• Economic growth decelerated from 10.6% in 2011 to 4.4% in 2012, reflecting a fragile recovery owing largely to inherent political and economic uncertainties, a high debt overhang and the deteriorating infrastructure.

  • Key challenging factors to doing business include policy instability, lack of funding, corruption, excessive or poorly functioning government bureaucracy and inadequate infrastructure.

  • As a highly natural resources rich and dependent economy, Zimbabwe is vulnerable to environmental conditions. Moreover, the resource base has been stressed by increases in population and competition for natural resources.

Overview

Real gross domestic product (GDP) growth was projected to decelerate to 4.4% in 2012 down from an estimated 10.6% in 2011 reflecting a slowdown in economic activity. It is projected to improve marginally to 5.0% in 2013. The projected improvement in 2013 will be underpinned by improvements in mining and agriculture.

In 2012, inflation averaged about 5.0%. Under the multi-currency regime, inflationary developments, in the short to medium term, will continue to be influenced by the USD/rand exchange rate, inflation developments in South Africa, international oil prices and local utility charges.

The economy continues to experience structural challenges emanating from the limited sources and high cost of capital; uncertainties arising from policy inconsistencies, especially with respect to economic empowerment and indigenisation regulations; dilapidated infrastructure and obsolete technologies.

The mining sector has made a significant contribution to the economic turnaround since 2009. The average share of mining to GDP grew from an average of 10.2% in the 1990s to an average of 16.9% from 2009 onward. Mineral exports, on the other hand, rose by about 230% over the 2009-11 period, making mining the leading export sector. By the end of 2011, mineral exports accounted for 47% of total exports, led by platinum (43%), gold (28%) and diamonds (20%). In 2012, mineral exports accounted for 64% of total exports. There is, however, a lack of transparency and accountability in the allocation of mining rights, as well as in the distribution and use of revenue from mining. Hence, mining revenues are a tiny fraction of total production.

The poor performance of domestic revenue inflows against the background of rising recurrent expenditures will continue to constrain the fiscal space. With the continued use of the multi-currency regime, monetary policy is not expected to change significantly. Overall, the economic performance will be influenced largely by the outcome of the forthcoming 2013 general elections.

Figure 1: Real GDP growth 2013 (South)

Table 1: Macroeconomic indicators

 2011201220132014
Real GDP growth10.64.455.7
Real GDP per capita growth9.23.13.33
CPI inflation3.95.15.75.5
Budget balance % GDP-3.4-4-3.9-3.9
Current account % GDP-38.7-35.3-33.1-34.1

Recent Developments & Prospects

Table 2: GDP by Sector (percentage of GDP)

 20072012
Agriculture, forestry & fishing--
Agriculture, hunting, forestry, fishing21.319.8
Construction3.11.5
Electricity, gas and water11.44.9
Electricity, water and sanitation--
Extractions--
Finance, insurance and social solidarity--
Finance, real estate and business services4.914
General government services--
Gross domestic product at basic prices / factor cost100100
Manufacturing815.1
Mining22.714.9
Other services1410.1
Public Administration & Personal Services--
Public Administration, Education, Health & Social Work, Community, Social & Personal Services1.73
Public administration, education, health & social work, community, social & personal services--
Social services--
Transport, storage and communication26.1
Transportation, communication & information--
Wholesale and retail trade, hotels and restaurants10.910.6
Wholesale, retail trade and real estate ownership--

Economic growth in 2012 continues to improve from the low base of 2007/08, though recovery remains fragile. However, the economic rebound experienced since 2009 is moderating as growth declined from 10.6% in 2011 to 4.4% in 2012. It is projected to rise slightly to 5% in 2013 against a Medium-Term Plan (2011-15) target of 7.1%. Real GDP growth is driven by developments in the mining, agriculture and manufacturing sectors.

Growth has been fragile largely due to growing political and economic uncertainties arising from the impending elections in 2013 and the unpredictable policy environment. The country has also been saddled with a high debt overhang, which has served as a key bottleneck to investment and capital inflows. In addition, efforts by the government to deal with the debt issue have not yet yielded tangible results. Economic growth has been neither broad-based nor pro-poor with the high levels of unemployment and under-employment.

The agriculture and mining sectors have led the economic recovery. The mining sector has become the leading export sector accounting for 64% of total exports. Strong external demand for primary commodities, particularly platinum and gold, underpinned higher production levels. The anticipated recovery of mineral prices combined with ongoing investment in the sector, as well as the expected resumption of production of nickel and asbestos in 2013, will result in the mining sector growing by a projected 17.1% in 2013.

