Back to Index

This article participates on the following special index pages:

New deal won't fix Zim's financial ills
Peter Fabricius
August 31, 2008

It will take many years for the ruined Zimbabwean economy to recover, even if a political settlement is reached and a credible government espousing sensible policies takes over the country soon.

So says top Zimbabwean economist Tony Hawkins, professor of the Graduate School of Management at the University of Zimbabwe. He was speaking in Pretoria on Friday as President Thabo Mbeki tried once again to persuade Zimbabwe's ruling Zanu-PF and the two opposition Movement for Democratic Change (MDC) factions to agree on a power-sharing unity government.

This would be the first step on the road to recovery for an economy now experiencing an official inflation rate of 11.2 million percent - though Hawkins thinks it might be as high as 30 million percent.

Hawkins said that 10 years of disastrous policies, including President Robert Mugabe's land grab, have fundamentally changed the structure of the Zimbabwean economy so that it could never return to what is was.

For instance, commercial farming, which used to be the main driver of the economy and the basis for much of manufacture, would probably never recover its old prominence.

And most of the skilled Zimbabweans who had fled the country - including the white farmers - would probably never return, at least not as owners.

As a result he predicts it will take at least 10 to 12 years to regain 1998 per capita income levels.

In addition, it would take 15 years or more to get back to where the economy would have been without the downturn of the last decade.

Hawkins was speaking on the prospects of a post-crisis Zimbabwean economy at Trade and Industrial Policy Strategies, an independent research institute in Pretoria.

He said there was a widespread belief that if a new government took over and began practising sensible policies, foreign donors and investors would pour money in and the economy would recover quickly.

This idea was partly based on several myths - including the one that Zimbabwe had once been one of sub-Saharan Africa's most successful economies in the 1990s, that it was a resource-rich country and that it had been "the bread basket of Southern Africa".

In fact the economy had been going down since the mid-60s, Zimbabwe was classified by the World Bank as a resource-poor landlocked country and only in a few good years did it export as much as 200 000 tons of maize - compared with South Africa's 1.5 million tons.

It was true that the decline had accelerated since 1999 when the economy had shrunk every year - by as much as 15% in 2003 - and by 10% this year.

"Optimists believe that when the politics normalise, Zimbabwe will revert seamlessly to the - mostly unsuccessful - growth path of the 1990s," Hawkins said. "They see the challenge as simply one of going back to the mid-1990s.

"That is wrong - the country has undergone seismic change - rapid structural transformation across several different dimensions."

This included the brain drain of skilled workers which would be difficult to correct because many of those who had left were teachers or lecturers. Zimbabwe had also de-industrialised, partly because manufacturing was largely linked to now-defunct commercial agriculture.

No new government was likely to give back white farms so farming would largely continue as small-scale operations subsidised by the state.

So there would be no turning back and Zimbabwe would have to discover a new economic model in which mining, tourism, construction and financing would be dominant.

Hawkins stressed that international donors would not support a new government in which Mugabe or Zanu-PF still had a big say in policy - a fact which he said Mbeki did not seem to understand as he tried to retain a prominent role for Mugabe in a new government.

Yet substantial foreign funding would be needed, first to help fund the budget because the government would have to cut spending drastically to bring down inflation to manageable levels.

The government would also have to liberalise the exchange rate of the Zimbabwe dollar and exchange controls - and prices.

It would also need foreign aid to restructure domestic debt, estimated at up to $3 billion, and to forgive foreign debt which no-one has been able to calculate.

Foreign aid would be needed too to provide food assistance when agricultural markets were liberalised.

The reserve bank would have to be made independent and parastatals would have to be restructured and many privatised.

A land commission would have to be created to audit who owned what farms and to place a limit on ownership - though Hawkins said he did not think the white farmers would ever get their land back.

Hawkins said his biggest concern for Zimbabwe's future recovery was the corruption and destruction of institutions under Mugabe. An inflow of foreign aid would not substitute for this.

"Capital without skills, without infrastructure and without efficient, well-oiled institutions such as an efficient and incorruptible civil service, will have a very low rate of return.

"If you don't believe me, just look around Africa."

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