The Centre for International Governance Innovation

WORKING PAPER
State Fragility

Zimbabwe in Crisis:
Mugabe's Policies and Failures

HANY BESADA
NICKY MOYO

Working Paper No. 38

October 2008

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Nicky Moyo
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CIGI WORKING PAPER
State Fragility

Zimbabwe in Crisis:
Mugabe's Policies and Failures

Hany Besada
Nicky Moyo

Working Paper No. 38

October 2008
Research Committee
John English
Executive Director (on leave)
Daniel Schwanen
Acting Executive Director
Andrew F. Cooper
Associate Director and Distinguished Fellow
Jocelyne Bourgon
Distinguished Fellow
John M. Curtis
Distinguished Fellow
Louise Fréchette
Distinguished Fellow
Paul Heinbecker
Distinguished Fellow
Ramesh Thakur
Distinguished Fellow
John Whalley
Distinguished Fellow
Jennifer Clapp
Chair in International Governance at the University of Waterloo
Jorge Heine
Chair in International Governance at
Wilfrid Laurier University and CIGI Distinguished Fellow
Eric Helleiner
Chair in International Governance at the University of Waterloo
Maurice Kugler
Chair in International Governance at Wilfrid Laurier University

Publications Team
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Senior Director of Communications
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Publications Assistant
 John English
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About the Authors

Hany Besada is a Senior Researcher and Program Leader,

Health & Social Governance, at the Centre for International
Governance Innovation (CIGI) in Waterloo, Ontario. He holds
an MA and a BA in International Relations from Alliant
International University in San Diego, California, where he
specialized in peace and security studies. Prior to joining CIGI,
he worked as the Business in Africa Researcher at the South
African Institute of International Affairs in Johannesburg, and
as a research manager at Africa Business Direct, a US trade and
investment consulting firm, also in Johannesburg. While studying
in the United States, he was a policy analyst at several non-
governmental and governmental research institutes and offices,
including Amnesty International, the office of US Senator
Dianne Feinstein, the United Nations Association of the USA,
and the Joan B. Kroc Institute for Peace and Justice.

Nicky Moyo is Director of Development at Enterprise Africa

Trust, a Zimbabwean-based policy research and nonprofit organ-
ization. He holds a Bachelor of Commerce degree in financial
management from the University of South Africa and an
Advanced Degree in good governance from the University of
Pretoria. He has more than eight years of working experience
in the private sector and civil society-related developmental
work. His main research interests include poverty reduction,
health and economic governance, debt relief, development
finance, and private enterprise development – all areas in which
he has presented papers at various regional and international
conferences. He is also a trustee of the Zimbabwe Grace Trust,
a disability rights and development NGO, which he co-founded
in 2004.
Abstract

Exemplifying the negative consequences of a variety of

inappropriate fiscal and social policies, Zimbabwe has failed to
realize its potential to become a strong, independent state, going
from the admiration and envy of its neighbours to near-complete
collapse and abject poverty. Economic turmoil, caused by failed
land reforms and inflation, combined with increased malnutrition,
and evaporating access to education, health care, and employment
have only exacerbated unrest, particularly for constituencies
who receive few benefits from President Robert Mugabe's
regime. This paper assesses Zimbabwe's social, political and
economic crisis and its impact on Zimbabweans, indicating the
steps needed for national recovery and sustainable development.
 1. Introduction

In 1980, Zimbabwe emerged from British colonial rule

under the leadership of Robert Mugabe and his independence
movement. With its strong colonial infrastructure, a high level
of social cohesion, and an abundance of government promises
for reform, equality, and African autonomy, Zimbabwe arguably
had enormous potential to become a strong independent
African state.

Within the first decade of independence, however, President

Mugabe had reneged on his promises to provide Zimbabweans
with basic government services, adequate living standards, and
a democratic and representative government that embraced the
rule of law and fundamental human freedom, and the country
began to spiral out of control.

Economic decline was quick to follow, and Zimbabwe saw

a re-emergence of ethnic tensions along both regional and
political lines. One lingering issue that haunted the newly inde-
pendent state was the slow progress of land redistribution.
Before independence, the country had undergone a series of
land resettlement programs, many of which were guided by the
United Kingdom in favour of white settlers. Yet, successful
changes have yet to materialize: land continues to be used
primarily as a means of bolstering political support, despite
government claims of unbiased redistribution in the interest of
the landless peasants who have tilled the land for decades.
Mugabe and his ruling party, the Zimbabwean African National
Union – Popular Front (ZANU-PF), have met threats of chaos
with increasingly authoritarian policies, which inevitably have
sparked further discontent across the country.

1 | Hany Besada and Nicky Moyo

 The country's land crisis and its aggravating effect on
economic stability and growth reveal a country that has gone
from the admiration and envy of its neighbours to near-complete
collapse and abject poverty. The key to economic recovery will
be the resolution of the long drawn-out struggle for a successor
to President Robert Mugabe. The final outcome is likely to be
determined not so much by open processes in the ruling party
as by the dominant constituencies, such as the armed forces,
whose leadership is increasingly represented in both govern-
ment and business.

2. The National Crisis

In the decade following independence in 1980, Zimbabwe

recorded solid economic growth of approximately 2.9 percent,
well above the southern African regional average of 1.7 percent
(UNCTAD, 2007b). Meanwhile, living standards improved
significantly, with life expectancy reaching 59 years in 1990,
before collapsing to 37 years in 2005 (World Bank, 2007). By
1999, Zimbabwe had begun to experience a deepening economic
collapse of unprecedented proportions. The crisis was attributed
to a number of political, economic, and environmental factors,
and largely blamed on the Mugabe government's ill-fated policies.
These policies can be placed categorically within the context of
poor governance, economic mismanagement, and loss of support
of the international community, following repeated human
rights violations and manipulated electoral processes and failed
elections, all compounded by periods of drought. The collapse
was triggered by the government's decision in 1997 to ignore
fiscal constraints by making large payments to veterans of the
independence struggle, as a way of buying their loyalty and
political support in the upcoming elections.

