THE ECONOMIC DOWNFALL OF ZIMBABWE FROM 1980 TO

2008

Michael Rangarirai Vusani

REG NUMBER: R118269ED

FACULTY OF EDUCATION

HISTORICAL RESEARCH METHODS

SEPTEMBER 25, 2014

AFRICA UNIVERSITY
vusanimchael@gmail.com
 INTRODUCTION

On 18 April 1980, the Republic of Zimbabwe was born from the former British colony of Rhodesia1. Not

only did the country have a well-developed, highly diversified and prosperous agricultural industry and a

lucrative mining sector, which also witnessed rapid industrialisation during the time of the Unilateral

Declaration of Independence2(UDI). The transition from minority white rule to majority black rule saw the

new democratically elected government with a task to integrate and build up an already sophisticated and

advanced economy, so with such an economy how then did the Zimbabwean economy crumble in 34 years in

a country that is not involved in any major long war, what then caused this promising nation formally known

as the breadbasket of Africa to de-industrialise at an era of economic development in some parts of Africa?

What were the factors involved in this downfall? Who or what is to blame for the inflation that ultimately

destroyed the Zimbabwean Dollar that was once compared to the British Pound and the United States dollar

to having no currency of its own? The following four chapters will give a narrative of the sequence of events

so as to expose some deficiencies within the nation that led to its downfall. The issues raised will be the

governments aggressive education and health policy within the first years of independence, To what extent

was this a factor in the downfall of the economy, the fast track land distribution programme and reasons why

it happened when it happened, population growth and the government’s failure to come up with policy to

create employment for the growing population, mismanagement of public finance or could it be the drought

in 1982-3 which impacted the agriculture sector heavily as well as the economy and government expenditure

to deal with the effects of the drought? Is the impact short term or long term and are they even worth

mentioning for the economic downfall of the nation. Was the process of De-industrialisation of the

Zimbabwean economy a concept the government was deliberately taking or it was in an unconscious state that

allowed this process to occur. Was it South Africa’s attempt to or rather the destabilisation of Zimbabwe from

1980-1989, was this a success or a failure? This narrative document is in 3 phases, 1980 to 1990, 1990 to

2000, 2000 to 2008 and there will be detail on the significant events that had a negative impact on the nation’s

1
Zimbabwe at 34: The economy since 1980 April 17, 2014 in Multimedia, News, Zimbabwe 34
2
A.S Mlambo The economic structural Adjustment programme, The case of Zimbabwe1990-1995 University of Zimbabwe
Publications 1997 page 29
1
economy. Each chapter will contain details of events that led to the economic downfall of Zimbabwe. Dividing

each chapter into a singular decade makes the information better to grasp. Naturally these periods experienced

a lot of government policy that affected the economy directly and indirectly, as well as situations that were

beyond the government control, and all these issues will be exposed in the coming chapters.

The assumption of this paper is that the Zimbabwean people are not entirely aware of what caused the

economic downfall. Information that they are aware of is that which comes out in the papers or information

that is spread through word of mouth that has not been verified. So based on this assumption it is of great

importance to give a narrative and break down the sequence of events that occurred that put the Zimbabwean

economy in its current state. This project will then give an analysis of these events and break them down as

well as explain why what happened, happened at specific times. It will also have solutions as to what is the

next step for the development of the economic situation in the country. An analysis of each policy that the

government implemented and what could have been done for the growth of the nation.

Another issue that this paper wanted to address is to look for causes that go beyond the bias or shallow

explanations of what caused the economy to decline, issues such as sanctions and corruption. These are factors

that should be considered but there are way more complicated details that need to be exposed so as to give the

reader a broad perspective that will allow objective analysis as to the causes of the downfall.

2
 CHAPTER ONE

1980 to 1990

THE BEGINNING

Soon after independence in 1980 the Government set up goals for the country’s economic development called

The Growth with Equity document, which sought to achieve a sustained high rate of economic growth and

speedy development in order to raise incomes and standards of living for all. To develop and restructure the

economy in ways which promote rural development…3 In light of this document the intention of the

government was very clear. The economic and social goals articulated in the government’s policy document

were based on the belief that the economy would grow at a rate fast enough to generate sufficient revenue to

fund the desired reforms. Such hopes were not unfounded at the beginning of the independence decade. In the

immediate post-independence period rapid growth in Gross Domestic Product (GDP) was achieved,

amounting to 11% in 1980 and 12% in 1981 in real terms. This was a Higher growth rate than any other sub

Saharan African country, including South Africa4. With this growth it would not be accurate to credit the

government for the figures mentioned above because there hadn’t been much change from independence to

the extent that credit could be really and truly given to the government because it can be argued that it was the

same colonial economic structure, prior to independence that had followed through to independence that can

be credited for this growth.

A fair assessment can be made after at least 5 years of majority rule and not a mere year or two. But what was

reason for this growth? Mlambo argues that it was a combination of unique circumstances that converged at

this particular point that could not be replicated later, the circumstances were that the end of the Zimbabwean

war following the Lanchester house conference not only provided a peaceful Climate for economic prosperity,

which also allowed displaced peasants with government support through Agricultural extension services and

supply of agricultural inputs became productive once more. Also the return to the land coincided with an

3
Zimbabwe, Growth With Equity: An Economic Policy Statement (Harare Ministry of Finance, Economic planning and
Development,1982),page 2.
4
Mlambo A.S; op. cit 1997 page 41
3
excellent rainfall season in 1980 and 1981, resulting in a bumper harvest in Zimbabwe producing ‘the highest

marketed crop volumes on record’. Moreover the resolution of the Zimbabwean political crisis at 1980 brought

an end to international economic sanctions which had retarded economic growth in the closing decades of

colonial rule. It also opened up the country to foreign investment and aid5, however these advantages were

short lived and the real test of governments effectiveness in policy making was tested. In 1982 the economy

nosedived and the economy was plunged into an economic crisis from which it never fully recovered, there

was a severe drought of 1982/3 which affected agriculture and negatively affected the economy of the country

for example it is estimated that by 1983, 120 000 people were facing death because of lack of drinking water,

hunger malnutrition and disease. The government came up with a drought relief which estimates say was $209

million on food imports putting the total financial cost at $479 million. Such expenditure, coupled with loss

of export earnings due to the drought, increased the country’s balance of payments deficit to over 30%. At the

end of 1982 the severe drought reduced the agricultural production, making Zimbabwe an Importer of maize

for the first time, and as a result the GDP fell by 4.4% in 1982 and saw a further contraction estimated at 4%6.

There were a series of issues that the government had to deal with and in dealing with them a lot of money

was spent, Money which could have been used for the development of the country. For instance, the

Mozambican civil war between the ruling FRELIMO government and the RENAMO strained the

Zimbabwean economy in several ways. First in solidarity with the FRELIMO government which had given

invaluable help to ZANLA during the armed struggle against colonialism and also because of the need to

protect Zimbabwe’s trade routes through Mozambique, Zimbabwe deployed over 15000 troops (which the

Zimbabwean government had to pay) in Mozambique to fight on the Mozambican government’s side in the

conflict. Zimbabwean soldiers remained in Mozambique throughout the decade at considerable cost to the

Zimbabwean Exchequer7. This was one among many costs that the nation incurred.

