased to 15 years for the murder of girlfriend Reeva Steenkamp on Valentine’s Day 2013. The athlete has served a year and 7 months and has 13 years and 5 months remaining.

The South African appeals court ruled that High Court Judge Thokozile Masipa’s decision to reduced the sentence to 6 years, based on the athlete’s state of mind, was wrong. Two of Judge Masipa’s rulings during the trials of Oscar Pistorius has been overturned by the appeals court. While gaining fame during the trials, she has been the subject of significant criticism on this topic. 

Other famous sports figures charged with murdering their partners include former NFL player O.J. Simpson and boxer Rubin “Hurricane” Carter.

Pistorius's

Photo By Jim Thurston [CC BY-SA 2.0 (https://creativecommons.org/licenses/by-sa/2.0)], via Wikimedia Commons

Keep reading |  1 min read

Africa

Zimbabwe: Life After Robert Mugabe

 7 min read / 

Robert Mugabe

It has finally happened. After 37 years, the regime of Robert Mugabe has come to an end. Amidst the pressure from the military in the aftermath of the coup, followed by the decision of ZANU-PF to cut ties with their former leader, it took the threat of impeachment and an inglorious exit for the nonagenarian to call it a day to save what is left of his tattered legacy.

In Harare and other major centres in Zimbabwe, there is euphoria. For the first time since the end of minority rule and true independence, Zimbabwe will have a new ruler. But amidst the joy come the following questions.

Will Zimbabwe Emerge as a Democratic Nation?

This is the million-dollar question. It should be mentioned that Zimbabwe, even under white-minority rule (despite what others might say) has never experienced a truly democratic system of government. In colonial times and the UDI period, the franchise was limited to whites and a few select blacks. Under the government, power – despite being split 80:20 between the blacks and whites respectively – was dominated by ZANU-PF, with the orchestration of Gukurahundi and the hounding out of Mugabe’s rival Joshua Nkomo, followed by the merger of ZANU-PF with Nkomo’s ZAPU, setting the stage for de-facto one-party rule. After 2000 and the formation of the MDC, Mugabe has resorted to every undemocratic act to manipulate the system in his favour. Democracy has often just been wallpapering over the cracks.

That’s not to say that this is an opportunity for change. The masses have come out in support for the removal of Mugabe, the allies that kept him in office for so long have deserted him, even his Chinese allies have reportedly said in private they have had enough. But this does not suggest democracy is inevitable.

First, both ZANU-PF and the opposition are in disarray. The rivalry between Emmerson Mnangagwa and Mugabe’s wife, Grace, has led to a bitter factional rivalry that has weakened the party. As for the opposition, with former Mugabe supporters such as Joice Mujuru ending up forced out, there lacks a unified direction. While Morgan Tsvangirai, the head of the MDC, is the clear favourite to challenge, his recent cancer treatment, as well as leadership style, makes his hold on power a lot weaker than in previous years.

Then there are the backstage factors. Naturally, when a country suffers sudden political turmoil, those with the means do what they can to salvage power, wealth and influence. Zimbabwe will most likely be the same. Since Zimbabwe has seen democracy used more as an excuse to legitimise Mugabe, people with these three means will be disinclined to see its introduction immediately, let they lose it all. Rather, a period of provisional governance, such as the one Reuters speculates will emerge, could emerge as a stepping stone to a stable democracy.

Zimbabwe’s Defence Force

Despite the euphoria, people are at the same time concerned about the defence force in power. Former Singaporean Prime Minister Lee Kuan Yew, on discussing repression, remarked “I am told it is like making love – it is always easier the second time”. The same can be said about military coups. It must be remembered that history has not been kind to nations where the military has seized power.

Often or not, the difference between nations which have never had a coup and those which have had many is, as Paul Nugent puts it when talking about Cote D’Ivoires first coup in 1999, the ‘military genie in the bottle’. Armies which have never led a coup often are apprehensive of the blowback, often preferring to sit back and watch. However, those that have often seize power multiple times. They gain experience in governing a nation and, despite oppressive means of governance, often find support for a return among some sectors of the masses when democracy fails to live up to expectations.

In Zimbabwe’s case, it is impossible to tell how this is going to pan out. If one took General Constantino Chiwenga at his word, this is just a neccessary transition of power to rebuild an ailing nation from ‘treasonous’ forces inside government. Early signs would support this argument, with the army more or less allowing all political and democratic procedures to run their course. But the whole idea of forcing regime change is not so cut and dry. Their motive, responding to the dismissal of Mnangagwa, contrasts with this theory.

