ZIMBABWE

2015

Mary Manneko MONYAU / m.monyau@afdb.org

Chief Regional Economist, Zimbabwe Field Office, AfDB
Amarakoon BANDARA / amarakoon.bandara@undp.org
Economic Advisor, UNDP

www.africaneconomicoutlook.org

Zimbabwe

ZIMBABWE
Economic growth slowed to around 3% in 2014, and only a marginal improvement
is expected for 2015 and 2016, with persistent de-industrialisation and a growing
informal economy.
There is a need to continue implementation of structural reforms to improve the
business environment, achieve a sustainable current account balance, reform public
enterprises and make growth more inclusive.
Various initiatives have been taken to improve spatial inclusion, but progress has
been limited by slow implementation of the related policies and strategies.

Overview
The period 2009-12 was marked by an economic rebound following the introduction of the
multiple currency system, with the economy growing at an average rate of 11.0% per annum.
However, GDP growth decelerated sharply from 10.6% in 2012 to 4.5% in 2013 and an estimated
3.1% in 2014. Real GDP is projected to marginally improve to 3.2% in 2015. This projected marginal
improvement will be on the back of planned investments in agriculture, mining, communications
and other infrastructure projects, including in the water and energy sectors.
Against the background of weak domestic demand, tight liquidity conditions and the
appreciation of the US dollar against the South African rand, inflation was slightly negative
in 2014, and it is projected to remain low in 2015. Industrial capacity utilisation continues to
decline, and is estimated at 36.3% owing to underproduction and lack of competitiveness. The
real exchange rate overvaluation relative to the South African rand has caused a loss in external
competitiveness, as it has made imports cheaper than domestically produced goods and exports
more expensive. As a result of increasing demand for imports and dwindling exports, the external
sector position is under severe pressure, with an estimated current account deficit of around
23.1% in 2014. The country is at high risk of debt distress, with an unsustainable external debt
estimated at USD8.4billion at the end of 2014. On 29October 2014, the government approved a
debt resolution strategy, with the main objective of expediting the reengagement process with
creditors. The government plans to hold a high-level international debt resolution forum in 2015
with the assistance of the African Development Bank (AfDB).
The economic recovery in recent years has been underpinned by the mining and agriculture
sectors, which accounted for 93.5% of export revenues between 2009 and 2013. Mining, which
made up 65.2% of export earnings over the same period, is a typical enclave sector, with weak
linkages to the rest of the economy. It is also capital intensive, with limited employment creation
opportunities. The manufacturing sector saw a drop in activity between 2011 and 2014: at least
4610companies closed down, resulting in a loss of 55443jobs (2015Budget Statement). On top of
this, more than 80.0% of workers are employed in the informal sector.

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Zimbabwe

Figure 1. Real GDP growth

%

Real GDP growth (%)

Southern Africa

Africa (%)

15
10
5
0
-5
-10
-15
-20
2005

2006

2007

2008

2009

2010

2011

2012

2013

2014(e)

2015(p)

2016(p)

Source: AfDB, Statistics Department AEO. Estimates (e); projections (p)

Table 1. Macroeconomic development

2013

2014(e)

2015(p)

2016(p)

Real GDP growth

4.5

3.1

3.2

3.3

Real GDP per capita growth

1.4

0.0

0.2

0.5

CPI inflation

1.6

-0.1

0.6

1.5

Budget balance % GDP

-2.4

-2.4

-1.3

-1.1

Current account % GDP

-25.4

-23.1

-17.8

-17.2

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors' calculations.

Recent developments and prospects

Economic growth in 2014 was underpinned by strong performance in agriculture, which
grew by an estimated 23.4%. This helped to counteract the adverse effects of a drop in mineral
commodity prices, notably platinum and gold, which has resulted in the growth of the mining
sector declining by an estimated 2.1%. According to the Chamber of Mines, the mining sector
continues to operate below capacity amid a host of challenges, including depressed metal prices,
lower capital and Foreign Direct Investment (FDI) flows, high cost structures, sub-optimal
royalties and power shortages.
However, notwithstanding the softening of commodity prices, the mining sector is expected
to rebound in the medium term. This is due to the planned completion of the merger and
consolidation exercise in the diamond sector, as well as finalisation of the amendments to the
Mines and Minerals Act and the new mining fiscal regime. The Zimbabwean cabinet approved the
principles for amendments to the Mines and Minerals Act in July 2014. The corresponding bill has
been drafted and reviewed and is expected to be submitted to the cabinet committee on legislation
by early 2015. Once enacted, the bill will modernise the legislation and make it consistent with
international best practices, in line with the authorities commitment to reforming the mining
sector.

