THE POLITICAL ECONOMY OF ZIMBABWE 1996 – 2002 BY RAYMOND PARSONS
UNIVERSITY OF THE WITWATERSRAND SOUTH AFRICA
PRESENTED TO THE X111TH CONGRESS OF THE INTERNATIONAL ECONOMIC HISTORY ASSOCIATION
23 JULY 2002
THE POLITICAL ECONOMY OF ZIMBABWE 1996 -2002
ABSTRACT OF WORKING PAPER
Zimbabwe was once hailed as the most successful democracy in Africa, with a strong, if somewhat narrowly based, economy.
President Robert Mugabe, the
leader since independence in 1980, was praised by many as a man of vision who confronted historical imbalances with reconciliation for the sake of the country’s stability and prosperity.
Economic growth in Zimbabwe surpassed the average
global growth rate in the 1980s, expanding at much higher than the average growth of Sub-Saharan Africa. Today, Zimbabwe is a country beset with mismanagement, corruption and political violence.
The economy is in crisis, with economic
fundamentals deteriorating progressively. Property rights and the rule of law are no longer respected in the country. At a time when Africa is seeking to re-address both its economic and political challenges through “African Renaissance” and NEPAD programs in the 21 st century, what has happened in Zimbabwe should provide telling lessons for all engaged in such endeavours. This paper offers some insights into the political and economic development of post independent Zimbabwe that culminated in the current crisis. It also suggests some lessons for NEPAD and the AU.
ACRONYMS AND ABBREVIATIONS
Democratic Republic of Congo
Economic Structural Adjustment Programme
Foreign Direct Investment
Gross Domestic Product
International Monetary Fund
Movement for Democratic Change
New Economic Programme for Africa’s Development
South African Development Community
World Economic Forum
Zimbabwean Congress of Trade Unions
Zimbabwe Programme for Economic and Social Transformation
THE POLITICAL ECONOMY OF ZIMBABWE 1996 –2002 RAYMOND PARSONS1 23 JULY 2002 BUENOS AIRES
INTRODUCTION To address the issue of “The Political Economy of Zimbabwe 1996-2002” is a daunting task, because there is a serious danger of being completely overwhelmed by the mass of material available. It is also an exercise in contemporary economic and political history, with all the risks that such an analysis must carry. Yet the developments in Zimbabwe, even at this early stage, require some kind of academic perspective, incomplete and even polemical though it may be perceived to be. Broad brush strokes are inevitable. What has been happening – and is happening – in Zimbabwe has become of importance not only to the SADC region but also to many Western nations. 1. I am indebted for research assistance to Cyril May and Martin Kaggwa of the University of the Witwatersrand. My grateful thanks also go to Professor Tony Hawkins of the University of Zimbabwe, Dr Gavin Keeton of Anglo American Corporation, Mr Rudolf Gouws of Rand Merchant Bank and Peter Duminy for extensive comments on an earlier draft. The usual caveat applies.
This paper attempts to unravel some of the fundamental causes of the current crisis in Zimbabwe, looks at how the failure by President Mugabe to manage and delicately balance political and economic issues led to the present socio-political and economic instability in Zimbabwe. It provides some lessons from the Zimbabwe experience that could be useful to African countries in this ‘African Renaissance’ era. Why 1996-2002? As this paper hopes to show, something went seriously wrong in Zimbabwe in the mid-1990s, which seemed to put the country on an irresistible path of serious economic decline and conflict over the next several years. What I hope to illustrate are some of the factors that explain, or contributed to, this process and which have brought Zimbabwe to where it is now. To identify the pattern of events in Zimbabwe over the past few years does, however, require a longer historical perspective within which to assess these developments. At the same time, we should not be sidetracked from the main thrust of the period covered by this paper. An effort will be made to hold this balance. 2.