Zimbabwe in Crisis: Mugabe's Policies and Failures | 2

 The strain of years of deficit spending on the so-called war
veterans and social welfare programs and growing corruption in
government began to show. Increasing numbers of well-educated
high school and university graduates left school to face an
unemployment rate of 40 percent and slim prospects for decent
jobs. Veterans of Zimbabwe's liberation war also began to feel
the pinch of a declining economy and to agitate government for
greater monetary assistance for their efforts in the liberation
struggle. The government also failed to resolve the land reform
question1 – a matter of social injustice in Zimbabwe – and the
commercial farmers became a pressing issue.
________________________________

1
The Anglo-Ndebele War (1893-1894) between white settlers in Masholand and
blacks in Matabeland resulted in Matabeland's being brought under the rule of the
British South African Company (BSAC). Indigenous populations were forced
off their land or to pay heavy taxes to the BSAC. The Land Apportionment Act
(1930) allocated fixed reserves to inhabitants, with blacks given land that had
been rejected by the European settlers. The rest of Rhodesia was deemed “European
Areas,” which witnessed development and further white settlement in the form
of large-scale commercial farms. White settlers increased from 80,000 in 1945
to 220,000 in 1960, and blacks continued to be forced onto communal land to
make room for incoming white farmers. With independence in 1980, large-scale
commercial farms occupied 15 million hectares (of a total 33.2 million hectares),
while small-scale black commercial farmers occupied only 1.6 million hectares,
each farm constituting an average size of 2,000 hectares.
With the Lancaster House Agreement in 1979, then prime minister of Zimbabwe
Abel Muzorewa and the Patriotic Front, led by Robert Mugabe, agreed to join in
negotiations with the British to determine land distribution policies for independ-
ence. The agreement provided for all white farmers to retain their lands for at least
ten years. The UK government declared that compensation would be paid to
Mugabe's government when white owners were willing to sell their farms and
that it should be based on the “willing-seller/willing-buyer” principle. Moreover,
only underutilized land would qualify for compulsory purchases and had to be
purchased at market prices. In exchange, the United Kingdom would fund half
the cost of a resettlement scheme for black farmers and encourage other foreign
donors to do the same. The UK government informally promised £75 million
for land reform, while the United States would provide US$200 million. The
United States actually never gave money for land purchase or distribution;
rather, it provided funds for the purchase of agricultural inputs (such as tractors
and food), which, it argued, could replace the need for redistribution.
During the 1980s, the UK government provided £44 million, although £3.5
million was suspended in 1989 due to accusations that Zimbabwean government
officials had received sums of money to buy more than 15 percent of the land
allocated for redistribution. In 1991, the Lancaster House Agreement expired,
but the country remained tied to the “willing-seller/willing-buyer” principle, and
no drastic action was taken until 1997.

3 | Hany Besada and Nicky Moyo

 In January 1998, the Zimbabwean government announced
a substantial price increase in basic foodstuffs, with cornmeal,
cooking oil, bread, and sugar all doubling in price. The economic
crisis, brought about by high interest rates and inflation, a
weak currency, and rising unemployment, provoked riots, civil
disobedience, and massive support for the Zimbabwean Congress
of Trade Unions. Residents of the cities of Mutare, Harare, and
Bulawayo witnessed days of looting and destruction of property.
In response to these developments, and to ease unemployment
and a food shortage, Mugabe sought to re-energize the economy
by redistributing white-owned land to landless black peasants
and war veterans. In the process, riot police killed dozens of
people, and many Zimbabweans were shocked at the lawlessness
of their once ordered, prosperous, and peaceful country.

Seeing the train coming, international money markets began

devaluing the Zimbabwean dollar. Between April and October
1998, the currency lost half its value, plummeting from 17 to
the US dollar to 38. In January 1999, an agreement between
Zimbabwe's central bank and the commercial banks pegged the
Zimbabwean dollar at 38 to the US dollar. That exchange rate
could not be justified for very long, however, and inflation
began to grow, peaking at about 70 percent in 1999
(McDonald, 2000).

In 1998, Zimbabwe took part in a donor conference to

establish the ground rules for the redistribution of land in a
legal, transparent, orderly, and just manner. Many agreed that
there was inequity in the ownership of land in Zimbabwe and
that land reform was a matter of social justice. Mugabe stressed
that Zimbabwe would be able to realize economic development
for its people only if land were redistributed fairly. The inter-
national community felt, however, that land reform should
be conducted on the basis of the willing-seller/willing-buyer
principle. It stressed, moreover, that the provision of land to

Zimbabwe in Crisis: Mugabe's Policies and Failures | 4

 Zimbabwe's rural poor was only the initial step in a process that
had to include access to capital, training, and support with
regard to infrastructure, such as roads and markets, needed for
economic development – an issue on which both the commercial
white farmers and the government had dragged their feet since
independence in 1980.

In April 2000, when it became clear that the land reform

process agreed to in 1998 had broken down because of illegal
land occupation and continued lawlessness on farms, the donor
nations first suspended, then, in September terminated their
support for the process. Two months later, the Mugabe govern-
ment provided the political framework for the land ministry to
confiscate 70 percent of the best farming land owned by whites,
who represented approximately 0.7 percent of the population,
and redistribute it to landless blacks without compensation. In
October 2000, as a new report described,

the veterans marched onto some 2,000 farms, threatening

white farmers and assaulting their black workers. Local courts
twice ruled that farm occupation was illegal and ordered
government to drive off veterans and their supporters. As a
result, Mugabe's land grabbing effectively crippled Zimbabwe's
commercial industry, which was once dominated by 4,500
mainly white farmers and which, in the past, had constituted
some 20 percent of the country's GDP and 40 percent of its
export earnings. (Hawthorne 2000, 98)

As a result, many Western donor nations and organizations

halted economic aid to and investment in Zimbabwe. In October
2000, for example, the World Bank announced that it would
extend no more loans to Zimbabwe.