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Production in the manufacturing sector is expected to decline further due to import

competition and the financial problems of firms. Manufacturing sector activity continues to be
weighed down by outdated plants and machinery, cheap imports, the high cost of production and
liquidity constraints. Capacity utilisation has shed 3.3 percentage points, from 39.6% in 2013 to
36.3% in 2014. Erratic power supplies, lack of capital, higher input costs, obsolete machinery and
dilapidated infrastructure have all constrained capacity utilisation.
Tobacco production increased significantly in 2014 as the number of growers and the acreage
increased. The increase in producer prices also boosted sales prospects for the 2014/15 agriculture
season, and production of the main crops maize, tobacco and cotton is expected to remain on
an upward trend. Overall, agricultural growth for 2015 is projected at 3.4%.

Table 2. GDP by sector (percentage of GDP at current prices)

Agriculture, forestry, fishing & hunting
of which fishing
Mining and quarrying
of which oil
Manufacturing

2009

2013

15.1

12.0

8.1

10.4

15.5

12.8

Electricity, gas and water

4.0

4.3

Construction

2.0

3.5

17.5

16.8

Wholesale & retail trade; repair of vehicles household goods;

Restaurants and hotels
of which hotels and restaurants

15.7

12.7

Finance, real estate and business services

9.6

11.3

Public administration and defence

2.7

3.7

Other services

9.8

12.3

100.0

100.0

Transport, storage and communication

Gross domestic product at basic prices / factor cost

Source: Data from domestic authorities

The tourism sector is expected to benefit from the implementation of the tourism policy,
launched in July 2014 to promote both international and domestic tourism in the country. The
policy articulates tourism development and marketing and promotion strategies. Successful
projects already under implementation include the Kavango-Zambezi Transfrontier Conservation
Area (KAZA TFCA) Univisa pilot project between Zimbabwe and Zambia, which was launched on
28November 2014 to promote the uninterrupted movement of tourists between the two countries.
Under the pilot project, tourists from 40eligible countries will now only have to obtain one visa
at a cost of USD50 to visit both countries for a period of 30days. As a result, tourist arrivals
are expected to increase to about 2.1million in 2015 from 2million in 2014. This translates into
tourist sector growth of 4.7% in 2015, compared to 3.9% in 2014.
The overall economic outlook in the short to medium term is sluggish owing mainly to the
continued liquidity crunch, policy inconsistency and the unsustainable external account and
debt situation. The government needs to implement policy reforms to ease the high cost of doing
business, achieve fiscal and external sustainability, reduce financial weaknesses and unlock the
potential for inclusive and pro-poor growth. Public enterprise reforms should also be prioritised
in order to improve their efficiency and profitability.

