History Monday: Zimbabwe Economy 2

1980 to 1990

THE BEGINNING

Soon after independence in 1980 the Government set up goals for the country’s economic development called The Growth with Equity document, which sought to achieve a sustained high rate of economic growth and speedy development in order to raise incomes and standards of living for all. To develop and restructure the economy in ways which promote rural development… In light of this document the intention of the government was very clear. The economic and social goals articulated in the government’s policy document were based on the belief that the economy would grow at a rate fast enough to generate sufficient revenue to fund the desired reforms. Such hopes were not unfounded at the beginning of the independence decade. In the immediate post-independence period rapid growth in Gross Domestic Product (GDP) was achieved, amounting to 11% in 1980 and 12% in 1981 in real terms. This was a Higher growth rate than any other sub Saharan African country, including South Africa. With this growth it would not be accurate to credit the government for the figures mentioned above because there hadn’t been much change from independence to the extent that credit could be really and truly given to the government because it can be argued that it was the same colonial economic structure, prior to independence that had followed through to independence that can be credited for this growth.

A fair assessment can be made after at least 5 years of majority rule and not a mere year or two. But what was reason for this growth? Mlambo argues that it was a combination of unique circumstances that converged at this particular point that could not be replicated later, the circumstances were that the end of the Zimbabwean war following the Lancaster House Conference not only provided a peaceful Climate for economic prosperity, which also allowed displaced peasants with government support through Agricultural extension services and supply of agricultural inputs became productive once more. Also the return to the land coincided with an excellent rainfall season in 1980 and 1981, resulting in a bumper harvest in Zimbabwe, producing ‘the highest marketed crop volumes on record’. Moreover the resolution of the Zimbabwean political crisis at 1980 brought an end to international economic sanctions which had retarded economic growth in the closing decades of colonial rule. It also opened up the country to foreign investment and aid, however these advantages were short lived and the real test of governments effectiveness in policy making was tested. In 1982 the economy nosedived and the economy was plunged into an economic crisis from which it never fully recovered, there was a severe drought of 1982/3 which affected agriculture and negatively affected the economy of the country for example it is estimated that by 1983, 120 000 people were facing death because of lack of drinking water, hunger malnutrition and disease. The government came up with a drought relief which estimates say was $209 million on food imports putting the total financial cost at $479 million. Such expenditure, coupled with loss of export earnings due to the drought, increased the country’s balance of payments deficit to over 30%. At the end of 1982 the severe drought reduced the agricultural production, making Zimbabwe an Importer of maize for the first time, and as a result the GDP fell by 4.4% in 1982 and saw a further contraction estimated at 4%.

There were a series of issues that the government had to deal with and in dealing with them a lot of money was spent, Money which could have been used for the development of the country. For instance, the Mozambican civil war between the ruling FRELIMO government and the RENAMO strained the Zimbabwean economy in several ways. First in solidarity with the FRELIMO government which had given invaluable help to ZANLA during the armed struggle against colonialism and also because of the need to protect Zimbabwe’s trade routes through Mozambique, Zimbabwe deployed over 15000 troops (which the Zimbabwean government had to pay) in Mozambique to fight on the Mozambican government’s side in the conflict. Zimbabwean soldiers remained in Mozambique throughout the decade at considerable cost to the Zimbabwean Exchequer. This was one among many costs that the nation incurred.

To further worsen Zimbabwe’s economic situation, the expansion of local demand which had fueled the economic boom of 1980-81 turned into a liability a few years later, as once the slacked capacity had been fully harnessed by industries, they could not continue to expand production to service the domestic economy due to most of them were using outmoded machines which had not been replaced during the period of economic isolation in the sanctions era (UDI). So the country had to import goods to meet local demand. This had a negative impact on the countries balance of payments, while exports rose by 7 per cent in 1981, imports rose by 28per cent. Consequently for the first time since the late 1960s the countries trade deficit amounted to $46 million, while the balance of payments deficit on current account rose from $157 million in 1980 to $424 million in 1981. According to a 1984 report of the National Westminster Bank of England, recent economic problems, particularly the drought and the resultant food import requirements worsened the country’s economic situation so that the current account deficit grew progressively from US$109 million in 1979 to US$709 million in 1982. Meanwhile, escalating local demand, together with growing government expenditure on education, health and defense fueled inflation which rose from 8.6% in 1980 to 17.9% in 1983.

This was just but the beginning of the economic downfall of Zimbabwe, because this gave the government its first among many challenges that tested its ability to come up with sound economic policy to deal with issues that affect the economy and  welfare of its people however it was still too early to conclude that the government was failing, there was still a lot to be done to bounce back since it had  only three years since independent to make its mark and make Zimbabwe an economic power in Africa. Unfortunately there were more challenges that were being faced by the government.

Bond and Manyaya argue that one strategy for increasing export revenue was periodic devaluation. The currency was allowed to fall in 1984-1985 by nearly 40% accompanied by budget cuts and the reduction of maize subsidies. The main beneficiaries were the agricultural and mineral exporters, but the devaluation simply cheapened goods temporarily, rather than structurally improving Zimbabwe’s export capacity. This would become evident as a result of debilitating changes to the Zimbabwean economy brought about during the structural adjustment era in the 1990s.

Other indicators of an economy in the doldrums were the rise in total debt from USD786 million to 2.3 billion in 1983. In addition the budget deficit had risen from 6.6 per cent in 1981-82 to 8.7 per cent in 1984-85. Defence commitments in Mozambique and expenditure on drought relief and social services ensured that the budget deficit would remain relatively high during the 1980s.

