The economy of Zimbabwe mainly relies on the
tertiary sector of the economy
The tertiary sector of the economy, generally known as the service sector, is the third of the three economic sectors in the three-sector model (also known as the economic cycle). The others are the primary sector ( raw materials) and the seco ...
, also known as the service sector of the economy, which makes up to 60% of total GDP as of 2017.
Zimbabwe
Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and ...
has the second biggest
Informal economy
An informal economy (informal sector or grey economy) is the part of any economy that is neither taxed nor monitored by any form of government.
Although the informal sector makes up a significant portion of the economies in developing countri ...
in the world as a percentage of its economy, with a score of 60.6%.
[https://www.herald.co.zw/zim-has-worlds-second-largest-informal-economy-imf/ /ref> Agriculture and mining largely contribute to exports. After continuous negative growth between 1999 and 2008, the economy of Zimbabwe grew at a meteoric annual rate of 34% from 2008 to 2013, rendering it the fastest-growing economy in the world. Its economy then stagnated again through 2020, before seeing another extremely sharp increase (45%) in the most recent year.
The country has reserves of metallurgical-grade Chromite. Other commercial mineral deposits include Coal, ]asbestos
Asbestos () is a naturally occurring fibrous silicate mineral. There are six types, all of which are composed of long and thin fibrous crystals, each fibre being composed of many microscopic "fibrils" that can be released into the atmosphere b ...
, copper
Copper is a chemical element with the symbol Cu (from la, cuprum) and atomic number 29. It is a soft, malleable, and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a pink ...
, nickel
Nickel is a chemical element with symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel is a hard and ductile transition metal. Pure nickel is chemically reactive but large pieces are slow t ...
, gold
Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile ...
, platinum
Platinum is a chemical element with the symbol Pt and atomic number 78. It is a dense, malleable, ductile, highly unreactive, precious, silverish-white transition metal. Its name originates from Spanish , a diminutive of "silver".
Pla ...
and Iron ore.
Current economic conditions
In 2000, Zimbabwe planned a land redistribution act to collect white-owned, commercial farms attained through colonization and return the land to the black majority. The new occupants, mainly consisting of indigenous citizens and several prominent members of the ruling ZANU-PF administration, were inexperienced or uninterested in farming, thereby failing to retain the labour-intensive, highly efficient management of previous landowners. Short term gains were achieved by selling the land or equipment. The contemporary lack of agricultural expertise triggered severe export losses and negatively affected market confidence. The country has experienced a massive drop in food production and idle land is now being utilised by rural communities practicing subsistence farming. Production of staple foodstuffs, such as maize, has recovered accordingly – unlike typical export crops including tobacco and coffee.[Zimbabwe's land reform: challenging the myths]
, by Ian Scoones, The Zimbabwean,19 October 2010 Zimbabwe has also sustained the 30th occurrence of recorded hyperinflation in world history.
Government spending is 29.7% of GDP. State enterprises are strongly subsidized. Taxes and tariffs are high, and state regulation is costly to companies. Starting or closing a business is slow and costly. Due to the regulations of the labor market, hiring and terminating workers is a lengthy process. By 2008, unemployment had risen to 94%.
A 2014 report by the Africa Progress Panel found that, of all the African countries examined when determining how many years it would take to double per capita GDP, Zimbabwe fared the worst, and that at its current rate of development it would take 190 years for the country to double its per capita
''Per capita'' is a Latin phrase literally meaning "by heads" or "for each head", and idiomatically used to mean "per person". The term is used in a wide variety of social sciences and statistical research contexts, including government statistic ...
GDP. Uncertainty around the indigenisation programme (compulsory acquisition), the perceived lack of a free press, the possibility of abandoning the US dollar as official currency, and political uncertainty following the end of the government of national unity with the MDC as well as power struggles within ZANU-PF have increased concerns that the country's economic situation could further deteriorate.
In September 2016 the finance minister identified "low levels of production and the attendant trade gap, insignificant foreign direct investment and lack of access to international finance due to huge arrears" as significant causes for the poor performance of the economy.
Zimbabwe came 140 out of 190 ease of doing business report released by the World Bank Group
The World Bank Group (WBG) is a family of five international organizations that make leveraged loans to developing countries. It is the largest and best-known development bank in the world and an observer at the United Nations Development Gr ...
. They were ranked high for ability to get credit (ranked 85) and protecting minority investors (ranked 95).
Infrastructure and resources
Transportation
Zimbabwe has adequate internal transportation and electrical power networks; however, maintenance has been neglected over several years. Poorly paved roads link the major urban and industrial centers, and rail lines managed by the National Railways of Zimbabwe
The National Railways of Zimbabwe (NRZ), formerly Rhodesia Railways, is a state-owned company in Zimbabwe that operates the country's national railway system.
It is headquartered in the city of Bulawayo. In addition to the headquarters, it has ...
tie it into an extensive central African railroad network with all its neighbours.
Energy
The Zimbabwe Electricity Supply Authority
Zimbabwe Electricity Supply Authority, (ZESA) whose official name is ZESA Holdings (Private) Limited, is a state-owned company whose task is to generate, transmit, and distribute electricity in Zimbabwe. It has organized this task by delegatio ...
is responsible for providing the country with electrical energy. Zimbabwe has two larger facilities for the generation of electrical power, the Kariba Dam
The Kariba Dam is a double curvature concrete arch dam in the Kariba Gorge of the Zambezi river basin between Zambia and Zimbabwe. The dam stands tall and long. The dam forms Lake Kariba, which extends for and holds of water.