The violence and economic disruption that have accompanied

land reform have left a scar on the face of Zimbabwe. In the

5 | Hany Besada and Nicky Moyo

ongoing anarchic and frequently violent redistribution of land,
the winners, often so-called war veterans, have had little or no
farming experience, while up to two million farmhands and
their dependents, constituting 15 percent of the population, have
faced internal displacement and unemployment, worsening still
further the country's political and economic turmoil. Moreover, the
displacement has come amidst an increasingly critical situation
in the agricultural sector. There is little fuel to transport grain to
mills, and, intimidated by the armed land invasions, many com-
mercial growers have not planted for the next season, raising fears
of prolonged food shortages for years to come. The economic
turmoil has succeeded, in turn, in worsening social unrest, as
the people have seen Mugabe's land reforms and promises of
higher standards of living bear little fruit. Zimbabwe, virtually
bankrupt – with little tax revenue coming in from former major
taxpayers like the commercial farmers – and its foreign
exchange reserves reduced to nothing, saw long queues for
gasoline, cooking oil, and bread.

With the continuing deterioration of Zimbabwe's economic

conditions (see Table 1), inflation has skyrocketed. In May 2008,
the official annual inflation rate reached 1 million percent, the
highest in the world. Zimbabwe's high inflation rate could be
blamed on an extremely large public sector and subsidized
loans to priority sectors – agriculture, in particular. Despite
relatively strong revenue collection, the fiscal deficit – including
quasi-fiscal activities by the Reserve Bank of Zimbabwe to
support parastatals and other strategic sectors that were showing
a loss2 – was equivalent to more than 80 percent of the country's
________________________________

2
A quasi-fiscal operation is an operation or measure carried out by a central
bank or other public financial institution, with an effect that, in principle, can
be duplicated by a budgetary measure in the form of an explicit tax, subsidy, or
direct expenditure, and that can have an impact on the financial operations of
the central bank and other public financial institutions (see Mackenzie and
Stella, 1996).

Zimbabwe in Crisis: Mugabe's Policies and Failures | 6

 Table 1: Macroeconomic Data, Zimbabwe, 2000 and 2006

Indicator 2000 2006

Gross national income (GNI) (current US$ billions) 5.7 4.5
GNI per capita (US$) 450 350
Gross domestic product (GDP) (current US$ billions) 7.4 3.4
GDP growth (annual %) -7.9 -5.3
Current account balance (% of GDP) -17.2
Total external debt (% of GDP) 124.5
Total external debt (US$ billions) 3.8 4.7
Foreign direct investment (current US$ millions) 23.2 40.0
Official development assistance and official aid (US$ millions) 175.8 279.8

Source: United Nations Development Programme, 2007

gross domestic product (GDP) in 2006.3 With limited scope for

external financing, a large part of the public sector's financing
needs were met via money creation, which further fuelled the
rapid monetary expansion and a sharp rise in inflation. The
Zimbabwean dollar continued to lose value, trading for about
Z$6 million to the US dollar in January 2008 and falling to
Z$70 million to the US dollar by March 2008, even though the
official rate was Z$30,000 to the US dollar (Robertson Economic
Information Services, 2008).

Looking at the broad structure of the economy, most sectors

have been severely affected since the launch of the land reform
program.4 Agriculture's share of GDP declined from 20 percent
in 2001 to 15 percent in 2006, while manufacturing's share
________________________________

3
The World Bank placed Zimbabwe on nonaccrual status in October 2000,
making the country ineligible for International Development Association (IDA)
and International Bank for Reconstruction and Development (IBRD) loans
granted on a concessionary basis and requiring clearance of arrears before new
loans can be made. As of September 2007, the Work Bank had approved 19 IBRD
loans and 14 IDA credits for a total of approximately US$1.6 billion, although
inactive due to the arrears situation.
4
The figures in this paragraph were provided by John Robertson, a leading
independent Zimbabwean economist.

7 | Hany Besada and Nicky Moyo

declined from 19 percent in 2001 to 15 percent in 2006. The
services sector's contribution to Zimbabwe's GDP decreased
slightly from 58.9 percent in 2001 to 57.2 percent in 2006,
although this figure should be seen in the context of a drop in
the share of value-added products in the social services sector
from 10.8 percent in 2001 to 7 percent in 2006. Mining was, to
a certain extent, spared the sharp declines elsewhere in the
economy, with its share of GDP increasing from 3.8 percent in
2001 to 6.4 percent in 2006, thanks to continuing Chinese
investment in platinum mines. In 2006, an estimated 65.8 percent
of the labour force was engaged in industry and the services
sectors combined, while another 32.4 percent worked in
agriculture (CSO and Macro International Inc., 2007).

3. Human Development

In 2007, according to the UN Development Report, Zimbabwe

ranked one hundred and fifty-first out of 177 countries surveyed
(UNDP, 2007), and the portion of the Zimbabwean population
living below US$1 a day stood at more than 80 percent in 2006, up
from 36 percent in 1990 (United States, 2007). Life expectancy
collapsed from 59 years in 1990 to 37 years in 2005, and is now
among the lowest in the world, apparently the combined result
of declining nutrition and the spread of the HIV/AIDS epidemic
(see Table 2). According to estimates of the World Food Program,
at least 44 percent of the Zimbabwean population is malnourished
(United Kingdom, 2008). Moreover, in 2006, Zimbabwe reported
one of the highest ratios of orphans to population in the world,
with an estimated 1.6 million orphans out of a population of 12
million. Much of this is due to the prevalence of HIV/AIDS.

