Zimbabwe - Where to now? - Maritz Africa Intelligence
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Zimbabwe – Where to now?
By Dianna Games and Jaco Maritz
Zimbabwe’s unexpected revolution in with a leader cut from the same cloth as
Dianna Games is Chief November 2017 took just a few weeks. their ousted dictator.
Executive at consultancy As citizens wearily braced themselves
Africa @ Work and Executive for Robert Mugabe, 93, to serve yet BACKGROUND
Director of the South Africa- another five-year term in power from
Nigeria Chamber of 2018 or, worse, hand over the reins to Zimbabwe’s economy has been on a rocky
Commerce. Jaco Maritz is his wife, both were swept off the road for many years as a result of poor
founder of Maritz Africa
political stage by the tide of history. governance, a lack of policy vision and
Intelligence.
political expedient actions by the president
This article was specifically The military, who finally removed Mugabe, and ruling party. Structural reforms and
written for the NTU-SBF carefully avoided undertaking a textbook political accountability, even in the darkest
Centre for African Studies. coup d'état in order to circumvent the need days of economic collapse, were politically
for regional intervention in the unpalatable; they were at odds with the
extraordinary events. Indeed, survival of Zanu-PF. Instead, for the most
Zimbabweans insisted on social media that part, the government followed a path of
the Southern African Development patronage, pillaging, and, crisis
Community (SADC) keep out of it. The management. Instead of tackling its
antipathy towards regional leaders is problems, it cast about for scapegoats and
based on years of perceived betrayal of enemies to blame.
ordinary Zimbabweans by the SADC,
which has legitimised what were widely Many believe the problems are recent. But
believed to be elections rigged to keep Mugabe’s record has been chequered for a
Mugabe in power. long time. His intolerance of opposition
showed in the early 1980s, soon after he
The news delivered on national television became head of state (then prime
late one night by a military general that minister). The army, at his behest, killed at
Mugabe was under house arrest and the least 10,000 Zimbabweans in a campaign
army was taking action against criminals to quell dissent in the region of
surrounding the president, came as a Matabeleland.1
shock to citizens. They awoke the next day
to tanks in the streets. It didn’t take long for Economic problems also appeared early
the celebrations to begin. on. High investment in health and
education in the early days of his rule,
A few days later, Harare, the capital, was albeit designed to counter the neglect of
flooded with thousands of people hailing the masses by the former Rhodesian
the previously hated military, celebrating, government, resulted in unsustainable
hugging and crying. They also called in levels of public expenditure, which also
unison for the president to actually resign. crowded out private investment and fuelled
Similar scenes were last seen 37 years inflation. The implementation of an IMF
ago in 1980 when cheering Zimbabweans structural adjustment programme in the
The NTU-SBF Centre for flooded the streets to welcome Mugabe early 1990s, which aimed to fix mounting
African Studies, a trilateral home from exile before electing him economic challenges, exacerbated the
platform for government, president. problems and the project was abandoned
business and academia to by Mugabe before it had run its course.
promote knowledge and What began as a factional battle in the
expertise on Africa,
ruling party turned into a revolution. When The president made costly political
established by Nanyang
Technological University the dust settles, Zimbabweans may find choices. In 1997, for example, he made
and the Singapore either that real change is underway or that unbudgeted payments to restive war
Business Federation. they have become a de facto military state veterans demanding payment for their role
https://ntusbfcas.com in the war of independence. The effect on
ht
an already ailing fiscus was dramatic. The Mugabe back into power. Their obstruction
Zimbabwe dollar fell by 70% against the in implementing media, security and
US currency and the stock market plunged electoral reforms that formed part of the
overnight.2 This was followed by unity government negotiations, served
Zimbabwe’s expensive, and unnecessary, them well. It also highlighted the weakness
intervention in the Democratic Republic of of what was by then a fragmented
Congo war. opposition, beaten down by years of
fighting on an uneven political playing field.
In 2000, the emergence of the first serious
opposition to Zanu-PF since independence But it was business as usual for the newly
in the form of the Movement for installed administration, which had no
Democratic Change (MDC) triggered a workable plans for the economy. Western
decade of violence against opposition investors, still waiting to see the back of
supporters and a slew of rigged elections. Mugabe, mostly kept away. The
government’s Look East policy, designed
But the biggest economic upset was the to lure less critical Asian investors to
seizure and redistribution of thousands of Zimbabwe, had limited success. The
white-owned commercial farms, which challenging business environment and
formed the backbone of the Zimbabwe concerns about policy predictability
economy. This began in 1998 but gained remained. A particular issue was the
momentum after 2000 when farmers were indigenisation legislation that forced foreign
accused of supporting the MDC. investors to cede 51% of their companies
When the dust Commercial agriculture output plummeted, to locals.
