Zimbabwe Economy Overview Part I

At the national level, ZimStat and the Reserve Bank provide information on economic developments. In addition, German experts from German Trade and Invest (GTAI) provide information on economic facts and developments. According to the UN, the economy of Zimbabwe shrank by more than 40 percent between 2000 and 2008. The economic situation improved only gradually between 2009 and 2013 under the unity government of Zimbabwe, the African National Union / Patriotic Front (ZANU-PF) and the Movement for Democratic Change (MDC). The livelihood was also 2016 and 2017 difficult for many people. The assessments and internationally comparative classifications of the World Bank, for example in the report “Changing Wealth of the Nations 2018 “, and the World Economic Forum with reference to the World Bank and International Monetary Fund. According to franciscogardening, the CATO Institute ranks Zimbabwe 146 out of 162 in its 2019 Economic Freedom Index.

The CORONA crisis and the associated restrictions from April 2020 will exacerbate the structural economic problems – economic experts and the Zimbabwean Finance Minister M. Ncube assume. For example, people in diamond mining areas and informal traders whose market stalls have been systematically destroyed are affected. In addition to intensified repression is the preferred allocation of (international) CORONA offers of help to members of the ruling party and its use by politicians, so Corruption motivated by party politics was also documented in some places.

Agricultural production, which was an increasingly important source of foreign exchange and an employer until 2000, collapsed due to the illegal expropriations of over 4,000 large white farmers. State mismanagement, massive corruption and political repression exacerbated the downward spiral. Hyperinflation and rising external debt were the consequences.

In 2009 the US dollar was approved as a means of payment; Euros, South African rand and Botswanan pula were also accepted. Because of hyperinflation, the Zimbabwean dollar has lost its importance. From 2009 onwards, China and South Africa offered bridging loans. The World Bank again granted financial support in 2009, which it had stopped in 2000. Under certain fiscal conditions, the World Bank and the European Union wanted to continue providing financial support to Zimbabwe, as explained in 2016. Criticism of economic and financial problems was constantly being made public. 2016 saw the most dramatic losses in the economy and clearly in the fiscal system. The government announced the introduction of promissory notes, a so-called bond currency, from October 2016. In media and research which lasted critical debate about it, because they quickly lost value. At the same time, there is still a lack of cash in everyday life, in banks and institutions, which affects existential and necessary services.

On June 24, 2019, the use of US dollar bills and other foreign currencies such as the South African rand in Zimbabwe became invalid. In addition, the changeover led to massive price increases for basic foodstuffs and everyday goods. The change is controversial among financial experts. In November 2019 new banknotes should be put into circulation again; that happened slowly.

The small amounts of money available in the central bank, which according to local estimates result from the low productivity, the minimal export and the bankruptcy of many entrepreneurs, already meant that government employees had to wait weeks or months for their salaries in mid-2016. This led to protests that were violently broken up by security forces. Banks still did not have the financial resources to enable savers to withdraw money. The economy remained fragile in the years that followed.

On November 1, 2018, the media reported that the government was planning massive layoffs of civil servants in 2019 and 2020 in order to reduce government spending on personnel, against which union officials protested. In October 2018, they had already criticized the tax on electronic money transfers. Currency and economic problems, for example, led to an increase in food prices, such as bread, in early November 2018. In November and December 2018 there was a lack of access to gasoline and diesel as well as simultaneous price increases for these fuels cause business and transportation problems; they led to protests in mid-January 2019 that bloody ended the military and thugs on behalf of the regime. In October 2019, gasoline and diesel prices rose again, which, according to the media, had business and political reasons. According to reports, a full tank now costs as much as half a month’s salary for a doctor or a month’s salary for a cook. Money sent by migrant workers from South Africa and Great Britain provides the necessary foreign exchange. In October 2019 there were also massive price increases for electricity made – despite long power cuts for weeks. The consequences included problems for companies, government institutions and private households. Power failure also creates difficulties in transferring money electronically via cell phones, a form of monetary transaction given the shortage of foreign currency.

In the meantime – on February 20, 2019 – the management of the Reserve Bank of Zimbabwe announced restructuring of the currencies, specifically monetary transactions through Real Time Gross Transfer Dollars (RTGS). The International Monetary Fund (IMF / IMF) welcomed this as a step in the right direction. Whether this can be used to counteract the economic crisis is being discussed critically. The end of March 2019 on the depreciation reported the new currency and continuing problems due to rising inflation.

In 2010 mining became dominant for government revenue. The mines’ contribution to tax revenue increased between 2016 and 2018, then reaching $ 8.64 million, attributed to the high price of gold. The corporate tax collected remained comparatively low for years due to company closings; In August 2016 alone, 246 companies filed for bankruptcy. These structural problems persist in many industries. Since the resignation of ex-President Mugabe and the inauguration of President Emmerson Mnangagwa in November 2017, at least 96 companies closed by February 2019. The African Development Bank documented the economic development and problems of Zimbabwe. These included financial policy, the government’s liquidity problems, the informalization of the economy, the inefficiency of administration and the corruption that discourages foreign investors.

In the World Bank’s Doing Business ranking on regulations for business start-ups and transnational trading conditions, Zimbabwe is currently ranked 140th out of 190. Because of the high debt (in August 2020 an estimated 18 billion US dollars, about which financial experts are calling for more transparency), the low repayment payments and Western donors and investors are cautious about the unpredictable implementation of indigenization measures by the Zimbabwean government.