LIST OF ACRONYMS AND ABBREVIATIONS
CHAPTER 1: NATURE AND SCOPE OF THE STUDY
1.6 RESEARCH QUESTIONS
1.7.5 Study context and site
1.7.5.1 The study context
The study was conducted in Harare, Zimbabwe. Zimbabwe is a landlocked country found in the southern part of Africa. Other countries found in the southern African region are Angola, Botswana, the Democratic Republic of Congo (DRC), Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland and Tanzania (GoZ, 2013). The country is situated on the central plateau of southern Africa, and is bounded by the Zambezi River in the north and the Limpopo River in the south (GoZ, 2013). Zimbabwe shares borders with Botswana, Mozambique, South Africa and Zambia, as illustrated in Figures 1 and 2. The country is divided into 10 provinces (Makumbe, 2009). The major cities are Bulawayo and Harare. The capital city is Harare.
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FIGURE 1. MAP OF SOUTHERN AFRICA
Source: Southern Africa Map Pictures (maps-africa.blogspot.com)
FIGURE 2. MAP OF ZIMBABWE
Source: GoZ (2004: 11)
Zimbabwe is a sparsely populated country with about 13 million people (Makumbe, 2009;
ZimStat, 2012). Approximately 65 % of the country’s population lives in rural areas, with the
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other 35 % located in urban areas (Bohwasi & Mukove, 2008). The literacy rate is about 91 % (Zimbabwe Independent, 2014) and is the highest in Africa. The country covers about 390 757 km2 (ZimStat, 2012; United States Agency for International Development (USAID), 2010). Water covers 3 910 km2 while the land occupies 386 847 km2. About 85 % of the land is under agriculture, and the remainder consists of national parks, state forests and urban land (GoZ & UN, 2004).
Zimbabwe’s political and policy environment has influenced its socio-economic situation.
The political climate is characterised by human rights violations, injustice, political intolerance and violence that is politically motivated (Dansereau & Zimponi, 2005;
Chakawarika, 2011; Ministry of Foreign Affairs of Denmark & International Development Co-operation, 2013). Violence is directed by the ruling party, the Zimbabwe African National Union Patriotic Front (ZANU PF), towards members of the main opposition party, the Movement for Democratic Change (MDC), led by Morgan Tsvangirai (Makumbe, 2009).
Corruption amongst government officials is rampant (Bwititi & Towindo, 2014). Zimbabwe, in the eyes of the international community, has therefore become an unsafe investment destination (Robertson, 2012).
In 2008, the GoZ embarked on a Land Reform Programme (LRP) under the Indigenisation and Economic Empowerment Act (IEEA) (Toriro, 2009; Zhou & Zvoushe, 2012; Chowa &
Mukuvare, 2013). The aim of the LRP was to address the imbalance in land ownership between blacks and whites that was a legacy of the colonial era (Zhou & Zvoushe, 2012).
However, the programme removed productive white commercial farmers from the land (Toriro, 2009; Maseko, 2014), and the beneficiaries of the programme did not have the requisite capital to support agricultural production. The demand for agricultural inputs and farm implements and machinery declined (Magure, 2012, cited in Short et al., 2012), and many farms in Zimbabwe now lie unused (Magure, 2012, cited in Short et al., 2012). The LRP led to negative international publicity, and Zimbabwe became unattractive to tourists and investors (Robertson, 2012; Shangahaidonhi & Gundani, 2014). Agricultural production in Zimbabwe has declined significantly, turning the country into a net importer of food (Taru &
Basure, n.d.; Tawodzera, 2013).
In accordance with the IEEA, all foreign-owned companies had to cede 51 % of their shares to black Zimbabwean citizens (Munyeza, 2011; Magure, 2012, cited in Short et al., 2012;
Robertson, 2012). Targeted companies were in the financial, mining and manufacturing sectors (Robertson, 2012), and this made Zimbabwe unattractive to investors (Magure, 2012, cited in Short et al., 2012; Robertson, 2012), as giving 51 % of company shares to local people is tantamount to disempowering foreign investors (Shangahaidonhi & Gundani, 2014).
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Today, mining companies are deliberately winding up their operations, and selling equipment and machinery so that they are not victims of the indigenisation process (Magure, 2012, cited in Short et al., 2012). The closure of companies has led to job losses, thereby worsening the poverty levels in the country.
Zimbabwe’s primary economic activities are agriculture, mining, manufacturing, tourism, retailing and services (African Economic Outlook (AEO), 2014; KPMG, 2014). The manufacturing sector contributes 25.1 % of the GDP, agriculture 20.3 % and services 54.6 % (Index Mundi, 2013). The agricultural sector produces tobacco, cotton, maize, groundnuts, sunflower, paprika, cowpeas, and sugarcane (Maiyaki, 2010). Small-scale farmers constitute the majority of farmers (AEO, 2014). The mining sector extracts minerals such as gold, copper, tin, asbestos, platinum, and chrome, as well as coal (RBZ, 2013; Kwaramba et al., 2015). Cooking oil, soap, lotions, car batteries, chemicals, clothing, paper, pharmaceuticals, plastics, beverages, stock feeds, shoes, furniture, and iron and steel are produced in the manufacturing sector (Confederation of Zimbabwe Industry (CZI), 2012 cited in Saungweme et al., 2014). The tertiary sector is composed of retailers, the transport sector, the banking sector, insurance institutions and tourist companies (KPMG, 2014).