Growth in agriculture in 2012 was driven mainly by tobacco and cotton. Actual tobacco production amounted to 144.5 million kilograms (kgs) in 2012 up from 133 million kgs in 2011, while cotton production improved from about 250 000 tons in 2011 to about 350 000 tons in 2012. In 2013, the agriculture sector is projected to grow by 6.4%. This projected growth will be supported by credit financing facilities to farmers and continued contract-farming arrangements for major crops such as tobacco, cotton, barley and soya beans.

The manufacturing sector remains in crisis with capacity utilisation declining from an average of 57% in 2011 to 44% in 2012. Capacity utilisation remains constrained by erratic power supplies, lack of capital, higher input costs, obsolete machinery and dilapidated infrastructure. Equipment has not been upgraded over the past ten years, resulting in constant machinery breakdowns and poor-quality products. Consequently, manufactured products failed to compete both locally and internationally. The inherent political and economic uncertainties of Zimbabwe continued to affect growth negatively in the manufacturing sector. The situation has been worsened by the continued implementation of the “indigenisation legislation”, which has forced potential foreign investors to take a wait-and-see attitude resulting in a further deterioration of productive base.

Although the private sector is a more dominant contributor to GDP, growth in gross investments is driven mainly by growth in public sector investments, with the private sector contributing more in terms of consumption. While public and private sector investment complement each other, it is critical that, in the medium to long term, the role of private investment be enhanced. Total public expenditure constitutes a very small percentage of real GDP and this trend is likely to be maintained in the medium term as the government struggles to find sustainable sources of financing in the absence of external support. In this context, private consumption is expected to continue contributing a larger proportion of real GDP growth. The external position remains unsustainable.

While the primary balance has recorded a small surplus since 2009, with the exception of 2010, the overall balance deficit, albeit small, persists. The government has managed to keep the deficit small by following the cash budgeting framework. This framework is expected to remain in place in the short to medium term. The bulk of expenditures are current, effectively crowding out capital expenditure that is so essential for medium- and long-term recovery and growth. This has been exacerbated by the low borrowing capacity because of the high public-debt overhang.

Both the trade and current-account balances are projected to remain largely negative in the medium term as imports rise against a backdrop of low export receipts. Import growth continued to be dominated mainly by fuel, chemicals, machinery and manufactured goods. As the manufacturing sector continues to struggle, domestic demand for consumption goods is being met through imports. The current account will remain under pressure unless there is a full recovery of the local manufacturing sector, which in turn should help the economy to become less dependent on imports. Exports over the period January to December 2012 amounted to USD 3 884 million, while imports totalled USD 7 484 million over the same period.

Overall, political and economic uncertainties present the greatest risk to the economy. Zimbabwe is due to hold elections before the end of 2013 and this follows the agreement by the three principals to the Global Political Agreement (GPA) on the draft constitution.

Zimbabwe is preparing to co-host the United Nations World Tourism (UNWTO) general assembly, scheduled in August 2013. This conference will provide the country with an opportunity to market itself to the more than 4 000 delegates from the 158 countries expected to attend.

Macroeconomic Policy

Fiscal Policy

Fiscal space remains severely constrained because of the poor performance of domestic revenue inflows against the background of rising recurrent expenditures. In addition, the country has not fully engaged with the international development partners leading to low capital inflows. In light of the constrained fiscal space imposed on the government by adopting the multi-currency regime and the public debt, the government has been forced to adopt a contractionary fiscal policy regime.

In line with the cash budgeting principle adopted in 2009, the 2012 national budget targeted a fiscal balance with both aggregate revenue and expenditure set at USD 4 billion. This represented a 25% increase in real terms over the 2011 budget. In step with recent trends, the bulk of the revenue was expected to come from the value added tax (VAT) followed by corporate and individual income tax and import taxes.

Net revenue collections amounted to USD 3 257 billion against a target of USD 3 233 billion giving a 7% positive variance. Individual taxes and the VAT contributed the bulk of the revenue, with 33% and 21% respectively. Corporate tax came third with 14%, followed by excise duty and customs duty with 12% and 11%, respectively. Although dividends from diamonds were projected at USD 600 million, by the end of the first half of the year, they accounted for only USD 44 million. Diamond revenues for the year are now projected to total only USD 240 million, representing only 40% of the initial projected amount.

