Sanctions are real but… (Part 1)

By Prosper Chitambara

The major highlight of the past week was the anti-sanctions march on Friday 25 October; a day designated as the anti-sanctions day by SADC and declared a public holiday by the government of Zimbabwe.

While external sanctions are real and have had some negative implications on the economy, the worst form of sanctions are internal and the result of our own acts of commission and omission through corruption; the capture of key state institutions by political elites for personal aggrandisement; mismanagement of the economy (bad governance); the implementation of politically convenient but economically irrational/unsound policies among others.

It is generally agreed that the massive crash of the Zimbabwe dollar on 14 November 1997, commonly referred to as ‘Black Friday’, marked the onset of the crisis. The crash was precipitated by the government’s unbudgeted payment of gratuities to war veterans.

Each of the estimated 50 000 ex-combatants (war veterans) received a once-off gratuity of Z$50,000 (US$4,167) by 31 December 1997, and a monthly pension of Z$2,000 (US$140) from January 1998.

The government sought to fund this through the introduction of a war veteran’s levy, which was rejected by workers through the Zimbabwe Congress of Trade Unions (ZCTU)-organized demonstrations, and the government had to seek recourse through unsustainable borrowing and printing money.

As a result of the massive depreciation of the Zimbabwe dollar, input costs soared, thereby undermining the viability of producers/businesses. The government immediately intervened by introducing price controls on all basic commodities at below cost-recovery levels.

In August 1998, the government unilaterally sent troops to the Democratic Republic of Congo (DRC) to help the government of that country repel rebels who were on the brink of taking over the capital city, Kinshasa. Zimbabwe’s involvement in the DRC war was estimated to cost US$33 million a month.

This was followed by a decision to increase civil servants’ salaries by between 69% and 90% at the beginning of 2000, just before a referendum on the government proposed a new constitution in February. Since these salary increases had not been budgeted for, the government had to borrow again to meet the expenditure. However, Zimbabweans rejected the proposed constitution.

A process of occupation of white-owned commercial farms then ensued, and in June 2001 the Fast-Track Land Reform Program was officially launched. This followed accusations by the government that white farmers had provided transport for their workers to vote against the proposed new constitution.

Though the fast track land reform program was noble, it was chaotically and violently conducted with a lot of destruction of infrastructure which led to significant declines in both agricultural productivity and production.

The country was reduced from being the breadbasket of the region to being a basket case as we suddenly became a net food importer from being a net food exporter. Against this background, the relationship between Zimbabwe and its development partners deteriorated to the extent that Zimbabwe earned itself a high-risk profile (pariah status).

Donors and investors deserted the country, resulting in an acute shortage of foreign currency. As a result, a thriving parallel market emerged, which virtually became the only port of call for foreign-currency seekers.

That the crisis emanated from a descent into lawlessness and bad governance was reinforced by the Tripartite Negotiating Forum (TNF) where, in the Kadoma Declaration of August 2001, government, business and labour agreed that the way forward involved the ascent to good governance.

The Kadoma Declaration emphasized internal factors as the cause of the crisis and not external intervention. The Zimbabwe Democracy and Economic Recovery Act (ZDERA) came into force only in 2001 when the crisis had already set in. Furthermore, Zimbabwe stopped accessing balance-of-payments support from the IMF in 1998 owing chiefly to its failure to service its outstanding debt.

The write Prosper Chitambara is an economics scholar who is based in Harare.

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Daniel Chigundu

Daniel Chigundu is the news editor for OpenParlyZW an online platform that covers Parliament of Zimbabwe activities using social media (Twitter and Facebook). He is currently the secretary-general of the Zimbabwe Parliamentary Journalists Forum and a board member of Digital Communication Network.

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