Just as Zimbabwe is a land of political contradictions, so it is a land of economic paradox, for the nation is simultaneously both developed and underdeveloped. A developed economy can be seen through its industrial sectors, in the commercial farm areas, and in the mines. These sectors have relatively modern technology, excellent infrastructure, sophisticated management techniques, and a skills pool well above the average for the continent. But in the former tribal trust lands, where about 75% of the population lives, Zimbabwe is obviously a land of underdevelopment, if not of poverty. The shortages of arable land, clean water, schools, roads, farm implements, irrigation facilities, and fertilizers, combined with the generally poor quality of the land, make this side of Zimbabwe a candidate for “least developed” status.
BY MIRANDA MUNGATE
The government aims to correct this distortion and pull the underdeveloped segment out of its poverty. But it says that it does not want merely to transfer wealth from the rich to the poor, as it realizes that this could eventually cut incentives and reduce the economic pie to the detriment of all. The task then is to obtain sufficient growth in the developed sector to give a fair return on investment and to fund development in the neglected areas.
Can this essential growth be achieved? On the basis of Zimbabwe’s history, there is a good chance that it can. While the country is burdened with distortions between the developed and underdeveloped sectors, within the developed sector itself Zimbabwe is blessed with a level of diversification and therefore of economic balance that is the envy of Africa.
The economy is basically powered by three engines: mining (12% of GDP), agriculture (17%), and manufacturing (18,43). These sectors balance each other, with a bad year in one often compensated by a good year in another. And within each sector, there is again a surprisingly balanced variety of activities. Hundreds of crops can be grown, six main minerals are mined and manufacturers cover a wide variety of fields.
But a prosperous future is not automatically assured. Four things could sabotage it. First, overhasty or inappropriate government policies could scare off the white population which still possesses many skills essential to the economy. Such policies could also deter foreign investment that is essential for growth. Second, an international recession could depress prices for Zimbabwe’s exports, curtailing foreign exchange revenues. Since the pace of manufacturing expansion depends on the availability of foreign exchange for importing machinery and raw materials, a fall in commodity revenues would also slow manufacturing growth. Third, rapid manufacturing progress requires export markets and, if the lucrative South African market were closed, manufactures would suffer. Fourth, massive government social welfare spending, high wage policies, and international price rises could eventually spin inflation to levels that erode economic growth. Despite these dangers, Zimbabwe’s post-independence economic record encourages a moderately optimistic outlook. Certainly, Zimbabwe is far better equipped than virtually any other African country to withstand whatever economic storms the future brings.
According to Riddell R.C (1984), it was only in the first two years of Independence that Zimbabwe outperformed her neighbors. Economic performance in the second year of independence, 1981, was less stupendous than the 1980s but still entirely respectable. Economic growth was hindered by the fall in demand for minerals due to the international recession, transport problems associated with South Africa’s lack of cooperation on lending railroad stock, and difficulty in maintaining rail equipment because of the emigration of skilled repairmen. But even with these breaks, 1981’s current prices growth rate reached an estimated 23%, the same as the 1980s. It was only when the plateaued growth was combined with a two-fold increase in the inflation rate, up to about 16%, that 1981’s growth rate estimate fell to the 6% to 8% range. The slowdown was disappointing but it still left Zimbabwe with enviable figures far above most African, and indeed some European, indices.
Manufacturing fared moderately well for the first half of the year when 1980 revenues paid for increased foreign exchange allocations for manufacturing inputs. But the effects of decreased minerals’ revenues started to bite in the third quarter, forcing 10% to 15% allocation cuts in the last quarter of the year. The consequent shortages of inputs and equipment, combined with a steady, if not dramatic, erosion of skills, led manufacturing growth to slacken from the 1980s 15% to an estimated 12%.
But contrary to expectations, consumer demand did not fall simultaneously. An estimated 37% increase in government expenditure and the ongoing effects of increased wages and employment led to a 33% increase in the first four months of the year.
The combination of an estimated 22% fall in the volume of exports in 1981 and an escalating deficit in Invisibles caused Zimbabwe’s foreign reserves to fall from a post-independence peak of Z$212 million in October 1980 to only Z$150 million in September 1981, which is equivalent to just two months’ import cover. Consequently, the 1980’s trade surplus of almost Z$70 million moved to an estimated 1981 deficit. This, combined with an increased deficit in Invisibles only partially alleviated by aid-flows, led to an increase in the current account deficit, as yet unspecified but clearly above 1980’s Z$182 million (monthly digest of statics, November 1981). Furthermore, the government’s budget deficit grew from 9% to 11% of GDP. The government sought to ease the economic crunch by borrowing. World Bank figures showed Eurocurrency borrowings of US$27 with US$6 million in the final part of 1980 and US$116. 6 million in the first half of 1981. Other finance came from aid, which contributed 6% of 1981 total expenditure. The Zimcord donors’ conference, held in March 1981, brought pledges amounting to Z$1.3 billion which was to be used over the following three years for a variety of public projects.
The new borrowing pushed Zimbabwe’s debt service ratio from a low 7% at independence to nearly 12%. To control the money supply and bring down inflation the government almost doubled most interest rates in 1981. (The prime overdraft rate of the commercial banks went up from 7.5% to l3%.) . Furthermore, banks were “advised” to increase their liquid assets ratio from 35% to 40%, tightening credit still more. In the 12 months ending June 1981, the money supply grew 11.3%, a marked slowdown from the 1980 liquidity expansion.
But while the government was juggling with the economy in an effort to stimulate maximum growth and minimum inflation, it also had to continue to respond to the needs and demands of the black population. After all, the whole point of the exercise was to improve living standards for previously neglected sectors of the population.
Miranda Mungate is an MSc student at the University of Zimbabwe student and can be contacted on mirandamungate@gmail.com
He added that the figures could be more if they increase the scope of their research to include other sources
However, the interface meeting saw WERDIT and both state and non-state members agreeing on improving Wedza District’s services towards gender based violence victims by urging the provision of one stop shops to protect gender based violence victims.
