Table 2: Coping strategies of farm workers after land reform

Coping strategy Number Percentage
Retraining 1 1
Informal deals 2 4
Cross border trading 4 5
Working in other countries 4 5
Becoming a beggar 5 7
Migrating to rural areas 7 9
Migration to town 17 23
Continue staying on the farm 21 28
Continue working for old employer 22 29
Buying and selling 31 41

 

The Table above shows, there was considerable displacement, migration and diversification of and by farm workers during this decade as a consequence of the FTLR. With the greatest proportion of workers coping after eviction by “buying and selling”, we see how the informal sector became to thrive. It is interesting too that a few workers migrated to rural areas, with only nine per cent saying that they had chosen this strategy. It was also interesting that 17 per cent stated that they worked for the new farmer.

There was also a mismatch about the supply and demand of foreign currency. Foreign exchange reserves also deteriorated quickly with the situation getting worse levels by the same year 2000. It was with this background that yet another set of reforms was introduced. This time it was called Millennium Economic Recovery Programme (MERP). MERP launched in August 2001, it was another government attempt to address the declining economic performance. It was a short (18 months) economic recovery programme. It sought to mobilise all the stake holders, the government, and business, labour and civil society, to implement a set of reform measures that were designed to restore macro-economic stability. MERPs prime objective was to restore vibrant economic growth and remove the fundamental causes of inflation. The burden of adjustment was to be on the fiscal policy measures to reduce expenditure and enhance revenues.Like previous programmes, MERP was to a great extent, a failure. For example, the target of reducing the budget to 3.8 per cent of GDP in 2000 was not achievable .My mid 2000 it had already risen above 14 per cent of GDP. In fact, from 2001 to the time of writing, the macro-economic environment had become so turbulent and unpredictable. A number of multinational companies closed and many people lost their jobs. The level of unemployment may now be above 75 per cent, considering the percentage of people who lost their jobs as a result of Operation Clean Up

The Zimbabwean economy spiralled rapidly into a world record decline. By 2006 GDP per capita was 47per cent lower than it was in 1980 and 53per cent below its 1991 peak. Formal sector income levels also experienced a drastic decline. At the end of December 2006, the average minimum wage for agriculture and domestic workers of Z$2,800, was only 3per cent of the food Datum line, while average minimum wage of Z$57, 000 in the same period was 16.6 per cent of the Poverty Datum Line, prompting the chief economist of the ZCTU to label these ‘Starvation wages’. A wages declined, their share in the gross Domestic income decreased from an average of 49 per cent between 1985 and 1990, to 41 per cent between 1991 and 1996, and dropping dramatically to 29 per cent between 1997 and 2003. This decline or downfall in the context of the formal-sector employment shrinking from 1.4 million in 1998 to 998,000 in 2004.

Hyperinflation reached an official level of 230 million per cent by the end of 2008, devaluing both incomes and savings. Peter Robinson explained the effects of this process on the various classes in the economy:

Hyperinflation is…. Notorious for concentrating incomes in the hands of the rich while impoverishing the poor, often making already highly unequal societies even more divided. In Zimbabwe’s case, this undesirable process has been magnified through being accompanied by high level of patronage. Key resources in a highly distorted environment (such as cheap credit and foreign currency at the official rate) have been allocated to selected individuals and groups, enabling them to amass enormous levels of wealth in a very short space of time. Those with political clout have borrowed heavily from the banks and then declined to pay, waiting for inflation to remove the burden of the original debt and claiming the ‘in duplum’ rule to evade interest. The small depositors bear the cost, in effect subsidizing the rich.

This process contributed to the share of profit in Gross Domestic Income rising from an average of 50 per cent between 1985 and 1990 to 73 per cent between 1997 and 2003, while the estimate of Zimbabweans living below the poverty Datum line was 85 per cent in 2006. The combination of the agrarian crisis, formal sector employment decline and the growing informalisation of the economy created huge challenges for workers. The loss of the labour force remittances to rural households severely impacted on the capacity of rural urban linkages to be maintained, and thus affected the food security of both rural and urban families.

The loss of the formal employment sector was a terrible blow to the government as a means to generate income through taxes. As a result of the loss of employment it simply meant that the government did not receive as much income as it did. Also the lack of people’s ability to receive income from employment meant that they could not pay bills (water, electricity and city council) and as a result of this these parastatals were not receiving funds for effective service delivery. Consequently the service delivery was poor and the infrastructure depleted, due to insufficient funds for maintenance and adequate payment for their employers and this affected the country.

