OVER the past two or so years key economic fundamentals have not been good in Zimbabwe. The gross domestic product growth rate has been on a downward trend.
The formal unemployment rate stands at more than 80% (of course many people work in the informal sector of the economy), the trade deficit is more than $5 billion which may be the reason why the government increased import duty for some products recently and capital flight has increased over the past 18 months.
Despite all these signs, there is hope for the Zimbabwean economy. Those who believe that when chips are down for an economy, they will always be down are obviously not students of economic history.
The United States economy was able in the 1950s to emerge out of the Great Depression of 1929 which was exacerbated by the World War II. Of course, some entrenched structural economic problems in Zimbabwe may take time to resolve, but eventually they will be resolved, if not by this generation, then by the next.
There are three main signs or indicators that the Zimbabwean economy has great potential to be revived.
The first sign is that of mineral wealth and significant levels of foreign direct investment that have been committed to the mining sector over the past five years. No one can deny that minerals or the mining sector is currently Zimbabwe’s cash cow.
One wonders what would have become of this country’s economy without its vast mineral wealth which has acted as a cushion at a time when much of the Western world has sour relations with the domestic economy.
A number of scholars have argued that Zimbabwe can have accelerated economic growth if leakages from the mining sector are plugged, capacity utilisation improved and beneficiation or value addition is adopted instead of just gifting developed and fast developing economies with the country’s non-renewable mineral wealth.
- Chamisa under fire over US$120K donation
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Pension funds bet on Cabora Bassa oilfields
- Councils defy govt fire tender directive
Keep Reading
Very few people would argue about the benefits of value addition in the mining sector. Of course developed countries and the fast emerging economies would not relish a situation in which African countries add value to their raw mineral and other resources because this would improve their bargaining power in international trade.
The second sign that Zimbabwe will ultimately come out of the doldrums is the fact that large swathes of the domestic economy is now indigenised or owned by citizens or permanent residents of this country.
According to the celebrated Scottish economist Sir Adam Smith: “It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest.”
This implies that people are generally driven by self-interest to amass wealth. It does not make sense for the petite bourgeoisie and upper class which has grown since the 1980s to be expected to have sustainable wealth if the economic base is crumbling. The major reason for this argument is that in the long term a crumbling economy undermines the grip of those who hold economic levers.
It is therefore safe to assume that the bourgeoisie and upper classes of Zimbabwean society will work hard in crafting long term solutions to the problems currently blighting the domestic economy.
The revision of indigenisation regulations and the authentication of the same by the highest office in the land is an indicator that the current administration is keen to engage international players to revive the domestic economy.
It remains to be seen whether the international investment community will respond positively given the fact that in the past macroeconomic policies have had inconsistencies which saw the period 2003 to 2008 witnessing one of the worst levels of inflation and economic downturn despite government pronouncements that quasi-fiscal and other economic activities were meant to resuscitate an ailing economy.
The third key indicator that the Zimbabwean economy may be revived are the good relations that the country has with populous East Asian economies such as India, China, Russia and Malaysia.
These economies present a huge market for Zimbabwean products once key economic fundamentals have been stabilised through pragmatic and robust macroeconomic policy formulation and implementation.
While economic policy formulation and implementation the world over generally answers to the ideological imperatives of the ruling elite at the time, successful economies have benefited from pragmatic policy making and implementation which also responds to local sociopolitical and economic milieu which obtains in different countries.
That is the reason why modern China, Zimbabwe’s all weather economic friend pursues more of state capitalism than the originally Marxist-Leninist brand of socialism.
In fact some scholars such as Li-Wen Lin, Curtis J Milhaupt and Peera Charoenvattananukul argue that over the past 30 or so years the Chinese developmental state has undergone a tremendous metamorphosis from the original so-called scientific socialist allocative mechanism to the current dispensation with all the key features and trimmings of a capitalist society.
This implies that with the passage of time, all Zimbabwe’s key resources will need to be sufficiently monetised and securitised to attract meaningful investment.
Ian Ndlovu is an economist based at the National University of Science and Technology skilled in data analysis using SPSS, Gretl, Stata, Eviews and Microsoft Excel software packages. His research interests cover business, development, economic and e-commerce issues. He writes in his personal capacity.
