Monday, June 27

Zimbabwe: From Hyperinflation to Hope

By: Anton Kozyrev

Zimbabwe has had a long road to its present-day state — including from an economic standpoint. While the economic activity and history of the area dates back 100,000 years, including the emergence of kingdoms such as the Rozvi and Mthwakazi, the land that is today the Republic of Zimbabwe was integrated into the present-day economic system in the 1880s. This was, of course, when the area was colonized by European powers. After the Portuguese had tried unsuccessfully to invade, it was British mining magnate Cecil Rhodes who proved instrumental in enabling the British Empire to colonize the land.

This marked the beginning of company rule in the state that would be called Rhodesia in his honor. This state would continue to exist in a variety of administrative forms, all under the dominion of the British Empire, until the 1960s. Rhodesia was split into three entities, two of which — Nyasaland and Northern Rhodesia — became Malawi and Zambia. The third was Southern Rhodesia, where white settlers wished to maintain minority rule. To do so, they declared independence from British rule and harshly suppressed resistance to colonial rule. After the 15-year long Rhodesian Bush War between the Southern Rhodesian government and Zimbabwean liberation forces. After the Lancaster House Agreement of 1979, elections were held. The party ZANU (Zimbabwe African National Union) won a decisive victory, and Robert Mugabe was elected the first Prime Minister of independent Zimbabwe.

Mugabe’s rule over Zimbabwe lasted decades, from 1980 until his ouster in 2017. His position in the nation’s history is enigmatic — while he may be a symbol of the country’s liberation in the late 20th century, he is simultaneously the face of many of Zimbabwe’s economic woes that led to his removal from power. 

When Mugabe was pressured to step down from power in the 2017 military coup d’etat, Emmerson Mnangagwa replaced Mugabe as the head of state. Since then, the role of Mnangagwa has been that of a restorer, with the primary goal of stabilizing the country economically. A crucial issue plaguing Zimbabwe’s economy has been hyperinflation — particularly within the past decade. While today’s scholars and students of inflation may point to more contemporary instances of large-scale inflation, such as Venezuela, Zimbabwe of 2009 maintains an inflationary record. The nation holds the record for the largest denomination of currency ever issued: 100 trillion Zimbabwe dollars (Z$100,000,000,000,000). This was first issued and circulated by the government in early 2009, at which point inflation had eroded purchasing power so substantially to the point where 100 trillion became a needed banknote denomination. According to the Dallas Fed, this stood in stark contrast to the economic well-being of Zimbabwe shortly after it gained independence, when one Zimbabwe dollar had been the equivalent of $1.54.

Evidently, hyperinflation is one of the nation’s most pressing issues. Undoubtedly, it is Mnangagwa’s top priority — in order to effectively spur a country’s growth, one needs to first stabilize it. Only after stability is achieved may Zimbabwe pursue expansion opportunities in earnest. However, this has not deterred Mnangagwa from laying out a groundwork of actions intended to set up a future economic path for Zimbabwe. While Zimbabwe does promise to implement common sense economic reforms that are considered standard practice in every economy, there are several key aspects of Mnangagwa’s plan that are more indicative of the direction of Zimbabwe.

For one, there has been a move toward an organized, structured devolution of authority and power to local provincial governments. Zimbabwe is a unitary state, meaning the provinces can only have the power that the central government chooses to delegate. This does, of course, take some control out of the central government’s hands, but the upside of this policy is to enable certain provinces to take definite courses of action that are best suited for their own provincial development. By the thoughtful and individually-determined allocation of government resources, a more-even economic growth is possible within Zimbabwe as each province focuses on the most critical issues facing them.

Additionally, Zimbabwe’s government has, particularly on the provincial level, promoted traditional cultural beliefs and values, in the hopes that they will enable stronger economic growth and development. For instance, the Shona people have a proverb that says “you do not educate your child for yourself alone; education is for society, by society.” Such a collectivistic nature and belief in service to an entity greater than oneself, whether it be local community or a national community, may go a long way toward unifying a national purpose and driving economic development not just for the self, but for Zimbabwe.

Zimbabwe also benefits from several key trends in the world — particularly with respect to finding trading partners. Since the U.K. has left the European Union, the former has had trouble competing with the latter for trade deals. After all, trading with the European Union bloc as an aggregate is far more appealing than trading with just the U.K. This enables Zimbabwe to forge connections with large economies such as the U.K. who urgently needs more latitude in terms of nations to conduct trade with. Of course, one would also be remiss not to consider China’s substantial influence in the African continent at large — which poses another opportunity for Zimbabwe to forge closer ties with a power that aims to expand its sphere of influence. On the flip side, the United States’ approach toward China might pose yet another opportunity for Zimbabwe. Given the present U.S. strategy of doubling down on alliances and key trading networks to counter Chinese expansion, there may be an opening for Zimbabwe to convince the U.N. and U.S. to lift sanctions that the government asserts have curtailed Zimbabwean economic growth. In fact, Mnangagwa implied as much in a recent tweet, wherein he expressed optimism for future lifting of the sanctions.

Of course, Zimbabwe still has several challenges to deal with — from the global impact of COVID-19 to the still-fragile economy. But with a healthy vaccination rate and an economic policy aimed at stabilizing the economy, there is hope for a stabilizing point on the horizon. Once Zimbabwe reaches this “stabilizing point” in its economy, the conditions may be ripe for the nation to begin exploring its own massive potential. One must remember that Zimbabwe was often referred to as the “breadbasket” of Africa. By capitalizing on its well-educated population and favorable geopolitical circumstances, Zimbabwe can place itself on a path to transition from a strong agrarian foundation to a strong industrial foundation.