ABSTRACT
From 2004-2009 Zimbabwe suffered one of the most serious hyperinflations in world history, which eventually forced the country to abandon its currency, the Zimbabwean dollar, and adopt the US dollar and the South African rand as official currencies.
There were a number of reasons that led to the collapse of the Zimbabwe economy as the country experienced a dramatic rise in hyperinflation through the years. The reasons, which ruined one of Africa’s most prosperous economies, were, among other things, fiscal indiscipline, civil unrest and an unstable political environment. This led to millions of Zimbabweans living the country to find greener pastures somewhere across the globe, leaving the country without enough educated, qualified personnel to run public and private sectors of the economy.
In this thesis we examine why the Zimbabwean economy collapsed, and the little that has been done to revive it and also comparing it to theory. The methodology used in this re-search project will be qualitative, and will rely on academic internet sources, textbooks, newspapers, informal discussions, questionnaires and knowledge from previous experiences. The conclusion is that the Zimbabwean economy is gradually improving beside the long suffering of its people .There is the possibility for a bright future, if resources are managed more efficiently, but this will take time.
TABLE OF CONTENTS
1 Introduction
1.1 Research aims
1.2 Research questions
1.3 Demarcation
1.4 Methodology
2 Literature review
2.1 Inflation
2.2 Types of inflation
2.2.1 Supply-side inflation
2.2.2 Demand-side inflation
2.3 Causes of inflation
2.3.1 Monetary factors
2.3.2 Unemployment levels
2.3.3 Too much demand in the economy
2.3.4 Cost push factors
2.4 Controlling inflation
2.5 How to ensure a stable economy
2.5.1 Maintain economic growth
2.5.2 Maintain stable prices
2.5.3 Favourable balance of trade
2.6 Hyperinflation
2.6.1 Negative effects of hyperinflation
2.6.2 Positive effects of hyperinflation
2.7 Consequences of hyperinflation
2.7.1 Banks loss
2.7.2 Barter system
2.7.3 Decrease in commercial activities
2.7.4 Foreign investment
2.7.5 Currency devaluation
2.8 Dollarization
2.8.1 Advantages of dollarization
2.8.2 Disadvantages of dollarization
2.9 Germany hyperinflation
3 Empirical research
3.1 Zimbabwe Economy
3.1.1 Agriculture
3.1.2 Healthcare and humanization
3.1.3 Political aspect
3.2 Zimbabwe inflation
3.3 The collapse of the Zimbabwe economy
3.3.1 Land redistribution programme
3.3.2 War veteran payments
3.3.3 Central bank
3.3.4 Congolese war intervention
3.3.5 Economic sanctions
3.3.6 Withdrawal of the IMF, World bank and Africa development bank
4 Research results
4.1 Comparison to theory
4.2 Comparison to the case of Germany
4.3 Results from the dollarization era
4.4 Summary of questionnaire results
5 Conclusions
6 List of references
CHAPTER ONE
1 INTRODUCTION
Zimbabwe is a country geographicaly located in the southern part of Africa, it is also a landlocked country. Zimbabwe has a population of approximately 12, 5 million. The main languages include Chewa, Chi-barwe, English, Kalanga, Koisan, Nambya, Ndau, Ndebele, Shangani, Shona, sign language, Sotho, Tonga, Tswana, Venda and Xhosa. (Sikuka, 2013) The official language is English. Back in the day Zimbabwe was called Rhodesia when it was a British colony, the name Zimbabwe was later driven from the name of the ruined city, Great Zimbabwe which in Shona language is dzimba dze-mabwe, meaning large houses built with stone. (Government, 2013)
Zimbabwe gained its independence on the 18th of April 1980 and Robert Mugabe has been president since then. Zimbabwe is a democratic country, which means elections are held every five years in order to select a new president. The currency is the Zim-babwe dollar which is currently not is use due to hyperinflation that will be discussed more in the paper, now the United States dollar is the official currency together with other currencies like the rand from South Africa and pula from Botswana.
Years back the Zimbabwe economy relied heavily on agriculture, agriculture is said to have been the backbone of the Zimbabwe economy as it provided income for the coun-try and jobs for many citizens. Zimbabwe used to have a very strong agricultural system before the land redistribution was put into action, to give locals farm ownership. The land redistribution led a total negative turnover for the Zimbabwe economy, and the start of the rapid economic decline. (Government, 2013)
1.1 Research aims
The aim of this research is to give a clear and in-depth understanding of the Zimbabwe economy revolution from the late 1990s till now. The research will briefly look at how the Zimbabwean citizens have suffered during the time and pick of the crisis and how a lot of things have changed over the years like for example standards of living due to low salaries, shortage of basic commodities and migration of professionals.
1.2 Research questions
The research seeks to examine the causes of the collapse of the Zimbabwe economy and the measures which are being or have been taken to revive it. The paper will shortly de-scribe the historical structure of the Zimbabwe economy and how it benefited and con-tributed to the Zimbabwe economy and its citizens . The research will also be compared and supported by theory and an example of a similar case .
This paper describes and explains what has happened to the economy of Zimbabwe since it gained its independence till now. It highlights the important occurrences or negative impacts that have each lead to the collapse of the economy and the abandoning of the Zimbabwe currency. And also its hyperinflation as a key factor that has now be-come the second world's worst hyperinflation cases.
This study is a guiding example very relevant for future references, and for people to learn and understand the major causes and problems of inflation and hyperinflations so that other countries do not go through the mistakes that Zimbabwe has made in the past and that they would understand the roots of these problems and or crisis's. It further-more provides an insight and understanding of how different parts of the economy are linked and how each is importantly dependent on another in ensuring a good economi-cal structure.
1.3 Demarcation
This research paper will not include in-depth study or discussion about the future of the Zimbabwe economy because of the great damage that has been done to the economy it is hard to predict the future, until the time comes then we know better. This paper will not go deep into the Zimbabwe politics even though the economic collapse was circled around political actions, there will be a brief and short discussion concerning the politi-cal aspect of the country.
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