with a knock-on effect on the
settles, manufacturing sector, which was tied to Manufacturing continued its decline, with
Zimbabweans agricultural inputs. It also affected tobacco companies battling with power shortages
production, a key export. and unable to source foreign exchange for
may find either inputs and machinery upgrades. Imported
that real change Meanwhile, the government began to print goods flooded the market, particularly from
money to cover its debts, unwilling to neighbouring South Africa, and the trade
is underway or reform in order to attract new investment. deficit widened to more than $3 billion by
that they have The economy eventually collapsed in 2008 2015.4 In 2016, Zimbabwe received foreign
under the weight of hyperinflation that direct investment of just $320 million.5
become a de reached nearly 231,000,000% in the
summer of that year.3 The opportunity presented by Zimbabwe’s
facto military significant diamond fields was undermined
state with a 2008 was also a pivotal year politically, as by the widespread looting of the
Mugabe and MDC leader Morgan commodity by military leaders and political
leader cut from Tsvangirai went head to head in an elites in partnerships with Chinese and
the same cloth election characterised by disputed results other companies licensed to mine them. It
and unprecedented levels of violence. is suspected that more than $15 billion
as their ousted Eventually, the SADC intervened, worth of revenues were diverted from the
dictator. brokering a government of national unity in national treasury.6
which Mugabe remained president,
Tsvangirai became prime minister and While the multicurrency regime allowed
cabinet posts were shared among the main nine currencies as legal tender, most
parties. citizens preferred the US dollar.7 However,
this removed control from the monetary
The uneasy political compromise, while it authorities. Cash quickly disappeared
disappointed Zimbabweans hoping for across borders and, as cash shortages
change, allowed the economy to stabilise. loomed, it increasingly was stashed under
The Zimbabwe dollar was replaced by a mattresses. The Reserve Bank of
multicurrency regime, which enabled the Zimbabwe said in 2015 alone, $1.8 billion
wheels of commerce to turn again. worth of dollars left the country.8
Zimbabwe’s budget in 2017 was just $4
2013 ELECTIONS AND BEYOND billion.9
The unity government ended in 2013 when The use of the US dollar has also made
the next election ushered Zanu-PF and exports and tourism expensive, particularlyfor regional trade and tourism as all Forex transactions were sharply curbed on
currencies in the region are weaker than the back of shortages. Supply fell far short
the US currency. of demand. Although mining sector
revenues, buoyed by increasing
In 2016, in a desperate measure to commodity prices and improved
introduce liquidity, the government productivity from the gold, platinum,
announced a limited number of “bond chrome, nickel and coal sectors, rose, the
notes”. These were theoretically backed by currency was quickly snapped up.
hard currency, but their value against the
real dollar quickly deteriorated, reaching Foreign institutions tightened transaction
lows of 80% against the greenback. limits on international cards, while nearly
Zimbabweans mistrusted the move, 50 international correspondent banks
believing it was a way of introducing turned their backs on Zimbabwe. 12
through the back door a new local currency
that the authorities could control. The The Mugabe government’s response was
existence of a quasi-currency that was not to criminalise black-market foreign
tradeable beyond Zimbabwe was also currency trading. Similarly, it imposed price
unappealing to investors. controls on a range of goods, blaming
retailers for profiteering. But it steadfastly
Zimbabweans have eschewed the use of refused to cut expenditure on the public
the South African rand as a result of the service, which swallows more than 70% of
currency’s volatility and rising political risk the budget.
Mugabe was put in that country. It would, however, make
more sense given that South Africa is Overarching the economic problems was a
under house Zimbabwe’s biggest trading partner and gathering political storm that had its
arrest, about 70% of Zimbabwe’s tourists come genesis in the succession battle that had
via its southern neighbour.10 raged around the presidency for years.
government Two clear factions had emerged: Team
buildings were The long-term dysfunction of the economy Lacoste, headed by long-time Mugabe ally
has had wider consequences. Key among and first vice president since 2014,
sealed off and a them is the erosion of institutions and the Emmerson Mnangagwa, and G40, fronted
general was dysfunction and even paralysis of state- by first lady, Grace Mugabe, whose
owned enterprises. Corruption had become political ambitions to succeed her husband,
seen on rife, in both the public and private sectors. once muted, became clear in 2017.
GDP growth declined from 1.4% in 2015 to
national 0.7% in 2016. Projections were for growth She openly campaigned against
television of over 2% in 2017 on the back of Mnangagwa, accusing him of plotting to
improved mining receipts. topple Mugabe, as she had done with his
announcing that predecessor, Joice Mujuru, who was
the military had 2017: A PRELUDE TO MILITARY eventually fired. Mnangagwa suffered a
INTERVENTION similar fate at her hand, being removed in
taken over in early November from government and the
the interests of By 2017, Zimbabwe was effectively party. He fled the country.
bankrupt. The fiscal and monetary situation
saving was again parlous with a fiscal deficit of But his friends in the powerful security
Zimbabwe. about 55% of total expenditure and establishment came down on his side.
