This was supposed to be Zimbabwe’s chance at a fresh start. Strongman Robert Mugabe, who died on Sept. 6 at the age of 95, was forced from office in late 2017 after a 37-year rule that left the economy in ruins. His ouster sparked celebrations in the streets and hopes of a recovery for the resource-rich nation. But his successor as president, Emmerson Mnangagwa, has failed to deliver on his promises of a revival. The southern African nation suffers from spiraling inflation and chronic shortages of foreign exchange, bread and electricity, prompting protests that have been brutally repressed.
1. Why is the economy still such a mess?
Though Mnangagwa has declared Zimbabwe open for business, investors have stayed away and a drought has crippled agriculture and hydropower plants. The government lacks the money needed to kickstart growth because it has accumulated $9 billion in external debt and can’t borrow more until it settles its arrears with international lenders. The economy is at risk of contracting this year for the first time since 2008. Zimbabwe’s woes date back to Mugabe’s rule, when he allowed ruling party-backed militants to violently seize thousands of white-owned commercial farms starting in 2000. Agricultural exports and tax revenue collapsed, the central bank began printing banknotes so the government could pay its workers, and inflation skyrocketed to the point where prices were doubling every day.
2. What happened with the protests?
Widespread frustration over rampant unemployment and poverty has boiled over into strikes and demonstrations. The round of protests in August, called by the main opposition party in the capital, Harare, saw police arrest at least 128 people and use tear gas and batons to disperse others. Court bans were then instituted on marches in other cities. At least 18 people have been killed in demonstrations since Mnangagwa took power, according to the Zimbabwe Association of Doctors for Human Rights.
3. What’s the government doing?
Finance Minister Mthuli Ncube has reined in spending and boosted tax revenue to try to get the government’s finances back on track. He’s also reintroduced the nation’s own currency, a move aimed at addressing a liquidity crisis that grew steadily worse after the 2009 adoption of the U.S. dollar and other currencies as legal tender. His other plans include entering into an International Monetary Fund-supervised program to reduce debt, as well as winning debt relief from the so-called Paris Club of creditors, the World Bank and African Development Bank. He also aims to raise new loans both locally and abroad, and is establishing a nine-member Monetary Policy Committee to reduce interest rates from the current 50%. Mnangagwa says the country is implementing reforms as fast as it can.
4. How has the new currency worked out?
Not as the government had hoped. Since its introduction in June, the new Zimbabwean dollar’s spending power has rapidly eroded; it now trades at more than 10 to the greenback. Its predecessor, a quasi-currency known as a bond note, was officially said to be at parity as recently as February. The national statistics agency has suspended the publication of year-on-year inflation figures until February 2020, but economists estimate it is running at between 230% and 570%. Many of the country’s 400,000 civil servants, who form the bulk of the middle class, now live below the “extreme poverty” level, defined by the World Bank as less than $1.90 a day.
5. Is Mnangagwa’s grip on power at risk?
Despite Zimbabwe’s economic woes, he remains in firm control of the military and other state institutions. There are no signs of an imminent bid to topple him, although there’s no telling what would happen should the situation deteriorate further. One possible challenger to Mnangagwa is his deputy, Constantino Chiwenga, a former army general who emerged as kingmaker during Mugabe’s ouster. But Chiwenga has been shuttling between hospitals in South Africa, India and China to receive treatment for an undisclosed illness and hasn’t been seen in public for several months. While the main opposition Movement for Democratic Change claims it’s been cheated of victory in successive elections, it’s never been able to assume power or secure the international backing needed to threaten the government’s legitimacy.
6. Why is the world watching?
Zimbabwe has enormous economic potential, which could lift the entire region. It was a leading producer of grain before Mugabe’s rule, which began after it won independence from the U.K. in 1980. Mugabe devastated commercial farming with his expropriations, but the country remains a large tobacco producer. It also has reserves of gold, platinum, diamonds and other metals and minerals. And its 14 million people are among Africa’s best educated, although many of those with skills have emigrated to neighboring South Africa and the U.K. About a quarter of the population has gone into exile.
(A previous version of this story corrected the date Mugabe died.)
--With assistance from Laurence Arnold, Ray Ndlovu, Godfrey Marawanyika, Antony Sguazzin and Paul Wallace.
To contact the reporters on this story: Brian Latham in Harare at email@example.com;Mike Cohen in Cape Town at firstname.lastname@example.org
To contact the editors responsible for this story: Paul Richardson at email@example.com, Andy Reinhardt
©2019 Bloomberg L.P.