Economy growth masks collapse

AS Finance minister Tendai Biti presented a state of the economy report to cabinet on Wednesday, Zimbabwe’s economic growth rate –– which others say is effectively recovery –– has confounded critics over the last three years.

Report by Clive Mphambela

A report released by American think tank, the Cato Institute, last week says the country’s GDP grew at an impressive average of 7,3% per annum between 2009 and 2011, far outpacing the growth registered by Hong Kong (5%) in the same period.

However, Zimbabwe’s economic metrics masks a grim reality that the country is poorer now than it was at Independence in 1980. The local currency is now defunct and infrastructure is decaying every year.

Water supply systems and other utility services have virtually collapsed, with numerous studies showing that Harare’s water is contaminated by human waste and industrial effluent.

While evidence on the ground shows Zimbabwe’s economy has since 1980 grown in unstable fits and starts, various schools of thoughts abound as to the causes of the economic meltdown, especially between 1998 and 2008.

Zanu PF blames Western sanctions for the virtual economic and social collapse of the country, but critics point to the party’s suicidal economic policies and corruption entrenched in its politics of patronage.

Zimbabwe enjoyed gross domestic product (GDP) growth rates of 11% in 1980 and 10,7% in 1981, before it slumped to 1,4% in 1982 and declined by 4,2% in 1983 and 1984. There was a sharp growth of 9,3% in 1985 before another heavy retreat to 0,2% growth in 1986.

From there was a general decade of recovery between 1986 and 1996 before the country embarked on an ill-advised intervention in the DRC war where the country spent an estimated US$1 billion.

While government claimed to have spent US$260 million, actual expenditure was reportedly between US$25 million and US$30 million a month.

In the early years, Zimbabwe suffered a huge outflow of capital from multinational corporates that had general mistrust of the new socialist government.

The Bretton Woods-sponsored Economic Structural Adjustment Programme (Esap) in the early 1990s also failed to stem the economy’s decline.

Critics also say the unplanned payment of Z$50 000 (old Zimdollar) lump sum gratuities to war veterans in 1997 sapped Treasury while the fast track land reform programme of 2000 rocked foundations of the economy, scared away donors and potential investors.

Zimbabwe has been without balance of payment support since 1999 after the International Monetary Fund and donors withdrew financial aid over policy differences.

In response to the economic collapse, the Zimbabwe dollar which was worth approximately the same as the British Pound Sterling in 1980, devalued significantly under pressure from rising inflation and very low export earnings.

By August 2005, the currency had devalued to more than Z$17 000 per US dollar at the official rate.

In 2008, the rate was over Z$10 trillion per US dollar. Zimbabwe’s sovereign currency ceased to exist in February 2009, confirming the country’s disastrous economic failure.