Zimbabwe: Doing business & staying in touch

Zimbabwe's economy is now in freefall. Half the workforce is unemployed; the economy contracted by 6.5% in 2005 and by November 2006, hyper-inflation had reached 1,100%. There are four main reasons: a catastrophic decline in the value of the Zimbabwean Dollar; the chaos in the vital agricultural and agro-industrial sectors caused by government policies on land redistribution; the drought that is afflicting the entire region; and the growing impact of the very high rates of HIV/AIDS infection on the workforce.

Approximately two-thirds of the population face food shortages. The situation is now extremely serious and the immediate prospects of recovery are virtually zero without radical political change. Under other circumstances, Zimbabwe would have one of the most diverse and best-performing economies on the African continent.

The agricultural base relies on tobacco and other cash crops, including sugar, coffee, cotton and maize, as the main export earners. Livestock rearing is also important. The mining industry produces gold and nickel, mainly for export, as well as smaller quantities of a host of other minerals including silver, emeralds, lithium, tin, iron ore, manganese, cobalt, coal, diamonds and a number of rare metals. Large coal deposits and hydroelectric plants supply the country's power stations. The manufacturing industry was well developed by regional standards: food processing, metals, chemicals and textiles were the main components. In the service sector, tourism grew rapidly in the period after independence, but the industry has now all but vanished.

Although Zimbabwe is better developed than many of its neighbours (especially as regards basic infrastructure such as roads, telecommunications, water and electricity), much of this benefit has been squandered or allowed to disintegrate through neglect.

Zimbabwe's economy remains heavily dependent on South Africa. The South Africans have been more sympathetic to the Zimbabwean government than most of the international community; all the major donors in Europe and North America have now suspended grants and loans to Zimbabwe, further depressing economic prospects. The IMF has expelled Zimbabwe, as has the Commonwealth (formerly a valuable source of aid).

Although Zimbabwe is a member of the Southern African Development Community and has signed up to the Common Market for Eastern and Southern Africa, these are of marginal assistance in present circumstances. Zimbabwe's once thriving trade patterns have been all but wrecked as the country has become isolated internationally.