Although literacy rates among the adult population continue

to remain close to 90 percent, the country's educational system
has declined with regard to both quality and resources. Rising

Zimbabwe in Crisis: Mugabe's Policies and Failures | 8

 Table 2: Human Development Indicators, Zimbabwe, 1990-2006

Indicator 1990 1994 1997 2000 2003 2006

Population 10.6 11.6 12.2 12.6 12.9 13.2
Population growth (% per year) 1.1 0.8
Life expectancy at birth (years) 58.6 40 43.8 39.8 37.2 37.3
Infant mortality rate (per 1,000 live births) 52 64 68 81
Under-five mortality rate (per 1,000) 76 99 117 132
Prevalence of HIV (% of ages 15-49) 22 20.1
Incidence of tuberculosis
(cases per 100,000 population) 135.1 333.6 537.7 646.6 678.6 601.0
Aid per capita (current US$) 32 41 27.5 14 14.5 21
Population undernourished (% of total population) 45 47
Human Development Index 0.654 0.613 0.541 0.513
Adolescent fertility rates (births per 1,000 women ages 15-19) 85.5 64.2 61.8
Population living below US$1 a day (%) 25.8 34.9 56
Population living below US$2 a day (%) 83
Adult literacy rate (% ages 15 and older) 80.7 89.4
Internet users (per 100 people) 0 0.4 7.6 9.2

Source: UNCTAD 2007b; World Bank 2007

poverty and hunger, particularly in rural areas and disadvantaged

communities, have contributed to declining school enrollment,
erratic attendance, and a high dropout rate. In 1990, gross
secondary school enrollment stood at 48 percent, but by 2005
it had fallen to 36 percent, complicating Zimbabwe's future human
capital development efforts. Despite a general improvement in
the provision of primary education, quality has been decreasing
due to high teacher-to-pupil ratios, high book-to-pupil ratios, and
increasing economic hardship (Zimbabwe, 2004). Government
attempts to soften the effects of poverty and HIV/AIDS through
a program called the Basic Education Assistance Module, which
supports children from disadvantaged communities, has yielded
little success due to a failure to provide adequate budget financing,
the absence of budget support from external donors, and mis-
appropriation of funds.

9 | Hany Besada and Nicky Moyo

 Zimbabwe's progress towards achieving universal education
levels also appears to be under threat from population movements
into newly resettled areas under the fast-track land reform
program, high attrition levels among teachers – between January
and April 2007, at least 4,500 resigned due to poor wages –
the further depletion of human resources from the effects of
HIV/AIDS, and an ongoing brain drain, particularly to South
Africa. For its part, South Africa is turning to Zimbabweans to
fill its own severe shortage of mathematics and physical science
teachers at both the primary and secondary levels (Honey, 2007).
With a relatively stable economy and salaries above the poverty
line, South Africa has become a natural destination for many
Zimbabwean teachers who are eager to leave the country – some
have reportedly taken up menial jobs in the construction and
agriculture sectors in South Africa during Zimbabwean school
holidays in order to supplement their meagre wages.

In 2005, the government launched a national policy to

promote the use of information and communication tools in certain
sectors of the economy. As part of that program, schools were
targeted for new computer hardware and software, but chronic
electricity shortages and a lack of rural electrification, the migra-
tion of teachers to neighbouring states, and high mortality among
teachers due to the HIV/AIDS pandemic have thwarted attempts
to yield satisfactory results. Indeed, the country lags in the
development of information and communications technology
generally: in 2006, it ranked one hundred and thirty-fifth out of
195 economies in terms of mobile phone penetration, and one
hundred and tenth in terms of Internet penetration (UNCTAD,
2007a). As the government itself concedes (Zimbabwe, 2004),
challenges remain in taking education beyond the digital divide,
a key to achieving the country's Millennium Development Goals.

Zimbabwe in Crisis: Mugabe's Policies and Failures | 10

 4. Food Security

Zimbabwe is an agriculture-based economy: about 70 percent

of its population resides in rural areas and earns a living largely
from subsistence farming, and agriculture contributes 17.6 per-
cent of Zimbabwe's GDP, followed by manufacturing, with 11.5
percent. Yet, the most recent UN Development Report (UNDP
2008) found that around 5.8 million Zimbabweans, or 44 percent
of the population, were undernourished. In December 2007, the
UN World Food Programme (WFP) – which has been distributing
food aid since 2002 to millions of Zimbabweans who are entirely
dependent on outside intervention – warned that Zimbabwe was
one of seven famine “hotspots” and that more than 4.1 million
people would need food assistance by summer 2008. Human
rights organizations within the country believe, however, that
the WFP's estimate is far too low, since it does not take into
account that a sizable segment of the population is nominally
employed at best. The food security problem is exacerbated
by the Mugabe government's refusal for several years to
acknowledge its seriousness, even as human rights organizations,
multilateral institutions, Western governments, civil society, and
the opposition have accused the ruling party of controlling the
supply of food and food aid and of using food as a political
weapon to weaken the opposition and strengthen its support
among rural, impoverished Zimbabweans. During the recent
elections, for example, the government was found to have
coerced desperate people in the rural areas into voting for it.

In May 2007, the Famine Early Warning System Network

(FEWS NET) reported that prolonged dry spells during the 2006-
2007 harvest season in most southern districts had contributed
to low yields of cereals – maize (corn), in particular. Northern
districts received comparatively ample rainfall, but yields in

11 | Hany Besada and Nicky Moyo

 Figure 1: Maize (Corn) Production, Zimbabwe, 1975-2007
2,000,000

1,500,000
Tons Produced

1,000,000

500,000

0
1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007

Source: Robertson Economic Information Services, 2007

these areas were affected by frequent fertilizer shortages. In

August 2007, FEWS NET stated:

Protracted economic decline, exacerbated by a poor 2006-

2007 harvest, as well as current and potential future disrup-
tions of food supply, due to recent price controls and eminent
restrictions on basic commodity imports, have caused a
significant decrease in Zimbabwe's food security, especially
in the south-west and in urban areas. (FEWS, 2007)

Although Zimbabwe once reaped large harvests of cereals

such as maize (see Figure 1), cereal production in the 2007-2008
crop year is expected to meet only 55 percent of Zimbabwe's
requirements, and an additional 1.03 million metric tons of
cereal imports will be needed. Of this amount, some 839,000
metric tons, or about 81 percent, have reportedly been imported.
But chronic shortages of foreign currency – needed to pay for
such basics as fossil fuels, electricity, medicine, and fertilizer5 –
and the vanishing purchasing power of the Zimbabwean dollar

________________________________

5
Price controls have greatly reduced the output of Zimbabwe's main domestic
fertilizer companies, and the country has gone from a net exporter to a net
importer of fertilizer, putting further strain on foreign exchange reserves.