To further worsen Zimbabwe’s economic situation, the expansion of local demand which had fuelled the

economic boom of 1980-81 turned into a liability a few years later, as once the slacked capacity had been fully

5
Ibid. page 41
6
Ibid.page 42

4
harnessed by industries, they could not continue to expand production to service the domestic economy due

to most of them were using outmoded machines which had not been replaced during the period of economic

isolation in the sanctions era (UDI). So the country had to import goods to meet local demand. This had a

negative impact on the countries balance of payments, while exports rose by 7 per cent in 1981, imports rose

by 28per cent. Consequently for the first time since the late 1960s the countries trade deficit amounted to $46

million, while the balance of payments deficit on current account rose from $157 million in 1980 to $424

million in 1981. According to a 1984 report of the National Westminster Bank of England, recent economic

problems, particularly the drought and the resultant food import requirements worsened the country’s

economic situation so that the current account deficit grew progressively from US$109 million in 1979 to

US$709 million in 1982. Meanwhile, escalating local demand, together with growing government expenditure

on education, health and defence fuelled inflation which rose from 8.6% in 1980 to 17.9% in 19838.

This was just but the beginning of the economic downfall of Zimbabwe, because this gave the government its

first among many challenges that tested its ability to come up with sound economic policy to deal with issues

that affect the economy and welfare of its people however it was still too early to conclude that the government

was failing, there was still a lot to be done to bounce back since it had only three years since independent to

make its mark and make Zimbabwe an economic power in Africa. Unfortunately there were more challenges

that were being faced by the government.

Bond and Manyaya argue that one strategy for increasing export revenue was periodic devaluation. The

currency was allowed to fall in 1984-1985 by nearly 40% accompanied by budget cuts and the reduction of

maize subsidies. The main beneficiaries were the agricultural and mineral exporters, but the devaluation

simply cheapened goods temporarily, rather than structurally improving Zimbabwe’s export capacity. This

would become evident as a result of debilitating changes to the Zimbabwean economy brought about during

the structural adjustment era in the 1990s9.

8
A.S Mlambo; op. cit 1997 page 43
9
Bond P. and Manyanya M. Zimbabwes Plunge; Exhausted Nationalism, Neoliberalism and the search for social justice. Merlin
Press 2003 p. 30
5
Other indicators of an economy in the doldrums were the rise in total debt from USD786 million to 2.3 billion

in 1983. In addition the budget deficit had risen from 6.6 per cent in 1981-82 to 8.7 per cent in 1984-85.

Defence commitments in Mozambique and expenditure on drought relief and social services ensured that the

budget deficit would remain relatively high during the 1980s10

Employment creation was slow during the 1980s, and Unemployment grew substantially right from

independence. Some critics have attributed the problems to the race between growth of the economy and

population growth. From 1982 to 1990, GDP growth rates averaged 1.3 percent per annum while the

population grew at an average of 3.3 percent. Only 10 000 new jobs were created in the first decade of

independence, which did not keep pace with either the population increase or with the large numbers of school

leavers (approximately 100,000 by the mid-1980s)11. These figures clearly show that job creation was an

issue that needed to be dealt with by government before it went out of hand. At the same time, the gains of the

first decade were unevenly distributed. Elite groups in both rural and urban societies, which included rich,

peasants and farmers, business people and educated professionals benefited most from policies which opened

up the state and capita accumulation to blacks. As a result, there were no significant narrowing of income and

wealth differentials; it is estimated that three percent of the population, mainly white farmers and a small black

bourgeoisie, continued to own bulk of resources and controlled two thirds of gross national income in the

1980s12. As a result of this members of government or policy makers seemed to have got in a state of limbo

and seemed to be comfortable with the idea of unequal distribution of wealth and this phenomenon continued

and even got worse as time went on. This unequal distribution of wealth was soon to become an issue for the

soon to be educated population of Zimbabwe and resistance would then begin.

Another challenge that was faced by the Zimbabwean government was the attempt of the South African

government to destabilise the Zimbabwean economy from 1980 to 1989. This was done because Independent

10
N. Mlambo, The Cost of eope i g Zi a e s t ade ‘outes Th ough Moza i ue (B.A (Hons) dissertation, Department of
Economic History, University of Zimbabwe, 1991 p 45
11
B. Raftopoloulos and A. Mlambo Becoming Zimbabwe; A history from the pre-colonial period to 2008, Weaver press 2009
page 169
12
B. Raftopoloulos and A. Mlambo Becoming Zimbabwe; A history from the pre-colonial period to 2008, Weaver press 2009 p.
170
6
Zimbabwe was a threat to South Africa the reasons will soon be explained. Destabilise includes, cultural,

political, economic and military measures taken by one or more governments individually or collectively in

order to overthrow it or to force it to do their bidding13. According to Dzimba the principle reason for the

policy of destabilisation of Zimbabwe was that South Africa saw it as a threat to its own security and to its

programme for the regional economic community, CONSAS (Constellation of Southern African States).

CONSAS was essentially a strategy by South Africa to use its economic power and wealth to manipulate its

black member states, and to exert subtle pressure to ensure that they ‘behaved’ themselves as far as the white

minority government was concerned14. In order to deal with the Zimbabwean threat the South African

government decided to sabotage the Zimbabwean economy. Firstly The South African scare propaganda

directed mostly at Zimbabwe’s white community had resulted in the departure of a sizeable proportion of

white skilled manpower e.g. technicians, skilled artisans, who were readily absorbed into South African

economy. The manpower drained was felt in industry in general, and most critical in railways. The shortage

of skilled artisans resulted in the decline of maintenance and repair to the point that at the beginning of 1981

there were only 120 locomotives out of 220 needed to cope with traffic. At this precarious moment, South

Africa delivered a crippling blow15. Transport crisis affected the economy creating domestic shortages and

blocking imports and exports. In particular, fuel procurement was hit hardest and the result was wide spread-

spread shortage of diesel and petrol which by 1981 had adversely affected all sectors of the economy.

Agriculture which was the backbone of the country’s economy, was particularly vulnerable because the need

for diesel fuel at the beginning of the planting season. By December 1981, there were stokpiles of export

between Z$4.5 million and Z$6 million per annum in lost export opportunities and this affected Zimbabwe’s

foreign- exchange earning capacity16. Zimbabwe could not procure new heavy freight vehicles because of

shortage of Foreign exchange. Consequently the country had to rely on expensive foreign trailer-hire

operators, costing Zimbabwe about $100 million a year in foreign currency between 1980 and 1988. By 1989,

about 450 heavy truck units costing millions of dollars were needed to rectify the problem caused by many

13
J. Dzi a South Afri a s Desta ilizatio of Zi a we, -1989 National University of Lesotho 1998 page 7
14
Ibid. page 50
15
Ibid page 91
16
Ibid page 92
7
years of non-procurement17. All this money that was lost by the Zimbabwean government could have been

money that could have been used in other sectors of the economy such as infrastructural development which

would have created jobs for the newly educated people, invest in modernising industry so as to increase

produce for export as well as consumption but the fact that millions were spent trying to counter South Africa’s

attempt to destabilize the Zimbabwean economy was significant and left a dent of the income generated by

the government as well as foreign exchange.

Generally it can be noted that during the first decade of Zimbabwe’s independence the country experienced

mixed fortunes in the performance of its economy. The average annual growth rate was 4.1% between 1980

and 1985, and 4.6 between 1985 and 1990. In this period, the government realised tremendous achievements

in the social development sector also grew significantly. In addition, there was phenomenal expansion in

access to education at all levels, and the health service sector also grew significantly. In addition, there was

considerable investment in the land resettlement programme, road and dam construction.

