Institute for War and Peace Reporting | Giving Voice, Driving Change

From Rich Man to Poor Man of Africa

Observers see Zimbabwe's economic decline as a classic case of mismanagement.
By IWPR Srdan
Despite latest figures showing a halving of the country's rampant inflation rate from a peak of over 600 per cent in June, Zimbabwe shows no signs of recovering from its biggest economic crisis since independence. If anything, given fears of failing banks and a collapse in water pumping stations around Harare, things could even get worse.

The country's economy is in its fifth year of recession with most analysts here blaming the current government for the crisis. The economy they say has crashed due to poor policies and misrule by President Robert Mugabe. However, he insists the problems have been caused by droughts and western sanctions against Zimbabwe.

The country's economy has slumped by more than 70 per cent in the last four years with analysts predicting that the slide is likely to continue if no new policies are put in place. This year alone, GDP is expected to fall a further five per cent.

The story of Zimbabwe is both complex and sad. It is the tale of a country once regarded as a shinning example of a prospering African economy that failed due to poor governance. Just half a decade ago, the country was the breadbasket of Southern Africa. Producing on average three million metric tonnes of maize per year, it was able to feed itself and its neighbours.

According to the Reserve Bank of Zimbabwe, RBZ, in the late 1990s the economy was growing at an average of five per cent per annum with a thriving agricultural sector as the anchor of growth. Its currency was relatively stable against the dollar and the British pound. The manufacturing and tourism sectors were also flourishing. At their peak, Zimbabwe's exports were worth more than 3.4 billion US dollars.

Then in 1999 the economy crashed. Suddenly, the country became a classic example of economic dissolution. For the first time in its 19 years of independence, Zimbabwe could not feed itself. Production in the manufacturing sector hit rock bottom while the tourist industry came close to collapse. The question of what went wrong is still a subject for public debate and serious discussion in political circles.

Despite the fact that his economic crisis came first, President Mugabe blames the current malaise on the international community's imposition of sanctions on Zimbabwe following its land reform, which began in 2000. He says Britain and the United States wanted to undermine his government for taking land from white farmers.

But analysts insist that the current problems are a result of the government's muddled land reform; the breakdown of the rule of law; and poor fiscal management. The combination of factors helped to scare off potential investors and cause a massive brain drain.

"It is Mugabe's chaotic land reform, violence against the opposition and unsustainable expenditure that has caused the meltdown," said independent Harare-based economist John Robertson.

"We are in the current mess because of poor governance. We have lost many international friends. Our export capacity is at its lowest and we have a foreign currency crisis."

As well as the emigration of the brightest and best people, the HIVAIDS pandemic has seriously contributed to Zimbabwe's woes. The Zimbabwe Aids Council reports that a quarter of the country's 13 million people are infected. More than 1200 deaths are recorded each day.

The remaining pool of professionals is ever shrinking as people continue to leave for the United Kingdom, New Zealand and the United States. Some have also skipped into neigbouring countries such as South Africa and Botswana. A recent brain drain report by the Zimbabwe Congress of Trade Unions estimates more than 4 million Zimbabweans are now living in the diaspora.

The crisis in Zimbabwe's agricultural sector started when the government began seizing land from commercial white farmers who at that time held more than 60 per cent of the country's arable land. Ignoring the promises made by donors to support the land reform at a donor meeting in 1998 in Harare, Mugabe allowed the war veterans to invade white-owned farms bringing production to a standstill.

The Commercial Farmers Union, a grouping of mostly white farmers, says the sector which used to employ a third of the country's workforce has been completely destroyed. Only a tenth of former commercial farms remain partially operational. Production of tobacco, once the country's chief foreign currency earner, has plunged by more than 76 per cent over the last four years to a paltry 60,000 tonnes in the season just ended.

The last few years have also seen a sharp fall in the production of maize - the staple food - from about three million tonnes in 1999 to 290,000 tonnes this year. As a result, Zimbabwe is now expected to survive on maize imports from Zambia, which has recorded a surplus for the first time in history. Harare has already started importing maize from South Africa.

Godfrey Kanyenze, Director for Labour at the Economic Development Research Institute of Zimbabwe, an independent labour institute, says the economy has been "systematically destroyed" by a combination of two factors.

"Firstly the government borrows for consumption purposes and then puts reactionary measures that stifle investors and industry," he told IWPR. The problem has been worsened by the leadership's continued support for its debt-ridden large state-owned enterprises.

Over the past three months, substantial amounts have been doled out to the manufacturing sector and other troubled companies - a move which, the government says, is meant to boast the ailing economy. A further 90 million dollars has been handed to troubled banks.

Anthony Hawkins, a University of Zimbabwe management graduate school lecturer, says the leadership is making a huge mistake by dishing out unbudgeted funds to such state-owned corporations.

But Mugabe insists that it is the West that most contributed to the crisis when it "tricked" him into taking up an International Monetary Fund, IMF, programme. In 1990, the government followed the African bandwagon when it embraced the Economic Structural Adjustment Programme, ESAP.

It was the IMF that demanded African countries devalue their currency, cut public expenditure and open up their markets. Zimbabwe did just that and the results were disastrous. The programme led to the closure of mines and industry - throwing thousands of workers onto the streets. The government finally abandoned the restructuring programme nine years later in 1999 and relations with the IMF soured. Mugabe told the IMF to "go to hell" and refused to repay the country's loan.

The fund reacted by cutting off its balance of payment support and Zimbabwe now owes the IMF more than 280 million dollars with arrears constantly mounting as Harare battles to service the loan.

The president has continued to blast IMF policies at both local and international fora despite domestic pressure to re-engage with it. At a recent United Nations meeting in New York, he again lashed out at the IMF for "spreading lies" about Zimbabwe.

Yet despite this vitriolic attack, Mugabe appears boxed into a corner and seems to secretly admit that he cannot go it alone. Last month he sent two of his most trusted economic advisors to the IMF head office, in what analysts believe was a last ditch effort to save Zimbabwe from pending expulsion from the fund.

The two officials, Reserve Bank of Zimbabwe, RBZ, governor Gideon Gono and the acting finance minister Hebert Murerwa, left the country at the same time to meet IMF directors on the sidelines of the fund's annual winter meetings to plead for more time to put their house in order.

While the IMF states its October 1 decision to close its office in Harare is not linked to the country's overdue financial obligations to the fund, it is clear time is fast-running out for the government to cut a deal that will stop Zimbabwe plunging further into the economic abyss.

The names of some contributors in this package of stories have been withheld out of concern for their safety.