Zimbabwe in Crisis: Mugabe's Policies and Failures | 12

 will pose a serious challenge for the government in its attempt
to make up the cereal shortfall.6 The country thus will need
substantial assistance in 2008. The WFP and the Consortium
for Southern African Food Security Emergency tentatively plan
to import about 352,000 metric tons of supplementary food aid,
mostly in the form of maize. While it is conceivable that these
import requirements can be met, there are concerns about the
ability of the Grain Marketing Board to distribute the food – in the
past, the board's efforts have been erratic and local shortages
are common (FEWS, 2007). The poor 2006-2007 harvest and
the continued shortage of foreign currency are expected to fuel
further inflation, with the ever-increasing cost of living weighing
heavily on poor households. Maize prices increased by more
than 50 percent from January to March 2007, and those few
farmers with stock remaining from the 2005-2006 harvest held
onto their grain for their own consumption, causing further
shortages in the local market.

In an attempt to improve food security, the government is

encouraging a shift from mainly rain-fed agriculture to irrigated
crop production in the smallholder sector. The target is to
increase maize productivity to 3,000 metric tons per hectare by
2015 (Zimbabwe, 2004). Currently, land tenure issues, including
property rights, have prevented commercial banks from engaging
in lending in the agrarian sector. All land for agricultural use is
held by the state, and 99-year leases are held by all individuals
who have been allocated farms. Moreover, lack of mechanization,
fuel shortages, and persistent power shortages have reduced the
land available for tillage.

________________________________

6
“Zimbabwe: Food security forecast to worsen,” IRIN: Humanitarian News
and Analysis, August 2, 2008. Available at: http://www.irinnews.org/Report.aspx?
ReportId=77703.

13 | Hany Besada and Nicky Moyo

 The Reserve Bank of Zimbabwe, through its much criticized
quasi-fiscal activities to induce agricultural output, introduced
a range of price-support structures, including subsidies on fuel,
fertilizers, and farm equipment. Most of this funding was chan-
nelled through the state-controlled Agriculture Bank. Reports
indicate that most of the loans were nonperforming, with the
majority of funds being used for activities other than farming,
such as trading fuel and commodities on the parallel market. In
his 2007 budget speech, the minister of finance announced that
all quasi-fiscal activities would be transferred to the national
budget, but there is no evidence so far to indicate that the
Reserve Bank has refrained from undertaking quasi-fiscal
activities – in fact, the Reserve Bank, in its April 2007 monetary
policy statement, announced a new range of price-support
structures for tobacco. Zimbabwe's failure to address continuing
central bank quasi-fiscal losses – estimated to have been the
equivalent of about 75 percent of GDP in 2006 – has interfered
with both monetary management and the independence and
credibility of the Reserve Bank. Since such losses are financed
through money creation or the issuing of Reserve Bank securities,
they are the chief contributor to Zimbabwe's hyperinflation. In
Zimbabwe, however, inflation has been blamed on the Reserve
Bank's substantial quasi-fiscal activities, rather than on conven-
tional government deficits: the average central government
deficit between 2003 and 2005 was below 3 percent of GDP
and, since 2001, the primary balance has been in surplus every
year except 2004.7 In fact, quasi-fiscal activities, massive price
distortions, and poor governance in the public sector have placed

________________________________

7
For evidence on the close relationship in Zimbabwe between money and
inflation until 2004, see Munoz (2006). The empirical results indicate that,
except for 2004, a stable demand for money as a function of the parallel market
exchange rate, inflation, and real output can be found in Zimbabwe.

Zimbabwe in Crisis: Mugabe's Policies and Failures | 14

 an unbearable burden on public finances. Fiscal expenditure
will need to be prioritized within a tight regime, with increases
targeted at safety nets and food security.

5. Regional Spillover

The evolving, interrelated, and deteriorating social, economic,

and social crisis in Zimbabwe has contributed to an unprece-
dented exodus of Zimbabweans, with more than 3.5 million
people, approximately 25 percent of the population, having
emigrated over the past few years to countries such as Zambia,
Botswana, the United Kingdom, Australia, and United States,
and particularly South Africa, which, by conservative estimates,
more than a million Zimbabweans have entered, the majority
illegally (Pendleton, 2006).8 Large numbers of Zimbabweans are
believed to make it to the streets of Gauteng province, South
Africa's industrial and commercial hub, as traders and migrant
workers.9 The problem is exacerbated by South African visa

________________________________

8
According to South African immigration officials, at least 180,000 Zimbabweans
were deported between June 2006 and December 2006 (Honey, 2007), while the
International Organization for Migration (IOM) reports that, from January to
June 2007, more than 100,000 Zimbabweans were deported from South Africa.
In 2007, IOM opened a repatriation facility on the Zimbabwean side of the Beit
Bridge border post to provide food, transport, and assistance to deportees.
9
Explanations for the motives and drivers of external migration from Zimbabwe
are varied, according to the Zimbabwe Torture Victims Project (2005), which
conducted a “snap” survey of 236 Zimbabweans living in Gauteng in 2005.
While the findings were not representative of all Zimbabweans living in Gauteng,
the majority of those surveyed identified deteriorating economic conditions as
having caused them to leave in the hope of finding better opportunities in their
more prosperous southern neighbour. A large number of respondents indicated
that political repression by the state had strengthened their determination not to
return to Zimbabwe until political and economic conditions improve with the
departure of Mugabe from office. Merely 20 percent of the respondents held valid
permits to be in South Africa, while another 16.5 percent had either asylum
applications or refugee permits. The majority (62 percent) had held a skilled or
semi-skilled position at one time or another in Zimbabwe.