By the late 80s it became evident that the economy was not performing well, and therefore it required some

form of revamping. It was hoped that such revamping would boost the depressed investment, streamline labour

regulations, create employment, and stimulate export growth, among other objectives. However in dealing

with issues in relation to growth there was lack of clarity on industrial strategy and that was another weakness

that was identified by some analysts. For instance, it was observed that a clear industrialisation strategy has

not yet emerged in the 1980s. The co-ordinating capacity of the state still left much to be desired, especially

in defining and disseminating an ideology of industrialising and industrial programmes, and successfully

implementing and co-ordinating them18. Finally in the end of the 1980s, the ideology of socialism co-existed

uneasily with capitalist reality. The former appeared more and more anachronistic in view of domestic

developments of emerging embourgeoisement and corruption, and the collapse of the socialist model

worldwide19. This argument was raised by David Coltard in the next chapter in his analysis of the Economic

17
Ibid page 95
18
L. Sachikonye Zi a e s Lost De ade, Politi s, De elop e t a d So iety Weaver press 2011 p92
19
Ibid p.92
8
Structural Adjustment Program that the government introduced as a solution for development in the next

decade.

9
 CHAPTER TWO

1990 to 2000

THE TURNING POINT

In all the challenges that the Zimbabwean government had faced between 1980 to1990 there was need for

government to come up with a progressive policy of economic reconstruction for the country in order to

promote economic growth. This chapter focuses on 1990 to 2000 and the chapter will highlight some of the

policies that the government came up with and some of the results of these policies within the economy. Some

of the questions that will be addressed will include the fact that was it in this decade that was the turning point

or was this decade a mere reflection of the inevitable decline of the Zimbabwean economy.

In an effort to deal with the economic challenges that the Zimbabwean government had been facing in its first

decade of independence the government came up with the Economic Structural Adjustment Programme

popularly known as ESAP in 1991.

Zimbabwe's adjustment program contained the usual collection of Bank-inspired reforms - trade and currency

de-regulation, devaluation of the Zimbabwe dollar, movement towards high real interest rates, the lifting of

price controls, chopping of "social spending" and removal of consumer subsidies. All were standard

ingredients of "liberalisation," as were the Bank's and IMF's increasing emphasis on reduction of the

government deficit, civil service reform and shedding of public enterprises. And finally, there was the string

of large loans and credit facilities from the Bank, the IMF and international donors, aimed at supporting the

country's balance of payments and government's plans for substantial private sector infrastructural

development. At the outset, it was estimated that roughly US$3 billion over five years would be needed from

overseas donors to make the reforms work. Zimbabwe would spend its way into a new free market on

borrowed money20.

20
R. Saunders Southern Africa Report SAR, Zimbabwe" ESAP'S FABLES II Vol 11, No 4July 1996 P.8
(http://www.africafiles.org/article.asp?ID=3876)

10
The ESAP optimistically projected that the implementation of these measures over a five –year period would

lead to a five per cent annual growth, a reduction of the budget deficit to five per cent of the GDP by 1995, a

reduction of the external current account deficit to four per cent of GDP and reduction of the debt service ratio

to 20 per cent by 199521

This had consequences economically as well as socially, it is fair to say ESAP was the beginning of a new

political or economic philosophy that the government had embarked on and this would have dire consequences

and David Coltart, MDC Senator, who has been a human rights lawyer in Zimbabwe since his return to the

country in 1983 commented on his opinion on ESAP, he argued:

“As we look at what is happening in Zimbabwe it appears as if we are moving away from a centrally controlled economy

to a free-market, capitalistic economy. We are seeing a drift from state ownership or state control to African styled

privatisation in which the key players are well connected men and women not too far from the seats of power.

Government has not actually admitted yet that structural adjustment marks a shift from socialism to capitalism and a

free-market economy. Indeed Government, or rather the ruling party, every now and then reiterates its commitment to

socialism/Marxist-Leninism, but this flies in the face of what is actually happening in the country. Furthermore, in all

the television programmes organised by Government they have not actually come out and said that they are now

committed to capitalism. In my view, the term “structural adjustment” in Zimbabwe is simply a smoke screen or a

euphemism; it is a convenient phrase to disguise the “U” turn that Government is now taking22”.

As aggressive as this may come across it really does make sense, the idea of socialism here seemed to have

disappeared to more of a capitalist system that will as a result low income workers, the poor and unemployed

suffered as a result of this shift. Moreover, there was a shift in emphasis in the redesign of the state's social

programs, away from a concern with issues of equity and access, towards a system of management driven

primarily by the problem of how to administer the supply of services given defined, limited resources. The

negative social and economic consequences of this shift were immediately and abundantly clear for ordinary

21
L. Schikonye Op Cit. p. 93
22
Speech by David Coltart: An Introduction to ESAP: Zimbabwe 1992
January 31, 1992 An Introduction to ESAP: Zimbabwe 1992
http://www.davidcoltart.com/1992/01/speech-by-david-coltart-an-introduction-to-esap-zimbabwe-
1992/#sthash.jr0exDN2.dpuf
11
Zimbabweans. Of particular note was the rapid deterioration in the country's acclaimed health and education

sectors.

On the Health sector Public expenditure on health care declined by 39% in 1994-95. This decrease implied

diminished spending on common drugs, extension and preventative health services, specialist facilities and

treatment, and other components of quality health care delivery. At the same time, the government's stricter

enforcement of a user fees system erected barriers to health care in the way of poorer social groups who were,

typically, those most in need of health services. Decreased access to prenatal consultancies, equipment,

necessary facilities and, not least of all, drugs. A more widespread, essential problem involved diminishing

drug supplies. Between 1988/89 and 1993/94, the real value of the national revolving drug fund, allocated to

the agency that supplied approximately 80% of drugs dispensed to public and private health institutions,

declined by 67%, resulting in shortages and the growing use of private channels to secure drugs and

equipment. In 1992 doctors and nurses began referring to "ESAP deaths", described as deaths caused by the

inability of patients to pay for the minimal length of time in the hospital, or for prescription medicine. The

Minister of Health, Dr. Timothy Stamps has acknowledged that only one in ten Zimbabweans can afford to

pay for their own health care. Yet fees remained in place, largely at the insistence of ESAP policy makers.

Meanwhile, accounts from rural clinics and hospitals have urgently noted the near collapse of health care

services under the weight of cutbacks and imposed self-reliance. Professional morale and service delivery

within the public health system has wilted. Many doctors, nurses and technicians have been tempted into the

higher-paying, better equipped local private sector, or out-of- country altogether23 According to a 1993

UNICEF study, health services had fallen by 30per cent, twice as many woman were dying in childbirth as

had before 1990, and fewer people were visiting clinics and hospitals because they could not afford it24.

