Zimbabwe’s quest for an upper middle-income status by 2030 can be blurred by the persistent challenge of economic growth that has evaded the country for decades.
At the turn of independence, Zimbabwe was once regarded as one of the most prosperous countries in Africa, but its economy has been in a continuous state of decline.
Since the turn of the millennium, the country has been facing various economic challenges that have hindered its growth, including political instability, lack of infrastructure development, high inflation, currency devaluation, and a foreign exchange shortage.
The root cause of the economic crisis in Zimbabwe at the turn of the millennium, is the collapse of the agriculture-based economy, which was once the backbone of the country.
This collapse was brought about by a combination of factors including poor governance, corruption and the fast-track land reform programme.
The fast-track land reform programme which aimed to redistribute land from white commercial farmers to black Zimbabweans, resulted in a decline in agricultural production, which in turn affected food supply and agricultural exports, thus fuelling the economic crisis.
Another challenge that has hindered the development of Zimbabwe is the lack of political stability.
The country has been characterised by political instability, which has been a major impediment to economic growth.
This instability has been characterised by political violence, disputes between political parties, and lack of consensus on key policy issues.
This has resulted in the lack of investor confidence, which has made it difficult for the country to attract foreign investment.
Lack of infrastructure is another factor which contributed to Zimbabwe's economic decline.
The country has not invested enough in its infrastructure, which has made it difficult for businesses to operate efficiently.
The lack of modern transportation systems and reliable power supplies has hindered the growth of the manufacturing sector, which is critical for economic growth.
The country's infrastructure has been in a state of disrepair with lack of investment in roads, bridges, water systems, and other critical infrastructure.
This has made it difficult for businesses to operate, which in turn has led to a decline in economic activity.
The shortage of foreign exchange is another challenge that has hindered the economic growth of Zimbabwe.
This has made it difficult for the country to import essential goods and raw materials, which has had a negative impact on the economy.
In addition, the devaluation of the currency has made it more expensive for the country to import goods, further exacerbating the problem.
The past decades have also witnessed the unfettered growth of another challenge; power shortages. Zimbabwe has been rocked by inadequate and inconsistent power supply.
This has significantly impacted the economy as businesses have not been spared by this menace.
Effects of power shortages
Power shortages have a significant impact on the growth of an economy.
Inadequate electricity supply incapacitates industries and businesses, which leads to decreased productivity and profitability.
This reduction in output can lead to job losses, lower wages, and reduced investment, all of which can contribute to a decline in the overall economic growth of a country.
One of the primary ways in which power shortages impact the economy is by increasing production costs.
When businesses are unable to access a reliable and consistent supply of electricity, they may have to resort to alternative sources of energy such as diesel generators.
These alternative sources are often more expensive and less efficient, which raises the cost of production and decreases competitiveness in the global market.
Another way in which power shortages affect the economy is by disrupting supply chains.
For example, if a manufacturer is unable to access electricity, they may not be able to produce goods at the required rate, leading to shortages in the market and increased prices.
This can also result in delays in the delivery of goods, which can lead to decreased consumer confidence and reduced demand.
Moreover, power shortages lead to a decrease in investment in the economy.
Investors hesitate to invest in a country that is unable to provide a stable and consistent supply of electricity.
This limits the flow of capital into the economy and reduces the availability of funds for infrastructure development and job creation.
The intense impact of power shortages on the growth of an economy cannot be overemphasised.
By increasing production costs, disrupting supply chains, and reducing investment, power shortages will negate our efforts to grow the economy to an upper middle-income status and will in turn harm the well-being of citizens.
Government and businesses must work together to address this issue and ensure that a reliable and sustainable supply of electricity is available to support economic growth.
However, for businesses to contribute willingly, to addressing the challenge there is a need for political will to engage and develop a friendly economic environment that accommodates all players and accords everyone a chance on merit without ‘greasing’ the hands of the authorities.
Such an economic environment can be achieved by considering and implementing the high-level recommendations below.
High-level recommendations
The government should consider implementing the following measures:
Stabilising the currency: Authorities could adopt a more stable currency, or adopt the US dollar as the official currency, to curb inflation and boost confidence in the economy.
Encouraging foreign investment: Authorities could implement policies that attract foreign investment, such as tax incentives, reducing the cost and enhancing the ease of doing business, to bring in the much-needed capital and expertise.
Improving governance and reducing corruption: Improved governance and reduced corruption will help to build confidence in the economy, increase transparency, and attract investment.
Boosting productivity: Authorities could implement policies that encourage investment in key sectors such as agriculture, mining, and manufacturing, to increase productivity and create jobs.
Reducing government spending: Authorities could reduce government spending and curb the budget deficit to regain investor confidence and stabilise the economy.
The fiscal authorities must focus on containing money supply growth, the convergence of the existing informal and formal exchange rates, curbing arbitrage opportunities as well as improving the stability of the local currency to encourage its use, otherwise, a more stable currency can be adopted.
The monetary authorities, on the other hand, should put their focus on balancing the twin, but sometimes conflicting objectives of managing inflation and exchange rate volatility while encouraging economic growth with a focus on ensuring exchange rate and price stability, reducing inflation, boosting foreign reserves and promoting a sound financial system.
These are just some of the measures that the authorities could consider to resolve the economic challenges.
However, implementing these measures would require strong political will, sustained efforts, and close coordination between the government, the private sector, and international partners.
In conclusion, Zimbabwe is a country with great potential, but its development has been hindered by a number of challenges.
The main challenge is the economic crisis, which is characterized by high levels of inflation, unemployment, and poverty.
If authorities fail to take deliberate policy steps to address these challenges, then vision 2030 may remain an elusive goal.
- *Paison Tazvivinga is a development economist
- *These weekly articles are coordinated by Lovemore Kadenge, an independent consultant, managing consultant of Zawale Consultants (Private) Limited, past president of the Zimbabwe Economics Society and past president of the Chartered Governance & Accountancy Institute in Zimbabwe.
- Email - kadenge.zes@gmail.com and mobile +263 772 382 852.