Zim Digital Sunday Express
June 18, 2021

Zimbabwe: economic recovery, new realities and new paradigms

The intent of this article is to explore the economic side of the country’s decline with the view to put forward new areas of economic significance

By Laurence Sithole

Modern and contemporary Zimbabwe as we know it – was built on the back of agriculture, mining and other related primary extractive industries so much so that at independence in 1980 the country had one of the most advanced industrial economies in Africa second only to South Africa.

The economic growth and progress brought on by these primary sectors with time naturally cascaded to the rest of the economy resulting in the emergence of various industries.

The industrial capability of the country according to Herbst and Mills (2010) in the 1960s was such that Zimbabwe exported electronics to the United States.

At the time of independence, the Zimbabwe Dollar was then stronger than the US Dollar (from 1978 to 1980 one United States Dollar would have bought you ZW 68c) and ranked at par with the Pound Sterling.

 

This was a very strong position no doubt to be in as a country at the most critical and defining juncture of the nation’s history and instead of developing on this platform to reach greater heights of prosperity and economic progress the nation retrogressed to the point where the advantage gained at independence from policies adopted and implemented prior reduced to almost zero resulting in a nation that is a pariah at best and a basket case at worst.

The reasons for the current position are both economic and political. The intent of this article is to explore the economic side of the country’s decline with the view to put forward new areas of economic significance that can give rise to the recovery of the country’s fortunes.

These new areas if adopted and implemented will most certainly result in economic green shoots and with time they will transform into the major industries anchoring the economy on the same scale and extent that mining and agriculture did in the former years.

 

The political side of the equation of Zimbabwe’s economic decline has been written about extensively and it is beyond the scope of this article. However, it must be noted and born in mind that it is immensely difficult to separate politics from economics as these two concepts enjoy a very strong symbiotic relationship.

Why agriculture and mining will not be the anchors of the new economy

It is the firm view of the author that while agriculture and mining industries remain central to the economy, they will not lead the country into economic transformation and spur it into the middle-income status envisaged by 2030.

This view is as radical as it is unconventional and, in many audiences, may even be dismissed with contempt.

However, when one considers the critical success factors necessary for thriving mining and agricultural industries the radical and unconventional ideas postulated by the author do not seem so farfetched.

Agriculture cannot sustainably lead Zimbabwe into the promised land of economic transformation in its present state simply because the most important resource needed to sustain activities in this sector, land, does not have a market value and as a result, cannot be considered a factor of production.

 

This phenomenon has been a legacy of the fast-tracked land reform program implemented in 2000.

The agricultural land that was expropriated during the Fast Track Land Reform Program went from being land that was freely held in terms of title to land that is held under 99-year lease which is not transferrable and as a result renders it impossible to tender such land as security and or collateral for loans.

The original stance of the policy of land reform was that it would be conducted on a willing buyer willing seller basis. This method would not have compromised the issue of title over the land and would have permitted the subsequently resettled farmers to access credit to develop, enhance and sustain their agricultural operations.

For land to be appraised to determine its value, it must tradable and this implies that it must be transferrable. When it is not transferrable as in the case of 99-year leases it is not possible to ascertain the value of that land.

Providers of finance cannot on this basis provide beyond the short-term funding needs of borrowers in this space.

The issue of land reform which was made necessary by the need to redress previously disadvantaged black people by allocating them land expropriated from former commercial farmers had the unintended consequence of severely compromising security of tenure of the land acquired by the state.

This has been so adverse that financial institutions will not generally lend against such land.

 

This absence of or lack of credit for agricultural purposes has meant that farming activity is heavily subdued in comparison to when the originally titled owners of the land engaged in farming activities.

To further reinforce this notion Masiyandima et al. (2011) assert that: “Before 2000, access to credit was relatively easy for the commercial farmers whose land ownership rights were clearly defined in the Land Apportionment Act of 1930 compared to the small scale communal agricultural sector with communal land ownership vested in the state.

