Zimbabwe’s middle-class economy ambitions a pipe dream

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As Zimbabwe heads for its national elections this year, the ruling party’s ambitions to turn the country into a middle-class economy by the year 2030 are being put to the test amid growing discontent driven by spiralling costs of living.

By the World Bank’s definition, middle-income countries are divided into two categories: lower-middle-income economies with gross national income per capita within the US$1 036 and US$4 045 range, while upper-middle-class economies have a per capita range of between US$4 046 and US$12 535.

Zimbabwe’s civil servants such as police and teachers earn less than US$200 a month, effectively confirming them as poor by World Bank categorisation. The country’s labour unions say more than 80% of the population is without formal jobs.

President Emmerson Mnangagwa has built his presidency on creating economic opportunities for all under what is dubbed the “Zimbabwe is open for business” mantra, designed to spur economic growth.

“For the majority of Zimbabweans the dream of being a middle-income person in a middle-income country is a distant one,” said Stephen Chan, a professor of world politics at the University of London’s School of Oriental and African Studies.

“This is not to say that in aggregate terms Zimbabwe could not become a middle-income country, but it would be one in a fragile sense as the economy is likely to be volatile and unpredictable for the foreseeable and middle-term futures,” he said.

The country is facing a raft of structural and policy problems that have blocked economic growth, such as corruption and electricity shortages that have shut down already struggling industrial production, effectively constricting the self-imposed 2030 middle-income timeline.

“Zimbabwe’s aspiration to become an upper-middle-income economy by 2030 has morphed from a happy dream to a phantom nightmare,” said Gorden Moyo, a former state enterprises minister who is now the director of the Public Policy and Research Institute of Zimbabwe.

“All economic indicators currently point toward an economic tailspin rather than recovery, stabilisation, and inclusive growth,” he said.

The United States and the European Union have repeatedly refuted the ruling party’s claims that the country is where it is because of sanctions, with the two blocks citing corruption and bad governance instead as the cause. 

“As it is, even among the extremely wealthy in Zimbabwe, the precarious nature of competition amidst corruption, political patronage and plain racketeering would remove any sense of middle-income psychological stability,” said Chan. “The degeneration of services such as electricity would mean that even the extremely wealthy could not guarantee for themselves the enjoyment of their disproportionate existence.” 

In an update of its 2022 Worldwide Cost of Living Index, the Economist Intelligence United painted a gloomy global picture, reporting that food commodities had seen the highest increase in 20 years, with Zimbabwe cited as one of the most expensive places on Earth.

“The current president, Emmerson Mnangagwa, is a virtual clone of Robert Mugabe, and his economic policies are in the same incompetent, incoherent vein as Mugabe’s,” said Steve Hanke, a professor of applied economics at the US-based Johns Hopkins University. 

“In consequence, the Mnangagwa government has no chance of creating any sort of middle-class economy by 2030. At the heart of Zimbabwe’s problem is the Reserve Bank of Zimbabwe. It should have been mothballed and put in a museum long ago. The only hope for Zimbabwe is to formally dollarise the economy,” he said.

Local rights groups that have been viewed by the government as hostile to the ruling party have cautiously staked their deck against the president’s optimism, citing long-standing good governance issues and sound economic policies.

“The major constraints towards a middle-class economy include currency instability and inconsistency, high productivity costs, and low agricultural output which has resulted in many firms opting to import raw materials or even import semi-finished goods,” said Blessing Vava, the director of Crisis Coalition Zimbabwe.

“One of the major hindrances to the improvement of the economic situation is the continued political and social uncertainty, corruption, looting of mineral resources through informal channels and lack of respect for the Constitution, property rights and cronyism.” 

Mugabe famously claimed minerals worth US$15 billion were looted from the country but no arrests were ever made.

Amid such levels of worsening corruption, the country’s efforts to resuscitate the economy have effectively been put on pause.

“The current economic indicators such as inflation, inequality and poverty paint a bleak picture and Vision 2030 can only be achieved if the government institutes fiscal policy consistency to attract domestic and foreign investment,” said Nigel Mafundikwa, spokesperson of the Zimbabwe Coalition on Debt and Development.

“There are minimum standards to [reach the status of an] upper-middle-income country and achieving these has been curtailed significantly by corruption and the energy crisis.” 

According to Hanke, the country needs a complete overhaul of fiscal and monetary policy.

“To do that, they would have to follow what I call the ‘Singapore strategy’, the strategy adopted by the great Lee Kuan Yew, Singapore’s first prime minister, in 1965. That strategy was based on four principles: stable money, no foreign aid, first-world competitiveness and the protection of private property and the public’s safety,” he said.