Zimbabwes Road to Economic Recovery
The World Bank describes Zimbabwe as one of the most economically fragile countries on the planet. This description comes as no surprise considering the scale of economic disruption that has been going on in Zimbabwe for quite some time now.
Zimbabwe may be the only country in the world right now that does not have its own currency. As a result of hyperinflation, the savings of the people were obliterated overnight and Zimbabwean currency ended up becoming worthless pieces of paper. Zimbabwe also has one of the worlds highest unemployment. About 80% of the working population in Zimbabwe is unemployed. Once again this is the highest in the world.
The problem with Zimbabwe is that they have been following the soak the rich policy for a very long time. This has led to a situation where there are no wealthy people or wealthy corporations left to tax! Since there is no wealth generation happening in Zimbabwe, rebuilding the nations economy is almost impossible. The task is akin to building an entire economy from the ground. This is the reason why most Zimbabweans are skeptical of President Mnangagwas ability to bring about such a change. However, President Mnangagwa is of the opinion that Zimbabwe has nothing to lose. Hence, he has proposed some historic measures to kick-start the Zimbabwean economy once again. In this article, we will have a closer look at some of those measures:
End Zimbabwes Racist Economic Policies
Under the reign of previous President Robert Mugabe, much of Zimbabwes economic policies were designed for political purposes. This is the reason why economic policies which were obviously damaging the economy were allowed to continue.
For instance, consider the case of the agricultural policies which were implemented in Zimbabwe. These policies were designed to seize control of vast tracts of farmlands from the white farmers and Zimbabwe and turn them over to the black farmers. The policy had nothing to do with economics. It was only an exercise in identity politics! Due to massive corruption in Mugabes government, most of these farmlands ended up being controlled by the military and political elites in Zimbabwe. The people controlling the lands were not farmers and did not know how to run the business. As a result, the production of food grains in Zimbabwe dropped all of a sudden. Zimbabwe, which was supposed to be the breadbasket of Africa, started facing famines and food shortages!
Another policy implemented on racial lines proposed the redistribution of control of Zimbabwean companies to black Zimbabweans. This meant that it was made mandatory that 51% or more of the outstanding shares of all Zimbabwean companies were owned by black Zimbabweans. Obviously, this policy did not go well with international investors.
Ever since this policy was introduced, most foreign companies simply shut down their shops and started moving elsewhere. Even countries like China which have been aggressively making investments in Africa have shied away from Zimbabwe.
Hence, one of the biggest tasks facing Mnangagwas government is the repeal of these policies. The government may face some political resistance. However, it is important that these policies are repealed and that the market economy is restored. This will restore the confidence in global investors and urge them to make investments which Zimbabwe is in dire need of.
Negotiating With Foreign Lenders
The previous Zimbabwean government has defaulted over international debt worth over $9 billion. Obviously, this has led to strained relations between Zimbabwe and the foreign lenders. The current government led by President Mnangagwa will have to do the difficult task of convincing foreign lenders to invest once again in Zimbabwe. This might be difficult considering the dire situation of the economy.
There are only two viable options actually. Firstly, the IMF might be willing to invest a limited amount of money. However, IMF loans are known to come with many strings attached. IMF usually seeks to privatize the national resources of the country. This policy might not play well with left-leaning Zimbabweans. On the other hand, President Mnangagwa could convince China to make some investments.
China has been making a lot of investments in troubled economies for its Belt and Road Initiative. However, this could be a debt trap as China gives loans at very high interest rates. It will be the job of President Mnangagwa to ensure that the loans are obtained at the correct interest rate and for the correct projects.
In the long run, Zimbabwe may have to pack back some of its old debt in order to convince more countries to invest with them and create more options.
Create A Vibrant Workforce
At the present moment, there are close to zero formal jobs in Zimbabwe. This is the reason why the unemployment rate runs over 80%. All the skilled Zimbabweans have fled the nation. They are now in neighboring African countries.
However, Zimbabwe is still rich in natural resources. Agriculture and mining can be immediately carried out here if the skilled workforce is present. President Mnangagwa will have to win the trust of fellow Zimbabweans and convince them to re-migrate to their nation. It is unlikely that the Zimbabwean economy can flourish once again if the required workforce is absent.
To sum it up, President Mnangagwa and his team have a challenging task ahead. However, it is not impossible. There are many nations in the world which have come back from such situations.
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