In education the same contradictions between cost savings and rising social need have emerged to threaten the

country's celebrated post-independence advances in primary and secondary education. In the primary sector

in particular, real per capita spending and average spending per pupil fell to the lowest levels since

23
Saunders op. cit. p8
24
Raftapolis and Mlambo op. cit. p188
12
independence. While government's declining investment undermined the quality of education, its imposition

of user fees effectively barred easy access to education for hundreds of thousands of students from poorer

households. The overall result of fee imposition was a decline by as much as 5% in enrolments by children in

urban primary schools, despite a growth in the potential school-going population. Over time, the government

has established a relief system and in 1995, government spent $53 million helping 265,000 students with

tuition and examination fees. But this still fell far short of the actual basic need, and did not begin to address

additional heavy school attendance expenses including school levies, materials, uniforms and other costly

items. And the economic benefit to government from the imposition of cost-sharing fees? In 1992-93,

educational charges raised only $50 million - or 0.5% of budgeted government expenditure25. To further

elaborate on the consequences of ESAP on health and Education Mlambo states that ESAP provided harmful

to Zimbabweans educational and health care reforms. Indeed it can be said that, by 1995 Zimbabwe was

undergoing what essentially amounted to a counter revolution as well as the impressive gains made in the first

decade of independence in education and health were being eroded by ESAP. The government of Zimbabwe

was itself forced to admit in 1996 that because of ESAP, the gains made earlier in the provision of health

services were in serious danger of being reverted. It stated:

During ESAP, Government resources have decreased so that real expenditure on health has declined because of a

combination of raising costs, inflation, declining value of the Z$, emergence of costly diseases such as AIDS and TB. .

. The gains that have been made to date are therefore under threat.

During the early 1990s, workers and the unemployed moved towards mass action and responded to the

impoverishing effects of ESAP with strike action. The Zimbabwe Congress of Trade Union (ZCTU) gradually

distanced itself from the state became more confrontational, and in this way was able to assert its autonomy.

It organised a march against the government’s economic reform programme in June 1992, but the event was

poorly attended and brutally quashed by the police; the future of the ZCTU as a body able to mobilise workers

against government and employers came under threat26 However, workers became more and more agitated as

25
Saunders op. cit. p8
26
R. Saunders, St iki g ahead: I dust ial a tio a d la ou o e e t de elop e t i Zi a e , in Raftapolous and
Sachikonye (eds), striking back, pp. 133
13
their real wages continued to decline. Then there was a public sector strike of June 1996 was the largest strike

organised by civil servants in post-independent Zimbabwe the eight week strike by teachers, doctors, nurses

and other government workers was supported by student groups, human rights organisations and churches.

The state responded by making them illegal, detaining union leaders and refusing to negotiate, the strike nearly

paralysed the country and delivered a blow to the governments cultivated image of unchallenged authority27

Indeed, by 1995, a growing number of studies had begun to document the negative impact of ESAP on the

poor majority of Zimbabweans. For instance the government’s decision to deregulate prices and remove

subsidies for basic consumer goods in 1991 caused severe hardships for the Zimbabwean poor28. The poor all

of whom battled to afford basic goods as prices skyrocketed and workers real wages declined. Under structural

adjustment, woman and children’s suffering intensified, as poor households relied increasingly on these

groups’ reproductive labour to sustain themselves29.

The plight in rural population also worsened during this period there was a de-industrialisation of the agro-

industrial sector, and rural poverty intensified as a result of ESAPs adverse effects on the agricultural output

of the poor. It also exacerbated national and rural income inequalities. The combined result of the reduction

in government extension and agricultural input services, the introduction of a tight and more expensive credit,

and the deterioration in rural roads was a severe decline in both peasant agricultural productivity and peasant

earnings and furthermore structural adjustment increased pressure on rural land and natural resources as

retrenched urban workers either sent their families to their rural homes or went with them 30. In an extended

survey of factors that conspired to derail ESAP, one analyst identified them as:

 Technically deficient implementation owing to poor design

 Speculative surge of imports

 Late disbursements of funds by donors including the world bank

 Punitive interest rates and contraction in foreign investment

27
Ibid p 10- 11
28
Mlambo op. cit. p.83
29
Raftapolis and Mlambo op cit. p189
30
ibid
14
  A major drought in 1990-91 necessitating food imports31

In light of the impact of Structural adjustment on society and the economy it must be noted that this was a

process that contributed to the decline of the Zimbabwean economy, it was not sudden but one event led to

the other and ultimately affected the Zimbabwean economy. However it was not until 1997 that all hell broke

loose. It was Friday 14 November that the Zimbabwean dollar collapsed, a day referred to as “Black Friday”,

when the Zimbabwe dollar lost 7.1% of its value against the United States dollar. The stock market

subsequently crashed, wiping away 46% from the value of shares as investors scrambled out of the Zimbabwe

dollar. Debates are inconclusive on the real cause of Black Friday32. According to Professor John Makumbe

a political scientist “Black Friday” was as a result of the suspension of the War Veteran Compensation Fund,

because of this the war veterans marched and physically confronted President Mugabe at State House and

demanded payment for their contribution in the war. They argued that it has almost been two decades and they

have nothing to their name yet they fought and liberated the country, the police could not stop them because

some of them were war veterans so they were not stopped and demanded payment and the President had no

option but to pay them Z$50 000 and Z$2000 dollars a month. He argued that this had never been done before

and to make matters worse it was unbudgeted for and the impact on the economy was that it collapsed 33

With the ZCTUs ability to organise and mobilise masses for protest during this period it was further

strengthened by growing frustration with the slum in the economy and by the government unbudgeted gratuity

of payments to war veterans (Black Friday). Notably the general strikes and stay-away of this period were

joined not only by workers alone but by other urban social groups, including the unemployed and the students,

and by civil society organisations working for human rights and democratisation. In this way a broad alliance

between and others in the fight for workers’ rights and social justice was born and cemented34. Some of these

demonstrations were severely crushed by the police.

31
L. Sachikonye op cit. p94
32
L. Mambondiani A i ute of sile e fo Bla k F iday November 2, 2007 in Business
(http://www.theindependent.co.zw/2007/11/02/a-minute-of-silence-for-black-friday/)

33
Rageh Omaar Interview with John Makumbe State in Denial (Al jazeera) April 15 2010
34
Raftopolous, The Labour Mo e e t ; Da sereau, Liberatio a d oppositio i Zi bab e
15
The year 1998 opened up with an intensification of pressure on the state by the workers and civil bodies. By

the end of 1997 several key economic indicators pointed to the challenges facing the state: as a percentage of

gross domestic income, the share of wages dropped from 54% in 1987 to 39% in 1997, while the ratio of profit

increased from 47% to 61% during the same period; real wages fell from an index of 100.6 between 1985 and

1990 to 86.0 between 1996 and 1999 employment growth declined from an index of 2.4 to 1.5 and inflation

increased from 11.6% to 32.6% during the same period; poverty levels increased from 40.4% in 1990/91 to

63% in 199635. As a result of this in January 1998 food riots, in response to the steep rise in the cost of mealie

meal, erupted in the capital city and smaller towns such as Beitbridge, Chegutu and Chinhoyi. The response

of the state was brutal, ten people were killed and hundreds arrested and assaulted by the security forces. This

was accompanied by more collective union actions, and the emergence of a coalition of workers, student

intellectuals, humans’ rights organizations and women’s groups to from one of the most effective social

movements in the country’s history, The National Constitution Assembly (NCA)36.

It was clear at this point that the economy was going downwards and that there was need for immediate

government intervention in order to deal with the state of the economy, however this was not done instead the

government decided to send troops to the Democratic Republic of Congo, a move that will not only strain

government budget but that also increased government expenditure in a foreign land.

