Zimbabwe’s 39 Years of march to Utopia: Can Remittances be the Panacea?

 Zimbabwe, once a vibrant and diversified economy, had been known as the breadbasket for Southern Africa but seems to have degenerated into what Crush and Tevera[i] have described: “from breadbasket to basket-case”.

Today, the country is in deep crisis and facing an unending political and economic meltdown. Zimbabwe’s economy has been labelled as unstable and has faced a meltdown since the early 1990s. The year 2008 marked the height of the ‘Zimbabwean Crisis’ as it recorded high inflation, and basic commodities were scarce in shops. Almost 11 years down the line, and as we celebrate 39 years of independence history seems to be repeating itself.

No one ever anticipated the repeat of 2008, the so-called ‘Operation Restore Legacy’ -“coup”- promised a return to the promise of Liberation. Its architects argued the dawn of real Uhuru, but Alas, it is already fast turning into a march to “utopian Canaan”; a self-illusory daydream that will never  come true. The turnout of the Zimbabwean economy from 2018 till present has led to memes on social media calling the former President Mugabe to return back to work, and apologising for the so-called “coup”.

 Mis-governance has significantly contributed to the political and economic meltdown; therefore, driving most citizens into the diaspora or the informal sector. An economy in free-fall, elevated inflation and unemployment, the collapse of public services, political oppression and deepening poverty proved to be powerful, virtually irresistible, push factors for many Zimbabweans to migrate[ii]. This has resulted in crisis driven migration in the country. This sentiment is aptly summarised by ANC Head of Elections, Fikile Mbalula when he says, “Zimbabwean nationals are in South Africa in “droves” because of the economic crisis in their country”.

Remittances: ‘The Goose’ that can lay the ‘Golden Egg’?

This article focuses on the Zimbabwe economy through the lens of remittances, questioning whether they can be the panacea to its attempt at reconstruction. The International Monetary Fund (IMF) defines remittances as “household income from foreign economies arising mainly from the temporary or permanent movement of people to those economies”. Remittances can be in money, goods or in kind. Globally remittances are recognised as major source of financing for development in low and middle income economies. The negative impact of emigration in Zimbabwe has been well documented, in particular, the costly impact of the brain drain on the country.

However, emigration in Zimbabwe should not be demonised since it has the potential to turn into a brain bank. It is noteworthy, that it is not only the receiving country that benefits from migration but the sending country as well. The country’s economy currently relies on the remittances from emigrants and to be more precise, Zimbabwe in 2016 ranked highly among global remittance recipient countries, ranking 36th in the world and fifth in Africa[iii].The Zimbabwe diaspora policy states that, “In 2009 Diaspora remittances stood at US$294 million, increased to US$552 million in 2011, US$788 million in 2013 and peaked at US$935 million in 2015.” Diaspora remittances contributed $619,2 million, in 2018 and $699 million received in 2017. It is worth mentioning that the total amount remitted is much higher than these figures because a large number of transactions are carried through informal channels. Undocumented migrants usually opt for the informal channels of sending remittances. There has been a significant decline in the remittances in the past two years. This maybe contributed by the challenges to get hard cash in Zimbabwe and the diaspora opting to send remittances in kind rather than cash. Remittances in Zimbabwe are mostly used in areas such as real estate, agricultural support and social responsibilities.[iv]

Remittances have become a source of income in many households in Zimbabwe. It is notable that in Zimbabwe families that have remittances as a source of income are better off compared to those families with no remittances.[v] Remittances are used to access education, health services, to build and to invest. Remittances are viewed as a way of wealth distribution and play a crucial role in reducing poverty in Zimbabwe. Remittances to Zimbabwe largely replace streams of income lost through the country’s overall economic decline.

Remittances have a positive impact at macroeconomic level. The inflow of cash remittance has a positive impact at the macroeconomic level. Increased cash inflow of foreign currency results in domestic currency appreciating. Remittances sent through the formal channels have a positive impact to the country at large. In support of the flow of remittances, Zimbabwe introduced Homelink in 2005. In 2016 Zimbabwe government drafted the Zimbabwe diaspora policy in order to engage with the diaspora and encourage investment in Zimbabwe. Nevertheless, the potential benefits a country stands to get through remittances from its citizens remain high and needs no further emphasis.

Right direction but half-hearted steps.

Over the years more attention has been given to policies on the safety and transfer of funds to enhance the developmental impact of remittances. Previously, The Zimbabwean government supported the sending of remittances to Zimbabwe by giving a 3% incentive to those collecting money from relatives abroad. However, this arrangement was nullified early 2019. In addition, the macro-economic framework has negatively affected various Money Transfer Agencies (MTAs) as the country experienced a shortage of American Dollars or hard currencies leading to a dip in official remittances. It is evident that Zimbabwe had attempted to move policy in the right direction but with half-hearted steps.

There is need for improved policies, improved governance in order to improve the economy of Zimbabwe. As the Zimbabwe Diaspora policy states, the country should work on reducing charges incurred when sending remittances so as to encourage more cash inflow into the country. It is essential to note that remittances increase the forex reserves, the per capita income and further increases the liquidity of banks. In a country with a working currency, remittances reduce the balance of payment deficit and keep local currency from degenerating so that purchasing power of citizen is not affected. This increases the wealth effect of a nation that drives the expectation levels of markets and keeps economy in expansionary mode.

Remittances respond to investment opportunities, the business and political climate in the home country as much as to altruistic and insurance considerations[vi]. Macroeconomic stability and sound policies attract more remittances. A good business environment, investment climate and functional national institutions, including the financial ones are conducive for increased remittances[vii]. There are many opportunities for Zimbabwe to tap into its Diaspora, but the sticky area remains largely at the policy level.

The Government of Zimbabwe (GoZ) sees the diaspora as money dispensing Automatic Teller Machines (ATMs) and not citizens who need to be involved in the governance affairs of the state. The GoZ needs to change its approach in dealing with the Diaspora and fully integrate them within the affairs of the state in-order to build a mutual beneficial and developmental relationship. Before sending remittances the Diasporans are citizens first. Therefore, for the Zimbabwean diaspora to invest more in the country, the government needs to create a conducive environment and policies.

Sostina Spiwe Matina is a PhD Candidate In Paediatrics at the University of the Witwatersrand.

References

[i] Crush, J. and Tevera, D., 2010. Exiting Zimbabwe. Zimbabwe’s exodus: Crisis, migration, survival, pp.1-49.

[ii] Crush, J. and Tevera, D., 2010. Exiting Zimbabwe. Zimbabwe’s exodus: Crisis, migration, survival, pp.1-49.

[iii] Banya, N., 2018. ZimFact

[iv] Zimbabwe Diaspora policy.

[v] Nzima, D., Duma, V. and Moyo, P., 2016. Migrant Remittances, Livelihoods and Investment: Evidence from Tsholotsho District in the Matabeleland North Province of Zimbabwe. Migracijske i etnicke teme, 32(1).

[vi] Stratan, A. and Chistruga, M., 2012. Economic consequences of remittances. Case of Moldova. Procedia Economics and Finance, 3, pp.1191-1195.

[vii] Stratan, A. and Chistruga, M., 2012. Economic consequences of remittances. Case of Moldova. Procedia Economics and Finance, 3, pp.1191-1195.