Zimbabwe’s Economy

Whoever ends up in control has to sort out the disaster that has become the Zimbabwean economy. Famously dubbed the ‘breadbasket of Africa’ once upon a time, the nation has seen its fortunes tumble. It might as well be argued that a Zimbabwean optimist is one that thinks things cannot get any worse. Decades of kleptocracy, poor policy and ideological point scoring has depleted the treasury. Unemployment, though hard to measure, sits around the 60-95% mark, depending on who is telling the story. Furthermore, Hyperinflation forced the abandonment of the Zimbabwean dollar in favour of using foreign currency. Hyperinflation returned not long after the Zimbabwean government began using bond notes as a form of currency. These are serious issues where there is no easy fix.

However, if we assume that Mnangagwa is likely to assume power, there are some likely policy changes that will be of some benefit. First and foremost, unlike the teacher/career politician Mugabe, Mnangagwa is said to be Zimbabwe’s richest man. Having served as Mugabe’s spymaster in the 1980’s (for which his role in the Gukurahundi massacres means he is still reviled amongst the Matabele population), Mnangagwa has used every opportunity (much like Mujuru and other high ranking officials) to enrich himself, with speculation he even profited from Zimbabwe’s incursion into the Congo during the late 90’s.

Despite this dubiousness, Mnangagwa has shown he more than willing to work with persons Mugabe would consider ideological enemies. Mnangagwa has previously stated the need for a strong agricultural sector, something non-existent since the forced acquisition of white-owned farms begun in the early 2000s. Both he and Tsvangirai want the return of white farmers to boost the economy. Whether they will come back or, alternatively, cause friction among those who took ownership of the land in the aftermath of their expulsion is yet to be seen.However, more will need to be done.

Indigenisation policies orchestrated by Mugabe, whilst redistributing power to native Zimbabweans, has been a spectacular failure, with foreign investment drying up. Likewise, the nation’s penchant for state-ownership instead of private enterprise, particularly with the nations bountiful diamond mines, will be something that needs review. This may seem a simple fix, but it is a complicated issue, one that needs serious reform just to stem the tide of economic disaster.

Mugabe’s Legacy

It is safe to say whatever positives that have come from Robert Mugabe’s rule, be it education or health-wise, has been completely forgotten in the shadow of the misrule and repression that he openly endorsed. His role as a freedom fighter has brought admiration and affection for him in the past, but these days it is hard to reconcile that image with that of the tyrant whom many see as worse than their white oppressors. He will be remembered as one of Africa’s self-centred dictators, and the man who broke Zimbabwe’s heart.

Conclusion

Zimbabwe is in for a period of uncertainty. How long it lasts and how well the country recovers is yet to be seen. But right now, any prediction of how this transpires is just that. Zimbabweans may celebrate the removal of a tyrant, but there is an old saying – ‘meet the new boss, same as the old boss’. If the best-case scenario prevails, Zimbabwe may return to its mantle as the ‘breadbasket of Africa’. If it’s the worst-case scenario, people may well start reminiscing about the Mugabe years.

Keep reading |  7 min read

Africa

What Does the Future Hold for Zimbabwe’s Economy?

 6 min read / 

Zimbabwe

On Sunday, Zimbabwe’s ruling party sacked President Robert Mugabe as its leader, being replaced by Vice-president Emmerson Mnangagwa. This will be welcomed by the people of Zimbabwe; for decades Mugabe has been at the heart of the nation’s collapse, and the stricken country may finally be able to kick-start and rejuvenate its dwindling and faltering economy.

Zimbabwe used to be regarded as a country with huge economic potential, capable of developing into one of Africa’s leading lights. This was largely due to its strong agricultural sector, giving it the title of the ‘bread basket’ of Africa. Alongside this, it has an abundance of natural resources including diamonds, gold and tobacco, yet its potential has been curtailed by a number of structural economic problems including hyperinflation, corruption and the imposition of sanctions from the likes of the US and the UK.

When Robert Mugabe came into power, Zimbabwe had the 10th biggest economy in sub-Saharan Africa. However, it has now fallen to 20th, showing the staggering decline the economy has experienced over the last few decades.

Where Did It All Go Wrong?

Zimbabwe has seen an incredible downturn in its agricultural production, with its wheat production falling by 16 times, from 320,000 tons in 1990 to 20,000 in 2016. Alongside this, its corn production has also collapsed, largely due to the seizure of agricultural land from white farmers starting in the 1990s. Moreover, although tobacco exports to the likes of China and South Africa have remained high, income from this industry declined in 2017, whilst the gold and platinum industries have been restricted by governmental intervention, which has included the central bank limiting exports in order to contain a shortage of dollars. Most notably, diamond production has fallen significantly over the last few years, from 3.5 million carats in 2015 to just 961,000 in 2016. This has greatly affected the economy as Zimbabwe generates roughly half of its export earnings from the mining of these goods.