Construction
...
(owned together with Zambia
Zambia (), officially the Republic of Zambia, is a landlocked country at the crossroads of Central, Southern and East Africa, although it is typically referred to as being in Southern Africa at its most central point. Its neighbours are t ...
) and since 1983 by large Hwange Thermal Power Station adjacent to the Hwange coal field. However, total generation capacity does not meet the demand, leading to rolling blackout
A rolling blackout, also referred to as rota or rotational load shedding, rota disconnection, feeder rotation, or a rotating outage, is an intentionally engineered electrical power shutdown in which electricity delivery is stopped for non-overl ...
s. The Hwange station is not capable of using its full capacity due to old age and maintenance neglect. In 2006, crumbling infrastructure and lack of spare parts for generators and coal mining lead to Zimbabwe importing 40% of its power, including 100 megawatts from the Democratic Republic of Congo
The Democratic Republic of the Congo (french: République démocratique du Congo (RDC), colloquially "La RDC" ), informally Congo-Kinshasa, DR Congo, the DRC, the DROC, or the Congo, and formerly and also colloquially Zaire, is a country in ...
, 200 megawatts from Mozambique
Mozambique (), officially the Republic of Mozambique ( pt, Moçambique or , ; ny, Mozambiki; sw, Msumbiji; ts, Muzambhiki), is a country located in southeastern Africa bordered by the Indian Ocean to the east, Tanzania to the north, Malawi ...
, up to 450 from South Africa, and 300 megawatts from Zambia
Zambia (), officially the Republic of Zambia, is a landlocked country at the crossroads of Central, Southern and East Africa, although it is typically referred to as being in Southern Africa at its most central point. Its neighbours are t ...
.[Outages short Zim revival]
, October 9, 2006. News24 In May 2010 the country's generation power was an estimated 940MW against a peak demand of 2500MW. Use of local small scale generators is widespread.
Telephone
New telephone lines used to be difficult to obtain. With TelOne, however, Zimbabwe has only one fixed line service provider. Cellular phone networks are an alternative. Principal mobile phone operators are Telecel, Net*One, and Econet.
Agriculture
Agriculture
Agriculture or farming is the practice of cultivating plants and livestock. Agriculture was the key development in the rise of sedentary human civilization, whereby farming of domesticated species created food surpluses that enabled people ...
in Zimbabwe can be divided into two parts: commercial farming of crops such as cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective case, around the seeds of the cotton plants of the genus '' Gossypium'' in the mallow family Malvaceae. The fiber is almost pure cellulose, and can contain minor pe ...
, tobacco
Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ...
, coffee
Coffee is a drink prepared from roasted coffee beans. Darkly colored, bitter, and slightly acidic, coffee has a stimulating effect on humans, primarily due to its caffeine content. It is the most popular hot drink in the world.
Seeds of ...
, peanut
The peanut (''Arachis hypogaea''), also known as the groundnut, goober (US), pindar (US) or monkey nut (UK), is a legume crop grown mainly for its edible seeds. It is widely grown in the tropics and subtropics, important to both small an ...
s and various fruits, and subsistence farming with staple crops, such as maize
Maize ( ; ''Zea mays'' subsp. ''mays'', from es, maíz after tnq, mahiz), also known as corn (North American English, North American and Australian English), is a cereal grain first domesticated by indigenous peoples of Mexico, indigenous ...
or wheat
Wheat is a grass widely cultivated for its seed, a cereal grain that is a worldwide staple food. The many species of wheat together make up the genus ''Triticum'' ; the most widely grown is common wheat (''T. aestivum''). The archaeologi ...
.
Commercial farming was almost exclusively in the hands of the white minority until the controversial land redistribution program began in 2000. Land in Zimbabwe was forcibly seized from white farmers and redistributed to black settlers, justified by Mugabe on the grounds that it was meant to rectify inequalities left over from colonialism. The new owners did not have land titles, and as such did not have the collateral necessary to access bank loans. The small-scale farmers also did not have experience with commercial-scale agriculture.
After land redistribution, much of Zimbabwe's land went fallow, and agricultural production decreased steeply. The University of Zimbabwe estimated in 2008 that between 2000 and 2007 agricultural production decreased by 51%. Production of tobacco, Zimbabwe's main export crop, decreased by 79% from 2000 to 2008.
Tobacco production recovered after 2008 thanks to the contract system of agriculture and growing Chinese demand. International tobacco companies, such as British American Tobacco
British American Tobacco plc (BAT) is a British multinational company that manufactures and sells cigarettes, tobacco and other nicotine products. The company, established in 1902, is headquartered in London, England. As of 2019, it is the lar ...
and China Tobacco, supplied farmers with agricultural inputs, equipment, and loans, and supervised them in growing tobacco. By 2018, tobacco production had recovered to 258 million kg, the second largest crop on record. Instead of large white-owned farms selling mostly to European and American companies, Zimbabwe's tobacco sector now consists of small black-owned farms exporting over half of the crop to China. Tobacco farming accounted for 11% of Zimbabwe's GDP in 2017, and 3 million of its 16 million people depended on tobacco for their livelihood.