15 | Hany Besada and Nicky Moyo

requirements for would-be Zimbabwe travellers and by a corrupt
South African Home Affairs Department, which makes it increas-
ingly easy to obtain illegal identity cards and work permits.

These developments are raising growing concerns in South

Africa, where studies indicate a direct link between crime and
illegal migration, not only from Zimbabwe but also from another
impoverished neighbour, Mozambique. Growing xenophobia
towards foreign black workers is evident in the South African
public and media – the newspaper Daily Sun has called for the
erection of a “Great Wall of China” along the border to keep out
Zimbabweans. In recent months, violence targeted at foreign
migrants from southern Africa has flared in townships and cities
across South Africa, claiming more than 62 lives, displacing
more than 100,000 people, and leading to 400 arrests. In an
unprecedented move, South African president Thabo Mbeki
ordered the deployment of troops to assist police in quelling the
violence. Zimbabwe and Mozambique have subsequently begun
“voluntary repatriation” of their citizens.

Today, approximately 50 percent of households in Zimbabwe

are being sustained by remittances from abroad, mostly from
family members and friends working in unskilled positions or
in South Africa's informal economy (Zimbabwe, 2007). These
remittances provide a social safety net for many desperate house-
holds. Remittances move mostly through informal channels,
due to foreign-exchange controls, inconsistent monetary and
exchange rate policies, and the prohibition of operations by
money transfer agencies in Zimbabwe. A growing number of
traders now cross the border to buy in South Africa commodities
such as soap, cooking oil, and foodstuffs, which are destined
for resale in Zimbabwe. These traders have become the lifeline
for many local retailers in Zimbabwe, who are increasingly
dependent on these supplies of basic commodities following the

Zimbabwe in Crisis: Mugabe's Policies and Failures | 16

 collapse of local manufacturing. Remittances are also an impor-
tant source of scarce foreign exchange, injecting approximately
US$490 million into the national economy every year (Zimbabwe,
2007). In an effort to harness funds from Zimbabweans in the
diaspora, the Reserve Bank of Zimbabwe launched a foreign-
currency-denominated bond in December 2006, linked to the
London Interbank Rate plus a 10 percent premium and guaran-
teed by the state. With low external foreign currency reserves
and a record of defaults on sovereign debt, however, it remains
to be seen whether this strategy will prove successful.

The current drain of skilled labour will be a major obstacle

to any recovery efforts in Zimbabwe. The Scientific and Industrial
Research and Development Center (SIRDC) concluded that, by
2003, more than 490,000 skilled Zimbabweans had emigrated
due to limited employment opportunities and a weakening
economy (Chetsanga and Muchenje, 2003); this figure has since
doubled. Particularly hard-hit is the country's health care sector:
it is thought that up to 80 percent of the pharmacists, therapists,
doctors, nurses, and radiologists who were trained in the country
after independence have already emigrated – mainly to the United
Kingdom, Australia, South Africa, Namibia, and Botswana –
including approximately 1,950 certified nurses and more than
2,100 medical doctors (Bloch, 2005). According to the South
African weekly, Mail & Guardian, approximately 90 percent of
junior doctors trained by the University of Zimbabwe's Medical
School leave the country within four years of graduating.

The acute shortage of health professionals has further

weakened the country's fragile health sector, even as it struggles to
contain the HIV/AIDS pandemic, and starvation and malnutrition
due to food shortages. While Zimbabwe reported a three-year
decline in new HIV cases, these gains may be reversed as the
economic crisis compels many Zimbabwean males to go abroad

17 | Hany Besada and Nicky Moyo

in search of work, with some returning unknowingly HIV-positive
as the result of extramarital relationships. Further, the potential
for increased rates of infection is compounded as growing
numbers of women resort to prostitution to support their families.
The increased smuggling of young Zimbabwean girls to work
in the South African sex trade also has long-term implications
for efforts to halt or reverse the HIV/AIDS pandemic.

6. Internal Migration

Within Zimbabwe, mass movements of population have been

occurring in both urban and rural areas. In May 2005, the Mugabe
government launched an “urban clean-up program,” Operation
Murambatsvina (Drive Out Rubbish) aimed at the urban poor,
who are seen by the regime as a source of political opposition and
economic noncompliance. The government's actions destroyed
the livelihoods and homes of some 700,000 people and drew
widespread international criticism. In total, approximately 2.4
million people were affected to some degree by the government's
efforts to eradicate the urban informal sector, ostensibly under
the pretence of restoring law and order. Following a five-week
fact-finding visit, UN Special Envoy on Human Settlement Issues
Anna Tibaijuka issued a damning report (United Nations, 2005).
Stating that the government had precipitated an immense human-
itarian crisis, she called on the government to build adequate
housing for the displaced. Little has been done, however, to house
the thousands of displaced in Harare and other major cities across
the country. In response to international criticism, the government
launched Operation Garikayi to provide housing to the internally
displaced, but many of the houses that have been built were
allocated to ZANU-PF supporters and government cronies; the
few that were actually built for the victims of the government's
forced removal program were of poor quality and perceived to
be so dangerous to live in that recipients refused to move into

Zimbabwe in Crisis: Mugabe's Policies and Failures | 18

 them. Many of those who experience forced removal, like the
others who have been compelled to flee their home areas,
have faced some form of organized violence or torture at the
hands of security forces. Many have been found to be in need
of psycho-social and medical assistance (Zimbabwe Torture
Victims Project, 2005).

