We all know Zimbabwe in the world map for certain reasons, their swashbuckling cricketers who play their heart out to upset big teams and The Victoria Falls that always amuses its spectators with its gigantic and fresh gush of water, yet unlike its beautiful Victoria Falls, Zimbabwe faces something horrid, the tormenting hyperinflation.

Well to all our friends who haven’t taken time to brush up their secondary school economics, hyperinflation is a condition where there is a rapid increase in prices of products i.e. both goods and services, which can mainly be attributed to unmonitored printing of currency.

When I first saw the 1000 rs note in my life, I was pretty much amused, then I imagined what would have been if I was a Zimbabwean, being accustomed to see 10 million and 10 thousand Zimbabwean dollar(ZW$) notes.

The year 2008 was the worst year in Zimbabwe; an egg cost at 50 billion Zimbabwean dollars, a loaf of bread then cost as much as 12 new cars could have cost 10 years before as prices doubled every 25 hours. [1]

The same year, Zimbabwe created 100 trillion dollars, the highest denomination which was ironically sufficient only enough to buy a weekly bus ticket.

Funny that you were needed to be a millionaire to buy basic necessities such as food and a weightlifter to carry cash notes to buy items at shops as 100$ equivalent of ZW$ required 20 kg of cash notes. [2]

Zimbabwe is a young country, just like many other African Countries. It was created in 1980 replacing Rhodesia after the Lancaster House Agreement (1979) which brought recognized independence and de jure sovereignty.  Zimbabwe was a robust, young and excited lad who while climbing the ladder of development, stepped onto a false step and fell to a fracture of debts and hyperinflation.

Robert Mugabe, its longest serving president since 1987 is leading an era marked by vote-rigging, mass emigration, accusations of human rights abuses and economic decline.

The ignorance of the government can be evidently seen, when Mugabe who turned 92 last Sunday (21st February 2016) is set to host a lavish birthday party at the time of extreme poverty and hyperinflation faced by his country.

Takavafira Zhou, a political analyst at Masvingo State University stated “”There is very little to celebrate for a 92-year-old who has presided over the collapse of the economy, reducing the country to a nation of vendors and beggars,” “There will be wining and dining at the venue while all around people are starving.” [3]

26 years ago the country was hailed as one of the food baskets of southern Africa with thriving agriculture and Mugabe emphasized on developing access to rural education and health as well as providing agricultural aid for small-scale farmers such as fertilizers and machineries.

But the Zimbabwean success story ended like a tragic short film.

Just like the rule of Robert Mugabe, the causes of the Zimbabwean Hyperinflation are quite long.

  • The Land Reform Program.

Zimbabwe’s transformation from a breadbasket to a dustbowl can be seen through the land reform program initiated by Mugabe’s Zanu-PF party. The Country was only behind South Africa in leading the agricultural export in the 1980’s and 1990’s, yet presently the country is unable to even feed its own population.

The land reform program shifted the ownership of the productive agricultural land from the experienced white farmers to local people, Mugabe’s Political allies, Beneficiaries and other government officials.

The new owners lacked agricultural experience, knowledge and skills as the production of crops took a heavy hit.

The annual wheat production which once stood at 300,000 tons in 1990 plummeted to 50,000 in 2007. [4]

The Tobacco Industry which was the largest foreign exchange revenue for Zimbabwe was also affected because of the land reforms. Hence Zimbabwe became an importer of food grains from an exporter and the banking sector also collapsed thus unable to provide loans/capitals to farmers for rehabilitation. The country resorted to external borrowing and aid and fell into a big debt trap.

The Zimbabwean Dollar depreciated due to increase in imports and the debt trap encouraged the government to print currencies in order to redeem the debts, thus excessive money supply coupled with the depreciation of ZW$ led to the current state of hyperinflation.

  • The Costly Congo Venture.

Zimbabwe’s involvement in The Second Congo War was a major reason for the economic crisis.

The military support of 11,000 soldiers was given to fight for Democratic Republic of Congo in its war against rebels supported by Rwanda and Uganda.