A BRIEF PRE-1996 HISTORICAL PERSPECTIVE Zimbabwe gained its independence in 1980 under President Robert Mugabe. Like many other developing countries in Africa it was since then buffeted by a number of economic and political factors, most of which were of its own making. It also had its own legacy of history and geography. Between 1980 and 2002 a popularly-elected government set itself a formidable agenda:5
• land reform • income and wealth redistribution • a socialist/Marxist transformation (1980 to 1990) and again (1998-2002) • structural reform (1991-1995) • attraction of FDI (1990-2002) • industrialisation • development of small business • an efficient public sector. In the event, over the years the ultimate outcomes were poor under most of these headings. During this period there were also internal political conflicts, such as the suppression of the Ndebele in Matabeleland in 1982. Although eventually a Unity Accord was negotiated in 1987, it is not without significance that in the 2000 Parliamentary elections all the predominantly Ndebele provinces in Matabeleland, except for one constituency, voted against the ruling Zanu-PF party. On the other hand, Robert Mugabe, although he often became angry with white farmers in the past, did remain committed to “reconciliation” for many years. In the 1985 elections, when it appeared that the white farmers were supporting the opposition party, he “punished” them by abolishing the seats in Parliament reserved for white members at independence. Even then, the Mugabe policy of “reconciliation” continued well into the 1990s and – at least in terms of surface impressions - was really only abandoned under intense pressure from the war veterans in 1997. After independence, and in subsequent years, the government extended its control over the Zimbabwean economy in various 6
ways. These included “backdoor nationalisation”, “crony” or “party” capitalism (takeover of companies by the ruling party), and the creation of new parastatals (mining, state trading, urban development, media etc). This was in line with the proclaimed collectivist approach. What about land ownership? Land ownership began to change in the early 1980s. The land resettlement target was 162,000 families by 1985. Although this target was missed by a wide margin, some progress was made. The programme shrank because donors withdrew support as a result of the growing perception of failure and widespread abuse, as purchased land was frequently transferred to party officials and cronies. In 1988 consultants wrote a report for the British government (which had committed at independence to fund the programme of land redistribution) that led to a termination of the disbursement of land resettlement assistance, partly because of perceptions of corruption. The Zimbabwean government then also lost interest in land reform after the initial enthusiasm of the early and mid1980s. Land reform virtually disappeared from the political agenda from 1983 to 1990. It began to enjoy a gradual revival from the 1990 elections onwards. The share of land owned by commercial farmers has fallen to 30% of the total from 39% at the time of independence. Despite the radical nature of some of the original policy goals, the Zimbabwean economy did quite well in the initial years after independence. There was also a more benign global economic climate in this period. Zimbabwe exhibited resilience in the face of setbacks, including drought, and was widely seen as the second strongest economy in Southern Africa. 7
Independent Zimbabwe inherited an economy with a diversified productive base that was more industrialised than most countries in Africa, a well-developed infrastructure, compelling tourist attractions and a relatively sophisticated financial sector. The average growth rate in the first decade after independence (1980-89) was 5%, up from 4% in the previous decade; the comparative growth rates for the global economy and Sub-Saharan Africa in the 1980s were 3,1% and 2,3% respectively.1
In terms of its economic structure, Zimbabwe was emerging as a unique developing country with a dual economy, in some ways similar to South Africa. On the one hand, it had built up a relatively sound infrastructure, in the real and financial sectors of the economy, compared to its other African counterparts. On the other hand, Zimbabwe was experiencing the usual disparities in income and wealth distribution, a labour force needing skills, and heightened shortages of basic needs ranging from land to housing to water and energy – by a large part of its population. In other words, it faced the customary developmental challenges in the African context. Yet Zimbabwe had a far stronger skills base amongst its major ethnic groups than, say, South Africa. This is because preindependence Zimbabwe never had apartheid education, and the post-independence government focused substantial resources on education. This explains why so many skilled 1. It could be argued that a net increase of only 1% in economic growth from 4% to 5% once sanctions were lifted against Zimbabwe - was very modest in the immediate postindependence period.