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Macroeconomic policy
Fiscal policy
The fiscal position remains tight, and the country is under debt distress. The government has
implemented a cash budgeting framework, which helped to keep the deficit at a relatively low
level. This framework is expected to remain in place in the short to medium term. Within the
context of the Staff Monitored ProgramII (SMP-II), the government is targeting a zero primary
balance in fiscal operations. The large amount of current expenditures is effectively crowding
out capital expenditure, which is essential for medium and long-term growth. The weakness of
public investment is exacerbated by the low borrowing capacity as a result of the high public debt
overhang.
The credibility of fiscal policy has been seriously compromised by underperformance on the
revenue side. As a result, fiscal policy does not reflect the key development priorities and social
objectives articulated in the Zimbabwe Agenda for Sustainable Socio-Economic Transformation
(Zim Asset). However, in 2014 the government made a conscious decision to align the 2015
national budget with Zim Asset. Fiscal developments for the ten months to October 2014 show
that cumulative revenue collections remained 7% below target but were still a bit higher than the
preceding fiscal year. Value added tax (VAT) contributed 27% to total revenues, individual income
tax (PAYE) contributed 24%, excise duty contributed 14% and corporate income tax contributed
9%. Revenue shortfalls are mainly due to company closures and job losses.
Government expenditures, including loan repayments, for the ten months to October 2014
were higher than targeted due to additional employment costs and higher loan repayments.
Employment costs, excluding loan repayments, amounted to 80% of total expenditures. They
were higher than budgeted as public wages and salaries were increased by the civil service salary
review, implemented from April 2014. The expenditure mix remains highly unsustainable, with
current expenditures constituting about 90% of total expenditures.
The government approved the principles of the Public Debt Management Bill in June 2014. It is
expected that once enacted the bill will provide the Ministry of Finance and Economic Development
(MoFED) with a stronger and more effective mandate to plan, negotiate and monitor external
borrowing operations. It will also strengthen the institutional role of the Debt Management Office
at MoFED. Combined with fund technical assistance, the new bill should improve the quality of
public debt management in Zimbabwe.

Table 3. Public finances (percentage of GDP at current prices)

2006

2011

2012

Total revenue and grants

8.5

26.7

Tax revenue

8.2

24.3

Grants

0.0
11.4

Total expenditure and net lending (a)

2013

2014(e)

2015(p)

2016(p)

28.2

27.7

26.5

25.3

28.1

27.9

28.2

25.6

25.3

0.0

0.0

25.7

0.0

0.0

0.0

29.0

0.0

29.5

30.2

30.5

29.1

29.3
25.9

Current expenditure

9.4

24.0

26.7

26.6

26.9

25.7

Excluding interest

6.5

23.0

25.7

25.7

25.8

24.6

24.8

Wages and salaries

3.5

16.7

20.2

20.5

20.7

19.8

20.0

Interest

2.9

1.0

0.9

0.9

1.1

1.1

1.1

Capital expenditure

2.0

5.0

2.9

3.6

3.6

3.3

3.4

Primary balance

0.0

-1.3

-0.4

-1.5

-1.3

-0.1

0.1

Overall balance

-2.9

-2.4

-1.3

-2.4

-2.4

-1.3

-1.1

Note : a. Only major items are reported.

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors' calculations

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Monetary policy
The government has expressed the desire to continue using the multiple currency system. The
Reserve Bank of Zimbabwe (RBZ) has effectively lost direct control over money supply, interest
rates and the exchange rate. The role of the RBZ is therefore largely limited to banking supervision
and the smooth operation of the national payment system to ensure financial stability. The
governments treasury accounts were successfully transferred from a commercial bank to the
RBZ in July 2014, thus restoring the RBZs function as banker to the government. Cabinet approved
the principles for amendments to the Banking Act in June 2014. The amendments are expected to
be submitted to parliament by the end of March 2015 and should improve corporate governance
in the banking sector, strengthen the Troubled Bank Resolution Framework, enhance consumer
protection, improve regulatory co-ordination and facilitate the licensing and regulation of credit
reference bureaus.
According to the 2015 national budget statement, total banking sector deposits increased
8.3% from USD4.8billion as of 31October 2013 to USD5.2billion by 31October 2014. Total
banking sector loans and advances grew by 6.2% to USD3.9billion on 31October 2014, against
USD3.6billion in October 2013. In the face of the high cost of doing business, the debt repayment
capacity of borrowers remains under stress. As a result, the level of non-performing loans (NPLs)
has risen from 15.9% as of 31December 2013 to 20.1% by 13September 2014.
The banking sector remains generally sound, with a total of 12banks recording profits
on 30June 2014. According to the RBZ, the return on assets, however, remains very low and
was slightly negative in June 2014, while the return on equity improved somewhat. The losses
recorded by the few banking institutions are attributed to high levels of non-performing loans,
high operating expenses and high loan loss provisions.
The microfinance sector continues to play a critical role in the provision of finance to
households and small and medium enterprises. Total microfinance loans increased significantly,
amounting to 4.7% of total banking sector loans (RBZ Quarterly Microfinance Industry Report).

