Last week Zimbabwe celebrated 35 years of Independence. While many would argue that we have not made much progress in the last 35 years I would disagree.
In the first two decades post-independence, Zimbabwe made tremendous and unexpected progress in many sector sand was considered to be the jewel and bread basket of Africa.
Zimbabwe’s GDP grew by 4% per annum between 1980 and 1997, almost twice the rate of growth of sub Saharan Africa. Zimbabwe boasted single digit inflation, a trade surplus and a stable currency.
Armed with an honours degree in Economics from the University of Warwick I came home in 1996, filled with hope and optimism, ready to partake in the New Zimbabwe. Zimbabwe was the darling of the West and poster child of Africa. A thriving agricultural sector, stable banking sector, and a dynamic and growing manufacturing sector.
All this was about to change in 1999 following the implementation of the fast track land reform programme.
Britain, frustratingly for the Zimbabwean Government and its populace, had reneged on her pledge to compensate white farmers as part of the Lancaster House Agreement.
Zimbabweans were “hungry” for land and little had happened for 20years since the end of the war for liberation. The “willing buyer willing seller” arrangement was moving at a snail’s pace, if at all. Growing discontent from the landless masses and from those who had fought for freedom, Britain had left Mugabe with little choice but to embark on the fast track land reform programme.
Over the next decade Zimbabwe would sink into an economic crisis. The currency was the first to go as people and capital began to flee the country.
Inflation jumped higher and agricultural output declined. Agriculture was the mainstay of the economy accounting for over 25% of GDP. It was the backbone of the economy and supported many other industries including financial services and manufacturing.
Over the next decade GDP declined over 50% in what was coined “the lost decade”.
A once thriving economy was gradually being torn apart, with it the dreams and hopes of so many Zimbabweans. Over 3 million people left the country in search of greener pastures. By 2008, inflation had reached 128 billion per cent or 98% per day, the second highest rate in the history of the world.
Only Hungary in the 1940’s recorded a higher rate of inflation. The economy was on the verge of collapse when Zimbabwe entered into the Government of National Unity in September 2008. Zimbabwe abandoned its own currency and adopted the multi-currency regime in Feb 2009.
The stock market which was shut in Sept 2008 was reopened and Zimbabwe was back in business. Over the next 3 years Zimbabwe’s economy recovered with GDP growth averaging over 8%.
Was this a new beginning or another false dawn? Many Zimbabweans returned from the diaspora in search of opportunities. The multi-currency regime combined with other factors brought much needed stability and allowed companies to plan their activities.
The mining sector developed rapidly given the buoyant commodity market. Between 2009 and 2012 the mining sector grew by 35% per annum and by 2012 its share of GDP had grown to over 15%. In part, growth was fuelled by borrowings as hyperinflation had destroyed the value of any savings people and corporates had prior to 2009. Debt was expensive (around 20%) but could be supported in a rapidly growing market.
Delta Corporation, Zimbabwe’s leading beverage company saw significant growth in consumption.
Volumes increased from 2,519m hectolitres in 2009 to over 6,728m hectolitres in 2014. In 2012, volumes surpassed the previous peak of 6,815m hectolitres achieved in 1997. We were drinking more cokes and beer than we ever before.
Even mobile phone penetration grew from less than 20% in 2009to over 103% by 2014. Exports grew from US$1,8bn in 2009 to over US$4,5bn in 2014. Imports however surpassed exports in 2014 leaving Zimbabwe with a trade deficit of US$2bn. Zimbabwe was back in business.
Growth started slowing in 2013, in part due to political and regulatory uncertainty and an unfriendly investment climate. As the economy stalled the high cost of borrowing was no longer sustainable and non-performing loans started to increase.
Banks which had lent aggressively found themselves in trouble as delinquencies increased. Over the last two years we have seen three banks collapse and non-performing loans increase from less than 3% in 2009 to over 15% today.
Interest rates are far too high and unsustainable for most Zimbabwean businesses.
Furthermore, we have around US$700m in non-performing loans stuck in the system. International banks guided by their parent companies have limited their lending to blue chip companies and have not suffered the same demise.
In the absence of any new money how do we expect the economy to grow again? What are the key impediments to growth? How do we kick start the economy again? Where are the bottle necks and how do we unlock the gridlock in the system. How do we become attractive again? In an increasingly globalised world we compete for capital.
How is it that we receive less than US$400m dollars in FDI while our neighbours Zambia and Mozambique receive over US$2bn and US$5bn respectively? What policies do we need to adopt to make Zimbabwe attractive again? The solutions are simple but require focus and discipline. We need to deal decisively with corruption and become productive again.
We need to adopt more investor friendly policies and make investors feel welcome.
We need to deal with our outstanding debt and reduce our bloated civil service. We need to reduce our trade deficit by becoming productive again.
While I do expect growth to suffer in the short term as Zimbabwe goes through the painful process of deleveraging and cost cutting, we are laying the foundation for a better future. I do believe we can do it and government are taking bold steps towards building a better Zimbabwe.
Perhaps we need more focus on the economy and work together towards a common vision and goal.
What’s our vision for 2050? The world is becoming more complex and competitive. If we are to compete on the world stage then we need to raise our game.
You could say so far so good but we could be a lot better. Zimbabwe has shown great resilience over the last two decades but it is time to thrive.
It is time we build a better brighter and more dynamic Zimbabwe. Belated Happy Independence Zimbabwe. So far so good but certainly it could be far better.