black Zimbabweans have taken up (and are taking up) executive position in SA business, in schools, hospitals and universities etc. There were many more qualified black CA’s and medics in Zimbabwe in 1980 than in South Africa in 1994, when South Africa’s democratic elections took place. All-in-all, the Zimbabwean economy had a great deal going for it in the first decade of independence. Foreign investors, bankers and aid agencies ignored the official Marxist-Leninist policies and were prepared to invest in, or lend to, Zimbabwe. Indeed, towards the end of that decade GDP (admittedly aided by recovery from drought) grew faster than at any time since the 1960s – 7,4% (1988), 5,4% (1989) and 6,4% (1990). The collapse of Communism and the end of the Cold War forced the Mugabe government into a policy u-turn in 1991. Because of escalating government spending and its impact on inflation the Zimbabwean government asked the World Bank to devise an ESAP. This initially held out the prospect of a restructured Zimbabwean economy being committed to more market-related policies. The decision to adopt the ESAP in 1990/91 was driven by a combination of donor pressure – the World Bank had virtually withdrawn from lending to Zimbabwe because of the economic stance in the late 1980s – and by local business pressure. There was a growing recognition that import substitution since the mid-1970s, with a brief respite in the early 1980s and then again in the late 1980s – was constraining growth. However, the ESAP went wrong for four main reasons:(a)
it was not implemented in full. very ambivalent about it
Mugabe himself was 9
it was blown off course by the 1992/93/95 droughts
it was defective to the extent that it left public sector adjustment (its original rationale) on the ‘back burner’, and this failure eventually undermined the programme
it was weakened by some donors, like the IMF and the World Bank, who claimed from time to time that the reforms were on track when, basically, they were not.
It would seem that the subterfuge was double-sided. The World Bank and IMF (and other donors) pretended that Zimbabwe was implementing the programme and maintained support (boosted by the need to provide food assistance during the drought crisis of 1992/94), while Zimbabwe for its part “pretended” to implement reforms. Whatever the precise allocation of blame, the ESAP was not implemented under the most favourable conditions for success. The ESAP formally expired in 1995 and was ostensibly replaced by ZIMPREST, which was never properly or seriously implemented. The result, paradoxically, has been that the Zimbabwean economy was seen to have done better in its “socialist” phase in the 1980s, than in the structural adjustment stage of the 1990s. It also has had the effect of convincing local ideologues that “open markets” did not work – leading to the more recent economic programme again extending direct controls over the economy. These are in direct contradiction to what may now be regarded as the conventional economic wisdoms for dealing with economic restructuring. For it may plausibly be argued 10
that even the partly implemented ESAP was abandoned just as some of its fruits were starting to be realised, that is, the “Jcurve effect”. GDP growth in 1996 was 7,6% (again post drought) and 4,3% in 1997. During the 1990s Zimbabwe renewed three IMF loans – one in 1991/92 and two in 1998/99. All three foundered because the loan conditions were not met. Public spending was not reduced, hence the collapse of the loans. Both government and parastatals acquired an unsustainable debt burden and Zimbabwe fell into a ‘debt trap’. “Annual Budgets”, says Professor Tony Hawkins of the University of Zimbabwe, “ have become statements of wishful thinking”.1 This did not mean that Zimbabwe did not experience some economic gains during this period. After the setback of the 1992-95 droughts per capita income rose 7,6% between 1995 and 1997. GDP growth averaged 4,5% annually between 1994 and 1998. FDI inflows increased substantially. The tourism industry expanded, employment accelerated and investment ratios recovered. Zimbabwe’s terms of trade actually improved during this time due to weak oil prices (until 1999) and the recovery in some commodity prices, notably tobacco. But these positive outcomes could not prevent the increased vulnerability that the Zimbabwean economy was experiencing – partly as a result of the premature abandonment of the ESAP - and which led up to the events of 1997. So what ultimately tipped the balance into irretrievable disaster? Where did the decision-making go awry? 1. Business Day, 18 April 2000, p.5.