In October 1998 thousands of Zimbabwean troops were deployed to the Congo by the Government. At this

time inflation was already high at 30%. The Zimbabwean Government maintained that the troops were in the

region to promote peace. However, the problem that arose with this intervention was that it had not been

budgeted for and the Congolese were not paying the bill for the soldiers who were deployed by Zimbabwe. It

is said that more than half of the Zimbabwean ministers were against the war. However, various senior

members of Government privately benefitted from the war and did nothing to stop it; a planned demonstration

by the public about the war was quashed. The deployment went ahead and as the Congolese did not meet the

cost of the war, the Government printed money to meet the deficit that resulted. This in turn resulted in

35
Raftapolis and Mlambo op. cit. p.202
36
Ibid p. 203
16
inflation more than doubling in 199837. With the state of the economy the Zimbabwean army should have

never been involved in that war considering that it was not budgeted for and also considering the state of the

economy due to the effects of ESAP as well as the black Friday situation. This war should have never been

one that Zimbabwe should have been involved in. What the country should have focused on then is a number

of austerity measure, especially cutting government spending, policies of investment and infrastructural

development which would create jobs, revival of industry to encourage export of local products internationally

so as to bring in foreign currency. These are some of the things the government should have focused on in

order to improve the state of the economy.

Due to the increasing demonstrations the government was under attack and it gambled. It offered a new

constitution in 1999 which in return for cementing presidential powers it promised to redistribute white owned

farm land and with the economy in seemingly terminal decline white commercial farmers and black trade

unionist found common cause and against the new constitution and from this the MDC was formed. The

Movement for Democratic Change (MDC) led by Morgan Tsvangirai. With the rise of a new political party a

new era in politics in Zimbabwe began, the rise of the MDC would become a game changer in the political

sphere of Zimbabwe in the next decade.

37
T. Mhute Dollarisation in Zimbabwe: Cause and effect, 16 August 2012
(http://www.consultancyafrica.com/index.php?option=com_content&view=article&id=1092:dollarisation-in-zimbabwe-cause-
and-effect-&catid=87:african-finance-a-economy&Itemid=294 )

17
 CHAPTER 3

2000 to 2008

THE COLLAPSE

The year 2000 saw events that became known to define the true nature of the government of Zimbabwe and

its main agenda in respect to its populist/socialist policies. The governments respect or lack thereof for

property rights became exposed not only in 2000 but in this decade, between the years 2000 to 2008 the

economy of the country collapsed.

On the 13th of February 2000 the new constitution was rejected by 55% and this marked the first major political

defeat of the ruling party, against a political and civic opposition that made a national impression in a very

short time38. Tsvangirai announced that the party would field candidates for all 120 seats and predicted the

end of ZANU-PFs twenty-four year rule, privately owned newspapers published photographs of MDC

officials briefing white farmers on their manifesto, which guaranteed the rights of all Zimbabweans regardless

of colour. The MDC announced that any distribution of land would be done transparently and in keeping with

the law. Farmers wrote out cheques to the party and many became members39. The no vote of the referendum

was mainly blamed on the MDC and the white farmers, war veterans claiming that this defeat signifies the

control that the ‘white farmers’ had, and the MDC was named the puppet party made for regime change.

Within a few days of the constitutional referendum, a rag-tag army of former guerrillas invaded white owned

farms and occupied land throughout the country in a co-ordinated operation. The government provided Z$20

million (US$ 500 000) to fund the war vets, and the severity of attacks ranged from courteous negotiation to

total occupation of the farmers home, forcing him and his family to withdraw to a neighbouring property or

the safety of the nearest town. The police commissioner ordered the police not to intervene in ‘political

38
. Rageh Omaar Interview Op cit.
39
Hill Geoff The Battle fo Zi a e, The fi al Cou tdo Zebra press 2003 p.108
18
matters’, and the rural communities were left to fend for themselves40. This was a violent land reform program

popularly known as the ‘Farm Invasions’.

To understand the grievances of the Zimbabwean people there is need to expose the land situation in the

country. At independence about 6000 white commercial farmers owned 15. Million hectors of land while

8,500 small-scale African farmers had 1.4 million. The rest, an estimated 700 000 communal farming

households, subsisted on 16.4 million hectors. In other words, these households occupied less than 50per cent

of all agricultural land, of which 75per cent was in the drier less fertile agro-ecological regions 4 and 5. There

was therefore a keenly felt sense of historical injustice and deprivation over the question of land41. So it is this

injustice that gave the war veterans a reason to invade the white owned farms.

Where the blame should lie for the failure to change the racially skewed nature of land ownership in

Zimbabwe has been a key point in diplomatic interactions over the current land crisis. In the first two decades

of independence, Zimbabwe received financial assistance from various governments, including Britain, which

provided £44 million through a "land resettlement grant" and budgetary support to the Zimbabwe government.

The land resettlement grant was mostly spent by 1988 and formally expired in 1996. Conditions were put on

the way that the money handed over could be used. Britain in particular, especially under the Conservative

Party government in power from 1979 to 1997, favoured redistribution based on government purchase of land

from willing sellers at full market prices, a bias that contributed to the purchase of scattered, low-quality land

for resettlement. In 1997, the new British Labour Party government proposed that its new policy directing

development assistance to poverty alleviation guide its support for land reform. But Minister for International

Development Clare Short wrote to the Zimbabwean government stating that "we do not accept that Britain

has a special responsibility to meet the costs of land purchase in Zimbabwe." The donor community also raised

various problems with the way in which the funds provided for land redistribution were disbursed; arguments

that the Zimbabwean government rejected not least on the basis that the money paid was as a matter of

historical obligation rather than development assistance. Zimbabwe accused the new British government of

40
Ibid p.108
41
L. Sachikonye Op cit. p109
19
following the same racist policies as its predecessors42. It was this reason that again justified the land invasions

in the country, and throughout the course of the invasions the above reason was seemingly the most important

cause of the invasions. The shift in the new British government policy on land issue in Zimbabwe was seen

by the government as refusal to honour its promise and this was enough to start the invasions. The questions

that can be asked are why in 2000 after the rejection of the referendum, but answers to this question will

depend on ones perspective on the land question.

It is important to understand that Land occupation did not start with the farm occupations in 2000. They had

been taking place since the 1980s. The intensity of the farm occupations has, however, tended to vary, largely

because of the political environment. It can be observed that land occupations tended to increase during

election periods. Also the unresolved nature of the Land question has meant that the situation can be exploited

for political objectives. Many experts believe that this was the case during the occupations in 200043. There

were unconfirmed reports that the US and the UK governments promised a package of USD1.5 billion to

break the log jam in the negotiations about how land reform should be addressed. However whatever the actual

pledge might have been, it was not enshrined in the Lanchester House Constitution, which instead contained

onerous clauses on the protection of private property, including land44.

