Making of Zig-babwe

A Complex History of Struggle and Resilience: A case study on Zimbabwe

Heraclitus once said, “Change is the only thing that is constant.”

Zimbabwe, once known as the ‘Jewel of Africa,’ known for its rich raw materials and productive farmlands has undergone a tumultuous journey marked by colonialism, independence struggles, economic upheavals, and political controversies which has led 37.8% of the population to migrate internationally. From the era of Smith’s minority rule to Mugabe’s contentious presidency and beyond, the nation has faced numerous challenges that have shaped its trajectory over the decades.

Originally known as Southern Rhodesia under British colonial rule, it experienced significant unrest in the 1960s as aspirations for majority rule grew stronger. In 1965, Ian Smith’s government declared independence from Britain under the Unilateral declaration of Independence, establishing a white minority regime that was internationally unrecognised. This move triggered a period of guerrilla warfare led by nationalist groups such as the Zimbabwe African National Union (ZANU). By the late 1970s, after a protracted liberation struggle and amid international pressure, negotiations facilitated by the UK led to the Lancaster House agreement in 1979 which paved the way for elections and a transition to majority rule. In 1980, Zimbabwe gained independence, and Robert Mugabe, leader of ZANU-PF, became Zimbabwe’s first prime minister.

Mugabe’s ascent to power marked a new chapter in Zimbabwe’s history. Initially celebrated as a symbol of liberation and national unity, Mugabe’s presidency quickly became marred by allegations of authoritarianism, corruption, and economic mismanagement. In 1987, he consolidated power by becoming the country’s first executive president, a move that critics argued concentrated too much power in his hands and stifled democratic processes. The following years were marked with intimidation and violence, which moved Zimbabwe to a brutal and repressive single-party rule for years, where media freedom was curtailed, and the opposition parties, such as the Movement for Democratic Change (MDC), were harassed and beaten.

After independence the country initially saw economic growth and social development. However, the poor choices made by the dictator such as ESAP (1991) which intended to increase Zimbabwe’s international competitiveness and access to foreign exchange but didn’t, as banking sector failed to provide financing to small businesses and individuals, whereas, the main winners of the reforms were the leading members of the business community, the ruling and emergency bureaucratic elite.

Further, the unbudgeted payment of benefits to war veterans in (1997), joining the war in Congo (1998) right after the stock market crash (1997), embarking on a controversial land reform program in the early 2000s, which involved the seizure of white-owned commercial farms without compensation, which led to a sharp decrease in agricultural productivity and exacerbated food shortages in the country as property was often claimed by politically connected individuals with little or no farming experience which was followed by a severe drought, thus sparking international condemnation and contributing to economic decline. The first two incidents depleted Zimbabwe’s savings, while the last sacrificed one of the country’s last remaining sources of income, leaving only money supply manipulation to support government spending.

Hyperinflation Crisis and Global Isolation

The economic trajectory of Zimbabwe has been characterised by significant fluctuations and crises. One of the most notable periods was the hyperinflation crisis of the late 2000s, where the country’s inflation rate skyrocketed to unprecedented levels. The period consisted of factors such as political instability, unsustainable economic policies and international sanctions imposed due to human rights abuses and electoral irregularities. Including the 2001 credit freeze under Zidera Act by USA, Feb 2002 European Union sanctions, Swedish sanctions that included an arms embargo, travel bans and financial sanctions, as well as the Australian sanction related to supply and manufacturing arms. The government’s attempts to address these challenges often fell short, leading to prolonged periods of economic decline and social unrest. Roots of the current situation further increased with the suspension of all international humanitarian aid operations in the country due to the 2008 elections. And thus, hyperinflation peaked in November 2008. Which led to the abandonment of the Zimbabwean dollar and the adoption of multiple foreign currencies to stabilise the economy. The official demonetisation in 2015 and introduction of a temporary multi-currency platform, caused confusion into the system where in place of the Zimbabwean dollar, currencies including the South African rand, Indian Rupee, Euro, Yuan, and Dollar etc were put into use, which did improve conditions for a short while but predictability ended up further depressing Zimbabwe’s bilateral trade by nearly 15%. 2014–2016, saw slower growth due to falling commodity prices, reduced agricultural output, and ongoing political instability. In 2016, the government introduced bond notes to alleviate cash shortages, but this move triggered fresh economic instability and public dissatisfaction.

In November 2017, Mugabe was put under house arrest, leading to his resignation as president which marked a significant turning point in Zimbabwe’s political landscape and raised hopes for political and economic reforms under a fresh leadership. Following which, Emmerson Mnangagwa assumed the presidency. Mnangagwa’s administration initially promised reforms aimed at reviving the economy, attracting foreign investment, and improving governance. Especially, his “friend to all and enemy to none” approach aimed to counter Mugabe’s “Look East” policy that prioritised economic ties with countries such as China, Russia, and Iran instead of the West. However, progress has been slow, and Zimbabwe continues to grapple with economic challenges such as high inflation, unemployment, and foreign exchange shortages.

With $34 billion GDP, 2018 was marked as the peak of the economy. In order to increase transparency in the foreign exchange market and speed up the process of determining a market-based exchange rate, a new Zimbabwe Dollar was introduced in 2019. On March 29, 2020, the government did, however, had to permit Zimbabweans to use foreign currencies once more due to a pandemic and excessive inflation.

Efforts to implement structural reforms and address longstanding issues in sectors such as agriculture and mining have been hampered by political tensions, policy inconsistencies, and the effects of past mismanagement. With a GDP growth that is still insufficient to boost the economy Zimbabwe faces a tough situation.