WHAT WENT WRONG IN 1997? Most analysts agree that 1997 was the watershed year. Four “shocks” in 1997/98 marked the watershed:• the war veterans payout in August 1997 • the announcement of the accelerated land takeover proramme • entry into the DRC war in mid-1998 • the impact of the Asian financial crisis in 1998. In August 1997 Mugabe bought off a challenge to his legitimacy from more than 50,000 war veterans because their demonstrations in Harare, and their intense harassment of Mugabe’s party (Zanu), caused him acute embarrassment. This decision had serious fiscal consequences and sowed the seeds of future trouble. Mugabe also responded by announcing that, at long last, the government would begin implementing the Land Designation Act, and 1500 mainly white owned farms were identified for redistribution. Compensation was not guaranteed. This threw the agricultural sector into turmoil. White farmers were no longer sure of whether to invest more funds in their farms, with the government persistently moving away from respecting property rights. Zimbabwe’s spending on the DRC war also contributed to the IMF’s decision to halt financial assistance to the country; Mugabe decided in August 1998 to send troops to the Congo to prop up the tottering regime of Laurent Kabila, which was under attack by rebel forces advancing from the eastern Congo. This was a clear signal that the Mugabe of the first 12
decade of independence had a new agenda. It was only in 1999 that the IMF was compelled to break with Zimbabwe over the DRC adventure. It was soon to be acknowledged in June 2001 during the WEF in Durban-South Africa by Finance Minister Makoni that Zimbabwe’s external debt was now too large for it to service. A series of adverse socio-political and economic events therefore precipitated a financial crisis and a currency plunge. An attempt to deflect criticism of the “looting” of a war veterans’ fund by politicians and top officials by announcing generous and unaffordable grants to this group backfired: the ordinary populace was unhappy about paying higher prices in the wake of tax increases announced to finance the funding. Confidence suffered in mid-December 1997, when riots occurred in central Harare during protests at the government’s tax increases to fund the veterans’ payout. The national strike had been organised by the ZCTU. Government response was harsh. The demonstrators were baton charged by police, and party thugs beat up the ZCTU general secretary in his office. In mid-January 1998, an apparent spontaneous demonstration against a 21% increase in maize meal (which, combined with earlier rises, meant an effective doubling in price since October) also turned into a riot and looting of shops. Industry Minister Nathan Shamuyarira rescinded the price increase, calling it “unjustified”. With confidence in public administration falling, the Zimdollar came under further pressure. Higher lending rates, in the region of 40% in 1998, in an attempt to restrain acceleration in price increases, harmed economic activity. Inflationary 13
pressures were already mounting as a result of the previous declines in the exchange rate, as well as the spending splurge caused by the payout to veterans. International funders, the IMF and the World Bank, suspended finance talks with Harare in 1999 (the second tranche of the standby-facility was not released). The 1999 tobacco season was dismal, being far less than 1998 revenue. Holland and Italy suspended their annual aid packages due to lack of transparency, accountability and a poor human rights record. Export credit lines to Zimbabwe were reduced or suspended by South Africa and the UK, its most important trading partners. In summary, most economic and social indicators in Zimbabwe showed a cumulatively worsening trend from 1999 onwards:• economy was sliding into a deepening recession (-8% GDP growth in 2001 and probably –5% in 2002) • soaring inflation (116,7% in early 2002) • excessive government spending, especially on nonessential items like the DRC war • deterioration in investor confidence (the country attracted $5,4m in FDI from outside sources in 2001, down from a 1998 peak of $436m) • total debt escalated to extremely high levels (debt/GDP ratio reached about 180%) • external debt repayment arrears emerged in 2000 because of a shortage of foreign exchange • unemployment was rising and is now estimated at 60% • an estimated 75% of the population are now living below the poverty line • Zimbabwe had the second highest rate of adult HIV-Aids infections in the world 14
• overall the Human Development Index was now lower than it had been at independence in 1980. It was clear that political consequences would follow in the shape of a loss of political support for the Mugabe government. The progressive deterioration in social indicators from the early 1990s (if not before) had been gradually working its way through to political opinion. This coincided with the rise of the urban opposition – first as the ZCTU, and then in the form of the MDC. The rejection by popular vote of the proposed constitutional amendments in February 2000 brought home to Mugabe that he could lose “free and fair” elections in 2000 (Parliamentary) and in 2002 (Presidential) and thus pushed him along the road he then followed. It acted as an early warning signal of growing political dissatisfaction with his Government. His response