Sunday, June 29, 2008

Why Zimbabwe Is Collapsing? (Unit 5B)

Zimbabwe on the collapse:

1. Hyperinflation

Few years back, the Zimbabwe’s external debt mounted to more than 100% of its GDP. To overcome this, the Reserve Bank of Zimbabwe (RBZ) printed more money causing the supply of money to increase more than real GDP. This devalued the value of existing money causing price to rise. Second, serious shortage of basic goods. With too much money in circulation & yet few goods produced, prices of these goods have been ‘bid’ up to an unprecedented level. This is worsened by the imposition of price control, causing producers to be even more reluctant to produce due to escalating production costs. This means even worse shortage of basic goods (cycle repeat itself). This largely explains for its hyperinflation which is more than 100, 000%

2. Corrupt government

The Mugabe-led government is accused of highly corrupt & most of the aid given by IMF before 2004 has been siphoned for their own use, for political agenda etc. It could have benefited the whole Zimbabweans if the monies were used to construct more schools, increase number of hospitals, research centre & held campaign to rebuild its tarnish image on international stage

3. Food shortage

This stemmed from the land reform program in year 2000 where those lands owned by the Whites’ farmer were confiscated with the aim of benefiting landless Black Zimbabweans. With poor knowledge on modern farm management, usage of manpower rather than machineries, zero technology usage, poor international network & lack of innovation had contributed to serious fall in the productivity of agriculture sector. Supply of corn as their staple food has fallen drastically over these 7 years & tobacco production for the export market has suffered too

4. Refusal of IMF to help

Unsustainable foreign debt, failure to service the debt to IMF & misusage of aid given e.g. billions of dollars were wasted to finance the war in Congo rather than being used up to finance domestic development. These were the few main reasons why IMF has stopped providing aid to Zimbabwe

5. Serious drop in FDI

The chaotic land reform program, political instability, hyperinflation which will definitely increase the costs of operating in Zimbabwe, low productivity among its workers, low literacy, poor expenditure & management of infrastructures, difficulty even in getting telephone lines & erratic blackouts due to low availability of generators have caused foreign investors to stay away. What’s more with growing attractiveness of markets in Asia like China & India. The value of FDI has shrunk from USD 400 million (1998) to USD 30 million (2007) (

6. Tarnishing tourism image

Despite Zimbabwe can no longer rely on its primary sector as a main source of income, it can still somehow concentrate on tourism. Places of attractions are like the Great Zimbabwe stone ruins, Victoria Falls, Lake Kariba & extensive wildlife ( However, its tourism sector has started to decline ever since 1999 due to various international bad publicities

7. Brain drain

Zimbabwe has low literacy rates. For those educated ones, most of them had migrated to South Africa. This is worsened by emigration by the Whites too whereby we know that Zimbabwean economy depends much on them. In the end, there will be no productive workforce to rejuvenate the economy which is on the collapse

8. Political instability

Mugabe’s regime, by threat has forced his main political rival, Morgan Tsvangirai to withdraw himself from the election. This caused Mugabe to be automatically enrolled as the President once again after a landslide win in a one-man-race election. According to BBC, during the election run-up, the supporters of Morgan were either beaten or jailed. For women they were raped & 90 deaths had been reported thus far

9. Unexploited resources
No doubt Zimbabwe is endowed with rich mineral resources. Exports of gold, asbestos, chrome, coal, platinum, nickel, and copper could lead to an economic recovery one day if they were to be fully exploited. However, in order to do so they first need to spend substantially on expensive drilling machineries, team of researchers that can lead to discovery of new mines, proper logistic network & international connection. In other word, inevitably the Zimbabwean economy must rely on FDI. Also the current government needs to foster & rebuild their ties with EU & US which conduct a sanction on its economies

10. AIDS

As much as 20% of its population is inflicted with AIDS & it is estimated by UN (United Nations) that on the average, 565 new cases are reported everyday. Life expectancy for males is 41 years & for females 39 years old. This is a disaster as that is the age where one working individual contributes to the economy the most. This spells a serious shortage of workforce in the very near future if nothing is done to tackle it

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