Zimbabwe: Risk Assessment
Country Rating1
Rating: D
Business Climate Rating1
Rating: D
Risk Assessment2
Growth has been slowing as a result of delay on reforms
After a decade of recession marked by severe hyperinflation, Zimbabwe's economy began to grow again in 2009. In 2011, a slight economic slowdown is expected due to the underutilization of production capacity and the weakness of public investment. Also, the influx of capital and foreign investment needed to strengthen the growth of the mining sector was significantly below official forecasts in 2010 and will not increase in 2011 without significant improvement in the clarity and visibility of political measures. Moreover, The labour market, characterized by massive unemployment and large numbers of job seekers dropping out of the market altogether (80% according to official estimates, but this figure needs to be put into the perspective of Zimbabwe's very large grey economy), remains disorganised. The generally well-educated Diaspora will need to be mobilized if the country's economy is to recover. However, the humanitarian situation has improved considerably since the end of 2009, notably with the gradual reopening of schools and hospitals, and a slight improvement in the food situation. This progress is expected to continue in 2011, as long as the weather remains favourable, thanks to the gradual reorganization of the agricultural sector and better access to credit.
A difficult-to-sustain financial position
With the dollarization of the economy and the introduction of emergency measures (overhaul of the tax system, payment of wages), fiscal revenues began to increase in 2010. In 2011, the government is counting on a restructuring of the diamond mining sector to increase its resources for the long term. It is nonetheless very likely that the country will continue to suffer from limited fiscal revenues, given its lack of access to the markets to obtain financing and with foreign aid dedicated solely to humanitarian spending. Foreign debt will also continue to rise, largely because of new payment arrears and the accumulation of interest and penalties on existing arrears, but the authorities are seeking to make these repayments in order to have access to further aid. The external position of the country will continue to remain precarious until the debt is rescheduled.
Rapprochement with the international community but still a high degree of political risk
At the political level, the fundamental reforms intended to re-establish the rule of law and respect for basic human rights have yet to materialize. The party led by Morgan Tsvangirai, the Movement for Democratic Change (MDC), has on several occasions, been on the verge of withdrawing from the coalition government stitched together under the aegis of the former President of South Africa, Thabo Mbeki. Some of the key posts, such as Governor of the Central Bank, are still held by members of ZANU-PF, the party led by President Robert Mugabe (85 years old, leader of Zimbabwe since 1980), in spite of stipulations to the contrary in the agreement for the formation of the Government of National Unity. However, thanks to this agreement significant economic and humanitarian advances have been made, leading the IMF to resume its technical assistance in May 2009 and restore Zimbabwe's voting rights in February 2010. In 2011, continuing disagreement within the Government of National Unity will prevent any significant advances in implementing the Global Political Agreement, which requires the holding of elections after the adoption of a constitution guaranteeing free and fair vote, despite pressure on Zimbabwe to do so from the international community.
Strengths
- Considerable ore wealth (platinum, gold, nickel)
- Great agricultural potential
- Significant tourism potential
- Well-developed road system
- Qualified diaspora
- Normalization of relations with the international community
Weaknesses
- Disastrous economic and financial repercussions of the long period of hyperinflation
- Hyperinflation perpetuates disorganised trade and production
- Underinvestment in education and energy infrastructure
- Precarious nutrition and health situation. The majority of the population depends on international aid
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Incidence of AIDS (16%) among the highest in Africa and the world