Why is Zimbabwe’s economy in a nose dive?

Motorists queue to buy petrol in Harare on Monday. Photo: Reuters

Zimbabwe’s economy is on the brink, as it struggles with bad policy, lack of liquidity and severe shortages. How did it get there, and what needs to change?

For the past three months since Zimbabwe’s ‘watershed’ elections in July; life has been less than rosy for Nadine Moyo, deputy headmistress and mother of four at an upscale high school in Harare, the country’s capital city.

She has been forced to spend most of her time moving from one supermarket to another, searching for basic commodities like cooking oil, baking flour, and sugar among others.

I met Nadine Moyo at a major supermarket retail chain in Harare where she was stood patiently in a long queue waiting to buy cooking oil. This particular supermarket was limited to selling a single two-litre bottle of cooking oil per person which won’t even last her the month.

Unlike former President Robert Mugabe’s reign where citizens could not freely criticise the government; people now freely share their views without looking over their shoulders for fear of arrest.

In the queue, Nadine was vocal about her views, while others  advised each other on where to find commodities that were growing scarcer by the day.

Nadine’s predicament is not an isolated case. Zimbabweans face the same challenges, as they spend countless hours frantically queuing to buy increasingly scarce basic commodities, or stand in winding lines for fuel.

More than ever, long waits for basic goods has become the order of the day in most towns and cities.

The situation was exacerbated four weeks ago when the country’s new Minister of Finance, Professor Mthuli Ncube announced a raft of economic measures in an effort to resuscitate the country’s economy. The economy was in free fall, with political and economic analysts pinning the blame on what they described as chronic mismanagement.

The gazetting of the Intermediary Money Transfer Tax which sought to revive the country’s economic purse and the opening of separate foreign currency (nostro) accounts precipitated the disappearance of most goods in retail shops.

An overwhelming majority of suppliers began to wage a silent, if dangerous, war, clamouring to be paid in foreign currency, showing a preference for the United States Dollar (USD) or the South African Rand (ZAR).

Most retail pharmacies and hardware shops in Zimbabwe have pegged prices to both the USD and ZAR currency. An ordinary person like Nadine is used to the country’s surrogate currency, first introduced on November 28, 2016 as a means of injecting liquidity into the economy.

Among locals, they’re more popularly known as bond notes or coins.

But even the surrogate currency is in short supply and proves elusive. Meandering lines are the norm in most financial institutions, who disburse insignificant amounts, once a week per customer.

The amount Nadine receives from banks may not even be enough to feed her family of four, with most of her money stuck on a credit card that can only be used within Zimbabwe’s retail sector.

With the country in dire financial straits, there have been clarion calls for the nation to adopt the South African Rand for business convenience, and to further join the Southern African Customs Union.

South Africa is Zimbabwe’s biggest trading partner and countries which make up the customs union are Botswana, Lesotho, Namibia, Swathini (formerly Swaziland) as well as South Africa.

Speaking to TRT World, Professor Eldred Masunungure, who teaches at the Department of Political and Administrative Studies, University of Zimbabwe, said there was a need for some form of engagement by both the ruling ZANU PF party and the MDC Alliance, the major opposition party, as part of efforts to economically develop the nation.

“Political maturity must take precedence, as the current problems need some form of dialogue from major political players as well as civil organisations in trying to find a so-called common economic ground,” he said.

He went on to state that most of the government’s arms were largely dysfunctional, and in turn scared away investors. Meanwhile, the political elite was mostly out of sync with President Emmerson Mnangagwa’s vision of opening the country for business.

“The message of Zimbabwe open for business is not being heeded by some political players, as corruption is now the way of doing business, contrary to President Mnangagwa’s vision of trying to bring sanity to the country’s economy.”

“Our economy is in the doldrums, and a thorough shock therapy such as the Rwandan economic model is needed, which may have its shortcomings nonetheless,” he noted.

Former senior economic advisor to the opposition Movement for Democratic Change, Edward “Eddie” Graham Cross said the country’s economy was gradually heading in the right direction, as evidenced by an increase in exports.

“The situation will certainly improve within the next two years, and there is a need for patience as the government implements its monetary and fiscal policies.”

“Currently, however, there is no way Zimbabwe can join the Rand Monetary Union without putting in place economic fundamentals that would be acceptable to other union members,” said Cross in an interview with TRT World.

The MDC Alliance, on the other hand, has also come up with its economic blueprint which it believes is a panacea for most of the country’s problems, that has led to everything being rationed by most retail shops.

Earlier this week, the Zimbabwean government temporarily lifted the ban  on imports of basic commodities as part of an efforts to curtail profiteering by unscrupulous retailers and individuals.

Some of the commodities that can now  be imported without license or limit include cement, bottled water, sugar, flour, coffee creamers, fertilisers, cooking oil, body creams, crude soya bean oil, animal oils, cereals, packaging materials, cheese and pizza bases among others.

Weary Zimbabweans are pinning their hopes on Professor Ncube’s maiden 2019 national budget however, as he seeks to restore macroeconomic stability. It remains to be seen if the country can reclaim its glory as the continent’s breadbasket.

Burzil Dube is a Zimbabwe-based freelance journalist with more than five years experience especial in print media. He has covered news in countries such as Namibia and Zambia, as well as Norway, Sudan and Tanzania.