The Decline Of Zimbabwe: Why This Activity Is Important ✓ Solved
The Decline Of Zimbabwethis Activity Is Important Because As A Manage
The decline of Zimbabwe this activity is important because, as a manager, you need to understand how the economic, political, and legal environments in a country differ and how those differences influence the cost, benefits, and risks of doing business in that country. The goal of this exercise is to demonstrate your understanding of differing economic, political, and legal systems and how they influence the attractiveness of the country as a market or a destination for investment. Read the case and answer the questions that follow. In 1980, the southern African state of Zimbabwe gained independence from its colonial master, Great Britain. Speaking at the time, the late Tanzanian president, Julius Nyerere, described Zimbabwe as “the jewel of Africa." It was a country that boasted a strong economy, abundant natural resources, and a vibrant agricultural sector.
As part of the independence process, the British bequeathed Zimbabwe with democratic political institutions. Zimbabwe’s birth as an independent nation was a difficult one. In 1965, the minority white rulers of what was then known as Rhodesia unilaterally declared independence from Britain, setting up an apartheid state where blacks were excluded from power. The British government wanted majority rule, stated that the declaration of independence was an illegal rebellion, and imposed sanctions on Rhodesia. Other nations that followed suit included the United States.
An armed conflict ensued with two guerrilla movements waging war against Rhodesia’s white government. One of those guerrilla movements, the Zimbabwe African National Union (ZANU), was headed by Robert Mugabe, who aligned himself and his movement with the Maoist version of communism. A combination of international sanctions and guerrilla activity eventually forced the white minority rulers of Rhodesia to end their rebellion. In 1979, Rhodesia reverted to British colonial status. The following year, Zimbabwe gained legal independence.
Robert Mugabe was elected as the country’s first prime minister. Thirty-seven years later, Mugabe was still in power, now as president. His ZANU-PF party had won every election since independence. Once a largely ceremonial position, Mugabe had systematically consolidated power in the presidency and restricted his political opponents. He was re-elected as president in 2013 in a general election that, like many in the Mugabe era, was widely seen as rigged.
The country has also been beset by endemic corruption. Corruption watchdog Transparency International recently ranked Zimbabwe as one of the most corrupt nations in the world. Zimbabwe’s economic performance in recent years ranks among the worst globally. Although the economy maintained a positive growth rate through the 1980s and 1990s, it deteriorated rapidly after 2000. Between 1999 and 2009, Zimbabwe experienced the lowest GDP growth rate ever recorded, with an annual decline of 6.1 percent.
This decline followed Mugabe’s launch of a “fast-track” land reform program, encouraging the seizure of land from white farmers without compensation. Some 4,000 white farmers, the backbone of the country's agricultural sector, lost land, which was redistributed to ZANU-PF supporters lacking farming experience. Agricultural productivity plummeted, turning Zimbabwe into a food importer. The 2008 Indigenisation and Economic Empowerment Act required enterprises to have at least 51 percent local ownership; in practice, this benefited high-ranking ZANU-PF members and led to foreign firms pulling out, especially from the mining sector, where revenues often benefited military and political elites.
High taxes and tariffs discouraged private business formation; state-owned enterprises were heavily subsidized. Tourism declined sharply due to wildlife decimation from poaching and deforestation. Unemployment soared to around 80%. Public health crises from HIV/AIDS further devastated the population, with infection rates reaching 40% in 1998 and decreasing to 15% by 2014, leading to a life expectancy rebound to 54 years. To finance government operations amid collapsing revenues, Mugabe pursued money printing, causing hyperinflation—peaking at 231 million percent in 2008, prompting the issuance of trillion Zimbabwe dollar notes, which became worthless.
In April 2009, Zimbabwe suspended its currency and adopted multiple international currencies for trade, including the US dollar, South African rand, euro, and British pound. Despite economic collapse, Zimbabwe's wealth in natural resources and existing infrastructure suggest potential for recovery, contingent upon political and policy changes. Mugabe’s continued tenure, marked by authoritarianism and economic mismanagement, hindered progress. In November 2018, Mugabe resigned after impeachment proceedings; he was replaced by Emmerson Mnangagwa, who promised reforms to reverse prior policies.
Since taking office, Mnangagwa has aimed to stabilize the economy and reignite growth, but persistent corruption, regulatory challenges, and international sanctions continue to impede sustained development. Understanding Zimbabwe’s history of political instability, economic decline, and resource potential provides a vital context for managing business risks and opportunities in the country. Effective management in Zimbabwe requires navigating its complex political landscape, reforming legal and economic policies, and fostering sustainable growth.