On the public expenditure side, employment costs continue to account for the bulk of total expenditures, thereby crowding out expenditure on capital and social services. The huge employment cost does not reflect high salaries and wages per se, but is a result of the bloated civil service numbers, which include “ghost” workers in the face of a shrinking economy. This problem will continue to pose challenges to the government as long as the issue of the ghost workers identified by auditors is not addressed adequately.

The budget deficit is estimated at 4% of GDP in 2012 because of the fiscal slippages. In its mid-term fiscal policy review, the government announced a number of measures designed to close the potential budget deficit. The measures included, among others, a hiring freeze, the suspension of diamond-revenue-financed projects, increases in excise duty on fuel and other expenditure-rationalising and revenue-enhancing measures. In order to curtail leakages in diamond revenues the government announced plans to place a Zimbabwe Revenue Authority (ZIMRA) official at every level in the diamond value chain. The primary budget deficit is projected to worsen in 2013 on the back of the anticipated underperformance of diamond revenues and increases in spending before the 2013 elections.

The budget preparation process has been broadened to ensure the participation of a number of key stakeholders such as business, labour and civil society organisations. This has enhanced both the credibility and inclusiveness of the process. However, the apparent lack of synergy and disconnect between the national budget and the Medium-Term Plan has meant that the budget does not reflect fully the key national priorities. Although budget proposals are comprehensive, budget credibility has been compromised by underperformance on the revenue side. This has invariably resulted in the capital budget bearing the worst of the burden of fiscal adjustment. Hence, while the 2012 budget proposed a capital expenditure of USD 818 million (20% of total budget), this was revised to USD 484 million (13% of total budget) in the mid-term fiscal policy review.

Table 3: Public Finances (percentage of GDP)

 200920102011201220132014
Total revenue and grants17.928.732.932.632.231.9
Tax revenue16.227.13029.629.228.8
Oil revenue------
Grants0.800000
Total expenditure and net lending (a)213136.436.636.135.8
Current expenditure20.223.23130.829.729
Excluding interest16.520.928.828.227.727.3
Wages and salaries9.513.920.520.219.619.3
Interest3.62.32.22.52.11.7
Primary balance0.50-1.2-1.5-1.9-2.2
Overall balance-3.1-2.3-3.4-4-3.9-3.9

Monetary Policy

There was no significant change in monetary policy between 2011 and 2012 in view of the continued existence of the multi-currency regime. The central bank could not resort to the use of interest and exchange rates to influence other economic variables. The present government has expressed the desire to continue using the multi-currency regime. Under this regime, the role of the central bank is limited to banking supervision to ensure financial stability. In its first monetary policy statement for 2013, however, the Reserve Bank of Zimbabwe (RBZ) has expressed a desire to try to influence liquidity by issuing treasury bills, which proved unpopular when they were re-introduced in the fourth quarter of 2012. If these are successful and the government avails resources to enhance the “lender-of-last-resort” function of the RBZ, then activity on the money market will improve.

Total banking sector deposits continued to rise steadily by about 42% from USD 3.1 billion in January 2012 to USD 4.41 billion by December 2012. However, the growth in deposits was not distributed equally across all banking institutions with a few, mostly foreign-owned banks accounting for over 60% of the total deposits. The total loan book rose from USD 2.76 billion to USD 3.52 billion over the same period, as banks tried to achieve set minimum capital requirements through organic growth by aggressively increasing loan activity. This gives an average loan-to-deposit ratio of about 80% in January 2013 compared to about 82% in October 2012. The downside risks are high, however, as several of the loans are not performing. The average level of non-performing loans stood at about 9% in December 2012 when compared to about 3% in January 2012 reflecting high default rates.

In July 2012, the RBZ increased the minimum capital requirements for banking institutions from USD 12.5 million to USD 100 million to be phased over 2 years. This is expected to result in a consolidation of the banking sector given the prevailing liquidity constraints.

Out of 21 banking institutions, 16 had met the first phase of increased minimum capital requirements of USD 25 million by December 2012. The Interfin bank was placed under curatorship and the Royal Bank closed after the RBZ discovered irregularities in their operations during the course of 2012. A third bank, Genesis, surrendered its license after failing to raise capital in July 2012. Inflation, as measured by changes in the consumer price index, for the period up to December 2012 remained below the targeted 5.1%. Year-on-year inflation ended the year at 2.91%, due to, among other factors, steady oil prices, the relatively strong South African rand against the US dollar, low aggregate demand in the face of the prevailing liquidity constraints and limited capital inflows. The rate of inflation is likely to remain stable in the short term due to the continued use of the multi-currency regime and relatively stable oil and food prices.