Land reform has found considerable support in Africa and a few supporters among African-American activists, but Jesse Jackson
Jesse Louis Jackson (né Burns; born October 8, 1941) is an American political activist, Baptist minister, and politician. He was a candidate for the Democratic presidential nomination in 1984 and 1988 and served as a shadow U.S. senato ...
commented during a visit to South Africa in June 2006, "Land redistribution has long been a noble goal to achieve but it has to be done in a way that minimises trauma. The process has to attract investors rather than scare them away. What is required in Zimbabwe is democratic rule, democracy is lacking in the country and that is the major cause of this economic meltdown."[Jesse Jackson lambastes Mugabe, SA banks]
, June 20, 2006. Zimbabwe Situation.
Zimbabwe produced, in 2018:
* 3,3 million tons of sugarcane
Sugarcane or sugar cane is a species of (often hybrid) tall, perennial grass (in the genus '' Saccharum'', tribe Andropogoneae) that is used for sugar production. The plants are 2–6 m (6–20 ft) tall with stout, jointed, fibrous stalk ...
;
* 730 thousand tons of maize
Maize ( ; ''Zea mays'' subsp. ''mays'', from es, maíz after tnq, mahiz), also known as corn (North American English, North American and Australian English), is a cereal grain first domesticated by indigenous peoples of Mexico, indigenous ...
;
* 256 thousand tons of cassava
''Manihot esculenta'', commonly called cassava (), manioc, or yuca (among numerous regional names), is a woody shrub of the spurge family, Euphorbiaceae, native to South America. Although a perennial plant, cassava is extensively cultivated ...
;
* 191 thousand tons of vegetable
Vegetables are parts of plants that are consumed by humans or other animals as food. The original meaning is still commonly used and is applied to plants collectively to refer to all edible plant matter, including the edible flower, flowers, ...
;
* 132 thousand tons of tobacco
Tobacco is the common name of several plants in the genus '' Nicotiana'' of the family Solanaceae, and the general term for any product prepared from the cured leaves of these plants. More than 70 species of tobacco are known, but the ...
(6th largest producer in the world);
* 106 thousand tons of banana
A banana is an elongated, edible fruit – botanically a berry – produced by several kinds of large herbaceous flowering plants in the genus ''Musa''. In some countries, bananas used for cooking may be called "plantains", disting ...
;
* 96 thousand tons of orange;
* 90 thousand tons of soy;
* 80 thousand tons of sorghum
''Sorghum'' () is a genus of about 25 species of flowering plants in the grass family (Poaceae). Some of these species are grown as cereals for human consumption and some in pastures for animals. One species is grown for grain, while many other ...
;
* 60 thousand tons of potato
The potato is a starchy food, a tuber of the plant ''Solanum tuberosum'' and is a root vegetable native to the Americas. The plant is a perennial in the nightshade family Solanaceae.
Wild potato species can be found from the southern Uni ...
;
* 55 thousand tons of barley
Barley (''Hordeum vulgare''), a member of the grass family, is a major cereal grain grown in temperate climates globally. It was one of the first cultivated grains, particularly in Eurasia as early as 10,000 years ago. Globally 70% of barley p ...
;
* 42 thousand tons of peanut
The peanut (''Arachis hypogaea''), also known as the groundnut, goober (US), pindar (US) or monkey nut (UK), is a legume crop grown mainly for its edible seeds. It is widely grown in the tropics and subtropics, important to both small an ...
;
* 38 thousand tons of cotton
Cotton is a soft, fluffy staple fiber that grows in a boll, or protective case, around the seeds of the cotton plants of the genus '' Gossypium'' in the mallow family Malvaceae. The fiber is almost pure cellulose, and can contain minor pe ...
;
In addition to smaller productions of other agricultural products.
Mining sector
As other southern African countries, Zimbabwean soil is rich in raw materials
A raw material, also known as a feedstock, unprocessed material, or primary commodity, is a basic material that is used to produce goods, finished goods, energy, or intermediate materials that are feedstock for future finished products. As feeds ...
, namely platinum
Platinum is a chemical element with the symbol Pt and atomic number 78. It is a dense, malleable, ductile, highly unreactive, precious, silverish-white transition metal. Its name originates from Spanish , a diminutive of "silver".
Pla ...
, coal
Coal is a combustible black or brownish-black sedimentary rock, formed as rock strata called coal seams. Coal is mostly carbon with variable amounts of other elements, chiefly hydrogen, sulfur, oxygen, and nitrogen.
Coal is formed when ...
, iron ore
Iron ores are rocks and minerals from which metallic iron can be economically extracted. The ores are usually rich in iron oxides and vary in color from dark grey, bright yellow, or deep purple to rusty red. The iron is usually found in the ...
, and gold
Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile ...
. Recently, diamonds
Diamond is a solid form of the element carbon with its atoms arranged in a crystal structure called diamond cubic. Another solid form of carbon known as graphite is the chemically stable form of carbon at room temperature and pressure, ...
have also been found in considerable deposits. Copper
Copper is a chemical element with the symbol Cu (from la, cuprum) and atomic number 29. It is a soft, malleable, and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a pink ...
, chromite
Chromite is a crystalline mineral composed primarily of iron(II) oxide and chromium(III) oxide compounds. It can be represented by the chemical formula of FeCr2O4. It is an oxide mineral belonging to the spinel group. The element magnesium can ...
and nickel
Nickel is a chemical element with symbol Ni and atomic number 28. It is a silvery-white lustrous metal with a slight golden tinge. Nickel is a hard and ductile transition metal. Pure nickel is chemically reactive but large pieces are slow t ...
deposits also exist, though in lesser amounts. The Marange diamond fields, discovered in 2006 are thought to be among the richest in the world.
In March 2011, the government of Zimbabwe implemented laws which required local ownership of mining companies; following this news, there were falls in the share prices of companies with mines in Zimbabwe.