Alongside this, Zimbabwe has been on the receiving end on a number of economic sanctions including a travel ban and an asset freeze imposed by the US, condoning the government’s human right abuses and allegations of electoral fraud. Britain has also placed economic sanctions on Zimbabwe, which have further restrained the economy. These sanctions have also heavily affected the nation’s reputation, contributing to the falling levels of FDI.

Moreover, the economic situation has been worsened by the mass and wide-scale corruption in the nation, with Transparency international estimating that the country is losing more than $1bn a year due to corruption. This is largely as a result of the actions of the police and local councils, whilst Mugabe’s wife has earned the nickname ‘’Gucci Grace’’ for her luxurious and controversial lifestyle.

Zimbabwe is also drowning in debt. According to Zimbabwe’s finance ministry, the nation owed lenders such as the IMF and World Bank roughly $9bn as of October this year. The chart below illustrates a major hike in debt levels from 2012 onwards (the previous fall was due to a power-sharing deal between Mugabe’s Zimbabwe African National Union-Patriotic Front and Morgan Tsvangirai’s Movement for Democratic Change).

Source: Ministry of Finance & Economic Development and Reserve Bank of Zimbabwe

Is It All Doom and Gloom?

Despite all the economic problems within Zimbabwe’s economy, there is reason for optimism. First of all, the nation receives significant and consistent foreign direct investments from China, accounting for half of Zimbabwe’s annual FDI. This has helped boost tobacco exports, whilst it has also contributed to an improvement in the nation’s level of energy infrastructure, including the construction of solar power plants.

Furthermore, over the last decade, Zimbabwe has seen a slight economic recovery, whilst the World Bank reported that the nation has strong fundamentals for economic growth and poverty reduction due to its huge potential, should it introduce fiscal and investment reforms. This potential is a result of its abundance of natural resources, with the nation boasting the third and fifth largest reserves of platinum and lithium in the world, respectively. As such materials are key inputs into electronic equipment, with lithium being a vital component of rechargeable batteries, investment from mining companies may see a significant rise now that Mugabe’s rule has ended. Finally, Zimbabwe also has a significant supply of skilled labour and adequate infrastructure, which will be crucial to the nation’s resurgence and recovery.

Additionally, it must be highlighted that the US’ regional interest in South Africa is heavily dependent on Zimbabwe’s economic performance. This is due to the fact that South Africa is Zimbabwe’s biggest regional economic partner, and thus a faltering Zimbabwe, will adversely affect South Africa. This can be highlighted by the fact that goods delivered to Zimbabwe form roughly 40% of total South African exports, whilst Zimbabwean goods also form 40% of total South African imports. Thus, this means that the US may be forced to increase its investment in Zimbabwe in the foreseeable future in order to preserve its interests in South Africa, which may help revive Zimbabwe’s stricken economy.

How Can Zimbabwe Kick-start Its Economy?

‘The road to foreign financial aid and debt relief will be challenging”. This assessment given by Bloomberg analyst Mark Bohlund gives a perfect illustration of the path ahead for Zimbabwe. Under new leader Emmerson Mnangagwa, it is likely that the nation will return to a more orthodox economic policy, through instilling confidence in business, with a strong focus on the mining and agricultural sectors. This will likely include the installation of property rights (including for old farm owners) in order to spark a revival in agricultural production.

Such policies are likely to help resuscitate Zimbabwe’s economy, whilst also boost the nation’s reputation. This could potentially spark an increase in FDI, including from the UK. Moreover, improvements in liquidity and FX levels are likely to result from rising agricultural outputs, which could, in turn, boost electricity supply and minerals production.

Aside from this, it is also crucial that schools and hospital return to normal operation, in order to directly offer relief to the people of Zimbabwe, whilst also sparking greater confidence within the economy, particularly from abroad.

The success of such policies was highlighted by a research paper from 2016, showing the mass economic benefits of the implementation of such reforms, according to the IMF. The chart below depicts the benefits of major structural and economic policies, such as those listed above, on Zimbabwe’s economic growth. As can be seen, short-term growth could increase by just under 4%, whilst longer-term growth will also increase substantially.

The potential success of reforms in Zimbabwe:

Source: Ministry of Finance & Economic Development and Reserve Bank of Zimbabwe

Conclusion

Zimbabwe’s economic future is in balance. It is a country with huge economic potential, meaning that if new leader Emmerson Mnangagwa is able to dictate and implement a successful programme, the nation could experience a significant economic revival. However, the introduction of a programme is far from certain, and it remains to be seen whether or not investors will return to the economy.

Keep reading |  6 min read

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