Zimbabwe�s Lost Decade: Politics, Development and Society

5. Development Deferred

85 Introduction Nowhere has Zimbabwe performed as poorly as it has done as in economic development since it gained independence in 1980. The country’s economy shrank from an estimated USD9 billion in 1997 to USD4 billion in 2008. This is as surprising as it is disappointing. The surprise stems from the country’s inheritance of the second most industrialised and diversified economy, and with an enviable infrastructure, on the African continent. Its economy was also the most balanced, with the manufacturing sector contributing about 25 per cent of GDP. Compared to its immediate neighbours Botswana, Mozambique and Zambia, Zimbabwe was well-endowed with natural and human resources, resources which would have provided it with a head start in growth and development. Yet whatever growth occurred in the first decade of independence was, at best, mediocre; stagnation set in the 1990s while contraction marked a substantial decline between 2000 and 2008. If Zimbabwe’s growth had been steady, its GDP would now be about USD15 billion, or three times the current GDP (Zimbabwe Independent, 4 June 2010). What went wrong? Why is Zimbabwe now the ‘sick economy’ of Southern Africa? These are complex questions that this chapter seeks to address. Answers to the questions provide a clue to understanding the processes that unfolded during Zimbabwe’s lost decades. The Economy at Independence The inherited economy had particular strengths and weaknesses. One of the strengths was the forcefulness and coherence of state economic strategy, especially during UDI (1965–1979). This consisted of carefully chosen and systematically targeted instruments ‘in support of an essentially privately controlled economy, in which the major economic interests exhibited little dissonance with the nature, objectives and methods of the state’ (Khadhani 1986:104). The intervention was primarily prompted by 5 Development Deferred 86 Zimbabwe’s Lost Decades 86 the systematic need to keep a tight rein on fiscal and external account balances and maintain stability in the labour markets. Market forces were carefully attenuated in order to protect the high income levels and living standards of the white minority on which the Smith regime depended for legitimacy and technical and administrative skills. Despite sanctions, there was an economic boom from 1965 to 1972 which enabled a rapid restructuring of the economy at sectorial level, producing an annual GDP growth of six per cent. Second, UDI had the effect of widening the economy’s access to investible financial surpluses, primarily in the shape of the large blocked balances that would otherwise have been remitted abroad. In such circumstances , foreign firms were compelled to redirect surpluses towards reinvestment and thus retain them in the overall domestic system. This facilitated investment in product diversification. Third, the sanctions and other siege conditions facilitated the emergence of the Treasury and the Reserve Bank as the central loci of influence and authority in the running of the economy. This became evident in the tight control that was exercised over the use of foreign exchange and the level of the budget deficit as well as in the deliberate direction of resources towards productive sectors. Such sectors were designated to spearhead diversification and greater import substitution capability, particularly in metal and engineering products, mineral beneficiation and agro-industrial linkages. There were, however, several weaknesses in the UDI economy. These became quite evident in the mid-1970s when a prolonged recession set in. Capacity utilisation dropped to 75 per cent in 1978 and employment growth stalled. Import substitution and product diversification ran into problems, the first of which was the structure and limited size of the domestic market and the second the constrained scope for growth given the economy’s limited capacity to finance imported inputs. There were large expectations, therefore, that the lifting of the economic embargo at independence would provide a major stimulus to the economy. Defining ‘Development’ and an ‘Economic Strategy’ Zimbabwe’s lacklustre economic performance was not due to a lack of economic plans and clearly articulated policy objectives. Amongst early statements and plans of intent were the Transitional National 87 87 Development Deferred Development Plan (TNDP) (1982–1985) and the First Five-Year National Development Plan (FFYNDP) (1986–1990). Prior to these two documents, the Mugabe government had published the Growth with Equity statement , which spelt out broad economic policy objectives as being: to establish progressively a society founded on socialist, democratic and egalitarian principles … to end imperialist exploitation, and achieve greater and more equitable degree of ownership of...