Back to Index    « Prev Page   Next Page »

Zimbabwe's election: the stakes for Southern Africa
International Crisis Group (ICG)
January 11, 2002

III.  The economic impact on Southern Africa

South Africa risks serious structural damage to its economy if it does not take urgent action to prevent further collapse in Zimbabwe. The impact of the deteriorating situation in its neighbour to the north has been particularly noticeable in the falling rand. While other factors have contributed, the rand sank 25 per cent during 2000, 30 per cent since January 2001, and then a further 4.5 per cent in the first week of December 2001. At times the rand’s devaluation can be related directly to events in Zimbabwe, or comments made in South Africa regarding Zimbabwe. For example, following the murder of two white farmers by squatters, the bond market in South Africa suffered a record one-day outflow of R1.8 billion, and the rand lost value. When Deputy President Jacob Zuma appeared to endorse Mugabe’s land grab in October 2000, the rand fell again, as it did when opposition leader Morgan Tsvangarai was arrested in December 2001.

The Governor of the Reserve Bank of South Africa has worried publicly that the situation in Zimbabwe has affected the mood of investors in South Africa’s market. Loss of potential investment is often difficult both to quantify precisely and to attribute to a single cause. However, the American Chamber of Commerce estimated in mid-2001 that South Africa, the region’s most attractive economy, has lost U.S.$3 billion in potential investment because of the Zimbabwean crisis. The damage to the region as a whole has been estimated by others to be considerably higher, as much as U.S.$36 billion.

Zimbabwe has southern Africa’s second most diversified economy and has historically contributed significantly with its exports especially to regional food security. The country’s negative growth rate, estimated at 4.2 per cent for 2000, the last year for which statistics are available, has "greatly affected average gross domestic product (GDP) of the subregion". This decline is evident in Zimbabwe’s trade figures, which show an overall decline from 1999 to 2000 of 6.4 per cent. The loss in the vital food sector was 4.5 per cent from 1999 to 2000 and a dramatic 61 per cent compared to a decade earlier.

The health of South Africa’s parastatals also has been affected. Zimbabwe has defaulted on debt payments to both Eskom and Sasol, and both companies have had to absorb the losses as they have been instructed by the South African government to continue exports. South African utilities are thus carrying Zimbabwe with longer and longer credit lines for electricity and fuel. "South African taxpayers have been subsidising Mugabe’s government for the last year", noted a South African academic. The South African economy is also strained by approximately 500 refugees a day from Zimbabwe. Such refugees are also entering other countries in the region at an increasing rate. With its own unemployment hovering around 50 per cent, and domestic tensions resulting from xenophobia, South Africa, which already has two million illegal immigrants from Zimbabwe, will have difficulty absorbing these additional refugees. With over three million persons registered for food relief in Zimbabwe, and 800,000 tons of maize and 600,000 tons of soya beans needed in the next ten months to feed the population, even higher emigration can beexpected.

« Prev Page   Next Page »

Please credit www.kubatana.net if you make use of material from this website. This work is licensed under a Creative Commons License unless stated otherwise.

TOP