Once solid Zimbabwe economy is on free fall

Another looming drought, worsening foreign currency shortage and 18-hour rolling power cuts are set to push Zimbabwe’s troubled economy closer to the precipice this year, experts warn.

The once formidable economy has been lurching from one crisis to another since the turn of the Millennium when the government started repossessing fertile land from the white minority for redistribution to landless blacks.

A severe drought during the 2018/19 farming season, described as the worst dry spell in a century, saw the economy contract by nearly seven per cent and the country’s sole source of hydropower—Kariba Dam—virtually dry up.

Halfway through this 2019/20 season, the country received very little rainfall, signalling another drought.

Listed companies such as Delta Corporation and Econet Wireless Zimbabwe in their results for the year ending December, said their viability was threatened by the widespread power cuts and foreign currency shortages.

Delta, Zimbabwe’s largest drinks maker, reported a 48 per cent drop in half-year beer sales compared with the same period in 2018, after output and distribution were constrained by shortages of fuel and electricity.

“Our production and distribution operations were disrupted by the shortages of electricity and fuel, which in themselves are a manifestation of the limited foreign currency,” said Delta.

Zimbabwe introduced rolling power cuts, at times stretching 18 hours a day, in May after water levels at Kariba Dam dropped drastically.

Besides Kariba, the country relies on poorly maintained thermal power stations that produce less than a third of the country’s power needs.

A shortage of foreign currency also means that the country is not able to import power from neighbouring Mozambique and South Africa.

Fuel is also in short supply with motorists often queuing for several hours to fill up.

Delta said Zimbabwe’s economy was also struggling because of currency reforms, that saw the country end a decade of dollarisation mid last year.

Two years after President Emmerson Mnangagwa took over from Robert Mugabe following a 2017 military coup, Zimbabwe remains mired in crisis as investors remain unconvinced that Harare is ready to embrace reform.

Aid agencies estimate that 2.2 million Zimbabweans in urban areas are at risk of starvation and 5.5 million others in rural areas do not have adequate food due to drought.