Richard Hess

October 2001

Overseas Development Institute
111 Westminster Bridge Road
London SE1 7JD

Zimbabwe Background

1.1 Zimbabwe’s economic structure

Zimbabwe has one of the most diversified economic structures within Africa. This diversity
impacts on the extent of issues with which Zimbabwe needs to be concerned in international
trade negotiations. In turn this calls for a heavier involvement in such negotiations than would
be required by many other less diversified developing economies. While it has the second
strongest economy after South Africa within southern Africa, it is relatively very small in
comparison. Zimbabwe has enjoyed a good reputation by developing country standards;
however, recent developments in the economy have undermined that image.
The most important sector within the economy is Agriculture, followed by mining,
manufacturing and construction.

The agricultural sector is the most important revenue earner for the country. Although
agriculture encompasses no more than 15% of GDP, it is responsible for 40% of total export
earnings. It is also the largest employment sector, with 74% of the labour force accrued within
this sector. As such, it is not difficult to see that the current land redistribution exercise, if it
continues on its current basis could place the whole economy in jeopardy. The most important
commodities in terms of revenue generation are tobacco, maize and cotton. Although
Zimbabwe had to import food commodities during the 1982, 1987 and 1992 droughts, up
until the current land redistribution exercise it was the largest net food exporter within the
region and was fully able to meet its own food requirements under normal conditions.

The manufacturing sector is one of the largest and most diversified sub-sectors in subSaharan
Africa, and has traditionally accounted for roughly a quarter of GDP. Zimbabwean
industry is to a large extent a captive market where small companies produce a modest part of
the total production. There has been a strong history of market collusion among major
producers and price setting that has resulted in a business culture unconcerned with efficiency
and competitiveness. This culture has been reinforced by Government and parastatal
monopolies in a number of key sub-sectors. This sector has declined significantly in recent
years, primarily due to the policies adopted by Government regarding macro economic policy
and the land issue. This sector has been badly affected by down turn in the economy in recent
years and the major restructuring that is currently taking place in the sector. Many companies
face closure and the pressure on wage increases and price freezes will cause this situation to
worsen. The current shortage of foreign currency has affected this sector badly and will
continue to do so for the foreseeable future.


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