Employment creation was slow during the 1980s, and Unemployment grew substantially right from independence. Some critics have attributed the problems to the race between growth of the economy and population growth. From 1982 to 1990, GDP growth rates averaged 1.3 percent per annum while the population grew at an average of 3.3 percent. Only 10 000 new jobs were created in the first decade of independence, which did not keep pace with either the population increase or with the large numbers of school leavers (approximately 100,000 by the mid-1980s)[11].  These figures clearly show that job creation was an issue that needed to be dealt with by government before it went out of hand. At the same time, the gains of the first decade were unevenly distributed. Elite groups in both rural and urban societies, which included rich, peasants and farmers, business people and educated professionals benefited most from policies which opened up the state and capita accumulation to blacks. As a result, there were no significant narrowing of income and wealth differentials; it is estimated that three percent of the population, mainly white farmers and a small black bourgeoisie, continued to own bulk of resources and controlled two thirds of gross national income in the 1980s. As a result of this members of government or policy makers seemed to have got in a state of limbo and seemed to be comfortable with the idea of unequal distribution of wealth and this phenomenon continued and even got worse as time went on. This unequal distribution of wealth was soon to become an issue for the soon to be educated population of Zimbabwe and resistance would then begin.

Another challenge that was faced by the Zimbabwean government was the attempt of the South African government to destabilize the Zimbabwean economy from 1980 to 1989. This was done because Independent Zimbabwe was a threat to South Africa the reasons will soon be explained. Destabilize includes, cultural, political, economic and military measures taken by one or more governments individually or collectively in order to overthrow it or to force it to do their bidding. According to Dzimba the principle reason for the policy of destabilisation of Zimbabwe was that South Africa saw it as a threat to its own security and to its program for the regional economic community, CONSAS (Constellation of Southern African States). CONSAS was essentially a strategy by South Africa to use its economic power and wealth to manipulate its black member states, and to exert subtle pressure to ensure that they ‘behaved’ themselves as far as the white minority government was concerned[14]. In order to deal with the Zimbabwean threat the South African government decided to sabotage the Zimbabwean economy. Firstly The South African scare propaganda directed mostly at Zimbabwe’s white community had resulted in the departure of a sizeable proportion of white skilled manpower e.g. technicians, skilled artisans, who were readily absorbed into South African economy. The manpower drained was felt in industry in general, and most critical in railways. The shortage of skilled artisans resulted in the decline of maintenance and repair to the point that at the beginning of 1981 there were only 120 locomotives out of 220 needed to cope with traffic. At this precarious moment, South Africa delivered a crippling blow. Transport crisis affected the economy creating domestic shortages and blocking imports and exports. In particular, fuel procurement was hit hardest and the result was wide spread-spread shortage of diesel and petrol which by 1981 had adversely affected all sectors of the economy. Agriculture which was the backbone of the country’s economy, was particularly vulnerable because the need for diesel fuel at the beginning of the planting season. By December 1981, there were stockpiles of export between Z$4.5 million and Z$6 million per annum in lost export opportunities and this affected Zimbabwe’s foreign- exchange earning capacity. Zimbabwe could not procure new heavy freight vehicles because of shortage of Foreign exchange. Consequently the country had to rely on expensive foreign trailer-hire operators, costing Zimbabwe about $100 million a year in foreign currency between 1980 and 1988. By 1989, about 450 heavy truck units costing millions of dollars were needed to rectify the problem caused by many years of non-procurement. All this money that was lost by the Zimbabwean government could have been money that could have been used in other sectors of the economy such as infrastructural development which would have created jobs for the newly educated people, invest in modernizing industry so as to increase produce for export as well as consumption but the fact that millions were spent trying to counter South Africa’s attempt to destabilize the Zimbabwean economy was significant and left a dent of the income generated by the government as well as foreign exchange.

Generally it can be noted that during the first decade of Zimbabwe’s independence the country experienced mixed fortunes in the performance of its economy. The average annual growth rate was 4.1% between 1980 and 1985, and 4.6 between 1985 and 1990. In this period, the government realised tremendous achievements in the social development sector also grew significantly. In addition, there was phenomenal expansion in access to education at all levels, and the health service sector also grew significantly. In addition, there was considerable investment in the land resettlement program, road and dam construction.

By the late 80s it became evident that the economy was not performing well, and therefore it required some form of revamping. It was hoped that such revamping would boost the depressed investment, streamline labor regulations, create employment, and stimulate export growth, among other objectives. However in dealing with issues in relation to growth there was lack of clarity on industrial strategy and that was another weakness that was identified by some analysts.  For instance, it was observed that a clear industrialization strategy has not yet emerged in the 1980s. The coordinating capacity of the state still left much to be desired, especially in defining and disseminating an ideology of industrialising and industrial programs, and successfully implementing and coordinating them. Finally in the end of the 1980s, the ideology of socialism co-existed uneasily with capitalist reality. The former appeared more and more anachronistic in view of domestic developments of emerging embourgeoisement and corruption, and the collapse of the socialist model worldwide[19]. This argument was raised by David Coltard in the next chapter in his analysis of the Economic Structural Adjustment Program that the government introduced as a solution for development in the next decade.

Source:

  1. Vusani, M (2015) ‘ Economic downfall of Zimbabwe from 1980 to 2008’

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