Christmas in Zimbabwe

Our lives pretty much evolve about the rains as this brings back life after the long dry winter. If the Intertropical Conversion system does not come south soon, we will be in trouble. It is raining to the north of the Zambezi River and that might help us by filling Kariba, still the largest manmade dam in the world. The early crop in South Arica is also in trouble but they are getting some rain now from a band of weather that is passing through.

It has not been an easy year for us as a country. The year started with one of the most difficult seasons I can ever remember – four spells of wet weather interspersed with hot dry conditions. We have had to import everything and the rural population has relied on help from the Towns and the Diaspora. Our winter was not very cold, we hardly saw frost and this is always a bad sign. A heavy monsoon in India normally signals a strong ITCZ over central and south Africa but even that has failed. The El Nina has been weaker but not enough to swing the season.

In addition to these problems our economy has had a tough year, mainly self-inflicted. We launched a new local currency in April but four months later it was devaluing rapidly and in September we devalued by 84 per cent. In response we at last stopped all the activity that had successively destroyed our own currency since 2000. It has been stable now for a month or so but the market rate is still well below the official rate.

There is nothing wrong with our fundamentals but we simply have not been able to recover from the total collapse between 2000 and 2008. We were forced in 2009 to dollarize and since then every effort we have made to introduce our own currency has failed. This failure has led to the informalization of our economy which is now 70 per cent informal. Our formal economy, on which our tax base is dependent, has not recovered and if anything, industry and agriculture is still shrinking – the latter as much by the economic fundamentals as the adverse weather.

We have been saved by mining and the diaspora and these have both expanded their role very substantially. A third of our population now lives abroad or in South Africa and they send home at least, an average of US$1000 a year. This is now our largest single source of hard currency and is a life saver for our people who depend on this for groceries, school fees and medical services. The Diaspora is also responsible for a building boom which involves the construction of millions of new homes, most on State owned land.

We started the year with no confidence in the Government of the day, and nothing has really changed. If anything, the political environment has deteriorated and I am increasingly concerned about the millions of young people who have little or no hope of a job and many still think of only one option, how to get out of Zimbabwe and into a country where conditions are better and they can find work. In many respects this option defuses the political situation as an option to local change exists. But we remain a powder keg and it would not take much to see our stability unravel.

In my view, the failure to reintroduce a local currency to serve as the sole means of exchange remains the central problem we face. We do not understand how the use of the US dollar undermines our economy and growth. There is plenty of that around, but its not in our banks and we still have little or no reserves. Liquidity in the formal sector is simply not available and this is now impeding normal business activity and growth. The use of the US dollar for most trading activity simply means we are a dumping ground for imports and our own productive sector cannot compete.

The authorities here have decided on a slow and long-term de-dollarization program. I have my doubts that this will work as the local currency simply cannot compete with the US dollar. They argue that if they adopted what I propose, a radical program to switch to a local currency and to make the US dollar and other regional currencies unusable for local transactions, that the dollars in the system would simply disappear.

I do not think that would be the case, if we scraped exchange control, floated the local currency and made it available for local transactions, we would find that the market would very quickly establish the required relationships and given our balance of payments situation, we would have to buy US dollars off the market to keep our own currency undervalued. When we did that in the opposite direction in 2009, that is exactly what happened.

So, what of 2025? Already it is apparent that we are going to have another lousy agricultural season. The President made an astonishing announcement on Friday that we are going to re-introduce freehold title for farm land. This will only affect about 12 million hectares of land out of 49 million hectares, but it will completely change the outlook for the commercial farming industry. Farmers will now have the motivation and the capacity to invest and if we can get a million hectares under irrigation, it will give us food security and allow us to resume agricultural exports.

Two years ago, he announced we would grant all informal housing free hold title and this is now well underway. When complete it will create hundreds of billions of dollars’ worth of bankable property and will completely change the country by helping create a middle class. If only we can sort out our currency, these two developments will completely change the longer-term outlook.

During this year we have made significant progress in securing re-engagement with the major democracies in the West. This has not been easy and we need to acknowledge the support of the African Development Bank and the former President of Mozambique. In 2025, we should be able to close this door and get our national debt under management and see our political relations with the world improve. This is critical if we are going to rebuild our infrastructure and meet our needs for electrical energy.

For the rest, Zimbabwe remains one of the best kept secrets of the world, a great little country, with fantastic people, largely at peace with itself and finding its own way into the future. Every blessing for this Christmas as we celebrate the birth of Christ and best wishes to all of us for the coming year.

Harare, 22nd December 2024