Various NGOs reported that the diamond sector in Zimbabwe is rife with corruption
Corruption is a form of dishonesty or a criminal offense which is undertaken by a person or an organization which is entrusted in a position of authority, in order to acquire illicit benefits or abuse power for one's personal gain. Corruption m ...
; a November 2012 report by NGO Reap What You Sow revealed a huge lack of transparency of diamond revenues and asserted that Zimbabwe's elite are benefiting from the country's diamonds. This followed former South African President Thabo Mbeki
Thabo Mvuyelwa Mbeki KStJ (; born 18 June 1942) is a South African politician who was the second president of South Africa from 14 June 1999 to 24 September 2008, when he resigned at the request of his party, the African National Congress (ANC ...
’s warning days earlier that Zimbabwe needed to stop its "predatory elite" from colluding with mining companies for their own benefit.
Also in that month, the Associated Press
The Associated Press (AP) is an American non-profit news agency headquartered in New York City. Founded in 1846, it operates as a cooperative, unincorporated association. It produces news reports that are distributed to its members, U.S. new ...
reported that at least $2 billion worth of diamonds had been stolen from Zimbabwe's eastern diamond fields and had enriched Mugabe's ruling circle and various connected gem dealers and criminals.
In January 2013, Zimbabwe's mineral exports totalled $1.8 billion.
As of October 2014, Metallon Corporation
Metallon Corporation is a gold producer, developer and explorer with operations in Zimbabwe
Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bor ...
was Zimbabwe's largest gold miner. The group is controlled by its Chairman Mzi Khumalo
Mzi Godfrey Khumalo (born 4 November 1955) is a South African businessman and mining entrepreneur.
Early life
Raised by a single mother, Khumalo grew up in KwaMashu‚ Durban. One of ten siblings, his father died before he was nine years old. ...
.
In 2019, the country was the world's 3rd largest producer of platinum
Platinum is a chemical element with the symbol Pt and atomic number 78. It is a dense, malleable, ductile, highly unreactive, precious, silverish-white transition metal. Its name originates from Spanish , a diminutive of "silver".
Pla ...
and the 6th largest world producer of lithium
Lithium (from el, λίθος, lithos, lit=stone) is a chemical element with the symbol Li and atomic number 3. It is a soft, silvery-white alkali metal. Under standard conditions, it is the least dense metal and the least dense soli ...
. In the production of gold
Gold is a chemical element with the symbol Au (from la, aurum) and atomic number 79. This makes it one of the higher atomic number elements that occur naturally. It is a bright, slightly orange-yellow, dense, soft, malleable, and ductile ...
, in 2017 the country produced 23.9 tons.
Education
The state of education in Zimbabwe affects the development of the economy while the state of the economy can affect access and quality of teachers and education. Zimbabwe has one of Africa's highest literacy
Literacy in its broadest sense describes "particular ways of thinking about and doing reading and writing" with the purpose of understanding or expressing thoughts or ideas in Writing, written form in some specific context of use. In other wo ...
rates at over 90%. The crisis since 2000 has, however, diminished these achievements because of a lack of resources and the exodus of teachers and specialists (e.g. doctors, scientists, engineers) to other countries. Also, the start of the new curriculum in primary and secondary sections has affected the state of the once strong education sector.
Science and technology in Zimbabwe
Zimbabwe's ''Second Science and Technology Policy'' (2012) cites sectorial policies with a focus on biotechnology, information and communication technologies (ICTs), space sciences, nanotechnology, indigenous knowledge systems, technologies yet to emerge and scientific solutions to emergent environmental challenges. The policy makes provisions for establishing a National Nanotechnology Programme.
Zimbabwe has a ''National Biotechnology Policy'' which dates from 2005. Despite poor infrastructure and a lack of both human and financial resources, biotechnology research is better established in Zimbabwe than in most sub-Saharan countries, even if it tends to use primarily traditional techniques.
The ''Second Science and Technology Policy'' asserts the government commitment to allocating at least 1% of GDP to research and development, focusing at least 60% of university education on developing skills in science and technology and ensuring that school pupils devote at least 30% of their time to studying science subjects.
History
In 1997, Zimbabwe's economic decline began to visibly take place. It began with the crash of the stock market on November 14, 1997. Civil society groups began to agitate for their rights as these had been eroded under ESAP. In 1997 alone, 232 strikes were recorded, the largest number in any year since independence (Kanyenze 2004). During the first half of 1997, the war veterans organized themselves and demonstrations that were initially ignored by the government. As the intensity of the strikes grew, the government was forced to pay the war veterans a once-off gratuity of ZWD $50,000 by December 31, 1997, and a monthly pension of US$2,000 beginning January 1998 (Kanyenze 2004). To raise money for this unbudgeted expense, the government tried to introduce a ‘war veterans’ levy,’ but they faced much opposition from the labor force and had to effectively borrow money to meet these obligations. Following the massive depreciation of the Zimbabwean dollar
The Zimbabwean dollar (sign: $, or Z$ to distinguish it from other dollar-denominated currencies) was the name of four official currencies of Zimbabwe from 1980 to 12 April 2009. During this time, it was subject to periods of extreme inflat ...
in 1997, the cost of agricultural inputs soared, undermining the viability of the producers who in turn demanded that the producer price of maize (corn) be raised. Millers then hiked prices by 24 percent in January 1998 by 24 percent and the consequent increase in the price of maize meal triggered nation-wide riots during the last month. The government intervened by introducing price controls on all basic commodities (Kanyenze 2004). Many interventionist moves were undertaken to try to reverse some of the negative effects of the Structural Adjustment Programs and to try to strengthen the private sector that was suffering from decreasing output and increasing competition from cheap imported products. Some of the most detrimental policies that followed include:
1980–2000
At the time of independence, annual inflation was 5.4 percent and month-to-month inflation was 0.5 percent. Currency of Z$2, Z$5, Z$10 and Z$20 denominations were released. Roughly 95 percent of transactions used the Zimbabwean dollar.
