The Zimbabwe economy: new perspectives

The fascinating development over the last five years or so has been the emergence of a static and retrogressive first economy accompanied, surprisingly, by a somewhat resilient second economy

I must disappoint my judicious readers, who may be waiting for me to deal with the topic, “Moving Zimbabwe Forwards Despite the Politics” in this episode as I promised. However, it came to my mind that, in order for some to fully welcome my thoughts on the subject matter, it would be prudent for me to first deal with the structure of the Zimbabwean economy first, which has changed somewhat over the last few years. I shall then keep my promise in my next instalment, where I intend to share my thoughts on how we can move our country forwards, despite the distressingly slow grinding wheels of politics.

I want to suggest here that post colonial Zimbabwe essentially inherited three distinct economies:

A first economy, which is predominantly urban, driven mainly by financial institutions, and fuelled by commercial agriculture and mining. It is within this economy that the country's economic policy is manufactured and implemented. It also within this economy that your politicians, bankers, opportunists, and prophets of indigenization reside.

 A second economy, which provides labour to the first economy, and consumes its products and services. It is within this economy that the majority of Zimbabweans reside.

 And lastly, a rural subsistence economy that is, to a large extent, dependent for survival on regular incomes from those within the second economy.

The land repossession and the monetary policies between 2000 and 2008 effectively decimated this structure. This has resulted in the shrinking of the first economy due to decreasing agricultural output, an unstable currency, and lack of access to operational and expansion capital. This has been followed by diminishing employment and consumption levels in the second economy, and the marginalisation of the rural or third economy..

The fascinating development over the last five years or so has been the emergence of a static and retrogressive first economy, accompanied, surprisingly, by a somewhat resilient second economy that is no longer totally dependent on employment from this now less significant first economy.  Added to this, are the Diaspora remittances that have, to a considerable extent, increased disposable incomes within the second economy. The third, or rural economy has remained stagnant, but somehow self sufficient, mainly because it has been boosted by small holder farmers, no longer depend on second economy income remittances.

Over the last few years, Zimbabwe's second economy has emerged as vibrant and creative in the face of a shrinking job market. It is there that formerly employed individuals have created their own small entities that service the day to day basic consumption needs of the people,  with little interaction the first economy. In it are the technicians and craftsmen that used to provide labour to the first economy. Also found in it today are landlords, lodgers, traders, money changers, home industry housewives, chicken growers, airtime vendors, petty opportunists, peddlers  of all sorts ,drunkards and so on.

This second economy has become central in the lives of a very large portion of the economically active population. It is highly liquid and hugely profitable for retailers who have noticed that the cheese has moved.  I would wager that in excess of 80% of the population resides in this economy, but I stand to be corrected by the imminent population census.

Now given the above structural and behavioural economic shifts, I strongly believe that it is within the second economy where future economic growth lies. It is within this second economy that considerable potential exists, and I expect our investment and economic planning strategies ,our budgeting processes, indigenization policies,  and monetary policies to be informed by, and affirm these developments, so that we can create an economy that benefits ordinary Zimbabweans and improves the distribution of wealth.

This second economy is really where the action is, and I would expect our local companies to have strategies and desires to effectively access this sector. Some already have, but I sense some complacency by most local companies informed by old habits and sheer ignorance to understand that indeed the cheese has moved.

These developments present significant opportunities for those who those who understand emerging trends.

My estimation on how we can move the economy forward despite the politics are informed by these trends and I shall then deal with how this can be done in my next article.

-----------
Vince Musewe is an independent economist currently in Harare. You may contact him on vtmusewe@gmail.com

Comments