Zimbabwe’s recent ban on imports from South Africa suggests that the country has taken action that undermines the Southern African Development Community (SADC) regional integration project. This is because trade is an important element of regional integration. It promotes cross-border and local economic development, and provides the foundation for cross-border cooperation and integration, and the development of good neighbourly relations.
In the past few weeks, protesters brought Beitbridge, the busiest inland border post in sub-Saharan Africa, to a standstill for several hours. The main concern was the banning of some goods from entering Zimbabwe.
The African nation of Zimbabwe has been in the depths of a cash shortage with crippling effects: Zimbabwean banks have been forced to limit the amount of cash they give to their customers; foreign currencies (particularly the United States dollar) have become more widely accepted than domestic currency; and money laundering and capital flight have skyrocketed.
The International Monetary Fund (IMF) has weighed in on the deepening economic crisis in Zimbabwe. The African nation, already one of the poorest countries in the world, has been plagued by drought, suffered from deflation, and struggled with falling commodity prices around the world. Given the nature of Zimbabwe’s economic output, the IMF fears there is very little relief in sight for the African nation, according to a report it released on Wednesday.
Central bank governor John Mangudya urged Zimbabweans to limit cash usage as the nation’s cash shortage grew worse this week, according to New Zimbabwe. Zimbabwe discarded its defunct currency in 2009 in response to hyperinflation, and additional provisions prevented the central bank from printing the Zimbabwe dollar.
Zimbabwe switched to the U.S. dollar as one of its main currencies, but the economy is running out of American dollars. In response to the cash crunch, the government has limited bank withdraws and shut down some ATMs.
Zimbabwe, like many African countries, faces an ongoing struggle to secure fair compensation for its mineral wealth. The question of how to maximise government revenues from the mining sector is a complex matter.
However, turning the sector over to state-owned mining companies has rarely optimised mining revenues. What’s needed instead are improvements in management practices, regulations, regulatory capacity and the investment environment.
According to the U.N.’s World Food Program, Zimbabwe faces a severe food shortage as a prolonged drought plagues the economy, according to Reuters. The Southern African nation faces its worst drought in 25 years while recovering from unprecedented levels of inflation that brought the economy to its knees five years ago. Zimbabwe’s agriculture sector comprises 30 percent of exports and 19 percent of GDP.
According to the Zimbabwe Revenue Authority, mining royalties declined by 39 percent, and overall royalties fell 65 percent when compared to 2014 earnings, according to Reuters. The nation also lacks energy and water services in certain areas, including old roads and bridges that need repair, discouraging further foreign investment.
Zimbabwe dollars will be decommissioned at a rate of 35 quadrillion per US dollar (that is Z$35,000,000,000,000,000 for US$1). Any remaining Zimbabwe dollars in circulation after September 30 2015 will be officially, as opposed to practically, worthless. This is ditching a currency.
Foreign investment generated in Zimbabwe has fallen by more than fifty percent over the first six months of this year, according to the chief of the country’s central bank, John Mangudya. In comparison to the $165 million figure that was received throughout the same period in 2013, Zimbabwe only managed to gain $67m in investment this year. The policy considered by the government to return economic control to black Zimbabweans has been met by a degree of misunderstanding by foreign investors, according to Mangudya.
