A man buys eggs using a U.S. one dollar bill at a market in Harare (File)
A man buys eggs using a U.S. one dollar bill at a market in Harare (File)

Nearly two years into Zimbabwe's government of national unity, the country's economy is plagued by a declining industrial sector and continuing job losses. There is little foreign investment and little hope for financial assistance.

The International Monetary Fund said last week that while it continued technical assistance to Zimbabwe, the political situation remains too unstable for the international body to grant the country financial assistance. Without such assistance, however, the future for Zimbabwe's economy appears bleak.  

When President Robert Mugabe came to power 30 years ago, Zimbabwe manufactured more of its own products than any other country in Africa, including South Africa. Now, more than 50 percent of the country's factories are closed and most of those that remain are manufacturing at 30 percent of total capacity.

Zimbabwe began to slip into economic decline in 2000 when Mr. Mugabe launched a chaotic, violent land-reform program. This became a major crisis when the former ZANU-PF government imposed price controls in 2007, forcing companies to sell goods below cost of production, while the central bank printed tons of worthless Zimbabwe dollars and inflation broke world records.

When the government of national unity came to power in February 2009, the Zimbabwe dollar was abandoned and the country adopted hard currencies, primarily the U.S. dollar and the South African rand.

This brought stability to the economy, but Zimbabwe economist Rob Davies said the manufacturing sector has little chance of recovery. "So the manufacturing sector, particularly after that little post-dollarization boom, post price control, are dealing with old, outdated capital equipment and it is very difficult for them to recapitalize, it is difficult for them to get long term loans for that."

Davies said there are even greater challenges now facing Zimbabwe and Movement for Democratic Change finance minister Tendai Biti. "They just do not have the scale to compete with South African or Chinese producers. So what [finance minister] Biti inherited was a de-industrialized economy, and it is not clear what you would do to turn this around."

Another economist, John Robertson, also is gloomy about the economy. While he said Biti had improved tax collection since the inclusive government came to power, there was little left over from public sector salaries to reconstruct broken infrastructure.

Robertson said there has been some increased agricultural production in the past year. The United Nations says Zimbabwe still needs emergency feeding, though, for about 1.7 million people before the next harvest, which beings in April. Robertson also said the mining and industrial sectors need recapitalization.

"We have not been able to raise any international loans, because we are still so deeply in debt, and outstanding arrears are $7 billion," said Robertson. "That is close to nearly twice our GDP, so our credit rating is as bad as it can get, I think it is the worst in the world."

Robertson said most economic activity in Zimbabwe is the sale of imported goods in the retail trade. "Really, the economy has not got back on its feet. We are better than we were for reasons that are not related to production in the country, the shops are full of goods, the goods are mostly made in South Africa or South African suppliers, they are not made by local factories. We are not generating jobs in the country."

The MDC controls the social ministries and the finance ministry in the unity government and most economists say Finance Minister Biti has done the best he can with resources limited to tax collection.

But Davies said international donors and investors want to see political transformation and stability, and the MDC cannot achieve that without the full cooperation of Mr. Mugabe and his ZANU-PF. "One thing you can be sure about, you would not have that policy designed by a GNU where people are fighting for the politics of the GNV."

Davies said, as an example, that although the MDC is in charge of the public service within the unity government, the party would not be able reduce the number of public servants if that was necessary to revive the economy.

"MDC is not going to do that, they would not allow him [Biti] to do that and [ZANU-PF] is not going to do that," said Davies. "Biti inherited problems without power. The political economy is such that he can not do a lot."

Mr. Mugabe said he is uncomfortable sharing power with the MDC, which narrowly won the last elections in 2008. He said he wants fresh elections early next year.  

Many people fear new elections will bring a resurgence of the violence that affected the elections in 2008, when about 180 MDC supporters were killed and tens of thousands were injured and forced out of their homes.

Industrialists told ZANU-PF vice president Joyce Mujuru last week the economy is too fragile for another violent election.