Economic Cooperation, Regional Integration & Trade

South Africa is the single largest trading partner in Zimbabwe, accounting for at least 40% of total exports and 60% of total imports. The European Union (EU) is the second biggest trading partner followed by China. In terms of the composition of exports in 2012, declared mineral export shipments accounted for 64%, followed by tobacco (19.4%), agriculture (9.1%), manufacturing (7%), horticulture (0.3%) and hunting (0.2%). In 2013, imports will continue to grow while exports remain compressed, thus worsening the current account.

Zimbabwe is a member of the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA), the African, Caribbean and Pacific (ACP) Group and the World Trade Organization. The country also has six bilateral preferential trade agreements and over 40 bilateral trade agreements under the most-favoured-nation status.

The nation is currently involved in discussions on a tripartite free trade area encompassing COMESA, SADC and the East African Community. The country ratified an interim Economic Partnership Agreement (EPA) with the EU in March 2012. There are concerns that this EPA will pose challenges to local industries that are facing liquidity constraints and the high cost of doing business, among other challenges.

Although Zimbabwe liberalised all its current account transactions, there are still some administrative hurdles that inhibit the free flow of goods. The poor and deteriorating infrastructure also poses a major impediment to trade. The country is ranked 172 out of 185 countries in the World Bank report Doing Business 2013. This low ranking means that starting and operating a business is difficult due to a lack of regulations, which inhibits success and productivity. For example, the lack of conducive regulations or the opposite, inhibitive regulations in Zimbabwe, mean that, on average, exporting a standard container of goods requires eight documents, takes 53 days and costs USD 3 280 while importing the same container of goods requires nine documents, takes 73 days and costs USD 5 200.

Customs procedures remain cumbersome. Even though the government has made a commitment to enhance trade facilitation by streamlining and simplifying exporting and importing procedures, there have been no reforms to eliminate customs delays and improve customs administration.

The 2012 Global Enabling Trade Report by the World Economic Forum indicates that Zimbabwe has an average trade-tariff rate of 20.5%. The maximum tariff rates for luxury items such as vehicles can be as high as 60%. The standard deviation for the tariff dispersion is 34.3. The total number of distinct tariffs is 388 and the share of duty-free imports is only 12.2%. 

According to the Zimbabwe Investment Authority (ZIA), FDI rose from USD 165.9 million in 2010 to USD 387 million in 2011, but for neighbouring countries such as Angola, South Africa and Zambia, FDI was above USD 1 billion. The ZIA had only approved USD 120 million investment project proposals in the first half of 2012. Economic and political uncertainties are the major deterrents to FDI.

Table 4: Current Account (percentage of GDP)

 2004200920102011201220132014
Trade balance-4.9-29.4-24.1-34.6-33.6-32.2-33.9
Exports of goods (f.o.b.)27.129.643.350.747.847.247
Imports of goods (f.o.b.)31.95967.485.381.479.480.8
Services-1.7-4.9-5.9-7.3-5.7-4.6-3.8
Factor income-4.6-7.7-5.5-5.9-6.1-6.5-5.6
Current transfers3.3177.59.11010.29.2
Current account balance-7.9-25-28-38.7-35.3-33.1-34.1

Debt Policy

Total external debt is estimated at USD 10.7 billion constituting 111% of GDP as of July 2012. Arrears account for 59% of this amount. The 2012 debt sustainability analysis, conducted jointly by the IMF and the World Bank, indicates that Zimbabwe is in debt distress with arrears continuing to accumulate. This impacts growth prospects negatively. Total domestic public debt, estimated at USD 507 million, also represents a potential source of economic vulnerability. About 84% of the external debt is public and publicly guaranteed.

In order to strengthen debt management, the government established a Zimbabwe Aid and Debt Management Office (ZADMO) within the ministry of finance in December 2010. With the financial and technical support of development partners,1 the ZADMO has been able to carry out activities such as debt data validation and reconciliation and set up structures necessary for effective debt management. This exercise is expected to be concluded by the end of 2012.

To resolve the debt crisis, the country needs to implement strong macroeconomic policies accompanied by a comprehensive arrears clearance strategy. In this regard, the government has adopted the Zimbabwe Accelerated Arrears Clearance, Debt and Development Strategy (ZAADDS), which is a hybrid debt-resolution strategy that includes the adoption of traditional debt resolution initiatives combined with leveraging of the country’s natural resources to achieve sustainable economic development. The ZAADDS is aimed at accelerating re-engagement with creditors including the international financial institutions, which has begun. The successful implementation of ZAADDS will largely depend on the political context prevailing in Zimbabwe.