The results of the land reform programme were as follows. In April 2001, the objectives of the land reform

and resettlement program were, among other things, said to be to acquire not less than 8.3 million hectares

from the large scale commercial farming sector for redistribution (an increase from the five million hectares

stated in 1998). In October 2001, the government announced that it intended to list for acquisition 4,558 farms,

covering 8.8 million hectares. In the same month, based on a survey of its members, the Commercial Farmers

Union (CFU) estimated that 1,948 farms had been physically occupied and that the number of people

occupying farms had risen to 104,000 from an estimated 25,000 at the end of 2000, with an overall average

of fifty-three occupiers per farm. By the end of 2001, about 250 farmers out of the CFU's total membership of

42
Land Reform in the Twenty Years After Independence (http://www.hrw.org/reports/2002/zimbabwe/ZimLand0302-02.htm)
43
Hammar A, Raftopolous B and Jenson S Zimbabwes Unfinished Business, Rethinking land, State and Nation in the context of
Crisis. 2003, weaver Press
44
L. Sachikonye Op cit. p109
20
3,500 had left their farms over the previous year, and the Ministry of Land, Agriculture and Rural Resettlement

had recorded that 114,830 households had physically moved and resettled on 4.37 million hectares. By January

2002, up to 6,481 farms had been listed for acquisition. Of these, 918 had been removed because they were

counted twice, and 689 were delisted after litigation or negotiation; leaving a total of 4,874 listed farms, or

9.23 million hectares of land45.

The next phase of this chapter is now to expose the ultimate consequences of the Land reform programme in

Zimbabwe, mainly focusing on the economy. The Reserve bank of Zimbabwe gave the government a report

criticising the farm occupations and predicting major fall-out on three fronts:

 All foreign investment would disappear.

 There would be no money from the IMF

 Many farmers had mortgaged their properties, and unless they could grow and sell crops, they would

default on their loans to the commercial banks, creating a financial crisis46

The government did not respond to this criticism and so, these farm invasions had terrible economic and social

consequences. A 2002 study of farmworkers noted several indicators relating to the impact of the land reform

programme on this group: the occupations led in a huge drop in employment levels, estimated at 70per cent

in the Midlands and 65per cent in the two Matabeleland provinces; by mid-2000 an estimated 900 000 people

had been affected by the evictions; less than 5 per cent of farm workers were granted land; the loss of incomes

and access to housing and safe water affected the capacity of households to care for the sick in particular those

affected by HIV/AIDS47.

According to the Commercial Farmers’ Union, the total output of the agricultural industry in Zimbabwe in

2000 was 4.3 million tons of agricultural products, worth, at today’s prices, some US$3.347 billion. This

output has declined to just over 1.348 million tons of products in 2009, worth some US$1 billion—a decline

of 69 percent in volume and a decline of 70 percent in value. It is not often appreciated that smallholder farmers

45
Land Reform in the Twenty Years after Independence Op cit.
46
Geoff Op cit. p108
47
Raftoupolous Op cit. p.216
21
have been just as badly affected as the large-scale commercial farmers. Their production in 2008 was 73

percent lower than their production in 2000. According to the government-appointed Utete Commission,

during the first three years of land reform, some 250,000 people and their 1.3 million dependents were forcibly

displaced from commercial farms alone48. The combined costs of the land reform are staggering they include

US$2.8 billion in international food aid on an emergency basis, nearly US$12 billion in lost agricultural

production over 10 years, and a potential US$5 billion in compensation a total of some US$20 billion. It is

time to give all farmers secure tenure that will enable them to finance their operations properly. Such policies

cannot be implemented until the issue of the rights of the farm owners is resolved and the issue of

compensation addressed49. Another example was maize production, it declined from an average annual output

of about 1.7 million tonnes in the mid-1990s to about one million tonnes between 2000 and 2004. During most

of this decade, the country therefore needed to import maize to meet its full needs. Thus from having been a

regional breadbasket, Zimbabwe became a food importer during this lost decade. Similarly wheat production

declined from about 270,000 tonnes in 1998 to 62,000 in 2007, thus falling well short of the national

requirement of 350,000 tonnes50

48
Eddie Cross CATO i stitute E o o i i est e t Bulleti The Cost of Zi a e s Co ti ui g Fa I asio s No. • May
18, 2009 p.2
49
ibid
50
L. Sachikonya Op cit.
22
 Table 1: The decline in Agricultural production, 1998-200

Commercial Production in tonnes

Crop Percentage of 1998
1998 2007 levels

Wheat 521 160 31

Soya Beans 113 64 57

Tobacco 210 65 31

Coffee 10 1 10

Tea 18 15 83

Sugar 553 384 69

Source: UNDP (2008:156)

In industrial crops, there was a more mixed picture in production trends. From an average annual output of

about 200 million kilograms, tobacco production plummeted to 65 million kg in 2004.It declined further to

below 60 million kg in 2008. However it recovered to 110 million kg in 2010 although this was still about

50per cent of average annual output some 10 years earlier51. The table above provides depicting the relative

decline in agrarian production in selected commodities between 1998 and 2007. More generally when

Zimbabwe’s agricultural performance is measured by per capita value added, it can be shown that it has

declined from its peak in 2001 to about half that level in 2006. This drop explained not only by the impact of

the (Fast Track Land Reform) FTLR on commercial production, but also by critical input constraints. (UNDP,

2008:156)52.

51
L. Sachikonye Op cit. p. 119

52
Ibid p.119
23
What this meant was that Zimbabwe did not export as much as it used to and they also could not provide

enough farm produce for its population. This also meant that agriculture as a means to export in order to

generate income for the country had rapidly gone down. The country’s capacity to make money out of

agriculture suffered and provision of goods to its people depleted and this affected the economy on drastically.

Individuals that were affected instantly are the farm workers who worked in white owned farms.

Prior to the FTLR, there were about 320,000 farm workers on white commercial farms, supporting a

population of about two million. At the end of the reform period, an estimated 220,000 farm workers had lost

their jobs as the number of white farmers dwindled to about 400. By 2007, an estimated 85,000 full-time

workers were still in employment, mainly on agro-industrial plantations such as those producing sugar, tea

and timber. In addition, there were about 40,000 to 50,000 casual and part-time workers on various farms,

including those of the remaining white farmers.

Table 2: Coping strategies of farm workers after land reform

Coping strategy Number Percentage

Retraining 1 1

Informal deals 2 4

Cross border trading 4 5

Working in other countries 4 5

Becoming a beggar 5 7

Migrating to rural areas 7 9

Migration to town 17 23

Continue staying on the farm 21 28

Continue working for old employer 22 29

Buying and selling 31 41

24
The Table above shows, there was considerable displacement, migration and diversification of and by farm

workers during this decade as a consequence of the FTLR. With the greatest proportion of workers coping

after eviction by “buying and selling”, we see how the informal sector became to thrive. It is interesting too

that a few workers migrated to rural areas, with only nine per cent saying that they had chosen this strategy.

It was also interesting that 17 per cent stated that they worked for the new farmer53.

