Decades of Robert Mugabe's ruinous policies have driven his country to economic disaster. But will his successor and former ally be any improvement?
Where did it all go wrong?
In 1980, Robert Mugabe inherited a well-diversified economy with the potential to become one of sub-Saharan Africa's star performers. The country is blessed with fertile land, natural resources (including platinum and diamonds) and has a well-educated population. But after almost four decades under Mugabe, it's an economic basket case - although to be fair he had help in driving it towards ruin.
In the 1990s, in the wake of the collapse of the Soviet Union (a funder of the notionally Marxist-Leninist regime in Harare), Mugabe was "shoehorned by the World Bank and Western donors into a poorly designed and ineptly managed" programme of structural adjustment, financial liberalisation and public-sector reform, says Tony Hawkins in the Financial Times. The main effect was to damage the competitiveness of manufacturing industry - a sector that shrank from 25% of the economy in the 1990s to less than 10% today.
What did Mugabe do in response?
As the economy slumped and unrest grew, the government made catastrophic economic decisions alongside a further slide into repression and dictatorship. It bought the loyalty of liberation war veterans via a system of gratuities and pensions that the country couldn't afford. It entered the war in Congo in 1998, costing billions. And in 2000 Mugabe introduced a "fast-track land reform" system, which - accompanied by murderous violence - accelerated the process by which the state seized control of white-owned farms.
The land was not handed to experienced black farmers or landless peasants, but to politically well-connected people with no experience of managing the land. Over the following years about two million farm workers lost their jobs, there were terrible food shortages, and several million Zimbabweans left the country in despair.
What's the situation now?
It's grim. Multiple political and economic crises between 2000 and 2008 nearly halved Zimbabwe's GDP. The country abandoned its own currency in 2009 due to hyperinflation, and enforced dollarisation led to some stabilisation and recovery between 2009 and 2012. But in recent years the situation has worsened again. GDP per capita was $1,009 last year, compared to $5,275 in neighbouring South Africa.
About three-quarters of the population live in poverty, about 90% of Zimbabweans don't have a formal job, and nearly a quarter of the country's 16 million citizens rely on food aid for at least part of the year. Inflation is still running at between 25%-50%, the national debt is $9bn and the fiscal deficit is about 15% of GDP.
Can Mugabe's successor fix this?
Some analysts have touted the idea that Emmerson Mnangagwa, the new president - who was Mugabe's former vice-president and ally - will be a pragmatist who can put the country on the road to prosperity. One positive sign is Mnangagwa's public acknowledgement of a key problem: corruption. At his inauguration ceremony last month, he vowed to stamp it out, and punish offenders harshly.
Days later, he declared a three-month amnesty for "certain individuals and corporates" to return the "huge sums of money and other assets" they had illegally taken from the state. Mugabe has immunity from prosecution, but Mnangagwa is likely to target the remaining allies of Grace Mugabe, the former president's wife, whose efforts to succeed him led to his overthrow.
Are there other encouraging signs?
Mnanagagwa also pledged a new era of international engagement, hinted that he plans to drop some of Mugabe's ruinous policies, said that "foreign investment will be safe in Zimbabwe", and promised elections by next summer. This should be treated with scepticism: Mnangagwa was a forceful security minister and expert election-rigger complicit in some of the regime's worst excesses.
Still, some associates and analysts believe he is serious about boosting the economy, and are pleased that he has reinstated Patrick Chinamasa, the finance minister sacked by Mugabe in October. His downfall prompted a row over the reforms needed to attract vital international loans.
What should investors look out for?
One test will be whether the new president moves to scrap Mugabe's "indigenisation" law that private firms must be majority owned by black Zimbabweans (in practice, this often means political bigwigs).
Another crucial question is land: nearly all of the country's 4,000-plus commercial farmers have had their lands confiscated since 2000. The government will need to restore confidence in property rights. If it does, it may be able to attract foreign cash, re-establish a national solid currency, gain crucial aid and loans, and persuade the diaspora to return.
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