Economic co-operation, regional integration and trade

South Africa remains Zimbabwes largest trading partner, accounting for about 40% of total
exports and 60% of total imports. Zimbabwe and South Africa are set to introduce the ZimbabweSouth Africa Simplified Trade Regime as a means of facilitating and formalising small-scale trade
between the two countries. Under the agreement, qualifying goods worth USD1000 or below will
be allowed to pass border points duty-free, and traders will not be asked to provide certificates of
origin for their goods as long as they are on the list of products agreed on by the two countries.
The EU is the countrys second biggest trading partner. The country ratified an interim Economic
Partnership Agreement (EPA) with the EU in March 2012. As a result of an appreciating US dollar
relative to the South African rand, there has been a loss in external competitiveness. The external
position remains precarious, with large current account deficits and low international reserves.
Both the trade and current account balances are projected to remain highly negative and improve
slightly in 2015.
A Southern African Development Community (SADC) audit has noted that the key problem
with implementing SADCs deep integration agenda is overlapping membership, as countries
cannot effectively implement two sets of rules. SADC has delayed the adoption of a revised
Regional Indicative Strategic Development Plan (RISDP) 2015-20 to allow for synchronisation of the
four regional integration pillars: industrial development and market integration, infrastructure
development, peace and security co-operation and special programmes. The SADC secretariat
is expected to consolidate the inputs from stakeholders and produce a final draft of the revised
RISDP. It should be ready for presentation to the Council of Ministers at its sitting in March 2015.

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2006

2011

2012

2013

2014(e)

2015(p)

2016(p)

-7.7

-28.7

-23.5

-23.1

-23.7

-17.9

-19.3

Exports of goods (f.o.b.)

28.3

40.4

30.7

27.4

27.2

23.9

23.9

Imports of goods (f.o.b.)

36.0

69.0

54.1

50.5

50.9

41.8

43.1

Services

-2.0

-6.9

-7.0

-6.9

-5.6

-5.0

-3.2

Factor income

-5.1

-8.3

-7.7

-7.5

-7.5

-7.2

-6.6

Trade balance

Current transfers
Current account balance

7.2

14.0

13.5

12.1

13.7

12.3

11.8

-7.6

-29.8

-24.6

-25.4

-23.1

-17.8

-17.2

Zimbabwe

Table 4. Current account (percentage of GDP at current prices)

Source: Data from domestic authorities; estimates (e) and projections (p) based on authors' calculations.

Debt policy
Zimbabwes debt situation remains critical and an impediment to economic development.
Addressing this issue will require a comprehensive arrears clearance framework, underpinned
by strong macroeconomic policies. The government has drafted the Public Debt Management Bill,
which is expected to be submitted to parliament during the first quarter of 2015. The passage of
this bill into law will statutorily establish the debt management office and outline the legal and
institutional framework to guide debt management operations. As a result of support from the
AfDB, World Bank, the United Nations Development Programme (UNDP) and other development
partners, a lot of progress has been made in constructing a database for external and domestic
debt. The government has completed the validation and reconciliation exercise of the database on
all public and publicly guaranteed external debt with all creditors. Total debt overhang amounts
to USD8.4billion. Public and publicly guaranteed external debt accounts for USD7.2billion, which
represents 52% of GDP. Domestic debt totals nearly USD1.2billion. Of the USD7.2billion in public
external debt, 81% constitutes the stock of accumulated arrears.
The Staff Monitored Programme (SMP), which the country entered into with the IMF, has
provided a useful anchor for Zimbabwes macroeconomic policies under difficult economic
circumstances. Following successful completion of the first SMP (SMP I), with all the targets
and benchmarks being met in the third and final review of the programme, the authorities have
reaffirmed their commitment to sound policies under SMP II. The latter will be implemented
through December 2015, with the main objective being to demonstrate the governments capacity
and willingness to start arrears clearance with international financial institutions and other
creditors. The main objective of SMPII is to strengthen the countrys external position as a
prerequisite for arrears clearance, resumption of debt service and restored access to external
financing. Successful implementation of the SMP would be an important stepping stone for
Zimbabwe towards normalised relations with the international community.
Given the governments objective of seeking comprehensive debt relief from creditors, the
importance of inter-institutional co-ordination (e.g.with the AfDB, the World Bank, the IMF and
the Paris Club) and the fact that Zimbabwe does not qualify for the Heavily Indebted Poor Countries
(HIPC) initiative, the government requested a study by the AfDB on alternative options for debt
relief in a non-HIPC framework. The AfDB, the World Bank and the IMF are at an advanced stage
of providing a joint roadmap for the countrys arrears clearance programme. The government
has also requested that the AfDB organise a second-round high-level debt forum on Zimbabwe
to progress discussions on debt and arrears clearance process and development finance in the
context of Zim Asset. The country has been making regular quarterly payments since mid-2013
to the AfDB and the World Bank, as well as monthly payments to the IMF

