As Zimbabwe approaches the polls, a simple reading of the evolving Zimbabwe situation may incline one to quickly conclude on a Hobbesian reality: a corrosive state of nature, a violent destiny, perdition, and wanton anguish. However, an evidence-based contrarian analysis of the Zimbabwean political economy brings into focus another perspective, and posits that material conditions in the domestic environment have the capacity to author a revival, a reflection of the venerable arguments of a classic business cycle.
Since time immemorial, economic cycles have been constant features of sovereign affairs. Current economic powerhouses have been basket cases of the past. The contemporary indefatigable parent of the EU, Germany, emerged from an economy paralyzed by the consequences of the wars, including hyperinflation, and the malaise of an insular political system.
The poster child of the developmental state, South Korea, was emaciated by the ravages of imperialism, and had to turn to a military dictator to eventually author a triumphal recovery story. As the cases of Ghana, Mozambique, Malaysia and Indonesia attest, the list is indeed endless, but this reflects the fact that most countries have the capacity to emerge from the backwaters of underdevelopment and steadily claw back to record heightened output.
Notably, there are certain inescapable common features of sovereigns that successfully negotiated the growth path, namely expertise-laden exploitation of the domestic environment and engagement with the external world.
Zimbabwe has the potential to recover and write another African legend. The structure of the Zimbabwean economy reflects a well-balanced economy, with the major sectoral contributors to the gross domestic product being mining, agriculture, manufacturing and services. In fact, analysis of the structural processes in the domestic front show an economy already sprouting green shoots.
The agriculture sector is on an irrefutable recovery mode, spurred by increase in sugar, cotton and tobacco production. In 2012 the agriculture sector grew by 4.6%, and contributed 5.6% to growth domestic product. The tobacco sector earnings deserve granular exposition. The 2010 auction records show that the tobacco sector produced 123m kg of the green leaf, and that output generated US$355m in revenues. The 2012 auction records showed an improvement; a production of 144m kg, and sales of US$525m. Despite recurrent ravages of drought and other disturbances, increase in output reflects tenacity, buoyancy; a welcome development as agriculture is a major foreign currency earner.
From the days of Mapungubwe and the Great Zimbabwe, the Zimbabwean hinterland has always had a strong mining sector. A macroeconomic report by African Development Bank Group avers that mining is the anchor of the unfolding recovery story. Our analysis augments this conclusion, showing significant sales, exploitation of new markets, with some companies recording exceedingly high equity returns.
In 2008 Zimbabwe mining contributed 13.3% to the the GDP, with mineral exports earning $680m to the fiscus. By 2012, mining contribution to the GDP has surged to 25.8%, earning $1.3bn in exports. Additional factors are playing a role in the success of this sector: Mining attracts comparatively low corporate taxes (on average less than 20%); low capital expenditure occasioned by a sizable number of open-cast mining operations; and unconventional cost containment strategies of underground operations.
Crucially, the Zimbabwean mining sector is characterized by harmonious human resources relations. The upside of the hyperinflation period in Zimbabwe is that it compelled the Zimbabwean business sector to dispense with orthodoxy and creatively manage corporations through innovation and constant improvements.
Notwithstanding the virtues of mining, there is a need to improve governance of this sector to ensure accountability. Nevertheless, mining is a major building block in the renaissance of the Zimbabwe economy.
Therefore, the architecture of the Zimbabwean economy has remained resilient and agile over the period in question. This has been complemented by the restructuring of monetary policy, dollarization and improvements on the fiscal front, especially the resurgence in economic growth. The 3 year average economic growth stands at 5.3%, and inflation currently hovers around a lowly 2%. This means that Zimbabwe has finally tamed stagnation and the beast of hyperinflation, and these are corollaries of the goodwill from the Global Political Agreement process and attendant fresh thinking.
The relative success of structural reforms indicates that Zimbabwe has the potential to revive itself from the abyss. Changes are re-energizing the economy, and with agriculture production trending positively, manufacturing has picked up, and a resurgence of food supplies has taken place, with the current currency arrangement empowering consumers, and enabling business to import resources. These developments augment Nobel prize winning economist Karl Gunnar Myrdal's theory of cumulative causation - the impact a succession of small changes have over time on other assorted spheres in the polity, thus countering the entrenchment of a vicious cycle.
The methodologies and certain policies applied in the restructuring of some sectors of the economy deserve discussion. Asset transfers policy has divided opinions and has attracted fans and foes. The Fraser Institute's resources nationalism perception index captures the dissenting voices, bewailing that the investment environment is not conducive to attracting capital. Amongst others, the readership of eminent English scholars, Joseph Hanlon and Ian Scoones, has largely acknowledged the success of the asset transfer policy, a sentiment that is palpable from communities from below.
In the end, a post-colonial state and economic development process is a treacherous undertaking, characterized by a range of competing public policies. That said, the political class will do well to heed John Maynard Keynes: "consumption - to repeat the obvious - is the sole end and objective of economic activity".
Amongst others, the Zimbabwean economy will trigger consumption and accelerate growth by prudently managing the current political instability, improve the investment environment, mend relations with the alienated sections of the global community, and improve governance. This is attainable. From the days of military dictatorships, Ghana has transformed itself to be a byword for democratic excellence. In the same vein, Kenya has just re-written history of electoral settlements. So has Lesotho. Thus, Zimbabwe has irrefutable African solutions to guide hitherto political schisms.
The inference is that the restructuring of the Zimbabwe economy during the most challenging of situations puts Zimbabwe on a potentially aggressive future growth path.
Rabelani Dagada is a development economist based at Wits Business School
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