7. Steps Needed for Recovery in Zimbabwe

Rebuild trust in government

Government needs to be returned to the centre of development

and economic management processes in Zimbabwe. For that,
trust needs to be rebuilt in government. Poor governance, cor-
ruption, politicization, and the militarization of institutions of
governance have eroded the confidence of citizens, investors,
and existing and potential donors. Improving governance would
build the confidence required to catalyze foreign investment,
official development assistance, and civic participation. Restruc-
turing and reform of the security sector, the judiciary, and the
public service would ensure a platform for the re-engagement
of the Zimbabwean government in the short term. In the long
term, a review of the Constitution, reform of undemocratic laws,
and reform of the business environment would create conditions
for sustainable economic recovery.

Harness remittance and financial flows for

sustainable development

While skilled migrants might want to invest in new business

initiatives in the country if economic conditions warrant, they are
unlikely to return home until they are assured that their liveli-
hoods will be secure. Since remittances are more stable than
official development assistance and foreign direct investment,

19 | Hany Besada and Nicky Moyo

they will remain an important source of foreign exchange for
the government and critical to the economic survival of the
poorer segments of society. The government, therefore, should
encourage transfers via formal channels by relaxing foreign
exchange and capital controls, lowering taxes on incoming
remittances. It should also allow domestic banks to operate over-
seas, providing matching grants, and offering loan and pension
schemes and mortgage bonds aimed at Zimbabweans abroad.
Educating Zimbabweans about the benefits and processes of
formal financial institutions could also reduce the attraction of
the informal economy.

Resume relations with multilateral institutions

Key to Zimbabwe's return to the international community

will be the resolution of sovereign debts to multilateral institu-
tions such as the World Bank, the International Monetary Fund,
and the African Development Bank. Only then will Zimbabwe
qualify for greater assistance, grants, and debt relief.

Develop a land tenure and agriculture system to ensure

food security

A return of white farmers to portions of the 4,000 expropriated

farms is neither feasible nor politically practical. Zimbabwe will
not return to its status as the breadbasket of southern Africa – at
least in the medium term. To ensure food security, an internally-
driven land reform process should be initiated, aimed at address-
ing the land title issue. Measures would include enabling farmers
to access credit and develop collateral; establishing multiple
farm ownerships to ensure equity; creating land institutions to
facilitate the transparent transfer and management of land; estab-
lishing banks to provide finance; providing technical assistance;
and developing transparent agriculture markets. In the absence of

Zimbabwe in Crisis: Mugabe's Policies and Failures | 20

 political change, measures that are urgently needed include the
training of staff in land institutions, agricultural technical support
centres, and in financial services. Future donor efforts should
be targeted at developing the technical capacity of resettled
farmers, at market reforms in the agricultural sector, and at a
broad-based compensation system for land that was transferred.

Reform economic policies and institutions

Central to Zimbabwe's economic mess are the Mugabe gov-

ernment's disastrous backward-looking policies, which have
brought with them increased poverty, unemployment, capital
flight, low exports, and drained foreign exchange reserves.
Misguided legislative actions and national policies – such as the
Indigenization and Economic Empowerment Act of March 2008,
frequent price and exchange controls, failure to target inflation,
and, above all, the involvement of the Reserve Bank of Zimbabwe
in quasi-fiscal activities – have further contributed to the eco-
nomic malaise. An economic stabilization plan, including sup-
portive legislation, is urgently needed. Particular emphasis should
be placed on eliminating all forms of exchange and price control,
creating investor-friendly policies, returning the Reserve Bank
of Zimbabwe to a focus on monetary policies while carrying
out forensic accounting investigations into its prior activities,
developing strategies to pay off outstanding arrears on sovereign
debts, and initiating broad-based governance reforms.

Improve the UN's response to assist displaced Zimbabweans

The United Nations should play a larger role in responding

to the needs of Zimbabweans who have been forced out of their
homes and displaced across the region. It should establish a
mechanism to improve coordination among national and inter-
national organizations dealing with the crisis in the region. Local

21 | Hany Besada and Nicky Moyo

and international media tend to portray displaced Zimbabweans
as essentially economic refugees. The international community,
spearheaded by the UN, should publicly acknowledge that
there are countless legitimate protection issues and growing
humanitarian needs facing Zimbabweans in neighbouring
countries, particularly in South Africa, and its contingency
planning should reflect more accurately the true nature of the
flight of Zimbabweans from their country

Prepare an economic recovery program and provide

adequate funding

The international community, led by the EU and the United

States, should establish a trust fund for the recovery of Zimbabwe's
economy under a post-Mugabe government. Coordination of
international aid should ensure that that money and technical
assistance delivered through the trust fund best reflects the
post-Mugabe government's economic recovery policies and the
economy's absorption capacity. Moreover, it is of great impor-
tance that donor support for a trust fund should depend on the
government's willingness to undertake often difficult macro-
economic reforms.

Encourage and facilitate the return of the diaspora

The international community and any post-Mugabe govern-

ment will need to encourage and facilitate the return of millions
of displaced Zimbabweans living outside of the country.
Repatriation of many able Zimbabweans would help to ensure
the revival of economic growth in the medium and long term
by supplying desperately needed technical, entrepreneurial and
managerial skills for private and public institutions. The inter-
national community will have an important role to play in facil-
itating the return of Zimbabweans abroad when the time comes.

Zimbabwe in Crisis: Mugabe's Policies and Failures | 22

 8. Conclusion

As Zimbabwe marked 28 years of independence from white

minority rule in April 2008, a feeling of despair and anxiety
loomed over all corners of this impoverished and increasingly
turbulent southern African state. Once regarded as the region's
breadbasket, blessed with an abundance of mineral deposits and
the most skilled and educated workforce on the continent, as well
as a thriving agricultural sector, Zimbabwe over the past eight
years has become a political liability to the rest of the region
and an economic and social basket case. With the world's highest
inflation rate, unserviceable debts, a current life expectancy of
36 years, poverty rates of more than 80 percent, an unemployment
rate of 85 percent, and more than 1.8 million Zimbabweans
receiving food aid last year, a crisis of severe proportions – even
by regional standards – is unfolding.