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Figure 2. Stock of total external debt (percentage of GDP) and debt service
(percentage of exports of goods and services)
%

Outstanding debt (public and private) /GDP

Debt service/Exports

140
120
100
80
60
40
20
0
2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Source : IMF (WEO & Article IV)

Economic and political governance

Private sector
Starting a business in Zimbabwe is a highly costly and time-consuming exercise. According
to the World Bank report, Doing Business 2015; Zimbabwe stands at 180 in the ranking of 189
economies on the ease of starting a business. It takes 90days and costs 114.6% of income per
capita. Comparatively, in South Africa it only takes 19days to start a business and costs only 0.3%
of per capita income.
The government has set up an inter-ministerial committee on doing business to improve the
investment climate and spearhead the harmonisation of investment laws. Six technical working
groups comprising the key stakeholders have been set up. These cover starting a business,
dealing with construction permits and registering property, getting electricity, obtaining credit
and resolving insolvency, paying taxes and trading across borders and protecting investors and
enforcing contracts. Furthermore, the government is set to rebrand the National Pricing and
Monitoring Commission (NPMC) the National Competitiveness Commission (NCC). It will be
responsible for promoting a competitive business environment and reviewing regulations on
doing business.
The Zimbabwe Investment Authority (ZIA) is working towards implementing a digital onestop shop, which will improve turnaround periods for investment clearances. Moreover, the
government is in the process of setting up Special Economic Zones (SEZs) and has created an
inter-ministerial committee, which also includes development partners, to spearhead their
establishment.
The government is in the process of reforming and harmonising labour legislation. In terms
of land issues, there is currently no market for land as all the land is owned and controlled by the
state. The country needs to adopt a clear and robust legal framework to resolve all the outstanding
land issues, including multiple land ownership and security of tenure.

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While a number of ministries and government departments are responsible for infrastructure
development in the country, the high percentage of recurrent expenditure limits infrastructure
development. Lack of a comprehensive institutional framework for infrastructure development
is also a concern. There is no clear legislative framework to enhance the role of the private sector
in the financing and management of infrastructure projects through public-private partnerships
(PPPs).

Financial sector
The financial sector, though generally sound, has been adversely affected by the high levels
of NPLs, which rose from 15.9% as of 31December 2013 to 20.0% by 13September 2014. This
has exerted pressure on banks balance sheets, with adverse effects on their lending operations.
The reduction in the total core capital is largely attributed to loan loss provisions and subdued
earnings performance by some banking institutions.
In January 2015, the RBZ cancelled Allied Bank Limiteds licence under Section 14(4) of the
Banking Act (Chapter 24:20), following a voluntary surrender of the licence by the banking
institution. The bank was undercapitalised and was experiencing chronic liquidity challenges.
The RBZ has also applied to the High Court of Zimbabwe for the liquidation of Interfin Bank
Limited under Section57 of the Banking Act (Chapter24:20). This follows failed attempts to find
potential investors (Interfin Bank Limited was placed under curatorship in December 2012).
The cabinet approved the establishment of the Zimbabwe Asset Management Corporation
(ZAMCO), whose mandate is to clean up and strengthen banks balance sheets by acquiring NPLs
and providing them with liquidity to fund projects. According to the RBZ, as of 31January 2015,
NPLs amounting to USD65million have been acquired by ZAMCO. The 2015 national budget
outlined additional financial reforms, including the establishment of a credit reference bureau,
a bank for women, strengthening anti-money laundering actions and introducing an interbank
facility. The credit reference bureau will serve as a credit rating system to help financial
institutions screen loan applicants.
According to the 2012 FinScope Survey Report, as much as 43% of business owners are
financially excluded. Financial activity has, however, increased in rural areas owing to mobile
banking services offered by the countrys mobile telephone companies. The RBZ must come up
with regulations that ensure all mobile banking transactions are monitored and tracked to avoid
financial dislocations.

