As Emmerson Mnangagwa touches down in Zimbabwe today, the man due to be sworn in as president on Friday faces a mighty challenge to restore his country to economic health.
Almost four decades of Robert Mugabe's rule led Zimbabwe from relative prosperity to economic ruin, with hyperinflation so bad the central bank could not afford the paper to print practically worthless trillion-dollar notes.
From relative prosperity
Zimbabwe’s economy slid from the 10th biggest in sub-Saharan Africa to 20th over the past 37 years, with the country’s share of regional GDP dropping to less than 1%. Things improved slightly during a unity government following disputed elections in 2008, but have flatlined ever since.
The bread basket of Africa
In the 1990s, Mugabe’s government encouraged violent seizures of mostly white-owned commercial farms in a land reform programme slammed by human rights organizations around the world.
These crippled agricultural output for several years. Exports of tobacco, the nation’s biggest foreign-currency earner among agricultural products, collapsed. While exports recovered in recent years, the nation, which was the world’s fifth-largest producer of tobacco in 2000, is now number 15.
That contributed to a current account deficit that has dogged Zimbabwe for more than a decade.
Critics have long blamed land seizures for ruining Zimbabwe’s economy but there are some dissenting voices. A 2010 study by Prof Ian Scoones of Sussex University contends that – while the methods were inexcusable – 6,000 white farmers had been replaced by 245,000 black farmers and agricultural production was returning to its 1990s level. The debate rages on.
Still the country faces major agricultural challenges. Food production nosedived following the land seizures. Zimbabwe, once known as the bread basket of Africa, became a net importer of food. In 2017, the UN World Food Programme says almost a third of Zimbabwe’s population are “food-insecure”.
Change for a billion?
Hyperinflation in Zimbabwe was estimated to have reached 89.7 sextillion percent or 89,700,000,000,000,000,000,000% in 2008. That led the country to abandon its own currency in favor of a basket of foreign exchange including the South African rand, the dollar, the euro and the pound.
In recent years, Zimbabwe grappled with the opposite problem. But after 2.5 years of deflation, consumer prices started rising again in February, driven by a shortage of cash and higher food costs.
That has caused analysts to sound a note of caution amid the celebrations following Mugabe’s resignation. Gary van Staden, an analyst at Paarl, South Africa-based NKC African Economics, says: “The current euphoria in Zimbabwe over the prospect of a post-Mugabe era needs to be tempered by the understanding that what follows may not necessarily be much better.”
Dealing with corruption
Transparency International last month estimated that Zimbabwe was losing at least $1bn a year to corruption.
It ranks the country 154th out of 176 countries in its Corruption Perception Index, pointing to police, local councils and the driving licence authorities as being among the worst offenders.
Mugabe's critics say the country followed the example set by its leaders. Mugabe's wife earned the nickname 'Gucci Grace' for her lavish lifestyle.
Some say this is a reason to be hopeful. Ryan Turner, analyst at Protection Group International, told CNBC News: "Mnangagwa's apparent support for pro-business reforms are cause for cautious optimism after decades of mismanagement under Mugabe."
Mnangagwa inherits a heavy debt burden. Although Zimbabwe’s external debt decreased under the unity government, foreign debt surged after an election ended the power-sharing deal in 2013.
Zimbabwe now owes lenders, including the IMF, World Bank and African Development Bank about $9 billion, according to the finance ministry.
Bloomberg Economics analyst Mark Bohlund says the return of Mnangagwa is likely to facilitate the nation engaging with the IMF, but “even under a more orthodox economic policy regime, the road to foreign financial aid and debt relief will still be challenging”.
He says: “Bilateral and multilateral development partners are likely to offer support for an orderly transition of power, eventually leading to new elections. Still, financial support will only go so far in boosting economic growth.”