was therefore to focus on winning the rural vote, using the weapons of land, food and fertilizer handouts, intimidation and violence, and the erosion of civil liberties. To win the 2000 and 2002 Parliamentary and Presidential elections respectively it became necessary for Mugabe to play the land and race cards simultaneously. They were – and remain – his only cards. These strategies were his response to economic setbacks that were threatening his political power base. Mugabe was initially also quite happy to participate in “social dialogue” with business and labour until it became abundantly clear to him that his only chance of retaining his grip on power was by elevating the “land issue” into the sole plank of his 2000 and 2002 election campaigns. The 1998 donor agreement failed, not because Mugabe did not recognise its importance, 15
but because it precluded him from using land to “win” the elections in 2000 and 2002. Social dialogue deteriorated in Zimbabwe and the government under Mugabe now barely tolerates any opposition to its absolute power. In this process it was inevitable that winning elections meant abandoning the rule of law and ignoring property rights. From this perspective it could be said that the Zimbabwe crisis, which is political, social and economic, is the consequence of a failure of good governance at several levels. It also inevitably raises questions about the quality of policy advice, the capacity-building and judgement calls that are necessary to help structural adjustment programmes succeed in countries like Zimbabwe. This is a large subject deserving of special attention, especially as the African continent embarks on new structures and processes for its economic upliftment. Of course, the radicalisation of land reform has aggravated the situation in Zimbabwe, even though orderly land reform has been accepted by everyone as necessary. The historical imbalance in land distribution needed to be rectified and much more should have been done sooner. What we must not for one moment imagine, however, is that once the land issue - as that is currently presented to, and understood by, the Zimbabwean electorate - is out of the way, the problem will be solved. It has now become far more complicated involving a wide range of other concerns. Over the longer run land will support fewer people as urbanisation intensifies. Land use has to be made more, not less, efficient. Whoever governs Zimbabwe over the next few years will have nonetheless to address the land question, if 16
only to buy time to put other things right. Land is an emotive issue. Yet there is evidence that land redistribution could have been achieved on a willing-buyer willing-seller basis. Foreign donors agreed to fund a properly constituted programme and significant amounts of previously purchased land are lying unused. But such a programme did not meet Mugabe’s immediate political purposes. What about reaction from outside Zimbabwe? The deteriorating economic situation, the violation of civil liberties - and ultimately the ‘rigged’ Presidential election of March 2002 in Zimbabwe - triggered off a cumulative set of responses from neighbouring countries and elsewhere. These ranged from the mild (eg. South Africa and SADC) to suspension from the Commonwealth earlier this year. The US and EU are among the countries which have applied ‘smart sanctions’ to the Mugabe government itself. These do not seem to have as yet discouraged President Mugabe from continuing on his self-destructive path. What other options may exist to deal with Zimbabwe must remain the subject of further study. In the meantime the latest report of the UN Economic Commission for Africa – in an overview of the economic health of states on the continent – says the outlook for Zimbabwe in 2002 “shows an increasing incidence of food insecurity, poverty, inflation and worsening balance of payments”. Patrick Esea, director of the Commission’s economic, social and
political division, adds that Zimbabwe “is facing the worst crisis in its history”.1 4.
CONCLUDING THOUGHTS The fate of Zimbabwe cannot be seen in isolation. Not only are there broad lessons to be drawn from developments in that country but also in the context of the recent formation of NEPAD and the AU. The economic interdependence of SADC is also at stake, especially for South Africa. Whether the developed world is prepared to offer a better ‘deal’ to Africa via NEPAD hinges on NEPAD’s commitment to good governance achieved through a system of “peer review”. Such a commitment, however, depends upon the AU and NEPAD’s leaders providing proof of their intent to crack down on deviant states, such as Zimbabwe. To that extent Zimbabwe is an important test case for the AU and NEPAD. The issue that some analysts see as an immediate and serious obstacle to the AU taking off and gaining credence is Zimbabwe. What will the AU do about Zimbabwe? South Africa has all along claimed that nothing it has done in private and in public – the latter hardly critical – has deflected Mugabe from the ruinous path he has chosen for his county. Nor, for that matter, has anything done by Britain and other Western countries. But now South Africa and NEPAD have the power to exclude Mugabe from the AU. That would be a judgement by Mugabe’s peers, a sanction that the SADC and others on the African continent have so far studiously avoided. The new African 1.