Land productivity was, therefore, generally higher in the large-scale commercial farms compared to the small-scale, resettlement, and rural sectors. The large-scale commercial farmers, for example, produced about 85% of the total agriculture output in value terms, while the communal small scale, rural and resettled farmers produced 15%.”

Furthermore, Masiyandima et al. (2011) go on to argue that the higher yields and productivity in formerly white-owned commercial farms was not only a factor of the availability of funding and credit to the farmer but were also a factor in the expertise of the farmer and technology deployed as well as crop varieties.

They also spell out the various funding mechanisms that were available to the agricultural sector up to the period characterised by the Fast Track Land Reform Program (FTLRP) which were by and large highly comprehensive and substantial ranging from budgetary allocations from Government, agricultural procurement bodies such as the Grain Marketing Board, Cold Storage Commission, Cotton Company of Zimbabwe through input schemes, commercial banks, the Agriculture Finance Corporation (which in itself used to be funded predominantly by the EU and the World Bank).

Private sector companies like the main seed producing companies and tobacco merchants also added to the stock of credit funding available to farmers.

 

However, there was an acute dip in the availability and extension of credit to the agriculture sector during the period 2000-2008. As can be expected and almost naturally, productivity followed the trend of availability of financing in that sector.

The greatest and most dramatic fall in agricultural lending occurred in the years 2000-2001. According to the RBZ Monetary Policy Statement of 2008 in 1998 over 90% of commercial bank, credit was comprised of lending to the agriculture sector.

By 2001 however, lending to this sector had fallen to less than 20%. This made Government intervention necessary through various initiatives such as the infamous Agriculture Sector Productive Enhancement Facility (ASPEF).

Another arguably unintended consequence of the land reform program is that almost 50% of the population has become food insecure and that the country has gone from being a net exporter of food and agricultural products to a net importer.

Although it would not be entirely accurate to attribute the country’s weak food security status to FTLRP it, played the biggest role.

USAID posits that: “Zimbabwe’s economy and food security situation remains fragile.

Poor weather conditions, including erratic rainfall and long dry spells, contributed to increased humanitarian needs across the country, while the deteriorating economic situation exacerbated the already rising vulnerability in both rural and urban communities. Zimbabwe experienced a drought in the 2018/2019 agricultural season, resulting in large-scale crop failure.

 

The 2019 Zimbabwe Vulnerability Assessment Committee projects an estimated 5.5 million rural Zimbabweans to be food insecure during the peak of the 2019/20 lean season, with 3.8 million people in need of food assistance. Urban vulnerability is also on the rise, with the Ministry of Public Service, Labour and Social Welfare estimating that up to 2.2 million people in urban areas are food insecure.”

The very good rains experienced at the end of 2020, coming into 2021 will provide some much-needed respite on the masses in terms of food security. Much more needs to be done to restore the agricultural sector to get it back to what it was to the economy in terms of significance around 1980.

The present administration has made some strides to restore the agriculture sector including an agreement to compensate former farmers for the improvements made on the land where their farms were situated.

The effect of this policy is that many of the farmers who left the country two decades ago have safely settled in neighbouring countries chief among them Zambia where they are once again thriving.

Readers might find it somewhat of a cruel and amusing irony that the late former President Robert Gabriel Mugabe is honorary minister of lands and agriculture of Zambia, Herbst & Mills (2010).

It will take some convincing for them to leave secure operations they have set up to restart enterprises in this country riddled with uncertainties.

It is the considered view of the author that such a development is unlikely. With that said agriculture with all its promise and potential will not be the avenue to economic recovery at least not in the state it is in now.

 

The next part in this series of articles explores the challenges obtaining in the mining industry.

The mining sector has the potential to lead the economic resurgence of the southern African country however, it is plagued by challenges that have rendered it impotent to deliver the economic impetus to transform the economy.

 

This the first part is a series that Sithole is writing in The Sunday Express. Watch this space for the next installments.

 

Laurence I. Sithole, B.Com (Hons) Banking & Investment Management, National University of Science & Technology Zimbabwe. Sithole is an independent economist who writes in his personal capacity. The views expressed are his own and do not represent the views of any other organisation.

 

 

 

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