The economy can, and will, get worse
A RECENT authoritative international survey has c
oncluded that Zimbabwe’s economy is now the third worst in the world. If one considers the very distressed state of the majority of the economies in Africa, many in South America, and many others in Eastern Europe, it is a most unenviable record to be possessed of an economy so devastated as to have only two others in the world in an even worse condition. When observing the disastrous circumstance of the Zimbabwean economy, President Mugabe must greatly regret his proudly-voiced contention that no one could have managed the economy as well as he has done.
Moreover, only a little over a fortnight ago, when opening the Fourth Session of the Fifth Parliament of Zimbabwe, the President implied that despite the state of the economy, it had inherent strengths which would enable government to restore its well-being, although he also expressed surprise and “puzzlement” at some of the economy’s characteristics.
He is right that the economy has the potential of strength. Properly managed, in a conducive political and stable environment, the economy could well be one of the strongest and most virile on the continent. Although the catastrophic destruction of the agricultural sector cannot be speedily reversed, that sector can be restored to viability to an extent that would assure Zimbabwe of food sufficiency for all its populace and a surplus for export, whilst concurrently yielding many other high quality crops for national consumption and export, inclusive of tobacco, cotton, wheat, sugar, citrus and much else.
Other economic sectors can also become very marked contributors to Zimbabwe’s economic success. The tourist potential is immense, with the international and regional tourist being magnetically drawn (if assured of security and of access to all needs) by the splendour of the Victoria Falls, the wealth of wildlife (if the present mass poaching and slaughter of that resource is speedily halted), the awesome Matopos Hills (recently accorded World Heritage Site status), the amazing Great Zimbabwe and the Khami Ruins, and many other desirable tourist destinations, which include Lake Kariba, Nyanga, the Vumba and Chimanimani.
The mining sector has shrunk considerably in recent times, its viability having been brought close to total destruction, but the wealth to be exploited is still there, with much platinum, gold, diamonds and emeralds, asbestos, chrome, methane gas and many more minerals awaiting exploitation.
The manufacturing sector has been brought to its knees by the mismanagement of the economy, but still has the second-most developed industrial infrastructure in the sub-continent and, given radical and constructive change to economic policies, could develop into a very major supplier to more than 320 million people in the region.
The ability to do so is reinforced by Zimbabweans being willing, able, conscientious labourers, anxious for employment and opportunities of advancement, but deprived thereof by government’s obdurate refusal to accept any guidance or advice on economic transformation, and its determined pursuit of ill-conceived, destructive policies which have been proven repeatedly to be disastrous.
Even a superficial overview of the economy highlights incontrovertibly the monumental extent to which the economy has been destroyed. Among the many facets indicative of an economy verging upon the threshold of extinction are:
l Inflation has soared upwards to 364,5% (year-on-year) for the year to June 2003 based upon the official calculation using the Consumer Price Index (CPI). Everyone in Zimbabwe, other than government, is clearly very aware that that inflation rate is very considerably understated, with the real rate of inflation being well in excess of 400%, and continuing to rise exponentially. There is little doubt that, in the absence of some very dramatic, almost impossible, immediate reversal of the inflation trend, the year-on-year inflation by September 2003 will, in real terms, exceed 600%;
l An estimated three-quarters of Zimbabwe’s employable population is without gainful employment. This includes over 300 000 former farm workers, many thousands of miners, and tens of thousands of industrial workers;
l Zimbabwe’s foreign debt now very considerably exceeds US$1 billion, with the magnitude of its failure to service its debt resulting in its voting rights in the International Monetary Fund (IMF) having been suspended, as has all funding by the World Bank, and its credit-worthiness being considered to be non-existent virtually world-wide, resulting in almost all suppliers of Zimbabwe’s essential imports demanding payment in full prior to shipment of those imports;
lApproximately 80% of the Zimbabwean population struggles for survival at levels well below the Poverty Datum Line (PDL), whilst at least half of the population is subject to gross malnutrition on incomes of less than the Food Datum Line (FDL);
lA gargantuan cash crisis has been prevailing for months, is intensifying continuously, and belated actions by government to contain and reverse the crisis, recently announced and yet to be implemented, having little prospect of a speedy resolution of the nation-wide non-availability of bank notes. So great is the inadequate availability of those notes that employers are unable to pay weekly wages, queues at banks and building societies are virtually endless, with thousands desperately seeking, without success, to withdraw funds from their accounts in order to meet the daily needs of their families and themselves. Retail trade is steadily shrinking, due to the non-availability of cash, with an inevitable repercussive negative effect upon industrial and wholesaler suppliers to the retail sector;
lMany essentials are in short supply, while others are totally non-available (other than, on occasion, in a vibrant black market). The scarcities include basic foodstuffs such as maize-meal, bread, sugar, cooking oil and flour. Equally scarce are petroleum products, medications and other healthcare requisites;
lSimilarly, foreign exchange is virtually wholly unavailable in the official money market, and even outside of that market foreign currencies are only obtainable in very limited quantities, at rates dramatically higher than those prescribed by the Reserve Bank (acting under direction of government). While the official mid-rate of exchange was increased from $55:US$1 on February 27 (with promised further reviews on a basis of purchasing power parity not having occurred up to the time of writing of this column), the rate within the parallel market has surged from an average of about $1 600:US$1, at the beginning of the year, to an average of approximately $4 600:US$1 at the end of July; and
lInvestment in new ventures, or in expansion of existing operations, has become virtually non-existent. Foreign Direct Investment (FDI) is not forthcoming, as investors are deterred by the straitened conditions of the economy (and the virtual absence of law and order), and instead they look for sound investment opportunities in neighbouring territories. South Africa, Botswana, Namibia, Zambia and Mozambique are the principal beneficiaries of Zimbabwe’s economic ills, insofar as their being recipients of FDI which would otherwise have been targeted at Zimbabwe. In like manner, there is very little substantive domestic investment, other than into existing securities on an overheated Stock Exchange and into the money market. Few can perceive any purpose in investment in agriculture, mining, tourism or industry when the economic environment can only erode the substance of the investment, instead of yielding a fair return on that investment.
These are but a few of the very many symptoms of a critically ailing economy, and despite government spuriously contending that the causes of the economy’s near fatal illness are sanctions, internationally-provoked economic sabotage, drought, and politically driven economic destruction by the government’s political opponents, the reality is that, almost without exception, there is but one cause. That cause is that instead of capably managing the economy, applying good and sound economic fundamentals, government continuously takes actions which can only worsen the economy further. It relies upon intense, but ineffective, regulation, and does nothing to establish an economically-conducive environment.
It arrogantly dismisses all advice of the private sector, although it pretends to consult. On the rare occasions that it does try to do something constructive, it does so when it is too late to be effective. Until there is either a change in government’s authoritarian stance, or a change of government, the economy not only can, but will, get worse.