All quoted in Business Day, 16 July 2002, p.4
structures still face a serious credibility test here. Who will bell the cat? But are there broader conclusions to be drawn about the nature of democracy and economic performance? Too many analysts of President Mugabe have proffered advice as if they are talking to a despot, yes, but one who will ultimately listen to reason. Why is Mugabe still implementing policies that he knows cannot – will not – work? It is the desperation and survival politics of an autocrat. There is also a salutary lesson from Zimbabwe, and indeed from elsewhere, that faith in the rule of law and related institutions is an inadequate safeguard for democracy. The reality that emerges from the Zimbabwean experience once again demonstrates - certainly when national economies are disintegrating - control of police, military and propaganda power is often what decides the fate of democracies. Here the government uses military force, economic controls and social inequalities to defend autocratic rule and marginalize or suppress opposition. For some time the judiciary stood – often very courageously – as a bulwark against such autocracy. But in recent times even this bastion has been increasingly eroded through the replacement of senior judges with party “yes-men”. To examine why, in this instance, the Zimbabwean constitution failed to protect its citizens is something that also needs further serious study. It also needs the rediscovery and elaboration of the conventional wisdoms that informed classical political economy – adapted to the challenges we now face. Adam Smith, David Hume and others had an in-built scepticism about the extent to which governments could be trusted, along with the implied 19
necessity to impose severe constraints on the exercise of governmental authority. Hence the need for effective checks and balances. Let me quote from JS Mill:“The very principle of constitutional government requires it to be assumed that political power will be abused to promote the particular purposes of the leader; not because it is always so, but because such is the natural tendency of things, to guard against which is the especial use of free institutions.”1 Today we need not so much to ask what light politics and history in Zimbabwe throw on economics but rather the reverse question: in what sense does economic analysis throw light on the problem we have to examine in the political sphere in Zimbabwe? This may provide new insights into the relationship between democracy and economic growth in the African context and to what extent a particular kind of political system helps or hinders economic performance. This also requires a serious look at the legacies of the failures of post-colonial development – the existence of authoritarian and predatory rule, failed bureaucracies, corruption, irrational aid programmes, poor global institutional advice, and stalled capitalist development. Hence also the emergence of NEPAD and the AU. Africa is not famed for the strength of its democracy. But in many African countries the voters now have a bigger say in choosing their governments than they had a decade ago. 1. JS Mill, Considerations on Representative Government (1861) in JS Mill, Essays on Politics and Society, Vol 11, University of Toronto Press, Toronto, 1997, p.505.
Almost every Sub-Saharan country has had elections of one kind or other in the past ten years. Of course, democracy requires more than mere ballots. Few African elections are wholly “free and fair”. Incumbent political parties and presidents are rarely rejected at the polls. While there is no “one-size-fits-all” democratic system, it must be possible to vote an unpopular government out of office. Democracy cannot be said to be truly consolidated until there has been at least one change of government. In the meantime, the overall trend in Africa is for authoritarian regimes to be gradually replaced by messy, flawed democracies. But what is immediately striking about the Zimbabwean experience is the crucial importance of good governance and the key institutions required to underpin it. A crisis situation unfolds in a developing country like Zimbabwe when the rules, incentives and sanctions that govern existing institutions cannot reconcile the escalating and crippling demands being made on them. This intensifies social and economic dislocation, and undermines the ability to manage conflict and produce viable solutions. Regressive change in Zimbabwe will continue for as long as its primary impact is a cumulative deterioration in the existing stock of social, economic and political capital. However, the possibility it creates is that many groups suffering from its adverse effects are likely to be mobilised against existing arrangements - once the costs of enduring them seem to exceed the risks of resistance.1 1. “It is difficult to see how Zimbabweans can take this for much longer. There is so much palpable human misery that no matter what the government does, something has simply to give in soon” - leader in Business Day, 15 July 2002, “Is the end nigh for Bob?”.
What we must hope is that a situation of crisis and breakdown will in itself indeed eventually stimulate action. This can, in favourable conditions – such as those leading up to the fall of the Berlin Wall - generate the political energy needed to organise conscious attempts at resistance and structural reform. These may or may not succeed, but their potential should not be underestimated, even in the Zimbabwean situation. --- oOo ---
Zimbabwe - Selected Economic Statistics*
Real GDP growth (%pa)
Consumer inflation (%)
Prime lending rate
Budget deficit (% of GDP) External debt (%of GDP)
*Source: Standard Bank Economics Division, World Bank & IMF
Zimbabwe Food Production In Thousands of tons
Years 1994 1995 1996 1997 1998 1999 2000 2001 2002f
Maize 1 750 900 2 065 1 553 1 200 1 806 1 614 1 476 510
Wheat 240 120 223 252 242 287 250 270 150
Sugar 523 513 338 568 570 570 538 515 555
Soyas 109 77 97 100 116 118 135 176 65
Other* 273 133 256 251 120 192 208 308 130
Source CSO, Harare and Commercial Farmers Union (for 2002) Other = Sorghum, Mhunga, Rapoko, Groundnuts and Sunflower seeds