There was also a mismatch about the supply and demand of foreign currency. Foreign exchange reserves also

deteriorated quickly with the situation getting worse levels by the same year 2000. It was with this background

that yet another set of reforms was introduced. This time it was called Millennium Economic Recovery

Programme (MERP). MERP launched in August 2001, it was another government attempt to address the

declining economic performance. It was a short (18 months) economic recovery programme. It sought to

mobilise all the stake holders, the government, and business, labour and civil society, to implement a set of

reform measures that were designed to restore macro-economic stability. MERPs prime objective was to

restore vibrant economic growth and remove the fundamental causes of inflation. The burden of adjustment

was to be on the fiscal policy measures to reduce expenditure and enhance revenues 54.Like previous

programmes, MERP was to a great extent, a failure. For example, the target of reducing the budget to 3.8 per

cent of GDP in 2000 was not achievable .My mid 2000 it had already risen above 14 per cent of GDP. In fact,

from 2001 to the time of writing, the macro-economic environment had become so turbulent and

unpredictable. A number of multinational companies closed and many people lost their jobs. The level of

unemployment may now be above 75 per cent, considering the percentage of people who lost their jobs as a

result of Operation Clean Up55

The Zimbabwean economy spiralled rapidly into a world record decline. By 2006 GDP per capita was 47per

cent lower than it was in 1980 and 53per cent below its 1991 peak56. Formal sector income levels also

experienced a drastic decline. At the end of December 2006, the average minimum wage for agriculture and

53
Sachikonye L Op cit. p. 126
54
The Centre For Peace Initiatives in Africa, Zimbabwe, The Next 25 years 2005 p. 130
55
Ibid p.13
56
P. ‘o i so , Ma ro-Economic Paper produced for the Zimbabwe Institute (Cape Town, 2007), p. 4
25
domestic workers of Z$2,800, was only 3per cent of the food Datum line, while average minimum wage of

Z$57, 000 in the same period was 16.6 per cent of the Poverty Datum Line, prompting the chief economist of

the ZCTU to label these ‘Starvation wages’. A wages declined, their share in the gross Domestic income

decreased from an average of 49 per cent between 1985 and 1990, to 41 per cent between 1991 and 1996, and

dropping dramatically to 29 per cent between 1997 and 2003. This decline or downfall in the context of the

formal-sector employment shrinking from 1.4 million in 1998 to 998,000 in 200457.

Hyperinflation reached an official level of 230 million per cent by the end of 2008, devaluing both incomes

and savings. Peter Robinson explained the effects of this process on the various classes in the economy:

Hyperinflation is…. Notorious for concentrating incomes in the hands of the rich while impoverishing the

poor, often making already highly unequal societies even more divided. In Zimbabwe’s case, this undesirable

process has been magnified through being accompanied by high level of patronage. Key resources in a highly

distorted environment (such as cheap credit and foreign currency at the official rate) have been allocated to

selected individuals and groups, enabling them to amass enormous levels of wealth in a very short space of

time. Those with political clout have borrowed heavily from the banks and then declined to pay, waiting for

inflation to remove the burden of the original debt and claiming the ‘in duplum’ rule to evade interest. The

small depositors bear the cost, in effect subsidizing the rich.58

This process contributed to the share of profit in Gross Domestic Income rising from an average of 50 per cent

between 1985 and 1990 to 73 per cent between 1997 and 2003, while the estimate of Zimbabweans living

below the poverty Datum line was 85 per cent in 200659. The combination of the agrarian crisis, formal sector

employment decline and the growing informalisation of the economy created huge challenges for workers.

The loss of the labour force remittances to rural households severely impacted on the capacity of rural urban

linkages to be maintained, and thus affected the food security of both rural and urban families.

57
G. Ka ye ze, The La our Market, Sustainable Growth and Transformation in Zimbabwe, Harare 2007 p.31-5.
58
. P. Robisnson Op cit. p.15
59
Kanyenze Op cit. p. 32
26
The loss of the formal employment sector was a terrible blow to the government as a means to generate income

through taxes. As a result of the loss of employment it simply meant that the government did not receive as

much income as it did. Also the lack of people’s ability to receive income from employment meant that they

could not pay bills (water, electricity and city council) and as a result of this these parastatals were not

receiving funds for effective service delivery. Consequently the service delivery was poor and the

infrastructure depleted, due to insufficient funds for maintenance and adequate payment for their employers

and this affected the country.

The ruling party created incentives for trading goods in short supply ‘not only as a way to become rich but

also as virtually the only way to survive’. The rewards for long term investment in production were minuscule

compared to the rapid profits of buying cheap and selling dear. Additionally, the informalisation of production

structures that intensified in this period also provided new opportunities for entrepreneurs with links to the

party and the state to accumulate wealth in the gold-and diamond – mining sectors. In such sectors reliance

on the states monopoly of coercion and selective law enforcement was a central factor in this race for riches60.

Another major effect of the economic meltdown in the country, in particular of the dizzying speed of

hyperinflation, was the rapid loss of value of the Zimbabwean currency and the resulting ‘dollarization’ of

economic transactions. As the Zimbabwean dollar lost its value, those with the capacity to do so transferred a

significant share of their assets into foreign currency; and as goods and services were increasingly available

only for foreign currency, more people left the country61. In what became an unprecedented development, in

2002 Zimbabwe was faced with shortage of local bank notes. Long winding queues outside banks became the

norm especially during the end of the month when most employees get paid. Regardless of ones needs and

good account balance, one could not get the amount of cash he or she needed or more cash than was stipulated

each day by his bank branch62. By Christmas time in 2002, most supermarkets had empty shelves. Basic

commodities including mealie-meal, bread, milk, soap, salt, margarine, meat etc. could not be found. The

situation was chaotic. As a result of foreign currency shortages, the country’s external payment arrears rose

60
Raftapoulos Op cit. p.222
61
Ibid p. 222
62
The Centre for Peace Initiatives for Africa Op cit. p.131
27
to about US$1.4 billion by January 2003 to hit the 600 per cent figure by December 2003. The financial service

sector was also characterised by massive indiscipline. Later on in the midst of this crisis a number of banks

were closed and temporarily placed under the management of the Reserve Bank of Zimbabwe-appointed

curator. Banks include Time Bank, Inter Market Building Society, Royal bank and Trust Bank. As a result

most people did not have access to their own money that was in these banks. This eroded customer confidence

in banks who had been affected by this problem63.

To deal with the shortage of bank notes the government introduced bearer cheques, which successfully

alleviated the shortage of bank notes. In an attempt to solve the foreign currency crisis, the government has

shut down all foreign bureau de change and introduced a foreign currency auction system where the exchange

rate was pegged at Z$5,6000 for every US$1.

The shortage of foreign currency can mainly be attributed to the destruction of the agricultural sector by the

fast track land reform. The agricultural sector which five years ago had accounted for 16.5 per cent of GDP

and 30 per cent of foreign exchange earnings, was severely crippled; alienated by the international community

and the bruising verbal contest between Zimbabwe, Britain and the United states all contributed to foreign

currency shortages. Other contributing factors include recurrent failures by Zimbabwe to settle external debts

resulting in the withdrawal of international financial aid, the suspension of balance of payment support, and a

marked reduction in aid flows64.

The state of the economy was the characterised by Hyperinflation, according to Steve Hanke Zimbabwe can

now lay claim to second place in the word hyperinflation record books. Zimbabwe is the first country in the

21st century to hyper inflate. Hanke asserts that in February 2007, Zimbabwe’s inflation rate topped 50per cent

per month, minimum rate required for a country to qualify as a hyperinflationary65. The Central Statistical

Office (CSO) failed to release official inflation figures for February, March, April and May, only to release

the July figure that stood at 231 million per cent. However, unofficial figures by independent economists are

63
Ibid p.132
64
E. V. Masunungure, Defyi g the Wi ds of Cha ge, Zi a e s 2008 Ele tio s. Weaver Press 2009 p. 15
65
Ibid p.12
28
as follows: February 165,000 per cent; March 335,000 per cent; April 732,604 per cent; May 1,694,000 per

cent; in June it was over 2,000,000 per cent, the highest outside a warzone66. There are about six countries

that have had extreme hyperinflation but the table below will focus on three including Zimbabwe.