Public sector management, institutions and reform

The right to private property is an important part of Zimbabwes Bill of Rights in the new
constitution; it is guaranteed and protected. There have, however, been media reports on farm
evictions targeting white-owned farms during the course of the year 2014. This negatively affects
the incentive for businesses to invest in the country.
The national budget process has remained largely inclusive, with broad participation
of key stakeholders. The Public Finance Management Act gives parliament greater scope to
monitor budget performance, and there is need for regulations to enforce the act in the event of
irregularities.
Salaries and wages for civil servants constitute about 80% of total government expenditure,
an unsustainable amount. Public sector restructuring needs to be undertaken to create the much
needed fiscal space and ensure a lean and efficient government structure.
Regarding the executive branch of government, a number of external accountability
institutions and mechanisms exist. Nevertheless, their operations are hampered by an inadequate

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allocation of resources. Overall, policy uncertainty has increased the risk premium attached to
investing in Zimbabwe.
While decision making has improved with regard to broad-based participation by key
stakeholders, it remains largely ad hoc, as there is a lack of an institutionalised framework for
stakeholder participation in decision making.

Natural resource management and environment

The constitution states that every person living in Zimbabwe has the right to safe, clean and
potable water. It further enshrines the right to a clean environment and puts forth that measures
must be taken to prevent pollution. The Environmental Management Act of 2002 also recognises
environmental rights as human rights.
Some of the environmental challenges affecting the country include deforestation and
overgrazing, water pollution, uncontrolled fires, human-wildlife conflict and sand poaching.
Sand is being extracted in the countrys rivers and other sandy areas for construction purposes.
The Forestry Commission estimates that each year 330000hectares are deforested nationally.
Limited financial capacity and expertise has constrained the capacity of the country to tackle
these problems.
The country has formulated the National Climate Change Response Strategy (NCCRS), which
was validated and adopted by the Ministry of Environment at a multi-stakeholder meeting
on 15July 2014. The strategy aims to produce concrete mitigation and adaptation actions
integrated into long-term economic planning processes to support a low carbon, climate resilient
development pathway.
Laws and policies governing the mining sector must embrace the Extractive Industry
Transparency Initiative (EITI). The EITI will allow mining companies and government to disclose
the revenue generated and taxes and payments made by mining companies in the sector. This
helps to improve transparency and accountability. The government should consider reviving the
Zimbabwe Mining Revenue Transparency Initiative (ZMRTI) as a vehicle to operationalising the
EITI. Additionally, mining laws should be aligned with the provisions of the new constitution.

Political context
The year 2014 was characterised by relative political stability and peace, even though there
were reports of factional infighting within both the ruling party and the main opposition party.
On a positive note, the government resuscitated the Tripartite Negotiating Forum (TNF). Under
the TNF negotiations that have been undertaken to date, government, business and labour have
agreed on the draft principles to review the countrys labour laws.
In November 2014, the EU lifted economic and trade restrictions against Zimbabwe. This is
expected to result in the resumption of development and finance co-operation with the country
and the normalisation of relations. This decision was made on account of improvements in the
political environment after the adoption of a new constitution and peaceful elections in July
2013. Starting in 2015, the EU will start a EUR234million (USD260million) five-year funding
programme to support social services.
Though the new constitution was adopted in May 2013, by December 2014 many pieces of
legislation had not been amended accordingly. In the 2014 Freedom in the World ratings by
Freedom House, the country is rated as not free, with an overall freedom rating of 5.5 (1.0=best,
7.0=worst). The 2014 ratings are a slight improvement from the 2013 rating of 6.0.