The ruling party created incentives for trading goods in short supply ‘not only as a way to become rich but also as virtually the only way to survive’. The rewards for long term investment in production were minuscule compared to the rapid profits of buying cheap and selling dear. Additionally, the informalisation of production structures that intensified in this period also provided new opportunities for entrepreneurs with links to the party and the state to accumulate wealth in the gold-and diamond – mining sectors. In such sectors reliance on the states monopoly of coercion and selective law enforcement was a central factor in this race for riches.

Another major effect of the economic meltdown in the country, in particular of the dizzying speed of hyperinflation, was the rapid loss of value of the Zimbabwean currency and the resulting ‘dollarization’ of economic transactions. As the Zimbabwean dollar lost its value, those with the capacity to do so transferred a significant share of their assets into foreign currency; and as goods and services were increasingly available only for foreign currency, more people left the country. In what became an unprecedented development, in 2002 Zimbabwe was faced with shortage of local bank notes. Long winding queues outside banks became the norm especially during the end of the month when most employees get paid. Regardless of ones needs and good account balance, one could not get the amount of cash he or she needed or more cash than was stipulated each day by his bank branch. By Christmas time in 2002, most supermarkets had empty shelves. Basic commodities including mealie-meal, bread, milk, soap, salt, margarine, meat etc. could not be found. The situation was chaotic. As a result of foreign currency shortages, the country’s external payment arrears rose to about US$1.4 billion by January 2003 to hit the 600 per cent figure by December 2003. The financial service sector was also characterised by massive indiscipline. Later on in the midst of this crisis a number of banks were closed and temporarily placed under the management of the Reserve Bank of Zimbabwe-appointed curator. Banks include Time Bank, Inter Market Building Society, Royal bank and Trust Bank. As a result most people did not have access to their own money that was in these banks. This eroded customer confidence in banks who had been affected by this problem.

To deal with the shortage of bank notes the government introduced bearer cheques, which successfully alleviated the shortage of bank notes. In an attempt to solve the foreign currency crisis, the government has shut down all foreign bureau de change and introduced a foreign currency auction system where the exchange rate was pegged at Z$5,6000 for every US$1.

The shortage of foreign currency can mainly be attributed to the destruction of the agricultural sector by the fast track land reform. The agricultural sector which five years ago had accounted for 16.5 per cent of GDP and 30 per cent of foreign exchange earnings, was severely crippled; alienated by the international community and the bruising verbal contest between Zimbabwe, Britain and the United states all contributed to foreign currency shortages. Other contributing factors include recurrent failures by Zimbabwe to settle external debts resulting in the withdrawal of international financial aid, the suspension of balance of payment support, and a marked reduction in aid flows.

The state of the economy was the characterised by Hyperinflation, according to Steve Hanke Zimbabwe can now lay claim to second place in the word hyperinflation record books. Zimbabwe is the first country in the 21st century to hyper inflate. Hanke asserts that in February 2007, Zimbabwe’s inflation rate topped 50per cent per month, minimum rate required for a country to qualify as a hyperinflationary. The Central Statistical Office (CSO) failed to release official inflation figures for February, March, April and May, only to release the July figure that stood at 231 million per cent. However, unofficial figures by independent economists are as follows: February 165,000 per cent; March 335,000 per cent; April 732,604 per cent; May 1,694,000 per cent; in June it was over 2,000,000 per cent, the highest outside a warzone. There are about six countries that have had extreme hyperinflation but the table below will focus on three including Zimbabwe.

Table  3: The Highest monthly Inflation rates in History

Country Month with highest inflation rate Highest monthly inflation rate Equivalent daily inflation rate (%) Time required for prices to double

 

Zimbabwe Mid-November 2008

(latest measurable)

79,600,000,000% 98.0 24.7 hours
Yugoslavia January 1994 313,000,000% 64.6 1.4 days
Germany October 1923 29,500% 20.9 3.7 days

Source: E.V Masunungure, 2009

 

Then came 2008, in the midst of all this economic chaos, was the beginning of a new era politically in the History of the country. Elections were to be conducted in this year and these elections will be remembered in history as having been conducted during a period when the economy and the social environment were experiencing the worst deterioration.

On 25 June 2007, companies were directed to roll back their prices by 50 per cent under the Statutory Instrument 159A of 2007 (Presidential powers Amending the National Incomes and Pricing Commission Act) after being accused of hiking prices to foment public anger against the government. This policy resulted in bare supermarket shelves. The RBZ made a futile effort to address the shortages by extending cheap finance to companies affected by the blitz through the Basic Commodities Supply Side Intervention (BACOSSI). The policy was unsustainable and was financed by the printing of even more cash. BACOSSI provided only limited relief in the short-term and worsened the situation in the long-term. Due to all the issues raised above what was the outcome of the situation in the next years to come.

Source:

  1. Vusani, M (2015) ‘Economic downfall of Zimbabwe from 1980 to 2008’