ZIMBABWE’S ECONOMY:

ZIMBABWE’S ECONOMY:
CURRENT OUTLOOK AND PROSPECTS
April 2009

Given its considerable potential, Zimbabwe has attracted enormous attention since the elections a year ago, particularly as they brought new people and new policy options into the ongoing debate. However, barriers and handicaps clearly designed to prevent change are far more in evidence than are the needed actions, or even proposals, that could place Zimbabwe onto a recovery path that depends on change.
To the extent that change has happened – the adoption of US dollars, the removal of price controls and the well-stocked shops that can supply almost anything we can afford – the changes have far less to do with the policy choices of new politicians than they have with the complete failure of the policies adopted before.
However, the invasive and damaging restrictions, regulations and controls were reactions to, rather than the causes of Zimbabwe’s economic collapse. The massive downturn in economic activity certainly reduced or wiped out the livelihoods, wages, salaries and savings of hundreds of thousands of Zimbabweans, but all of these resulted from more basic causes that have not been rectified. Even worse, they are still being defended. Even more seriously, some of the new cabinet ministers and parliamentarians have been persuaded to help defend them.
These causes were the destruction of the colatteral value of land that formerly supported a high percentage of commercial bank lending to the business sector and, with the damage done to physical output, property rights and business confidence, the country’s forfeiture of almost all possible investment.
From these flowed devastating losses of jobs, exports, supplies of food, supplies of many non-food agricultural products and the domestic markets for many goods and services that were formerly supported by companies and individuals who derived their incomes directly or indirectly from commercial agriculture.
Further consequesnce were the forced emigration of skilled people, the rapid fall in the country’s ability to pay for imports and to obtain credit from foreign lenders. When government weighed in with fixed exchange rates, price controls and interest rates that confiscasted the entire nation’s savings, it was trying to fix the problems without attending to their causes. And to suppress dissenting voices, it felt justified in riding rough-shod over civil rights, particularly freedoms of expression and association.
We now have no need to continue trying to warn government of the dangers of this thinking: we have all experienced the crash. But we have no excuse now for believing that the same strategies might now have a better chance of success simply because politicians from opposing sides are talking to each other.
The reality facing Zimbabwe now is that support will not be forthcoming either from productive sector investors or international development organisations before corrective measures have been taken to restore investor confidence. We need to reinstate property rights and restor respect for civil rights. The repeal of offending legislation can be done very quickly. We should not tolerate excuses for delays.
John Robertson