Zimbabwe Feels the Big Squeeze

Already bowed by hyperinflation, power and fuel shortages, and a stagnant economy, the largely indigent Zimbabwe needs urgent policy shifts.

“Zimbabwe’s economy may recover next year, but only if its capital city Harare speeds up reforms to attract foreign investment, the African Development Bank told City Press this week. It predicted further contraction this year after sustained economic headwinds, but with a sense of optimism after moves for a political settlement brokered by former South African president Thabo Mbeki,” the Johannesburg-based City Press reported.

The article added: “More Zimbabweans are food-insecure this year after the World Food Programme – which has made a further appeal for $200 million (R2.8 billion) – last month said that it intended to double the number of Zimbabweans it would assist to 4.1 million. This leaves at least 3 million Zimbabweans without aid, prompting Catholic and other faith-based agencies to partly step in.

“Apart from food insecurity, Zimbabwean companies and citizens in urban areas are battling electricity outages and fuel shortages. Those in rural areas have been hit by shortages of water for domestic and farming purposes due to persistent drought conditions, painting a gloomy outlook for this year’s farming season and forcing many farmers to sell their animals.

“It is against this backdrop that Walter Odero, Zimbabwe country economist at the African Development Bank, told City Press this week that Zimbabwe’s economy would further contract this year.”

Economist Odero was quoted as saying: “We are expecting a contraction of between 5% and 7% for Zimbabwe for 2020 because of challenges such as drought, the fuel crisis and foreign exchange issues. Industries require investment and we did not have an investment in 2017, 2018 and 2019. Because most of the industries in Zimbabwe are agro-based, if agriculture is affected, we can’t expect growth. So I wouldn’t be surprised to see no growth.”

Continuing, the article noted that this week the World Bank said in its Global Economic Prospects 2020 report that the Zimbabwean economy contracted by 7.5% last year. It said the country suffered a sharp rise in inflation, which continued to “squeeze real incomes, resulting in a large contraction” in economic activity.

“Activity has been further constrained by persistent shortages of food, fuel, electricity, and foreign exchange,” said the World Bank.

According to Odero, the African Development Bank expects some recovery next year, “depending on the impact of economic and investment [attraction] efforts by the government”.

Another financial and economic expert, Malcolm Hove, was also skeptical of a rebound this year.

“Unless something drastic happens, contraction will continue given the poor business environment, policy inconsistencies, lack of respect for property rights, corruption and devastating drought,” Hove said.

Tendai Biti, former Zimbabwe finance minister and member of the opposition Movement for Democratic Change (MDC), says incompetence by the government will worsen the plight of Zimbabweans this year.

The MDC is contesting the election of President Emmerson Mnangagwa in 2018, arguing that he stole the vote and is thus an illegitimate leader.