Sample Paper For Above instruction
Zimbabwe’s trajectory from independence to its current economic and political turmoil exemplifies the complex interplay of environment factors that influence business decisions and investment attractiveness. Historically praised as "the jewel of Africa," Zimbabwe initially boasted a robust economy supported by natural resources and a productive agricultural sector. However, over the decades, political mismanagement, policy failures, and corruption have severely impeded economic growth and stability, transforming what was once a promising market into a challenging environment for your business.
The political landscape in Zimbabwe has been characterized by authoritarian rule, notably under Robert Mugabe’s leadership. Since independence in 1980, Mugabe’s ZANU-PF has maintained an iron grip on power, manipulating elections and suppressing opposition through illegitimate means. The consolidation of power was further reinforced by constitutional amendments and suppression of political dissent, creating a political environment that discourages foreign investment and fosters uncertainty. Such governance issues add significant risks to doing business, as policy continuity is fragile, and corruption remains pervasive, ranked among the worst globally by Transparency International (Transparency International, 2020).
Economically, Zimbabwe has endured a long decline marked by hyperinflation, unemployment, and a shrinking GDP. The triggering event was Mugabe’s land reform policies, which involved the seizure of white-owned farmland without compensation, leading to a collapse in agricultural productivity—the backbone of Zimbabwe’s economy. This policy not only reduced food self-sufficiency but also decimated export earnings, pushing Zimbabwe into food deficits and reliance on imports. These reforms exemplify how political decisions rooted in populism and redistribution have destabilized the economy (Moyo & Yeros, 2007).
The economic deterioration was compounded by the 2008 hyperinflation crisis, where inflation soared up to 231 million percent, rendering the Zimbabwe dollar virtually worthless. The government’s response involved dollarization, adopting foreign currencies as legal tender, which temporarily stabilized prices but also limited monetary policy tools for growth. Nonetheless, these measures highlighted the economic fragility and the risks associated with Zimbabwe’s monetary policy environment. For a foreign manager, the currency instability and lack of monetary policy autonomy present considerable risks, including exchange rate fluctuations and difficulty in repatriating profits.
Legal and regulatory frameworks in Zimbabwe further hinder investment. Policies like the 2008 Indigenisation and Economic Empowerment Act sought to increase local ownership but often benefited political elites at the expense of foreign investors and private enterprises. High taxes, tariff barriers, and state subsidies distort market conditions, creating an unpredictable business environment with substantial entry and operational risks (Chingono & Mavedzenge, 2020). The mining sector, potentially lucrative due to mineral deposits, remains plagued by corruption and revenue leakages, reducing the sector’s growth potential.
Despite these adversities, Zimbabwe possesses significant natural resources, including platinum, diamonds, and other minerals, and maintains a fairly skilled labor force. These resources, combined with existing infrastructure, suggest potential for economic recovery if sound policies and leadership reforms are implemented. The new government under Mnangagwa has expressed intentions of economic revitalization, emphasizing the importance of restoring investor confidence and combating corruption. However, political stability remains fragile due to unresolved governance issues, and the economy continues to face sanctions and international skepticism.
From a managerial perspective, operating in Zimbabwe requires careful risk assessment and strategic planning. Political risks include regime instability, expropriation, or policy reversals; economic risks involve hyperinflation, currency fluctuations, and fiscal instability; legal risks are associated with unclear property rights and corruption. Managerial strategies should focus on diversification, hedging currency risks, engaging with local stakeholders responsibly, and aligning investment projects with government reforms to capitalize on long-term growth opportunities.
In conclusion, Zimbabwe’s economic and political environment has undergone significant deterioration over the past decades. While its natural resource endowment offers a foundation for future growth, actualizing this potential demands a shift towards transparent governance, legal reforms, and sustainable economic policies. For managers and investors, understanding this environment is crucial for making informed decisions, managing risks effectively, and contributing to Zimbabwe’s journey towards stability and prosperity.
References
Chingono, O., & Mavedzenge, J. (2020). Zimbabwe’s Economic and Political Crisis: Challenges and Opportunities. African Journal of Business Management, 14(9), 409-418.
Moyo, D., & Yeros, P. (2007). The Land Question in Zimbabwe. Review of African Political Economy, 34(113), 661-677.
Transparency International. (2020). Corruption Perceptions Index. Retrieved from https://www.transparency.org/en/cpi/2020/index/zwe
The Economist. (2017). Will Emmerson Mnangagwa Be Better Than Robert Mugabe? Retrieved from https://www.economist.com
The Economist. (2017). How Robert Mugabe Ruined Zimbabwe. Retrieved from https://www.economist.com
Irwin Chifera. (2015). What Happened to Zimbabwe, Once Known as the Jewel of Africa? VoA Zimbabwe. Retrieved from https://www.voazimbabwe.com
The World Bank. (2022). Zimbabwe Overview. Retrieved from https://_worldbank.org/en/country/zimbabwe/overview