The Zimbabwean Economy: From Mugabe to Droughts to Inflation to 2017

The Zimbabwean Economy: From Mugabe to Droughts to Inflation to 2017

Under the ZANU party led by Robert Mugabe, Zimbabwe became an independent country in 1980, freed from British colonial rule. This naturally presented challenges to governance: how could Zimbabwe disinherit its colonial institutions and become a new nation in a way which was economically viable and sustainable for its people? As Mugabe ends his 37-year stint at the helm, Zimbabwe’s future seems as uncertain as it did when he became Prime Minister in many ways.

The Mugabe Years:

Primarily an African nationalist, Mugabe also regarded himself as a Marxist-Leninist and later a socialist, aspiring towards education and healthcare which was accessible to all. His economic policies contradicted the beliefs he proffered, sticking to a capitalist framework throughout his premiership and calling for foreign investment to support Zimbabwe’s development. Things began positively, with an average growth of 2.7% per year for the first 10 years Mugabe spent in office, but population growth proved to be too great, which had a knock-on negative effect for unemployment rates. In addition to this, the ZANU party set up its own corporate empire, starting up the M&S Syndicate and Zidoo Holdings in the early 1980s. By the early 1990s, the party had amassed assets worth up to Z$500 million, which was the equivalent of around US$75 million.

Things began to spiral out of control at the end of the decade: a Second Congo War in 1998 proved to be costly for the government, and this was worsened by an unprecedented drought which followed in 1999. These factors contributed to the country’s bankruptcy, which was demonstrated when it defaulted on its debts to the International Monetary Fund and African Development Bank.

This hardship has been heightened by a decreasing level of foreign investment in the Zimbabwean economy, as investors have been deterred by the instability. Inflation rose to over 66,000%. In 2009, the Zimbabwean government was forced to stop using the Zimdollar due to the effects of hyperinflation, which had rendered the currency virtually worthless. The US dollar was taken on as a more stable alternative for the economy. Initially, this led to a 40% rebound in incomes for the small percentage (5%) of those in employment, but these figures returned to their previous state in due course. What’s more, taking the centralisation of currency outside of Zimbabwe has effectively prevented government authorities from having a say over their fiscal policy, which naturally creates tensions between local and global powers. In response to the shortage of US dollars due to Zimbabwe’s persistent trade deficit, 2016 saw the introduction of bond notes, but their value has fallen sharply since.

World Bank

The Mugabe Government attributed Zimbabwe’s economic difficulties to the Western powers the country has been indebted to for years. It has been argued that sanctions imposed by Britain and the US have been deliberately constructed to cripple the Zimbabwean economy and make it impossible for competitive growth. Whilst this cannot be known to be directly true, what is certain is that it is the Zimbabwean people who are suffering most acutely from the seemingly perpetual hardship.

2017 and beyond:

In 2017, per capita incomes in Zimbabwe are down by 15% since 1980. What’s more, businessman and politician Welshman Ncube recently spoke of the issues around persisting liquidity, saying he is usually permitted to withdraw a maximum amount of $20 from his bank account per day despite withholding much more. Statistics and anecdotes such as this will stay at the forefront of people’s minds as Mugabe ends his premiership, showing that little positive progress has been made in the development of Zimbabwe’s economy since independence was founded.

Going forward, it will be the responsibility of former First Vice President Emmerson Mnangagwa to pick up the pieces Mugabe left in his tracks. Perhaps disappointingly, In the eyes of many Zimbabweans, Mnangagwa represents the same values of Mugabe, heralding from the ZANU party despite potentially playing a role in the coup d’état against Mugabe.

Wall Street Journal

What has been speculated under Mnangagwa is the reinstitution of Zimbabwe’s currency which was established with its independence. Restoring the Zimdollar will signify the beginning of a new era for the country, with the president’s Special Advisor Chris Mutsvangwa suggesting in an interview in early December that this will reignite foreign investment interest. Whether or not this will be successful or to what extent it can be in the face of Zimbabwe’s long-term issues is unclear, but it is certain that Zimbabwe needs drastic economic reform to do its people justice after all this time.

Grace Ennis

Image: [CNN]