Following the Lancaster House Agreement in December 1979, the transition to majority rule in early 1980, and the lifting of sanctions, Zimbabwe enjoyed a brisk economic recovery. Real growth for 1980–1981 exceeded 20%. However, depressed foreign demand for the country's mineral exports and the onset of a drought cut sharply into the growth rate in 1982, 1983, and 1984. In 1985, the economy rebounded strongly due to a 30% jump in agricultural production. However, it slumped in 1986 to a zero growth rate and registered negative of about minus 3% in 1987, primarily because of drought and the foreign exchange crisis faced by the country. Zimbabwe's GDP grew on average by about 4.5% between 1980 and 1990.
In 1992, a World Bank study indicated that more than 500 health centres had been built since 1980. The percentage of children vaccinated increased from 25% in 1980 to 67% in 1988, and life expectancy increased from 55 to 59 years. Enrolment increased by 232 percent one year after primary education was made free, and secondary school enrolment increased by 33 percent in two years. These social policies lead to an increase in the debt ratio. Several laws were passed in the 1980s in an attempt to reduce wage gaps. However, the gaps remained considerable. In 1988, the law gave women, at least in theory, the same rights as men. Previously, they could only take a few personal initiatives without the consent of their father or husband.
The government started crumbling when a bonus to independence war veterans was announced in 1997 (which was equal to 3 percent of GDP) followed by unexpected spending due to Zimbabwe's involvement in the Second Congo War
The Second Congo War,, group=lower-alpha also known as the Great War of Africa or the Great African War and sometimes referred to as the African World War, began in the Democratic Republic of the Congo in August 1998, little more than a year a ...
in 1998. In 1999, the country also witnessed a drought which further weakened the economy, ultimately leading to the country's bankruptcy in the next decade. In the same year, 1999, Zimbabwe experienced its first defaults on its IMF
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glob ...
, World Bank
The World Bank is an international financial institution that provides loans and grants to the governments of low- and middle-income countries for the purpose of pursuing capital projects. The World Bank is the collective name for the Inte ...
, and African Development Bank
The African Development Bank Group (AfDB) or (BAD) is a multilateral development finance institution headquartered in Abidjan, Ivory Coast, since September 2014. The AfDB is a financial provider to African governments and private companies ...
debts in addition to debts taken out with Western lenders.
2000–2009
In recent years, there has been considerable economic hardship in Zimbabwe. Many western countries argue that the Government of Zimbabwe
The politics of Zimbabwe takes place in a framework of a full presidential republic, whereby the President is the head of state and government as organized by the 2013 Constitution. Executive power is exercised by the government. Legislative p ...
's land reform program, recurrent interference with, and intimidation of the judiciary, as well as maintenance of unrealistic price controls and exchange rates has led to a sharp drop in investor confidence.
Between 2000 and December 2007, the national economy contracted by as much as 40%; inflation vaulted to over 66,000%, and there were persistent shortages of hard currency, fuel, medicine, and food. GDP per capita dropped by 40%, agricultural output dropped by 51% and industrial production dropped by 47%.
The Mugabe Government attribute Zimbabwe's economic difficulties to sanctions imposed by the Western powers. It has been argued that the sanctions imposed by Britain, the US, and the EU have been designed to cripple the economy and the conditions of the Zimbabwean people in an attempt to overthrow President Mugabe's government. These countries on their side argue that the sanctions are targeted against Mugabe and his inner circle and some of the companies they own. Critics point to the so-called "Zimbabwe Democracy and Economic Recovery Act of 2001 In response to what was described as the "fast-track land reform" in Zimbabwe, the United States government put the Zimbabwean government on a credit freeze in 2001 through the Zimbabwe Democracy and Economic Recovery Act of 2001 (specifically Secti ...
", signed by Bush, as an effort to undermine Zimbabwe's economy. Soon after the bill was signed, IMF cut off its resources to Zimbabwe. Financial institutions began withdrawing support for Zimbabwe. Terms of the sanctions made it such that all economic assistance would be structured in support of "democratisation, respect for human rights and the rule of law." The EU terminated its support for all projects in Zimbabwe. Because of the sanctions and US and EU foreign policy, none of Zimbabwe's debts have been cancelled as in other countries.
Other observers also point out how the asset freezes by the EU on people or companies associated with Zimbabwe's Government have had significant economic and social costs to Zimbabwe.
As of February 2004, Zimbabwe's foreign debt repayments ceased, resulting in compulsory suspension from the International Monetary Fund
The International Monetary Fund (IMF) is a major financial agency of the United Nations, and an international financial institution, headquartered in Washington, D.C., consisting of 190 countries. Its stated mission is "working to foster glo ...
(IMF). This, and the United Nations
The United Nations (UN) is an intergovernmental organization whose stated purposes are to maintain international peace and security, develop friendly relations among nations, achieve international cooperation, and be a centre for harmoni ...