10

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Zimbabwe

Social context and human development

Building human resources
The budget allocation to the health sector declined from 10% in 2013 to 8% in 2014. Budgetary
allocation to education has improved over the past few years, from about 27% in 2013 to about
30% in 2014. The health sector has, however, been receiving a significant proportion of its funding
from the donor community under the Health Transition Fund (HTF), a USD435million multidonor pooled fund established in 2011 and set to expire in 2015. As a result, the Multiple Cluster
Indicator Survey (MICS) 2014, carried out in 2014 by the Zimbabwe National Statistics Agency as
part of the global MICS programme, shows that the number of women who die while giving birth
decreased from 960 per 100000 to 614 per 100000 between 2009 and 2014.
Food insecurity among households across the country remains high due to the combined
effect of recurrent droughts, occasional floods and high unemployment. The 2014 rural livelihoods
assessment report published by the Zimbabwe Vulnerability Assessment Committee (ZimVAC)
stated that a third of Zimbabwes children are stunted due to malnutrition. It also indicated that
6% of the rural population some 565000 people will be in desperate need of food assistance in
the first quarter of 2015.
Zimbabwe has one the highest literacy rates on the continent. The MICS 2014 has revealed
that more children are attending secondary school, with the percentage increasing from 44.8%
in 2009 to 57.5% in 2014. The literacy rate among young people aged 15-24 was estimated at 92.0%
for women and 86.1% for men.
Zimbabwes HIV prevalence rate increased to 15.0% in 2013, from 14.3% in 2012. This increase
can be attributed to the rising poverty and unemployment levels. It is estimated by the National
AIDS Council (NAC) that at least 1.2million Zimbabweans are living with HIV, and an estimated
657000 are on Antiretroviral Therapy (ART). The Health Transition Fund pays for the purchase
of 98.0% of the drugs, while the remaining 2.0% are paid for by the AIDS levy managed by the
National AIDS Council (NAC).

Poverty reduction, social protection and labour

The country has made good progress in expanding social safety nets, even though challenges
still exist with respect to funding and coverage. This is exacerbated by the weak administrative
system. Key state interventions in social protection for the period 2013-15 are underpinned by the
National Action Plan for Orphans and Vulnerable Children PhaseII (NAPII).
Budgetary allocations to social safety nets programmes continue to be affected by the limited
fiscal space. In the 2014 national budget the Basic Education Assistance Module (BEAM) was
allocated only USD15million instead of the USD73million requested. Consequently, according
to the Ministry of Public Service, Labour and Social Welfare, the number of children benefiting
from BEAM declined from a peak of 969962 in 2005 to 460329 in 2012, 456003 in 2013 and
405060 in 2014. Nevertheless, the country is developing a national social protection policy, which
is expected to be completed by 31March 2015.
Even though Zimbabwe has ratified the eight International Labour Organization core
conventions there is a need to ensure their full domestication. There is also a need to align the
labour legislation with provisions in the new constitution. For instance, Section65(1) of the new
constitution states that every person has the right to fair and safe labour practices and standards
and to be paid a fair and reasonable wage. Section 65(3) of the new constitution guarantees all
workers the right to participate in a job action and or strike, with the exception of members of
the security forces and some civil servants who offer essential services. The new constitution
also provides for a labour court with jurisdiction over matters of labour and employment as
may be conferred upon it by an act of parliament. Verdicts reached by the labour court can,

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however, be appealed at the High Court, which makes the labour dispute resolution process quite
cumbersome.
Labour market regulations remain highly fragmented. There are growing calls for the
harmonisation of existing labour market legislation. According to the Global Competitiveness Report
2014-15, the restrictive labour regulations remain one of the most problematic factors for doing
business. The 2014 State of the Manufacturing Sector survey by the Confederation of Zimbabwe
Industries (CZI) also identifies the rigid labour market regulations as one of the binding constraints
to full capacity utilisation in manufacturing.
Although Zimbabwe has a social security system offering social insurance and social
assistance, only a relatively small number of people in formal employment enjoy this protection,
leaving the majority of the population not covered. As the economy has continued to weaken,
many businesses have closed and employees have been laid off, increasing the number of claims.
The underperformance of the economy has seen most companies struggle to meet tax and
pension obligations. To ensure the sustainability of pension payments, the government has made
a decision to move from the defined benefit scheme to a defined contribution scheme.

