Unemployment is at a staggering 90 per cent, the currency – or lack thereof – is a global laughing stock and any money that could be raised through tourism isn’t coming though.
Welcome to Zimbabwe: the country that’s about to collapse.
Zimbabwe’s financial ruin is a foregone conclusion for many of the world’s economists, reports news.com.au.
A new currency experiment by the government, spearheaded by president Robert Mugabe, 93, is backfiring.
The country can’t pay for its borrowed electricity, a cash shortage has forced people to barter to survive, and it’s managed to drive away any foreign tourists otherwise willing to spend their money there.
And while a general election will be held next year, there seems little sign of change: Mugabe’s wife Grace, 52, revealed on the weekend her plan to succeed her ageing husband as the country’s first woman president.
But as Mugabe focuses on his party’s election victory, a cash shortage has sparked panic-buying as people struggle to find patrol and basic needs, and it echoes the economic crisis of 2009 that’s still a fresh nightmare to millions of people in the debt-ridden nation.
IT’S GOING TO GET WORSE
Zimbabwe’s currency dysfunction has long been the stuff of infamy.
The government scrapped the Zimbabwe dollar in 2009, after hyperinflation peaked at an eye-watering 500,000,000,000 per cent – wiping out people’s savings and destroying businesses. At that time, a loaf of bread was more than 100 trillion Zimbabwe dollars, or 40 US cents.
Zimbabwe then switched to a whole host of foreign currencies and largely settled on the US dollar. But amid a shortage of the greenback, the Mugabe government came up with a new plan – “bond notes”, equivalent to US dollars, which it introduced a year ago to boost economic growth.
In the past few weeks, a lack of confidence in the bond notes has set further in and stockpiling and panic-buying have seen prices rocket. The fear is things are returning to how they were in 2008, at the height of hyperinflation.
“We are already witnessing shortages of basic commodities,” Peter Mutasa, president of the Zimbabwe Congress of Trade Unions, told AFP.
“The situation has been triggered by lack of confidence in the bond notes. We are being driven to barter for goods as there is no hard currency in the banks.”
Meanwhile, the government is back to its notorious habit of printing more money to cover its rising costs and hyperinflation is creeping back. This year, it’s at 348 per cent, according to Forbes.
Zimbabwe’s export opportunities are limited – especially in the agriculture sector, in light of farm raids. Fuel shortages have struck the capital Harare.
The country is powered by electricity from South Africa’s state-run power company Eskom but doesn’t pay for it: Eskom threatened to cut power to Zimbabwe earlier this year.
Whether the cash-strapped government finally pays its electricity bill, or it doesn’t, there’s bound to be trouble.
Meanwhile protests held in the capital Harare to oppose Mugabe and his economic policies turned to violence last month, with police using teargas on protesters.
Zimbabwe economist Prosper Chitambara said things were likely to get worse ahead of next year’s election.
“There is a lot of uncertainty due to the political situation,” he told AFP.
“That is why we have seen the re-emergence of the parallel market and a multi-tier pricing structure. As we approach the elections, the uncertainty will increase.”
WHY TOURISM ISN’T HELPING
There have been many countries in economic crisis that have at least been able to rely on tourism to inject some funds into depleted coffers. Greece, for instance, recently described its tourism revenue as its “lifejacket” during its debt crisis.
Not so in Zimbabwe.
The naturally beautiful country is famous for its safaris and the awe-inspiring Victoria Falls – the largest waterfall in the world and an Instagram sensation – and locals are famously warm and welcoming. Outside of Africa, tourists from the US, the UK, Ireland and Germany have been among its top 10 foreign arrivals.
But Zimbabwe is a notoriously expensive place to visit and that’s been a huge turn-off for travellers.
“I went to some country recently where I booked in a five-star hotel and paid a bill of $53 all inclusive. I was shocked and thought they had made a mistake in their calculations,” Zimbabwe Tourism Authority chief executive Karikoga Kaseke said last year.
“This was when I realised that as a country, we need to do something to review our prices if we are not to earn a bad name as the world’s most expensive tourist destination.”
Zimbabwe recently started charging foreign tourists a value-added tax of 15 per cent, but that was another plan that backfired – if anything, it’s kept tourists away.
The Zimbabwe Council for Tourism president has called the tourist tax “exceptionally unhelpful, if not destructive” and last month George Manyumwa, president of Zimbabwe’s hospitality association, called for the tax to be scrapped.
“The introduction of the tax unfortunately resulted in an increase in the service rates in the tourism sector and reduced profitability due to a decline in demand,” Manyumwa told the Zimbabwe Independent. “The occupancy rates have remained stagnant at an average of 50 per cent.”
Manyumwa said tourists were also staying away because they feared Zimbabwe’s notorious police roadblocks. The money-making initiative, which is widely considered corrupt, has targeted tourists driving around the scenic country.
“The reality of the roadblocks is that tourists felt unwelcome into the country when they were penalised for offences unfamiliar to them,” Manyumwa said.
“The most affected market that has since declined is that of self-drive tourists, whose form of tourism benefited various parts of the country … Some indicated that they thought there were safety concerns resulting in the need for heavy police presence, implying that Zimbabwe might not be a safe destination.”
Tourists from South Africa can usually be relied on to comprise a third of the foreign visitors in Zimbabwe, but the South African rand’s depreciation against the US dollar has seen those figures fall below 10 per cent.
But tourism isn’t the focus in Zimbabwe right now. Neither is, it seems, the economy.
The ruling party, Mugabe’s ZANU-PF, needs to win next year’s election. As of now, Mugabe remains the party’s candidate, despite his failing health and his wife’s recent promise to succeed him.
Meanwhile the party is spending money as fast as it can, sociology professor Roger Southall said in a recent piece for The Conversation.
Finance minister Patrick Chinamasa, who had been warning of the country’s economic stability, has just been dumped by Mugabe. His replacement, according to Prof Southall, is a “party loyalist, who will brook no talk of any need for structural reform”.
“Zimbabwe is living on borrowed time and borrowed money,” Prof Southall, of Johannesburg’s University of the Witwatersrand, said.
“It will again end in financial ruin, as it did in 2008.
“But all ZANU-PF cares about is ensuring that it wins the next election and allowing its political elite to ‘eat’.” – New Zealand