Although the path forward will be difficult, Zimbabwe

remains among the most hopeful places on the continent, given
the inevitable exit of Robert Mugabe's government, through
either the ballot box or an inevitable violent explosion against
his rule – witness the recent mayhem that accompanied the 2008
presidential and legislative elections. As Roman scholar Pliny
the Elder articulated more than 2,000 years ago, “there is always
something new out of Africa.” It is time for something new to
come out of Zimbabwe. The country has one of the best-educated
populations on the continent. Its well-developed infrastructure
is the envy of its neighbours. And, in the recent elections,
Zimbabweans demonstrated their political courage and com-
mitment to democracy, which promises to pave the way for
a post-Mugabe transition towards a more accountable and
responsive government.

23 | Hany Besada and Nicky Moyo

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 IMF (International Monetary Fund). (2007). Direction of
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Pendleton, W. (2006). “Migration, Remittances and

Development in Southern Africa.” South African
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 ______ (2007). Monetary Policy. Harare: Reserve Bank
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27 | Hany Besada and Nicky Moyo

CIGI Working Paper Series
(for a full listing please visit: www.cigionline.org)

37 Peter K. Yu, “Building Intellectual Property Coalitions

for Development.” September 2008.

36 Gurpreet Mahajan, “Higher Education Reservations

and India’s Economic Growth: An Examination.”
September 2008.

35 Heidi Ullrich, “Global Health Governance and

Multi-Level Policy Coherence: Can the G8 Provide
a Cure?” July 2008.

34 Frédéric Grare, “Anatomy of a Fallacy: The Senlis

Council and Narcotics in Afghanistan.” February 2008.

33 Usman Hannan and Hany Besada, “Dimensions of

State Fragility: A Review of the Social Science
Literature.” November 2007.

32 Carin Holroyd, “Science and Technology Policies,

National Competitiveness, and the Innovation Divide.”
October 2007.

31 Agata Antkiewicz and Bessma Momani, “Pursuing

Geopolitical Stability through Interregional Trade:
The EU's Motives for Negotiating with the Gulf
Cooperation Council (GCC).” September 2007.

30 Robert Wolfe, “Can the Trading System Be Governed?

Institutional Implications of the WTO’s Suspended
Animation.” September 2007.

29 Andrew F. Cooper, “Celebrity Diplomacy and the G8:

Bono and Bob as Legitimate International Actors.”
September 2007.

Zimbabwe in Crisis: Mugabe's Policies and Failures | 28

 28 Hany Besada, “Egypt's Constitutional Test: Averting the
March toward Islamic Fundamentalism.” August 2007.

27 Hany Besada, “Fragile Stability: Post-Apartheid South

Africa.” August 2007.

26 Bessma Momani and Agata Antkiewicz, “Canada’s

Economic Interests in the Middle East.” July 2007.

25 Rajiv Kumar, Amitendu Palit and Karan Singh,

“Sustainability of Economic Growth in India.”
May 2007.

24 OG Dayaratna-Banda and John Whalley, “After the

MFA, the CCAs (China Containment Agreements).”
May 2007.

23 Simon J. Evenett, “EU Commercial Policy in a

Multipolar Trading System.” April 2007.

22 OG Dayaratna-Banda and John Whalley, “Regional

Monetary Arrangements in ASEAN+3 as Insurance
through Reserve Accumulation and Swaps.” April 2007.

21 John Whalley and Weimin Zhou, “Technology Upgrad-

ing and China's Growth Strategy to 2020.” March 2007.

20 Peter I. Hajnal, “Summitry from G5 to L20: A Review

of Reform Initiatives.” March 2007.

19 Tony Porter, “Beyond the International Monetary Fund:

The Broader Institutional Arrangements in Global
Financial Governance.” February 2007.

18 Ramesh C. Kumar, “Poverty Reduction and the Poverty

Reduction Facility at the IMF: Carving a New Path or
Losing Its Way?” February 2007.

29 | Hany Besada and Nicky Moyo

About The Centre for International Governance Innovation

The Centre for International Governance Innovation

is a Canadian-based, independent, nonpartisan think tank
that addresses international governance challenges. Led by
a group of experienced practitioners and distinguished
academics, CIGI supports research, forms networks, ad-
vances policy debate, builds capacity, and generates ideas
for multilateral governance improvements. Conducting an
active agenda of research, events, and publications, CIGI’s
interdisciplinary work includes collaboration with policy,
business and academic communities around the world.

CIGI’s work is organized into six broad issue areas:

shifting global power; environment and resources; health
and social governance; trade and finance; international law,
institutions and diplomacy; and global and human security.
Research is spearheaded by CIGI's distinguished fellows
who comprise leading economists and political scientists
with rich international experience and policy expertise.

CIGI has also developed IGLOOTM (International

Governance Leaders and Organizations Online). IGLOO
is an online network that facilitates knowledge exchange
between individuals and organizations studying, working
or advising on global issues. Thousands of researchers,
practitioners, educators and students use IGLOO to con-
nect, share and exchange knowledge regardless of social,
political and geographical boundaries.

CIGI was founded in 2002 by Jim Balsillie, co-CEO of

RIM (Research In Motion), and collaborates with and grate-
fully acknowledges support from a number of strategic
partners, in particular the Government of Canada and the
Government of Ontario. CIGI gratefully acknowledges
the contribution of the Government of Canada to its
endowment Fund.

Le CIGI a été fondé en 2002 par Jim Balsillie, co-chef

de la direction de RIM (Research In Motion). Il collabore
avec de nombreux partenaires stratégiques et exprime sa
reconnaissance du soutien reçu de ceux-ci, notamment de
l’appui reçu du gouvernement du Canada et de celui du
gouvernement de l’Ontario. Le CIGI exprime sa recon-
naissance envers le gouvernment du Canada pour sa
contribution à son Fonds de dotation.

To learn more about CIGI and IGLOO please visit:

www.cigionline.org and www.insideigloo.org

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57 Erb Street West
Waterloo, Ontario, Canada N2L 6C2
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