In light of Zimbabwe’s perpetually turbulent economy is there still reason to be optimistic? I think so, let’s explore why:
1. Currency & Infrastructure
The first tool President Mnangagwa would need, to even get a recovery kick-started, is hard currency. Zimbabwe hasn't had a currency of its own since 2009, after hyperinflation killed off the old Zimbabwean dollar. Since then, the US dollar as well as the South African Rand have been the main currency for transactions. Cash shortage has been suffocating the economy, but who would stump up the cash? The simple answer is - foreign-aid. Zimbabwe will need to mend relations with foreign donors who unfortunately will remain wary of the new government until they can be convinced that there’s a concerted effort to return to a more orthodox economic policy. In order to further instil confidence in foreign business there would need to be a re-introduction of fiscal and investment reforms that ensure the deletion of economic policies that are unpalatable to foreign investors.
Much of the Zimbabwe’s existing economic woes have been exacerbated by foreign donor institutions and international governments withholding financial support over differences with Mugabe. The economic situation in Zimbabwe is very difficult and growth is still threatened by high government spending and an untenable foreign exchange regime.
The International Monetary Fund, may be willing to begin talks - with many strings attached – but the most likely prospect is China. Zimbabwe receives approximately 50% of its foreign direct investments (FDI) from China. This has helped boost tobacco exports, as well as contribute to an improvement in the level of energy infrastructure, including the construction of solar power plants. Although the main focus over the coming decades will be to become a primarily self-sufficient state, and thus not dominantly dependent on aid - the strong trading relationship already established with China will come in useful whilst the “newly re-birthed” economy finds its’ feet.
2. Natural resources
The World Bank reported that the nation has strong fundamentals for economic growth and poverty reduction. Due to its' huge potential a strong focus needs to be placed on the mining and agricultural sectors. Zimbabwe’s abundant natural resources which include the third and fifth largest reserves of platinum and lithium in the world, respectively are key materials in the construction of electronic equipment, with lithium being a vital component of rechargeable batteries. Zimbabwe also has a significant supply of skilled labour and adequate infrastructure which will be crucial to the nation’s resurgence and recovery.
Zimbabwe’s economic future is definitely plausible. It is a country with huge economic potential. If new leader Emmerson Mnangagwa can pioneer and implement a successful programme, over time the nation could experience a significant economic revival. However, the introduction of a strategic and well executed economic mandate is not guaranteed. Time will tell what the future holds and whether investors will have the confidence to return to the economy.
Writers' Bio - Mduduzi Luthuli