Figure 2: Stock of total external debt and debt service 2013

Economic & Political Governance

Private Sector

The implementation of the one-stop shop investment centre in 2010 was expected to result in a significant reduction in the time taken to process investment proposals from over 40 days to just five days, but not much has changed on the ground. According to the World Bank report Doing Business 2013, Zimbabwe is ranked 172 out of 183 countries, down from 171 in 2012, in terms of the ease of doing business. This rank reflects the high levels of economic and political uncertainties.

According to the Global Competitiveness Report (2012/13), Zimbabwe was ranked 132 out of 144 countries. Zimbabwe scored relatively higher in the ranking in “soft factors”, such as female participation in the labour force (where it ranked 18th); reliance on professional management; the quality of education system; the low business cost of terrorism; and the extent of organised crime. By contrast, Zimbabwe had the worst rankings in the “hard factors”. Hard factors include national savings, breadth of value chains, property-rights observance and venture capital availability.

Zimbabwe has had a Competition and Tariff Commission since 1998 whose main functions are to encourage and promote competition in all sectors of the economy and to reduce barriers to entry into any sector of the economy. While the Competition and Tariff Commission is designed to increase efficiencies by encouraging competition, it is largely ineffective because of serious underfunding by the government.

Through General Notice 280 of 2012, indigenisation has been extended to cover all important sectors beyond mining to include banking, and tourism. Some of the key challenges facing the indigenisation process include: a lack of consistency and clarity in the implementation of the Act; a lack of direct involvement by communities in the formation of the Community Share Ownership Trusts; a lack of financial resources by indigenous investors to acquire equity in the foreign-owned companies; a lack of safeguards to guarantee investors’ rights and respect for the Bilateral Investment Promotion and Protection Agreements; and a lack of a focus on the promotion of small businesses. By 2012, 120 mining companies had complied with the indigenisation laws and 400 Employee Share Ownership Trusts and five Community Share Ownership Trusts had been established.

Financial Sector

The financial system faces a number of challenges relating to capitalisation, liquidity and credit risks. A number of banks remain vulnerable with a high percentage of non-performing loans and deteriorating asset quality. There is also an uneven distribution of deposits in favour of the big and more stable foreign banks. Downside risks remain; these emanate largely from low market liquidity, volatile deposits of a short-term nature, the absence of an active inter-bank market and the lack of an effective lender-of-last-resort function by the central bank.

As at 31 December 2012, there were 22 operating banking institutions, 16 asset management companies and 150 microfinance institutions. Competition in the banking system is limited due to the higher risks associated with indigenous banks following the collapse of the Genesis and Royal banks. In terms of distribution of deposits, 8 banking institutions with a deposit base of at least USD 200 million accounted for about 68% of total deposits. The liquidity crunch and high credit demand mean that lending rates have remained high, ranging from 8% to 30%. The tenor of the credit is short term ranging from 3 months to 1 year.

Activity on the Zimbabwe Stock Exchange (ZSE) has remained subdued, as most investors have adopted a cautious approach following concerns over the implementation of the indigenisation policy. Moreover, uncertainties exist over the timing of the impending elections in 2013.

There are generally high levels of financial exclusion within the banking sector. According to the 2011 FinScope Consumer Survey, 40% of Zimbabweans are financially excluded (do not use either formal or informal financial products or services), while 22% rely on informal financial products/services. Only 38% of Zimbabweans are formally served, with 24% using bank products/services, while the remaining 14% use non-bank formal products/ services. Apart from the stringent requirements for opening a bank account, other factors that have contributed to financial exclusion include the limited infrastructure in the rural areas, low disposable incomes and a generally illiquid economy.

The RBZ has so far approved 18 banks to partner with the three mobile telecommunications providers to set up cell-phone banking. The RBZ is also in consultations with the Ministry of Finance to relax the know-your-client requirements, including reducing the age requirements to open a bank account from the current 18 years. Even though up-to-date statistics are not available, anecdotal evidence points to an improvement in financial inclusion following the introduction of mobile banking.

