DPMN Bulletin: Volume X, Number 2, April 2003

Zimbabwe’s Economic Policies, 1980-2002

Dr. Owen Sichone

Introduction

The former British colony of Southern Rhodesia became the independent Republic of Zimbabwe on 18th April 1980 after a prolonged war of liberation. The head of state since independence has been Robert Mugabe, leader of the ruling ZANU-PF party. The main tasks that the ZANU-PF has faced since independence have been post-war reconstruction, redressing the racialised imbalances of the colonial economy and responding to the needs of the young population. Zimbabwe has a population of 21 million predominantly young people, with all the implications for health, education, recreation and employment opportunities that this implies. The aim of this paper is to review briefly the policies followed during the 1990s, and to argue that the pressures brought about by Economic Structural Adjustment Programme (ESAP) are the main cause of the political crisis that has gripped the country since the War Veterans demanded a share of national wealth. This review will focus on the second decade of independence when the economic heritage of racial inequalities finally unravelled.

Zimbabwe’s Economic Development Policies (1991-2001)

In 1980, Zimbabwe embarked on a programme of post-war reconstruction, which was supported by some foreign donors. In general terms, the reconstruction was successful as the economy was re-capitalised and reintegrated into the world economy. During the past two decades, Zimbabwe undertook several economic reform programmes. In October 1990, the Zimbabwe government succumbed to Western donor pressure and grudgingly agreed to implement the five-year Economic Structural Adjustment Programme (ESAP) as a response to the economic crisis which had been afflicting the country since the 1980s. The measures introduced were:

Subsequently, in early 1991, the Zimbabwean government announced the Framework for Economic Reform (1991-95), which set out a time frame for reducing support to parastatals. The objective was the implementation of programmes for improving efficiency and management, as well as commercialisation and privatisation of public enterprises. Furthermore, in 1998, the Zimbabwe government launched the second stage of its economic structural adjustment programme, the Zimbabwe Programme for Economic and Social Transformation (ZIMPREST). ZIMPREST outlined macro-economic reforms through to the year 2000. The plan envisaged a real annual GDP growth of 6 per cent until 2000 and a creation of 44,000 new jobs per year. To achieve such targets, savings and investments were expected to reach at least 23 per cent of the GDP and the budget deficit reduced to under 5 per cent. Besides seeking to advance the unfinished work of ESAP, ZIMPREST also added socio-political goals such as improvements in the quality of democratic institutions; the pursuit of good governance; and the elimination of corruption. Thus, political conditionalities were added to ZIMPREST.

Impact of Economic Structural Adjustment Policies: Macro-economic Crises

Since 1991 the Zimbabwean dollar has been devalued repeatedly and, after the crisis that started with the land restitution process, has become almost worthless. The official rate of 55 to 1 against the US dollar is unrealistic when compared to the unofficial black market rate of 300 to 1. The generous liberalization of the economy culminated in the lifting of protectionism. This opened up the domestic to cheaper import and resulted in closing and down sizing of many labor-intensive industries. The South Africa’s decision to impose tariff on Zimbabwe’s textile exports exacerbated the situation. And the severe drought in the country significantly affected the agricultural output, which is the main source of foreign currency revenue. The manufacturing productivity declined by 11,9% and the mining sector by 4% in 2001. Thus, between 1991 and the year 2001, Zimbabwe’s GDP declined, culminating the negative growth of -11.5%.

Similarly, the inflation rate in the country is running at double figures. In the year 2001, for instance, the inflation rate rose to over 100 per cent. The economic decline was exacerbated by the breakdown in the rule of law, as demonstrated by the ZANU-PF militants’ occupation of white-owned commercial farms, the granting of four billion dollars to the former combatants in the form of gratuities and the costly military intervention in the Democratic Republic of Congo.

Value of Trade Relation with South Africa

Zimbabwe is South Africa’s largest trading partner on the continent. The country largely exports primary goods to South Africa and is dependant on South Africa for fuel and electricity. The trading balance is in favour of South African exports of mainly manufactured products to Zimbabwe. South Africa’s protectionism ensures that Zimbabwe’s goods remain less competitive in South Africa and this has also contributed to the downturn in the latter’s economy in the 1990s. This is why the land question is said to be used for political ends in Zimbabwe: this is against economic logic. The consequences for South Africa manifest themselves in the fall of the Rand. Presumably, the fall of the Euro/dollar results from the same political events! Simply, while the land question is a problem that needs attention, what is at stake is the violation of the rule of law. The fact that there are just and unjust laws is not given attention at all!

Unemployment

Unemployment is rampart and an exodus of young skilled professionals has been in progress for many years now with South Africa, Britain, North America and even Australia being the preferred destinations. Economic policy reforms have thus resulted in declining employment opportunities. In the late 1980s, about 40,000 jobs were being created annually, reaching a peak of 1.26 million in 1994, a 26 per cent increase on 1980 figures, but has since been dropping (The Economist Intelligence Unit, 1998: 13). The fact that Zimbabwe is facing a rapidly increasing unemployment crisis is evident in the percentage drop of the total population formally employed, which dropped from 18 per cent in 1965 to 11 per cent in 1996. Currently, even the best unemployment estimates suggest that it is not less than around 60 per cent. Thus, the problem of unemployment continues to worsen.

Increased Poverty

The incidence of poverty has increased in Zimbabwe as a result of ESAP. The Poverty Assessment Study undertaken by the Zimbabwe Government in 1995 (Zimbabwe 1995) indicated that 62 per cent of the population was living in poverty. According to the report, 42 per cent of the population belonged to households which were below the ‘food poverty line’, and 62 per cent of the population belonged to households whose incomes were inadequate to meet basic needs. In addition, the report indicated that the incidence of poverty was higher in rural areas, where 72 per cent of households had incomes below the ‘total consumption poverty line’ compared to 46 per cent in urban areas.