Zimbabwe reportedly spent $260 million in fighting the war amidst internal economic crisis. [5] It was like rubbing salt to the wounds.

Zimbabwe’s support to the Congo war was deemed illogical in many ways as neither Zimbabwe shared boundaries with The Democratic Republic of Congo nor was in a condition of providing external support nor was facing any strategic threat from the Rebels.

In fact the Mugabe government was printing more money to help financing the war such as paying salaries to soldiers, application of weapons etc. Zimbabwe was under-reporting its war spending to the International Monetary Fund by perhaps $22 million a month. [6]

There were claims that the main beneficiaries behind this support strategy were group of people associated with the army and the government rather than the national economy.

  • Migration of people.

The story of Tawindo Marimo, briefly explains the case of migration of people, Tawanda Marimo was a 24-year-old college student who now resides in South Africa, she was compelled to quit her schooling at home because of the absence and strike conducted by teachers over non- payment of salaries due to inflation. Despite the fact of her father being the village head, her family suffered and she decided to leave her motherland. Being a paperless traveller was difficult as she resorted to paying the border guards to allow her cross the Beitbridge border post. Once she applied for asylum permit, she travelled to Johannesburg.

Like Tawindo there are many other Zimbabweans who have dispersed all across the continent, with a concentration residing in South Africa. Estimates of the number of Zimbabweans here range between 1.5 million and 3 million, but a large number are undocumented migrants who left in search of employment and a better standard of living. [7]

Many White farmers who were displaced of their land because of the Land Reform Program migrated vowing to not return back.

So Zimbabwe lost its active working population to migrants who left in search of better job opportunities and quality of life. The loss of workforce deeply impacted the Zimbabwean economy

  • The decline of Local Market and tourism:-

Zimbabwe is one the many natural wonders of Africa, boasting of The Victoria Falls , Hwange National Park, Mountain Nyangani and The Zimbabwe Ruins which is an UNESCO heritage site.

Nobody wants to visit a politically and economically affected country. Since the Land Reform program in 2000, the tourism has sharply declined. Less than 20% of Hotel rooms are being occupied and many jobs have been destroyed because of the declining tourism industry.

Many white farmers were murdered between 2000 and 2001 due to the land reform policy and these murders portrayed by the media caused a negative impact upon the tourists, thus resulting in the loss of tourism.

The seizures of the white-owned farms also contributed to the destruction of 83% of wildlife conservatories on these farms, which used to be privately owned. [8] Hence the tourists were deprived the opportunities of witnessing the sub Saharan wildlife.

The loss of tourism also affected the local handcrafts market, Zenzo Bhebhe is a 63-year-old sculptor from Bulawayo who is sculpting since 1980’s.

The tourists preferred Zimbabwe over South Africa as the latter was suffering Apartheid and the former was young and newly independent.

But with the tourists declining, the business of local handicrafts sellers like Zenzo Bhebhe has downtrodden, with the local population not interested in buying the handicrafts and sculptures.

Moreover several Airlines withdrew their services to Zimbabwe due to the economic feasibility and human rights abuses caused by the government. In 2012, the country’s flagship Airline the Air Zimbabwe stopped its services. This was a big blow to the tourism industry.

  • Black Market

The scarcity of goods in the market, the constant fluctuation in the prices of goods and the continuous devaluation of ZW$ encouraged the creation of black market/illegal underground markets.  Before 2009, Zimbabwe was not offering the flexibility of using foreign currencies in place of the hyper inflated Zimbabwean dollar; at the same time the Black Markets were accepting foreign currencies such as US dollars, which eased the transaction for the consumers.