World Food Programme
The World Food Programme; it, Programma alimentare mondiale; es, Programa Mundial de Alimentos; ar, برنامج الأغذية العالمي, translit=barnamaj al'aghdhiat alealami; russian: Всемирная продовольствен� ...
stopping its food aid due to insufficient donations from the world community, has forced the government into borrowing from local sources.
Hyperinflation 2004–2009
Zimbabwe began experiencing severe foreign exchange shortages, exacerbated by the difference between the official rate and the black market
A black market, underground economy, or shadow economy is a clandestine market or series of transactions that has some aspect of illegality or is characterized by noncompliance with an institutional set of rules. If the rule defines the ...
rate in 2000. In 2004 a system of auctioning scarce foreign currency for importers was introduced, which temporarily led to a slight reduction in the foreign currency crisis, but by mid-2005 foreign currency shortages were once again severe. The currency was devalued by the central bank twice, first to 9,000 to the US$, and then to 17,500 to the US$ on 20 July 2005, but at that date it was reported that that was only half the rate available on the black market.
In July 2005 Zimbabwe was reported to be appealing to the South African government for US$1 billion of emergency loans, but despite regular rumours that the idea was being discussed no substantial financial support has been publicly reported.
The official Zimbabwean dollar
The Zimbabwean dollar (sign: $, or Z$ to distinguish it from other dollar-denominated currencies) was the name of four official currencies of Zimbabwe from 1980 to 12 April 2009. During this time, it was subject to periods of extreme inflat ...
exchange rate had been frozen at Z$101,196 per U.S. dollar since early 2006, but as of 27 July 2006 the parallel (black market) rate has reached Z$550,000 per U.S. dollar. By comparison, 10 years earlier, the rate of exchange was only Z$9.13 per USD.
In August 2006 the RBZ revalued the Zimbabwean Dollar by 1000 ZWD to 1 (revalued) dollar. At the same time Zimbabwe devalued the Zim Dollar by 60% against the USD. New official exchange rate revalued ZWD 250 per USD. The parallel market rate was about revalued ZWD 1,200 to 1,500 per USD (28 September 2006).
In November 2006, it was announced that sometime around 1 December there would be a further devaluation and that the official exchange rate would change to revalued ZWD 750 per USD. This never materialized. However, the parallel market immediately reacted to this news with the parallel rate falling to ZWD 2,000 per USD (18 November 2006) and by year end it had fallen to ZWD 3,000 per USD.
On 1 April 2007, the parallel market was asking ZWD 30,000 for US$1. By year end, it was down to about ZWD 2,000,000. On 18 January 2008, the Reserve Bank of Zimbabwe began to issue higher denomination ZWD bearer cheques (a banknote with an expiry date), including $10 million bearer cheques – each of which was worth less than US$1.35 (70p Sterling; 0.90 Euro) on the parallel market at the time of first issue. On 4 April 2008 the Reserve Bank of Zimbabwe introduced new $25 million and $50 million bearer cheques. At the time of first issue they were worth US$0.70 and US$1.40 on the parallel market respectively.
On 1 May 2008, the RBZ announced that the dollar would be allowed to float in value subject to some conditions.[
On 6 May 2008, the RBZ issued new $100 million and $250 million bearer cheques.] At the date of first issue the $250 million bearer cheque was worth approximately US$1.30 on the parallel market. On 15 May 2008, a new $500 million bearer cheque was issued by the RBZ. At the time of the first issue it was worth US$1.93. In a widely unreported parallel move, on 15 May 2008, the RBZ issued three "special agro-cheques" with face values $5 billion (at time of first issue – $19.30), $25 billion ($96.50) and $50 billion ($193). It is further reported that the new agro-cheques can be used to buy any goods and services like the bearer cheques.
On 30 July 2008, the Governor of the RBZ, Gideon Gono
Gideon Gono (born 29 November 1959) is a former Governor of the Reserve Bank of Zimbabwe (RBZ), serving from 2003 to 2013, and is the former CEO of the CBZ Bank Limited.
Gono became known internationally due to his connection to the hyperin ...
announced that the Zimbabwe dollar would be redenominated by removing 10 zeroes, with effect from 1 August 2008. ZWD10billion became 1 dollar after the redenomination.
More banknotes were issued since Gono vowed to continue printing money: $10,000 and $20,000 (29 September); $50,000 (13 October); $100,000, $500,000 and $1 million (3 November); $10 million(2 December); $50 million and $100 million (4 December); $200 million (9 December); $500 million (11 December); $10 billion (19 December); $1 trillion (17 January 2009)
On February 2, 2009, a final denomination was implemented, cutting 12 zeroes, before the Zimbabwe dollar was officially abandoned on April 12, 2009. Pending economic recovery, Zimbabwe relied on foreign currency rather than introducing a new currency.
Dollarization: 2009–present
In February 2009, the newly installed national unity government (which included the opposition to Mugabe) allowed foreign currency transactions throughout the economy as a measure to stimulate the economy and end inflation. The Zimbabwean dollar quickly lost all credibility, and by April 2009, the Zimbabwean dollar was suspended entirely, to be replaced by the US dollar in government transactions. In 2014 there were eight legal currencies – US dollar, South African rand
The South African rand, or simply the rand, ( sign: R; code: ZAR) is the official currency of the Southern African Common Monetary Area: South Africa, Namibia (alongside the Namibian dollar), Lesotho (alongside the Lesotho loti) and Eswatin ...