Public Sector Management, Institutions & Reform

The public financial management system is characterised by some shortcomings, including poor expenditure control mechanisms by line ministries and weak payroll controls. This had the effect of raising employment costs above the budgeted amount. The Public Finance Management Act requires that the minister of finance submits to parliament monthly and quarterly reports. Although monthly and quarterly reports are being published, these are not produced on time, leading to cases of financial mismanagement being revealed too late to be rectified.

In view of the bloated public sector, average wages have remained low, relative to the poverty datum line (PDL), although employment costs now constitute over 70% of total public expenditure. As the public sector payroll and skills audit revealed, hiring practices have not been aligned with the detailed establishment tables, pointing to a civil service where some skills have been depleted while there is an overabundance in others.

Although the executive in Zimbabwe is supposed to be accountable to the legislature and the two are supposed to function independently of each other, there have been reports that this is not the case in practice. This has been deteriorated by the formation of the Inclusive Government in 2009 as decisions in the legislature follow partisan lines. In a number of instances, there were reports that ministers have refused to appear before both parliament and parliamentary committees to respond to questions relating to their ministries.

Following the formation of the Zimbabwe Media Commission (ZMC) in 2009, access to information has generally improved with the licensing of a number of privately owned media houses. There are however some risks of policy reversals. Zimbabwe was ranked 47 out of 52 countries in the Ibrahim Index of African Governance (IIAG) in 2012 up from 51 out of 53 countries in 2011. The IIAG provides an annual assessment of governance performance in Africa. Countries are assessed on four major categories: i) safety and rule of law; ii) participation and human rights; iii) sustainable economic opportunity; and iv) human development.

While civil society organisations (CSOs) have access to information relating to the national budgetary process, they find it difficult to access information in the extractive industries. The CSOs are excluded normally from information on contracts negotiated with mining houses. Moreover, diamond mining has been shrouded in secrecy. Data on production and sales of diamonds are not available to CSOs for public scrutiny. It is for this reason that the finance ministry wants to review and renegotiate some of the agreements reached with mining houses and to join the Extractive Industry Transparency Initiative in order to strengthen accountability and good governance.

According to the 2012 Corruption Perceptions Index by Transparency International, Zimbabwe is ranked 163 out of 176 countries; the country has a score of 2.0 on a scale of 0 (highly corrupt) to 10 (very clean). Anecdotal evidence shows that there is a high level of state capture by certain politically influential and powerful interest groups, especially in the mining sector.

Natural Resource Management & Environment

Zimbabwe has an Environmental Management Act, which led to the Environmental Management Agency (EMA) in 2002. The Agency was established to ensure the sustainable use and protection of Zimbabwe's environmental goods and services. The EMA has been auditing mines and other institutions to check for compliance to new regulations for establishing environmentally friendly disposal areas. A number of mines and local authorities have been found to be non-compliant and were fined heavily for polluting water and the atmosphere. In 2012, the Harare City Council launched a zero-litter campaign in Budiriro to try to reduce the dumping of solid waste. Although the country has environmental laws and regulations administered by the EMA, it is thwarted by a lack of resources. As a result, many companies and local authorities continue to discharge untreated effluent into local streams, thereby endangering both flora and fauna.

The principles of sustainable development have not been mainstreamed into policies and programmes. The prevailing energy crisis has forced most people to rely heavily on natural resources, such as firewood, thereby leading directly to biodiversity loss.

Political Context

Progress towards the implementation of the Global Political Agreement (GPA) has remained slow following the formation of the Government of National Unity in 2009. Some important elements of the GPA have been implemented, such as amendments to the Electoral Act, the appointment of independent commissions to address media, human rights and election issues and the issuing of media licenses. However, some of these commissions are not fully functional because of lack of clear legislative frameworks and funding. A new constitution has been drafted by the Constitution Select Committee, which is a co-ordinating body chaired by representatives from each of the political parties. The principals to the Inclusive Government agreed upon the constitution in January 2013; it was then ratified by the parliament. The next step will be a referendum, slated to be held in early 2013 before the general elections.

Social Context & Human Development

Building Human Resources

In 2012, the government continued with the targeted approach in the health sector. However, the total health budget allocation declined to 8.64% of the total budget in 2012 from 9.33% in 2011. A total of USD 21.6 million was disbursed during the first half of 2012 to 4 central, 6 provincial and 9 district hospitals as well as 11 mission hospitals. Co-operating partners have helped the government in the health sector through the Health Transition Fund (2011-15). The Fund intends to mobilise over USD 435.3 million over this period. About USD 80 million was disbursed in 2012. In addition, the World Bank has continued to provide financial and technical support to the Ministry of Health and Child Welfare for maternal and child health-care provision in 387 Rural Health Centres.