Political Disaffection

Cutbacks in public expenditure entailed the end of many public subsidies, set in motion the introduction of user fees for education and health, and meant that the poor could not afford these crucial amenities. This, coupled with high inflation, rising costs of living and the decline in real wages, resulted in not only widespread poverty but also disillusionment with the present ZANU-PF regime. It is, therefore, evident that for the first time since 1980 cracks have appeared within the ruling ZANU-PF party. Whereas in the past there was no credible opposition to speak of as such, ZANU-PF’s political dominance has been challenged. The previously weak opposition movement has been reinvigorated into a strong mass movement, following the formation of the Movement for Democratic Change (MDC). The Opposition has made major in-roads by not only increasing its representation in parliament, but also posing the strongest challenge yet to ZANU-PF rule since independence.

Within a very short period of time the gains of independence were reversed and the war veterans who had not gained access to private sector jobs found themselves being victims to the restructuring of the public sector. White farmers on the other hand gained from the liberalised environment and were able to earn and keep much more foreign currency than they had ever been allowed in the past. This in part was what led to the war veterans’ demanding and obtaining substantial pensions and gratuities from the state in 1997. From then on, all the benefits of the IMF-imposed austerity were rolled back and the middle classes started to experience a downturn in their fortunes unless they had access too foreign exchange. For the workers and peasants, however, the decline into absolute poverty was rapid. As political tensions rose and the country reached a political impasse, the government response to the crisis has been suicidal, to say the least. The government imposed price control measures, which created an illusion that the situation was under control. Instead, this created an economic environment conducive for the thriving of the black market.

The Land Question

According to the manifesto of the opposition MDC, the solution to the land question lies with the market forces. The main aims of the MDC in this regard are:

This is in sharp contrast with the policy of the ruling the ZANU-PF, which considers land to be the main economic resource without which prosperity is not attainable for the majority of Zimbabwean black people. While making land redistribution the main strategy, ZANU-PF also acknowledges that other sectors of the economy will have to be tackled. Thus the government hopes to solve the unemployment problem through the empowerment of the indigenous business community. It says that the challenge is to promote entrepreneurship especially in rural areas, to provide affordable credit, managerial skills development, factories and shelters to work from.

This strategy was designed to narrow the gap between Zimbabwe’s 6,000 white farmers who owned more than 70 per cent of the productive land (some of which lay without being utilised) and the peasants in the old colonial ‘native reserves’. The white farmers are not utilising all the land, and many of them are absentee farmers. In some cases, the white farms are utilised for game ranching, given the prominence of game hunting and the so-called eco-tourism. While it is true that the major export, tobacco, is produced by the large white-owned farms, the smallholder peasants produce 70 per cent of the food in Zimbabwe. Not only that, it is increasingly being observed by some analysts that in fact those smallholder farms are more productive per hectare compared to those large-scale farms.

The ongoing conflicts between the state and agro-industrial business and the workers since 1985 in particular have hardly been reflected upon. Even the struggles by various civic organisations and institutions around various economic, political, social, cultural issues and even the national question in general, have not drawn the critical attention of many analysts. The War Veterans did not emerge in March 2000; in 1998 they threatened to go back to the bush if land reforms were not undertaken, but instead Mugabe chose to send troops to support the ailing government of Laurent Kabila in Congo, so as to avert the catastrophe of soldiers joining hands with the War veterans. This simple fact is often ignored. The whole issue has turned into the question of Mugabe (as an individual) using the riffraff to consolidate political power. When in such circumstances, people are not capable of being critical; they are simply mobilised, and worked into a frenzy. There is complete silence to the fact that the land question has dominated the politics in Zimbabwe in all past elections.

The question is not why the national government did not effect land reforms before; rather, it should be, what are the social and political forces which sustained a regime that failed all this time to deal with the land question and even succeeded in introducing anti-people measures since the mid-1980s. The answer is that the black elite are really of the same class as their white counterparts and both have hitherto exploited the workers and peasants.

Conclusion

Economic policy reform in Zimbabwe has not resulted in improved socio-economic welfare for the populace. Consequently, economic decline has resulted in widespread political discontent and disaffection with the present regime. As political tensions have reached a political impasse, there are concerns that Zimbabwe’s economy is on the brink of total collapse.

References

Chikulo, B.C. 2001. Training for socioeconomic development reform in Zimbabwe: A country agenda. Regional Development Dialogue 22, no. 1 (Spring).

http://news.bbc.co.uk/1/hi/business/1524821.htm 

http://www.zimbabwebiz.com/zimbiz/magazine/03-2000/mar06.htm accessed 29 January 2003-01-29

http://www.eisa.org.za/WEP/zimbg4.htm accessed 29 January 2003-01-29.

http//www.heritage.org/research/africa/bg1525.cfm (accessed 29 January 2003-01-29)

The Economist Intelligence Unit. 1998. Country Profile: Zimbabwe 1998-1999. London: E.I.U.

UND.ac.za/und/indic/archives/ indicator/spring97/pottS2.htm. USAID.gov/pubs/bj2001/afr/zw

Zimbabwe Government. 1991. A framework for economic reform 1991-95. Harare: Government Printer.

_____. 1995. The poverty assessment research study. Harare: Government Printer.

_____. 1996. Zimbabwe programme for economic and social transformation. Harare: Government Printer.