, Botswana pula, British pound sterling
Sterling (abbreviation: stg; Other spelling styles, such as STG and Stg, are also seen. ISO code: GBP) is the currency of the United Kingdom and nine of its associated territories. The pound ( sign: £) is the main unit of sterling, and ...
, Australian dollar
The Australian dollar ( sign: $; code: AUD) is the currency of Australia, including its external territories: Christmas Island, Cocos (Keeling) Islands, and Norfolk Island. It is officially used as currency by three independent Pacific Is ...
, Chinese yuan
The renminbi (; symbol: ¥; ISO code: CNY; abbreviation: RMB) is the official currency of the People's Republic of China and one of the world's most traded currencies, ranking as the fifth most traded currency in the world as of April 2022. ...
, Indian rupee
The Indian rupee ( symbol: ₹; code: INR) is the official currency in the republic of India. The rupee is subdivided into 100 '' paise'' (singular: ''paisa''), though as of 2022, coins of denomination of 1 rupee are the lowest value in use ...
and Japanese yen
The is the official currency of Japan. It is the third-most traded currency in the foreign exchange market, after the United States dollar (US$) and the euro. It is also widely used as a third reserve currency after the US dollar and the ...
.[Hungwe, Brian (6 February 2014]
Zimbabwe's multi-currency confusion
BBC News Africa, retrieved 6 February 2014
Dollarization reversed inflation, permitting the banking system to stabilize and the economy to resume slow growth after 2009. Dollarization also had other consequences, including:
* Reduced taxation and financial transparency, as people continued to keep their money out of the formal banking system.
* Extremely high real interest rates due to lack of capital.
* Government forced into a "pay as you go" system, unable to spend more than it takes in.
* Deficits of coinage for everyday transactions, leading to the adoption of South African rand coins, sweets, airtime for mobile phones or even condoms for small change.[
* Counterfeiting currencies with which Zimbabweans are not familiar.][
* 10% growth of the economy a year up to 2012][
In January, 2013 Finance Minister Tendai Biti announced that Zimbabwe's national public account held just $217. The election budget for the July 2013 presidential election was $104 million and government budget for 2013 was $3.09 billion at a projected economic growth of 5 per cent. ]The Economist
''The Economist'' is a British weekly newspaper printed in demitab format and published digitally. It focuses on current affairs, international business, politics, technology, and culture. Based in London, the newspaper is owned by The Eco ...
described the 2013 election as "rigged" and how, after regaining full control of the government, the Mugabe government doubled the civil service and embarked on "...misrule and dazzling corruption."[
In August 2014, Zimbabwe began selling treasury bills and bonds to pay public sector salaries that have been delayed as GDP growth weakens while the economy experiences deflation. US$2 million was sold in July through private placements of Six-month Treasury bills at an interest rate of 9.5%. According to IMF data, GDP growth was forecast to be 3.1% by the end of 2014, a major decline from an average rate of 10% between 2009 and 2012, while government data showed that consumer prices declined for five consecutive months by the end of June. The Reserve Bank continued to issue large values of treasury bills to support the government's over-budget spending. This added to the money supply and in effect devalued all bank balances, despite them being US Dollar denominated.
In November 2016 a pseudo-currency was issued in the form of Bond Notes despite widespread protests against them. In February 2019, ]John Mangudya
John Panonetsa Mangudya (born 5 October 1963) is the governor of the Reserve Bank of Zimbabwe. He was appointed in March 2014 by the then Zimbabwean president, Robert Mugabe, and began his tenure as governor on 1 May that year. He succeeded Gideon ...
, through a monetary policy presentation formally introduced a new currency, the RTGS dollar which consists of electronic balances in banks and mobile wallets, bond notes and bond coins. This completed the conversion of all US Dollar denominated bank balances to a devalued Zimbabwean currency at a rate of 1:1.
In June 2019 the use of foreign currencies in local transactions was prohibited as part of the prospective plan for a new national currency and thus ended the dollarization period. There was still low volume trade in US Dollars, particularly in the informal sector and using in-shop bureau de change. In March 2020, blaming the challenges of dealing with COVID-19, the government allowed formal transactions in US Dollars once more.
Government of National Unity: 2009–2013
In response to the negative long-term economic situation the three parliamentary parties agreed on a Government of National Unity. Despite serious internal differences this government made some important decisions that improved the general economic situation, first of all the suspension of the national currency, the Zimbabwean Dollar, in April 2009. That stopped hyperinflation and made normal forms of business possible again, by using foreign currency such as the US American Dollar, the South African Rand
The South African rand, or simply the rand, ( sign: R; code: ZAR) is the official currency of the Southern African Common Monetary Area: South Africa, Namibia (alongside the Namibian dollar), Lesotho (alongside the Lesotho loti) and Eswatin ...
, the EUs Euro
The euro ( symbol: €; code: EUR) is the official currency of 19 out of the member states of the European Union (EU). This group of states is known as the eurozone or, officially, the euro area, and includes about 340 million citizens . ...
or the Botswana Pula. The former finance minister Tendai Biti
Tendai Laxton Biti (born 6 August 1966) is a Zimbabwean politician who served as Finance Minister of Zimbabwe from 2009 to 2013. He is the current Member of Parliament for Harare East Constituency and the second Vice President of Citizens Coa ...
( MDC-T) tried to hold a disciplined budget. In 2009 Zimbabwe recorded a period of economic growth for the first time in a decade.