Maternal mortality continues to be a major challenge in Zimbabwe with most deaths related to inadequate maternal care. This is mainly a result of the limited access to antenatal and delivery care in many remote areas. Although 94% of women seek at least one antenatal care (ANC) visit, only 71% return for at least four ANC visits. Even fewer women return to give birth in institutions where skilled childbirth practitioners are available.

The country is on course to achieving the MDG target of reducing the prevalence of HIV/AIDS to 9% by 2015, having reduced the prevalence rate to 14.3% by 2009. The Zimbabwe National HIV and AIDS Strategic Plan (ZNASP), is a five-year (2011-15) strategy to guide the national response towards achieving zero new infections by 2015. Only about 600 000 people receive antiretroviral therapy against a total estimated figure of 1.3 million infected people as of 2009.

The incidence of malaria has also been on the decline since 2005 as the government scales up its malaria prevention programme. Zimbabwe’s malaria programme receives support from the several donors, including: the Global Fund, the World Health Organization, UNICEF, the United Kingdom Department for International Development, the United States Agency for International Development (USAID), the European Commission and private sector entities. In 2012, USAID provided approximately 500 000 long-lasting insecticidal nets for free mass and routine distribution to complement the Global Fund procurement of 800 000 nets.

According to the Zimbabwe Education Act, all children have the right to education. However, education is not free. While tuition fees in government schools have been generally very low, development levies at times have proved to be impediments to the provision of education. The dropout rate in both primary and secondary schools is higher among girls than among boys.

The total education budget allocation rose to about 24% of the total budget in 2012 from about 22% in 2011. Under phase II of the Education Transition Fund, co-operating partners have pledged USD 21 million. Investments in education have resulted in a marked improvement in examination pass rates. The end of primary (i.e. grade 7) average pass rate has jumped from 20.11% in 2009 to 28.89% in 2011. At the ordinary level (O level), average pass rates remained constant at around 19% over the same period, but at the advanced level (A level), average pass rates improved from 78.88% in 2009 to 85.25% in 2011.

Poverty Reduction, Social Protection & Labour

The National Action Plan for Orphans and Vulnerable Children Phase II (NAP II) underpins the basic government strategies for social protection for the period 2013-15. Key objectives of NAP II are to increase incomes of an estimated 250 000 extremely poor households and to increase access to basic education, health, food and shelter for orphans and vulnerable children and their families.

These interventions, however, suffer from a serious lack of funding. From 2009-12 financial support for social-protection schemes came from co-operating partners. However, Zimbabwe does not have a comprehensive, social-protection strategy with current interventions being ad hoc, incoherent and not co-ordinated.

Zimbabwe has ratified the eight International Labour Organization (ILO) core conventions. Among the areas covered by these conventions are the freedom of association and collective bargaining; the elimination of forced and compulsory labour; the elimination of discrimination in respect of employment and occupation; and the abolition of extreme forms of child labour. Some of these standards have been adopted and written into the Labour Relations Act. However, Zimbabwe must ensure the full adoption and legalisation of the principles enshrined in the ILO core conventions. The government has discussed the need to strengthen the protection of casual workers.

Labour-market regulations are fragmented within three separate acts: civil servants are covered under the Public Service Act, health sector employees are covered under the Health Service Act and private sector workers are covered under the Labour Relations Act. The government is in the process of harmonising the plethora of labour-market regulations. They also plan to streamline the dispute settlement system by establishing an independent alternative dispute resolution mechanism. Financial constraints, however, have impeded the implementation of any labour market programmes.

Pension and old age savings programmes that are in existence only cover workers in the formal sector; hence, the majority of the population is not covered. Nevertheless, anecdotal evidence suggests that many employers are not complying with the requirement to provide benefits to workers under the Pensions and Other Benefits scheme. The government is reviewing the structure of the public sector pension scheme with the intention to create a funded Public Service Pension Fund. This review is expected to be completed by end of 2012.

Gender Equality

Significant progress has been made at the legislative level in terms of gender equality. There is near parity in enrolment in lower secondary school by gender. However, inequality still exists. Girls comprise only about 40% of the pupils currently in upper secondary education. The completion rate for secondary school is higher for boys than for girls.