GDP ZIMBABWE 2011–2022

SOURCE- GDP, IMF

Overall, we can decipher that, from 2012 to 2024, the country’s GDP has undergone significant fluctuations, reflecting both economic challenges and periods of growth. The data reveals a volatile economic landscape, starting with a substantial growth of 15.74% in 2012.

However, subsequent years saw varying levels of economic performance, contractions of around 7.82% in 2020 amidst global economic crises. 2021 showed a notable recovery with an 8.47% increase in nominal GDP, though real GDP growth was more modest at 3.40% in 2022. Overall, these figures highlight Zimbabwe’s efforts to stabilise its economy amidst considerable external and internal economic pressures over the past decade.

To understand today’s Zimbabwe, one needs to understand the related key factors that have led to such situations today. Traditionally, lower unemployment rates have often been associated with higher inflation rates due to increased demand and wage pressures. While data reflects a certain amount of calmness in the last 2–3 years as compared to pre-2021 period, Zimbabwe’s experience has been somewhat unique, due to structural issues, policy failures, and external shocks. Along with hyperinflation there also exists the problem of mass unemployment. The pandemic is a significant example of this situation.

Official figures have often been unreliable, but estimates suggest that unemployment rates in the country have been consistently high, particularly affecting the youth. The lack of formal job opportunities has driven many Zimbabweans into informal and often precarious employment. A study has also found that, unlike the rest of the countries, people of at least 15 years of age are included which does lead to overestimation of unemployment thereby making international comparison really difficult.

When Russia invaded Ukraine, Zimbabwe like many others, hiked their interest rates, a process known as monetary policy tightening, which caused prices of vital imported goods such as wheat, petroleum, and fertiliser to skyrocket. The price increases exacerbated inflationary pressures that had been building for decades which were the result of lax monetary policy and de-anchored inflation expectations.

Zimbabwe’s economic growth, driven by agriculture, mining, and remittances, reached 5.5% in 2023 following a 6.5% increase in 2022. The extreme poverty level has significantly declined after a peak in 2020. However, persistent macroeconomic instability, marked by currency depreciation and exchange rate distortions, continues to constrain its potential. Inflation surged, escalating from 26.5% in December 2023 to 47.6% by February 2024, exacerbated by a sharp local currency depreciation across official and parallel markets. Fiscal pressures intensified in 2023 ahead of national elections, with the government assuming $1.8 billion in external debt from the Reserve Bank of Zimbabwe. Despite revenue challenges and reversals in budget measures, increased taxes like the sugar tax have driven up prices. GDP growth is projected to slow due to structural constraints, inflationary pressures, and external shocks like El Niño-induced drought affecting agriculture and electricity supply. Fiscal deficits are expected to widen further, driven by debt servicing, drought mitigation, and wage demands, while the current account surplus is set to diminish amidst increased imports and economic challenges.

SOURCE- World Bank Data

Measures taken by Zimbabwe to improve economic stability

Zimbabwe has implemented several measures to improve economic stability. These include tightening monetary policy to reduce inflation and market uncertainty, extending the use of US dollars as legal tender until 2030, and launching the Zig initiative to address ongoing challenges. In agriculture, the govt. allowed private funding for transparency, partnered with international firms for machinery imports, and promoted crops like sorghum and millet suited to the semi-arid climate. Additionally, increased wheat production and efforts to enhance power supply for agriculture underscore their commitment. In mining, significant investments have been made in lithium and granite processing, signalling a proactive approach to resource development.

Introduction of Zig

Zimbabwe recently introduced ZiG, a new gold-backed currency aimed at stabilising its economy long plagued by currency instability and hyperinflation. The exchange rate was determined by the central bank using the interbank rate and gold prices as of April 5, 2024. ZiG notes and coins, ranging from 1ZiG to 200ZiG, are now in circulation, backed by reserves of gold and foreign currency, distributed through regular banking channels. Meanwhile, across Africa, initiatives like the Pan-African Payment and Settlement System (PAPSS), developed by the African Union and the African Export-Import Bank, seek to enhance financial market infrastructure for secure cross-border money flows.

Conclusion: Pathways to Recovery and Future Prospects

According to the last official reports, Zimbabwe saw 104.71 % inflation (at CPI) in 2022. As Zimbabwe navigates its complex history and current challenges, the path to economic recovery and political stability remains uncertain. Their experience underscores the importance of inclusive governance, sustainable policies, and respect for human rights in fostering long-term development. In March, under the Magnitsky Act, the USA imposed new sanctions on eight Zimbabwean individuals, including President Emmerson Mnangagwa, his wife and other officials, following allegations of corruption, election rigging, and human rights abuses.

To foster investment, job creation, and poverty reduction, Zimbabwe must tackle corruption, institutional weaknesses, and social inequality. For which International support will be vital. The country should leverage its strong human capital and abundant natural resources to boost private sector growth and capitalise on existing and emerging opportunities.

In conclusion, Zimbabwe should prioritise the development of its agricultural sector to enhance supply, reduce prices, and boost employment through targeted policy measures like the Command Agricultural model. Simultaneously, substantial investments in job-creating industries are crucial to alleviate unemployment, increase output, and stabilise prices across the economy. Enhancing the flow of information in the labour market and investing in training programs will further improve efficiency and innovation. Lastly, effective policy implementation, particularly in sectors like diamond mining, is essential to ensure accountability and maximise benefits for the nation. By addressing its challenges through concerted efforts and inclusive dialogue, Zimbabwe can pave the way for sustainable development and improved livelihoods for its people.

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