The black market served the demand for daily goods such as soap and bread, as grocery stores operating within the law no longer sold items whose prices were strictly controlled or charged customers more if they were paying in Zimbabwean dollars. [9]

At one point, a loaf of bread was Z$550 million in the regular market, when bread was even available; apart from a trip to another country, the black market was the only option for almost all goods, and bread might cost Z$10 billion. [10]

  • The Aftermath

The situation worsened with severe unemployment, the HIV epidemic and the severe draught that hit the farmlands, completely depleting the country of agricultural produce. Over 80% of the population was unemployed and the life expectancy dropped from 59.13 years in 1990 to 43.92 years in 2000. With a view of providing cushion the government on April 12th 2009 abandoned the official use of Zimbabwean Dollar and replaced it with a multi- currency system of US dollars, South African Rand and British Pound. [11]

Further currencies such as Indian Rupees, Australian Dollars, Japanese Yen, and Euro were also added.

In 2015 the government decided to flush out the worthless local currency and exchange them for dollars. The exchange rate was devastating as 35 quadrillion Zimbabwe dollars were now a mere 1 US dollar. People having 175 quadrillion Zimbabwe dollars will just be paid a 5$ bill. The use of multi-currency system reduced the inflation rate to a sustainable level but the economic sovereignty of Zimbabwe was in question. The use of currencies of other countries forcibly makes Zimbabwe externally dependent.

 

The use of Multi-currency system made Zimbabwe the 7th lowest in inflation rate [12], yet there are other issues such as unemployment, food crisis and poverty which are rampant in the country.

In December 2015, Zimbabwe added the Chinese Yuan as an official currency. [13]

Hence with a 92 year old leader celebrating a lavish party amidst the draught and poverty, the story of Zimbabwe portrays a future challenge of economic growth, food security and employment.

Endnotes:-

1) Zimbabwe phases out local currency at 35 quadrillion to US$1, available at:https://www.rt.com/business/267244-zimbabwe-currency-compensation-hyperinflation/.

2) 1 BLN dollars sometimes not enough to buy a scone, available at:http://on.rt.com/908.

3) Lavish parties planned as Zimbabwe’s Mugabe turns 92, Al Jazeera, available at: http://www.aljazeera.com/news/2016/02/lavish-parties-planned-zimbabwe-mugabe-

 

turns-92-160227061241492.html.

4) What factors contributed to the hyperinflation of the Zimbabwean Dollar? – Mithun Mohan, available at: https://www.quora.com/What-factors-contributed-to-the-hyperinflation-of-the-Zimbabwean-Dollar.

5) Zimbabwe spent $260 M on Congo war, available at:www.wral.com/news/local/story/152145/.

6) Mugabe’s costly Congo venture, Justin Pearce BBC, available at: http://news.bbc.co.uk/2/hi/africa/611898.stm.

7) Zimbabwe turns 34, but struggles economically, Tendai Marima Al Jazeera,available at: http://www.aljazeera.com/indepth/features/2014/04/zimbabwe-turns-34-but-struggles-economically-2014418133328970593.html

 

8) Causes of Decline, Zim Tourism, available at:https://www.mtholyoke.edu/~kniaz20a/classweb/ninth.html.

9) “Zimbabwe; A worthless currency”. The Economist, available at:http://www.economist.com/node/11751346?story_id=E1_TTSVTPQG.

10) “Harare Woman; If you talk to much… they hunt you down.”. McLaughlin, Elliot CNN Online, available at:http://edition.cnn.com/2008/WORLD/africa/06/25/zimbabwe.voices/index.html?iref=allsearch.

11) THIS DAY IN HISTORY: 12th April 2009, Fosuah, Amma, available at:https://www.modernghana.com/news/388714/this-day-in-history-12th-april-2009.html.

12) Inflation rate in Zimbabwe, available at: http://ieconomics.com/lowest-100-inflation-rate

13) “Zimbabwe to make Chinese yuan legal currency after Beijing cancels debts”. France-Presse, Agence, The Guardian available at:http://www.theguardian.com/world/2015/dec/22/zimbabwe-to-make-chinese-yuan-legal-currency-after-beijing-cancels-debts.

Author: Tejas Bharadwaj (He is pursuing his law degree from University of Petroleum and Energy Studies, Dehradun and currently in second year) 

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