Post-Government of National Unity: 2013–present
Following ZANU-PF's landslide electoral victory in the 2013 general elections, Patrick Chinamasa was appointed finance minister. Policies encouraging the indigenisation of the economy were fast tracked and laws requiring that 51% or more of non-black Zimbabwean owned companies had to be handed over to black Zimbabweans were implemented. This has been credited with creating further uncertainty in the economy and negatively impacting investment climate in the country. Although legislation dealing with the indigenisation of the Zimbabwean economy has been in development since 2007 and actively initiated by ZANU-PF in 2010 the policy has continued to be accused of being unclear and a form of "racketeering
Racketeering is a type of organized crime in which the perpetrators set up a coercive, fraudulent, extortionary, or otherwise illegal coordinated scheme or operation (a "racket") to repeatedly or consistently collect a profit.
Originally and ...
by regulation." The government doubled the civil service and embarked on what the Economist described as "...misrule and dazzling corruption."
In April 2014, Chinamasa admitted that the country was heavily in debt and that the country needed to better attract foreign direct investment. Officially Zimbabwe's debt is $7 billion, or over 200% of the country's GDP. However, this figure is disputed, with figures as high as $11 billion being quoted, once debts to other African countries and China are included. As of May 2014, it has been reported that Zimbabwe's economy was in decline following the period of relative economic stability during the Government of National Unity. It is estimated that Zimbabwe's manufacturing sector requires an investment of roughly US$8 billion for working capital and equipment upgrades.
In 2016 Tendai Biti
Tendai Laxton Biti (born 6 August 1966) is a Zimbabwean politician who served as Finance Minister of Zimbabwe from 2009 to 2013. He is the current Member of Parliament for Harare East Constituency and the second Vice President of Citizens Coa ...
, an opposition politician estimated the government was running a deficit of up to 12% of GDP and Zimbabwe began experiencing a significant shortage of US dollars partly due to a consistent trade deficit
The balance of trade, commercial balance, or net exports (sometimes symbolized as NX), is the difference between the monetary value of a nation's exports and imports over a certain time period. Sometimes a distinction is made between a balanc ...
. This prompted the Zimbabwean government to limit cash withdrawals from banks and change exchange-control regulations in order to try to promote exports and reduce the currency shortage. In June and July 2016, after Government employees had not been paid for weeks, police had set up road blocks to coerce money out of tourists and there were protests throughout Zimbabwe, Patrick Chinamasa, the finance minister, toured Europe in an effort to raise investment capital and loans, admitting "Right now we have nothing." In August 2016 the government announced that it would be laying off 25,000 civil servants (8% of the country's 298,000 civil servants), cut the number of embassies and diplomatic expenses and cut ministerial expenses in an attempt to save $4 billion in annual wages and secure help from the World Bank and the IMF.
At the same time, the government sought to improve women's access to microfinance via the Zimbabwe Women Microfinance Bank
Zimbabwe Women Microfinance Bank, whose full name is Zimbabwe Women Microfinance Bank Limited, is a deposit-taking microfinance institution in Zimbabwe. The bank serves those members in the community, who have been un-reached by conventional com ...
Limited, which began operations 29 May 2018. The Bank operates under the supervision of the Ministry of Women's Affairs, Gender and Community Development.
Re-adoption of the Zimbabwe Dollar
In mid-July 2019 inflation had increased to 175% following the adoption of a new Zimbabwe dollar and banning the use of foreign currency thereby sparking fresh concerns that the country was entering a new period of hyperinflation. The Zimbabwean government stopped releasing inflation data in August 2019. The year-on-year inflation rate was 521% in December 2019, but Zimbabwe central bank officials said in February 2020 that they hoped to reduce the figure to 50% by the end of December 2020.
See also
*Science and technology in Zimbabwe
This article examines trends and developments in science and technology in Zimbabwe since 2009.
Socio-economic context
Between 1998 and 2008, the Zimbabwean economy contracted by a cumulative 50.3%, causing GDP per capita to decline to less th ...
*Economy of Africa
The economy of Africa consists of the trade, industry, agriculture, and human resources of the continent. , approximately 1.3 billion people were living in 54 countries in Africa. Africa is a resource-rich continent. Recent growth has been ...
*Economic history of Zimbabwe
The Economic History of Zimbabwe began with the transition to majority rule in 1980 and Britain's ceremonial granting of independence. The new government under Prime Minister Robert Mugabe promoted socialism, partially relying on internationa ...
* Education in Zimbabwe
* History of Zimbabwe
*Zimbabwean dollar
The Zimbabwean dollar (sign: $, or Z$ to distinguish it from other dollar-denominated currencies) was the name of four official currencies of Zimbabwe from 1980 to 12 April 2009. During this time, it was subject to periods of extreme inflat ...
* Tobacco in Zimbabwe
*United Nations Economic Commission for Africa
The United Nations Economic Commission for Africa (UNECA or ECA; french: link=no, Commission économique pour l'Afrique, CEA) was established in 1958 by the United Nations Economic and Social Council to encourage economic cooperation among its ...
Sources
References
External links
*
The Economic Policies of Zimbabwe
'
*
Zimbabwe latest trade data on ITC Trade Map
CIA World Fact Book
World Bank Zimbabwe Summary Trade Statistics
{{DEFAULTSORT:Economy Of Zimbabwe
Zimbabwe
Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and ...
Zimbabwe
Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and ...
Zimbabwe
Zimbabwe (), officially the Republic of Zimbabwe, is a landlocked country located in Southeast Africa, between the Zambezi and Limpopo Rivers, bordered by South Africa to the south, Botswana to the south-west, Zambia to the north, and ...