By Dhruv Shah
In November 2017, Zimbabweans around the country watched as President Robert Mugabe of the ruling ZANU-PF party, was overthrown in a coup and replaced with his Vice President, Emerson Mnangagwa. To many, this coup represented an important sign that their misfortunes were about to change. Under Robert Mugabe, corruption and hyperinflation chipped away at Zimbabwe’s strong economy. Alas, 3 years later Zimbabweans once again face economic hardship, political instability and corruption very similar to their experience under Robert Mugabe’s administration. While economic crisis led to currency collapse and skyrocketing inflation of 737.3%, many Zimbabweans have had to face extreme food shortages and severe droughts. This worsening domestic situation has festered resentment towards President Mnangagwa, resulting in growing protests on the streets. Macroeconomic challenges and rising social and political problems indicate a country on the edge of collapse and requiring urgent reform.
Zimbabwe’s misfortunes were not always this bad. 20 years ago, Zimbabwe appeared to be a promising African country and was considered the breadbasket within the region due to its highly efficient farm-based economy. The country contained lush wildlife and was well modernised with a strong education system. However, problems arose with Robert Mugabe’s controversial land distribution plan which stole farmland from 4500 white farmers and gave it to 300,000 black families in a bid to ‘readdress colonial land imbalances’. In reality, prime estate was gifted to close supporters of Mugabe and more than $200 million of farm equipment was given away for free. With many families unable to efficiently run the farms, farming output dwindled dramatically. In response to declining output and proportionally ballooning debt, Mugabe’s government movedto print more and more money to continue paying government salaries while financing a war in the Congo. This ultimately remained a very short-term solution as the decline of output made everyday goods scarcer,pushing their prices up.
Mugabe’s infamous land distribution programme continues today to work against Zimbabwe’s economy and population, burdening them with even greater levels of debt. President Mnangagwa has agreed informally to pay $3.5 billion in land compensation in an attempt to resolve one of Zimbabwe’s more divisive policies. Unfortunately, this does not change the fact that Zimbabwe does not have the money to pay for this agreement. Instead, they will issue long term bonds on the international market and hope that they can attract investors in to raise funds. Economist, John Robertson, argues that the chances of Zimbabwe gaining any funding is unlikely, stating: ‘Bonds imply promises to pay. We have no way to repaying new debts when existing debts are beyond us.’
It does not help that President Mnangagwa’s hesitance to formally put this agreement in writing has led the IMF to withhold financial assistance, stating that the reform programme is ‘off track due to inconsistent policy implementations.’ Clearing the arrears is a necessary condition to repaying its $8.3 billion of foreign debt and attracting investment which can rebuild a country filled with aging infrastructure and increasing poverty levels. But President Mnangagwa’s lack of reforms attempting to right historical wrongs is one of many obstacles which prevents the country from securing vital outside help.
High levels of debt have caused a deterioration of reserves. In response, the ruling party has largely responded by printing greater quantities of money, thereby inducing high inflationary pressures. As the currency collapses, the government has sought to mitigate damage by dollarizing – a process by which the currency is replaced with the dollar. Many shops and businesses have started rejecting the local currency. The government faces mounting pressure from trade unions to pay its employees in dollars as opposed to local currency or risk mass protests. It is not hard to see why many have lost faith in President Mnangagwa. Many Zimbabweans have witnessed their savings evaporate and struggle to afford basic items of food like sugar and bread. Public sector workers like nurses, teachers and soldiers have experienced a real income drop as a result of inflation to a meagre $30 per month. This has contributed to a food crisis within Zimbabwe which the World Bank estimates has left nearly 60% of Zimbabwe’s population as food insecure -unable to gather enough food to meet ends.
In the background, Covid-19 has shocked the economy threatening to overrun Zimbabwe’s fragile healthcare system which remains extremely underfunded. The government has been unsuccessful in preparing their country to handle a pandemic on a scale like Covid-19. Presently, the sector employs 1.6 physicians and 7.2 nurses for every 10,000 people, well below the WHO’s recommendations. The virus has also hit Zimbabwe’s agricultural sector hard. With stringent government lockdowns, agricultural markets and farms have been shut down due to lockdown measures, leaving many people unemployed and without an income. With nobody able to work on the land, food has become scarce and many people are left helplessly wondering if their situationswill ever improve.
With a deepening economic crisis, domestic tensions are more volatile than ever. Mass anti-corruption protests have taken place as people are furious about the dire economic situation and triple digit inflation. The government has in turn responded by restricting civil freedoms – often using Covid-19 as a pretext. Harare, the capital city, was recently locked down on July 31st as a result of increasing infections, but voices from within opposition parties argue that this was about preventing further unrest. What is more worrying is Amnesty International’s report on human rights, which has exposed the gross violations by security forces. The report references live rounds being fired into protesting crowds and numerous allegations of rape of women within police custody. Under President Trump, the US has decided to continue to implement sanctions against key officials within the administration, citing lack of reforms and ‘accelerated persecution of critics by security forces.’
The challenges Zimbabwe is facing are numerous and complex. Plagued with an absence of reserves and ever-increasing debt, the country faces extreme social and political problems which will require significant investment into the country – money it does not have. In the absence of international support, Zimbabwe is in danger of deteriorating into a failed state. Zimbabwe’s ruling party must aim to rebuild trust with domestic and international actors by holding inclusive elections and engaging in international dialogue aimed at addressing its corruption and poor human rights abuses. A particular focus should be aimed at domestic policies of land compensation and anti-corruption initiatives; a critical step towards rapprochement with other countries and securing necessary investment. Finally, to reduce poverty, the country must focus on sustaining its critical agricultural industry. When it does well, the resounding effect on the rest of the economy is tremendous; creating new jobs and allowing Zimbabweans to acquire necessary farming equipment which will continue to grow the economy. One important step in this direction could be setting up a review commission to analyse and recommend new policies in order to improve the sector. If Zimbabwe gets the domestic politics right, international investment will flow, and there is no reason why Zimbabwe should not prosper.
The views expressed in this article are the author’s own and may not reflect the opinions of the St Andrews Economist.