Table 3: The Highest monthly Inflation rates in History

Country Month with Highest monthly Equivalent daily Time required for
highest inflation inflation rate inflation rate (%) prices to double
rate
Zimbabwe Mid-November 79,600,000,000% 98.0 24.7 hours
2008
(latest measurable)
Yugoslavia January 1994 313,000,000% 64.6 1.4 days

Germany October 1923 29,500% 20.9 3.7 days

Source: E.V Masunungure, 2009

Then came 2008, in the midst of all this economic chaos, was the beginning of a new era politically in the

History of the country. Elections were to be conducted in this year and these elections will be remembered in

history as having been conducted during a period when the economy and the social environment were

experiencing the worst deterioration.

On 25 June 2007, companies were directed to roll back their prices by 50 per cent under the Statutory

Instrument 159A of 2007 (Presidential powers Amending the National Incomes and Pricing Commission Act)

after being accused of hiking prices to foment public anger against the government. This policy resulted in

bare supermarket shelves. The RBZ made a futile effort to address the shortages by extending cheap finance

to companies affected by the blitz through the Basic Commodities Supply Side Intervention (BACOSSI). The

policy was unsustainable and was financed by the printing of even more cash. BACOSSI provided only limited

66
Ibid p.12
29
relief in the short-term and worsened the situation in the long-term67. Due to all the issues raised above what

was the outcome of the situation in the next years to come.

67
E. V. Masunungure, Defyi g the Wi ds of Cha ge, Zi a e s 2008 Ele tio s. Weaver Press 2009 p. 16
30
 RESULTS

 The Indigenization and Economic Empowerment Bill was signed into law

 The elections were held in March 2008, after four days the results of the house of Assembly stood as

follows: ZANU (Pf) 97 seats, MDC-T 99 seats and MDC-M 10 seats.

 The Government of National Unity GNU was formed (13 February 2009) with ZANU pf and MDC

sharing power

 In March of 2009, the newly instated Finance Minister, Tendai Biti, announced that the Zimbabwe

dollar would be suspended indefinitely.

 Some form of economic growth and stability from 2009 to 2013

 Company closures between 2012 to 2014(700 firms closed68,75 company closures were recorded69)

 Elections in July 31, ZANU (Pf) won the majority vote

 In 2013, the Zanu PF government launched the ZimAsset economic blueprint, which is a results-

based management economic system, with the aim of increasing and improving quality of

government expenditure, increasing productivity and competitiveness, as well as improving the

business environment as a whole.

68
700 Harare firms close, Zimbabwe Independent 18 October 2013 (http://www.theindependent.co.zw/2013/10/18/700-
harare-firms-close/)
69
Zimbabwe records 75 company closures, over 9 000 job losses, Newsday 21 February 2014,
(https://www.newsday.co.zw/2014/02/21/zimbabwe-records-75-company-closures-9-000-job-losses/
31
 CONCLUSION

During the first decade of independence Zimbabwe made real and positive progress in terms of Health as well

as education. Provision of free health care and education meant the increase in the standards of living of the

Zimbabwean people. This socialist principle the government used was justified based on the fact that during

the liberation struggle, leaders promised fighters they would gain not only political but economic and social

freedom. So it was of utmost importance to at least grant the people free, accessible health and education

because due to the racial injustice prior to independence the people were deprived of these benefits and it was

only the right thing to do for the government to sustain support from its people.

Governments focus on health and education was a moral and political issue, based on these grounds it had to

be done but it was not an economically wise thing to do. Considering that the country had just got its

independence, questions needed to be asked within government on the sustainability of this socialist concept.

The first step among many that had to be done was to come up with means to generate income for the nation

in order to create a foundation for high standard of living in the near future. Probably the economic growth in

1980 to 1982 had the government believe it will maintain such growth but the drought that affected the country

in 1983 should have been a wakeup call. Now the big question is, how would the government come with

policies that generate income? Firstly there was need to develop smart economic partnerships and improve

relations with Europe and America. This will be done by a committee set up to travel to these areas and meet

leaders and advertise this new, vibrant independent state that is open for major investment. This not only

attracts foreign aid it also attracts multinational cooperation’s that can come and invest in the country bringing

in money and technology as well as creating jobs for the people.

There was need for the government to come up with a highly and extremely aggressive industrialisation policy

that would promote a private sector driven economy, the government should have come up with programmes

that promoted local Zimbabwean people to create business, with low taxes that would employ people.

Employment creation should have been on top priority. This is because with employment of people this

empowers them an increases their standards of living.

32
After the drought the government should have taken the good relations with the IMF to their advantage and

borrowed money that would be used for industrial development, improving machines in industry and creating

new industry that would produce goods for exports that would compete with other products firstly in Africa

and then the world this would be a means to generate income for balance of payments as well as to bring in

foreign currency. This would be a win, win for all because with more industry means more employment and

with more employment means high standard of living for the people and also government makes money

through income taxes, customs and taxes on business too. This money would then be reinvested in the

economy for infrastructure development (which also creates jobs, promotes business by giving local

companies contracts). Some economists argue that Economic development leads to social and political

development. This could have been true for Zimbabwe.

By 1989 there were negative signs in the economy but it could still thrive in the next decade, considering that

ruling party leaders had political or military relations with China (it provided military training to ZANLA

forces in the liberation struggle). Based on these relations the government could have adopted the Alternative

approach when coming up with economic policy like China did. There are some similarities between the two

economies in terms of socialism/communist state controlled economies especially for Zimbabwe in the first

decade of independence and even on the principle behind the FTLR later in 2000. So government could have

adopted Chinese approach to create a private sector driven economy within a socialist like system. This

alternative approach worked for China (it created a private sector driven economy in a communist state) it

could have worked for Zimbabwe.

If jobs had been created there would have never been complications with the ZCTU, and there would have

never had as many demonstrations. Probably the MDC would have not been formed although opposition is

healthy in modern politics it was inevitable it was going to happen but maybe circumstances would have been

different.

Looking at the entire history of independent Zimbabwe there were four factors that led to the economic

downfall. Firstly the events explained in chapter two, it is reasonable to state that this decade was indeed the

turning point in the economic history of Zimbabwe due to the introduction of ESAP which was a complete
33
failure and a cause of the ultimate suffering of the Zimbabwean people as well as events in 1997 “Black

Friday” that can be blamed for the economic collapse. This was further worsened by the sending of military

troops to DRC. Lastly what caused the economic downfall was the land reform (Land Invasions) or FTLR,

its consequences were severe for the people of Zimbabwe and the economy.

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 Acronyms

BACOSSI Basic Commodities Supply Side Intervention

CFU Commercial farmers Union

CONSAS Constellation of Southern African States

CSO Central Statistics Office

ESAP Economic Structural Adjustment Programme

FTLR Fast Track Land Reform

GDP Gross Domestic Product

IMF International Monetary Fund

MERP Millennium Economic Recovery Programme

MDC Movement for Democratic Change

RBZ Reserve Bank of Zimbabwe

UDI Unilateral Declaration of Independence

US United States

UK United Kingdom

ZANU PF Zimbabwe African National Union Patriotic Front

ZANLA Zimbabwe African National Liberation Army

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 CONTENTS

Page

 Introduction 1

 Chapter 1: The Beginning 3

 Chapter 2: The Turning Point 10

 Chapter 3: The Collapse 18

 Results 31

 Conclusion 32

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