Gender equality
The constitution provides for the promotion of the full participation of women in all spheres
on the basis of equality with men. Zimbabwe has surpassed the Millennium Development Goal
of gender parity in basic education. The Net Intake Rate (NIR) in primary school is 75% for girls
and 72% for boys (Zimbabwe MICS 2014). Literacy rates stand at 97% for women and 98% for men
[above the average is quoted as 90.7%].
In terms of the labour market, approximately 60.0% of women are employed, as compared to
74.3% of men. Women are largely represented in the agriculture sector but less prevalent in other
economic sectors.
Zimbabwe has ratified the SADC protocol on gender and development. The representation of
women in parliament increased from 14.2% in 2008 to 32.0% in 2013 in the National Assembly and
from 33.3% in 2008 to 48.0% in 2013 in the Senate. This represents a total of 34.0% representation.
However, the representation of women at the local level has decreased from 19.0% in 2008 to
16.0% in 2013 due to the absence of a legislated quota at this level. Zimbabwe ranked 28 in the
2014 Inter-Parliamentary Union (IPU) classification of women in parliaments in 188countries. In
2012, the nation was ranked 90 out of 190.

Thematic analysis: Regional development and spatial inclusion

At independence the government inherited an economy that had been developed to promote
minority white interests and supremacy at the expense of the black majority. This resulted in
the creation of a dual and enclave economic structure whereby a small and modern formal
sector coexisted with a large and traditional non-formal economy. The formal sector was whitedominated and relatively capital intensive, while the non-formal economy was largely a peasant
sector.
The government has adopted a number of development plans to address regional inequalities
and promote spatial inclusion since independence in 1980. These policies have, however, not
succeeded in dealing with the dual and enclave nature of the economy whereby a shrinking
formal economy coexists alongside a booming non-formal economy. This has been exacerbated
by deindustrialisation. In fact, the dualism and enclavity has become entrenched, as most of the
policy propositions are aimed at the formal economy. While progress has been made in reducing
inter-racial inequalities, the inherited inequalities between and within the urban and the rural

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areas and between administrative districts continue to exist. Regional inequalities have persisted
and the anticipated spatial integration of the economy has not fully materialised.
One interesting initiative is that of growth points, which was first introduced before
independence in 1978. Since independence, successive governments have continued to implement
the initiative. Growth points can generally be defined as rural or urban settlements which central
and local governments consider as having potential for development and hence requiring support
by further public and private sector investment. The initiative has seen 55 rural districts granted
growth point status. However, these growth points have not met stated objectives since serious
development challenges are still evident in most rural districts. One reason advanced for this
failure has to do with the process of identifying growth points, which has somehow deviated
from the set economic criteria.
At a regional level, in 2001 a Memorandum of Understanding (MoU) was signed between
Limpopo and the Matabeleland South and North provinces, creating the Trans-Limpopo
Spatial Development Initiative (SDI). It seeks to create an economic development corridor from
Limpopo to Victoria Falls, with a radius of 50kilometres. A number of projects in infrastructure,
agriculture, mining, energy development and tourism have been identified within the area of
the Trans-Limpopo corridor. Once the corridor is fully operational the potential benefits include
a one-stop border post in Beitbridge, the development of food processing industries and coal
methane gas mining in Lupane, the refurbishment of the Joshua Mqabuko Nkomo and Victoria
Falls international airports, as well as the Matabeleland Zambezi Water Project. However, many
of the projects have not yet been implemented. Challenges facing Bulawayo, once the industrial
hub of the country, could be addressed if projects under the SDI were fully implemented.
The new constitution stipulates that not less than 5% of the national revenues raised in
any financial year must be allocated to the provinces and local authorities as their share in that
year. However, the necessary legislation and regulations to enforce this are not yet in place.
Some of the reasons for the failure of spatial inclusion include the lack of effective participation
by key stakeholders and the lack of independent institutions to correct market failures, promote
innovation, and reward risk taking.
The government should prioritise strengthening institutions engaged in social dialogue and
promoting entrepreneurship. It should also encourage developing skills and vocational training,
with specific measures to empower and support women, youths and SMEs and provide access
to affordable credit. Lastly, the government should promote rural development and help SMEs
participate in Global Value Chains (GVCs).

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