Source: Mugabe’s 37 years in power: How Zimbabweans’ wealth took a dive | Fin24
Cape Town – The average wealth of a person in Zimbabwe is one of the lowest levels in the world, according to Johannesburg-based global research group New World Wealth.
Its research shows that as of the end of 2016, the average wealth of a person in Zimbabwe stood at about US$200 (about R2 856), compared to a peak of more than $1 600 (about R22 816) in 1990.
According to New World Wealth, its term “average wealth” or “wealth per capita” refers to the private wealth held by the average individual living in a country. It includes all their assets – like property, cash, equities, business interests – less any liabilities. It excludes government funds and therefore wealth held by government officials is not included.
The research found that at the time when President Robert Mugabe and Zanu-PF took power following general elections in 1980, the average wealth in the country stood at $800 (about R11 424) per person.
Following a few years of solid growth, average wealth in the country reached its peak in 1990 at just over $1 600 per person. Due to droughts in the late 1990s and slowing economic growth, average wealth dropped during this period.
According to New World Wealth, a contributing factor to the drop in average wealth was that most of the very wealthy Zimbabweans left the country during the period between 1996 and 2000.
A notable trend seen in New World Wealth’s Global Wealth Migration Review is that wealthy people tend to leave a country before big trouble starts. When wealthy people start leaving a country, it is therefore normally seen as a “big warning sign”.
According to New World Wealth’s research, the average wealth of someone living in Zimbabwe fell by more than 400% (in US dollar terms) over a period of three months in 2000 when the local currency declined steeply.
This was, according to New World Wealth, when Mugabe was unexpectedly defeated in a referendum aimed at extending his powers. This led to a clampdown on the media and a call for the invasion of white-owned farms and businesses. Accordingly, property and businesses lost a lot of value during this short period.
By the end of 2001 the average wealth in the country amounted to less than $300 (about R4 284) per person.
Based on its research, New World Wealth has identified certain factors as being very important to encourage wealth growth in a country. It turns out Zimbabwe does not score very high on any of these.
Strong ownership rights are seen as such a factor. According to New World Wealth, Zimbabwe is an example of what happens when ownership rights are stripped.
“Once assets are taken away, they tend to lose value as no one is willing to buy anything,” the report explains.
On top of that, strong economic growth is usually linked to wealth growth – another factor lacking in Zimbabwe. Furthermore, a well-developed banking system and stock market tends to ensure that people invest and grow their wealth locally. It also ensures that gross domestic product (GDP) growth leads to wealth growth.
The report adds that a free and independent media is a factor that allows for the dissemination of accurate information to investors, while a government tampering in the business sector creates large inefficiencies within an economy. Government owned enterprises and parastatals are also seen as a problem.
Barriers to ease of investment, such as exchange controls, are found to inhibit wealth growth too, while large trade unions deter businesses from hiring workers.
The migration of wealthy people to a country, strong safety and security – especially of women and children – and low income tax and company tax rates are more factors aiding wealth growth in a country.
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