There has been little progress in turning the economy around since President Emmerson Mnangagwa took office in 2017, as punitive measures and policy inconsistency take a toll.
Mnangagwa came to power in November 2017 after a coup forced the late Robert Mugabe to resign as the country’s president amid widespread national euphoria and expectations that the country’s economy, which had been in stagnation for more than two decades, I would change.
The expectation was further raised when Mnangagwa declared that he would create “jobs, jobs, jobs”.
However, since that dramatic moment five years ago, the enthusiasm and expectation for an economic recovery have dissipated as headwinds characterized by a shortage of foreign exchange, currency volatility, a debilitating liquidity shortage, frequent power outages and triple-digit inflation, which stood at 268.8% for the month of October.
Despite Mnangagwa’s bold promise to create jobs, official statistics paint a totally different picture. A total of 314,304 jobs were lost during the fourth quarter of last year, according to the national statistical agency, Zimstat.
This year, Zimstat tapped into grimmer statistics on the employment front showing that the national proportion of 15-34 year-olds not in employment, education or training (NINI) was estimated at 50%, while the proportion of those with ages between 15 and 24 years in the same category stood at 49%.
Zimbabwe National Chamber of Commerce (ZNCC) chief executive Christopher Mugaga revealed at the Zimbabwe Employers’ Confederation (Emcoz) congress in September this year that one in 15 people has a formal job compared to with one in six in 1980, a reflection of the job hemorrhage perpetuated under the Mnangagwa administration.
The Mnangagwa government, which has been dubbed the Second Republic, has implemented various policies that have plunged the country into a deepening economic crisis and greater uncertainty.
The government’s decision to introduce the Zimbabwean dollar in June 2019 as the only legal tender and to banish the multi-currency regime without the benchmark to back it up, which includes low inflation, six-month import coverage and sustainable growth rate of the gross domestic product (GDP). of at least 7%, has had disastrous consequences for the country’s fragile economy.
The decision triggered high levels of inflation, which peaked at 837.53% in July 2020. The government reversed its decision to eliminate the multi-currency regime less than a year later under the pretext of ameliorating the challenges caused by the arrival of Covid -19 pandemic.
However, this caused further headaches for the government, as the local unit rapidly lost value against the dollar, severely eroding revenue. The crisis prompted the government to clamp down on mobile operators and even suspend the Zimbabwe Stock Exchange as well as three counters on the local exchange, namely Seed Co, PPC and Old Mutual in June 2020.
This resulted in the ZSE being labeled the worst performing stock in the region. Although Seed Co is listed on the Victoria Falls stock exchange called forex, shares in PPC and Old Mutual remain in limbo, affecting thousands of shareholders and undermining market and investor confidence.
Despite a lull in market chaos prompted by the Reserve Bank of Zimbabwe’s (RBZ) introduction of the forex auction market in 2020 to provide cheap foreign exchange to businesses to boost production, the central bank did not pay allowances. gave rise to market instability with the loss of value of the Zimbabwean dollar in the parallel market. The RBZ announced this year that it had cleared the backlog.
An alarmed government took additional steps in May this year to rein in runaway inflation and currency volatility, including suspending bank lending, raising interest rates to a world high of 200% and a Punitive tax of 40% to shareholders on merchants. , who dispose of ZSE shares in less than 180 days after acquiring them.
ZSE Chief Executive Justin Bgoni has warned that the capital markets penalty tax will have an adverse impact on the country’s capital markets.
The introduction of gold coins as an alternative store of value, the suspension of government contracts for those who charge for their goods and services at exorbitant rates, and high interest rates have helped bring relative stability despite uncertainty about how much time will last
Local economist Victor Bhoroma said: “The economy showed signs of recovery in 2018 due to positive changes in the ease of doing business, but a lack of real reforms, high inflation, overregulation and currency inconsistency dampened confidence. The promise did not lead to any significant economic growth.”
The government’s goal of achieving an upper-middle-income economy by 2030 will remain a mirage if uncertainty in the economy continues, according to labor market analyst and former Emcoz chief executive John Mufukare.
“Although the government has managed to post a budget surplus, this has been affected by many negative macroeconomic factors,” he said. “We have gone from bad to worse and the government’s goal of an upper-middle economy will continue to be pie in the sky. “The question remains how long the stability will last before things unravel, before we get to Canaan. We can be excused for being skeptical. We need some certainty in the economy.”
Economist Prosper Chitambara said the economy has been hit hard by various factors, including weather shocks, Covid-19 and external shocks as a result of the Russia-Ukraine conflict since the advent of the Second Republic.
“I would say that the performance of the economy has been very erratic due to a combination of external and internal factors,” he said. “We have seen instability. Inflation has been chronically high and that has caused uncertainty and weakened investment in the country.”
Chitambara said there have been some positives including massive government investment in infrastructure.
He added that more reforms were needed, particularly in the ease of doing business.