government spending being driven by Within days, tanks rolled into Harare. In a
Treasury Bills, a trend that potentially put rapid sequence of events that stunned
the banking sector in peril as the main Zimbabweans and the world, Mugabe was
buyers of government debt. put under house arrest, government
Contributions to pension funds had buildings were sealed off and a general
dropped by 40% as formal sector jobs was seen on national television
dried up and the cash crunch had hit hard, announcing that the military had taken over
with most Zimbabweans turning to plastic in the interest of saving Zimbabwe. He said
and mobile money to effect transactions. Mugabe was safe, but the criminals around
Cash withdrawals at banks were limited to him would be targeted. Several ministers
as low as $20 a day.11 and G40 members were arrested while
others fled.Mugabe, under threat of impeachment and Measures announced in the 2018 budget
removed as president by his party, by recycled finance minister Patrick
resigned a few days later. Zanu-PF also Chinamasa on 7 December backed up the
restored Mnangagwa’s membership and inauguration promises. Key elements
voted for him to finish Mugabe’s five-year included the scrapping of the 51%
term, with a new interim cabinet, ahead of requirement of local ownership for foreign
elections due to be held by mid-2018. investors, except in the diamond and
platinum sectors. Non-performing state-
THE MNANGAGWA PRESIDENCY owned enterprises are to be privatised or
closed; the public service is to be trimmed
The interim cabinet was a disappointment and legislation affecting business is to be
to Zimbabweans hoping for change. It was reviewed.
full of old Zanu-PF hacks with military
leaders in key appointments. In essence, it Education received the highest budget
was a “payback” cabinet. The need to keep allocation. On the downside, defence was
the military and the party sweet is bound to allocated significantly more than agriculture
have been on Mnangagwa’s mind when he and health, underlining the notion of
chose his line-up. Many hope that with Zimbabwe as a securocratic state.
political debts taken care of early on, there
is a chance for a reform cabinet after next International re-engagement has already
year’s poll in the likely event he takes part begun. China, Zimbabwe’s fourth-largest
and wins. But for now, he has to tread trading partner and biggest investor, is
International re- carefully. leading the charge. Days after the
inauguration, Mnangagwa was visited by
engagement Zimbabweans have not forgotten that he China’s Assistant Foreign Affairs Minister,
has already was among those accused of siphoning off Chen Xiaodong.13
billions of dollars of diamond profits, or that
begun. China, he was part of the security cabal that China has already announced a $153
Zimbabwe’s murdered thousands in the early 1980s. million deal to expand the international
Nor have they forgotten that he propped up airport, build a new parliament and a
fourth-largest Mugabe. computer centre at the university. None is
trading partner a priority in this stricken economy, but it is
But with their backs against the wall, the a start. But more than $1 billion of Chinese
and biggest economy tanking again and the prospect of money is on standby for the revival of
a dynasty succession plan, accepting a Zimbabwe’s defunct iron and steel
investor, is tainted successor was a compromise worth company, Zisco.
leading the making. Mnangagwa has, for some time,
been pro-business and supportive of Britain has also beaten a path to the new
charge. international re-engagement. president’s door and the IMF sent a
delegation in early December to see what
His inaugural speech made all the right assistance it could offer to rebuild the
noises. “I am not oblivious to the many economy. International lending is
Zimbabweans across the political and constrained by Zimbabwe’s large debt
racial divide who helped make this day burden and Zimbabweans are wary of
happen, and thus have legitimate incurring more debt if existing obligations
expectations of the office I now occupy,” he are cleared, but the size of the need may
told a packed stadium. push the country back in this direction for
now.
He vowed to uphold the constitution and
conduct the election as scheduled. He The region has been quietly supportive,
promised the safety of investment, reform with several Southern African presidents
of land title, increased local productivity attending the inauguration. Their support
through support to industry, and for the new administration is important
improvements to the business politically, as it has been for Mugabe for
environment, among other things. Mining, years.
agriculture and tourism are also at the
centre of his recovery strategy and The big test will be to see if Zanu-PF and
investors are already focusing on new its new president will conduct a free and
opportunities there, banking on change. fair election in 2018, particularly if thefragmented opposition puts up a united growth for 2018 is difficult to predict, but it
front. A level playing field would require is likely to be well above the 0.8%
long overdue electoral and other reforms, predicted by the IMF before the change of
which may be politically unpalatable to the president. But it is vital that Zimbabwe
party. addresses critical issues in monetary policy
to really unlock opportunities.
CONCLUSION
Although the international community has
Under the right leadership there is no fretted about the fact that Mnangagwa
reason why Zimbabwe should not quickly appears to represent more of the same,
begin the long rebuilding process. Its Zimbabweans believe that Mugabe’s
institutions are resilient and there is still a removal was a necessary condition for
reservoir of skilled professionals and economic removal and they are, for now,
nimble companies, as well as a large celebrating change as an end in itself.
diaspora to tap into. They seem to have finally found their
voice. It will not be easy to go back.
The new president can build on recent
achievements in improving agricultural
production and tap into rising interest in
mining, telecoms and other sectors. GDP
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