The United Nations Development Programme Human Development Report 2013 ranks Zimbabwe at the Human Development Index (HDI) 2012 rank of 172 out of 187 countries. Gender equality is in the mid-range with a 2012 gender inequality index (GII) value of 0.544. This index uses three dimensions to create an objective indicator of women’s equality in a nation – reproductive health, empowerment and the labour market. The empowerment dimension of the GII notes that 17.9% of parliamentary seats are held by women and that a 0.787:1 ratio of women to men have reached secondary or a higher level of education. Zimbabwe scores highly in the labour participation rate of women to men at 0.927:1, but it fares less well in the adolescent fertility rate and the maternal mortality ratio.

Despite the picture portrayed by statistics, gender disparities characterise all aspects of development. This reflects the generally low status of women with respect to access, control and ownership of economic resources and positions in decision-making processes. Until recently, women were not eligible to get loans from banks on their own right. However, such prejudices are being addressed as equality laws are pushed through parliament. For example, following a legal challenge in 2006, mothers can procure legal documents for minors from the Registrar General's Office without the presence of the father. In terms of the labour market, 60% of women participate in the labour market as compared to 74.3% of men.

A number of laws exist that provide for equality in treatment between men and women, including international conventions ratified by Zimbabwe and the SADC Gender Protocol call for non-discrimination between men and women. Zimbabwe has ratified the UN Convention on the Elimination of all Forms of Discrimination against Women (CEDAW). The Zimbabwean Domestic Violence Act criminalises domestic violence. In spite of the effort, and some modest success towards securing and protecting the legal rights of women, especially with respect to ownership of assets and protection against discrimination, the policy and institutional framework for empowerment of women still lags behind.

Thematic analysis: Structural transformation and natural resources

Zimbabwe is endowed with abundant natural resources that include rich mineral deposits, wildlife, arable lands, forests and surface and groundwater resources. Major mineral resources include gold, diamond, copper, coal, nickel and platinum. The contribution of mining to the revival of the economy, while discernible, is limited by the low level of beneficiation and value addition to mineral resources.

As a natural resources endowed economy, Zimbabwe is vulnerable to environmental degradation through deforestation, loss of biodiversity, excessive soil erosion, contamination and pollution of water resources and excessive exploitation of groundwater. This has been exacerbated by global climatic changes, which have led to changes in rainfall patterns, frequent droughts, floods and rising temperatures.

Zimbabwe has not created the necessary policies to ensure environmental sustainability. It needs policies that focus on ensuring more robust approaches to manage all aspects of natural resources. These should include: leveraging environmental financing; undertaking fiscal and institutional reforms to accelerate the uptake of renewable and clean energy technologies; adopting public-private partnerships in water, energy and housing provisioning; establishing strong government leadership to safeguard the water and sanitation sector; and clearly and transparently allocating the roles and responsibilities of sub-sectors on the basis of efficiency and effectiveness.

Structural change has been slow and ineffective. For example, Zimbabwe has not been able to exploit fully the benefits of linkages between sectors. For example, the manufacturing sector should be better linked to the mining sector, but because of low investment in the mining sector, this has not occurred. In addition, Zimbabwe’s manufacturing sector is still battling to recover its pre-Inclusive Government potential, even in areas where there were linkages with the mining sector. The economy has grown more reliant on imported products and inputs that were once sourced locally. Although Zimbabwe still has one of the largest and most diversified manufacturing sectors (as share of GDP) in Africa, the levels of capacity utilisation have declined significantly.

There are attempts to close loopholes that have led to insignificant revenue inflows from diamond trade. The government has introduced a diamond policy that focuses on ensuring 100% government ownership of diamond mines and the involvement of the Zimbabwe Revenue Authority in the entire value chain of diamonds. While the government has also embraced the World Bank’s Extractive Industries Transparency Initiative (EITI) principle in order to strengthen accountability, good governance and transparency in the mining sector, it has yet to launch an EITI programme.

The World Bank is providing assistance to the government for the Zimbabwe Mining Revenue Transparency (ZMRT) Initiative through:

  • multi-stakeholder discussions of the ZMRT;
  • finalisation of the ZMRT charter and working procedures by the Zimbabwe Oversight Group;
  • definition of the scope of the ZMRT process; and
  • assistance with contracting an independent reconciliation firm to help with the first ZMRT report.

Notes

1. The development partners providing either financial or technical support include the African Development Bank (AfDB), the United Nations Development Programme (UNDP) the Macroeconomic and Financial Management Institute of Eastern and Southern Africa (MEFMI) and the United Nations Conference on Trade and Development (UNCTAD).

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