Zimbabwe has a multi-currency system but the U.S. dollar is dominant (GoZ, 2013; AEO, 2014; KPMG, 2014). Currencies being used in Zimbabwe include the Botswana Pula, the South African rand, the British pound, the Australian dollar, the Chinese yuan, the Indian rupee and the Japanese yen (KPMG, 2014). The last four currencies were added by the RBZ in January 2014 to reduce the liquidity crisis. However, the cash crisis is still evident.
Zimbabwe’s macroeconomic environment is unstable and is characterised by high levels of external debt and unemployment, a budget deficit, deindustrialisation, a liquidity crisis, corruption and policy inconsistency (AEO, 2014; RBZ, 2014b). The manufacturing sector is confronted with challenges such as inadequate infrastructure, inappropriate and outdated technology, and power shortages caused by incessant load shedding (Index Mundi, 2013;
AEO, 2014; RBZ, 2014b; Saungweme et al., 2014). The Zimbabwean economy is becoming more and more informal due to the closure of large companies in the manufacturing sector.
The industrial capacity utilisation declined from 44.2 % in 2012 to 39.6 % in 2013 (CZI, 2013, cited in RBZ, 2014c; AEO, 2014; RBZ, 2014), and to 36.3 % in 2014 (CZI, 2014, cited in KPMG, 2014; AEO, 2015; Ndlovu, 2015). Such a decrease in industrial capacity utilisation was caused by the liquidity crisis, the lack of long-term funding, persistent power cuts and power shortages, high labour costs, competition from low-priced imported products (especially from South Africa and China), and decreasing consumer demand for products due
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to low disposable income (Chowa & Mukuvare, 2013; Institute of Chartered Accountants of Zimbabwe (ICAZ), 2013; RBZ, 2013; RBZ, 2014a; Saungweme et al., 2014; Ndlovu, 2015).
Companies have responded to such a scenario by downsizing or closing their operations (New Zimbabwe, 2014). The AEO (2014) notes that some companies have been put under judicial management. The number of companies placed under judicial management increased from 9 in 2010 to 37 in 2013 (Master of High Court, 2014, cited in RBZ, 2014b). The National Social Security Authority (NSSA), a government pension fund, notes that approximately 700 companies wound up their businesses between 2011 and 2014, leading to the loss of 10 000 jobs (New Zimbabwe, 2014). Between 2012 to 2013, a total of 6 383 workers were retrenched (Employers Confederation of Zimbabwe (EMCOZ), n.d., cited in RBZ, 2014a). Mazda Motor Industries, the only car assembly company in Zimbabwe, has since stopped manufacturing cars due to the unstable macroeconomic environment, decreasing demand, and competition from cheap imported cars, especially from Japan (Mambo, 2015).
The deindustrialisation of Zimbabwe, which has led to the closure of companies, has created unemployment (ICAZ, 2013) and has made the government the sole employer in the shrinking economy. Government revenue is decreasing due to the decline in the amount of taxes collected as companies are folding (ICAZ, 2013). Since revenues are declining, the government struggles to pay civil servants. The government does not have specific dates for paying civil servants, but they are paid as and when the financial resources become available.
About 75 % of government expenditure constitutes civil servants’ salaries (KPMG, 2014;
World Bank, 2014a).
Between 2009 and 2011, the Zimbabwean economy showed significant signs of growth as a result of the introduction of a multi-currency system (World Bank, 2015a) and the creation of a Government of National Unity by three political parties: ZANU PF, the MDC led by Morgan Tsvangirai (MDC-T), and the MDC led by Professor Arthur Mutambara (MDC-M).
However, economic growth again declined from 10.6% in 2011 to approximately 4.4% in 2012, and declined further to 3.7% in 2013 (AEO, 2014) and 3.2% in 2014 (World Bank, 2015b). The economic growth is projected to further decline to 2.8% in 2015 (World Bank, 2015c).
Agriculture is viewed by the government as a key sector for promoting economic growth.
However, production is also decreasing in this sector due to the impact of the hostile macroeconomic environment and persistent droughts (RBZ, 2013, 2014b). For example, in the 2012/13 farming season, production declined by 5.4% (AEO, 2014; RBZ, 2014c).
Droughts, flooding and inadequate funding for the agricultural sector have led to the reduced production of maize, cotton and groundnuts (Toriro, 2009; RBZ, 2014; World Bank, 2014b).
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The financial services sector (commercial banks, building societies, cooperative banks, microfinance institutions, asset management companies and insurance companies) faces a liquidity crunch. Very few operational companies remain and deposits are few, as only a small number of people are employed (ICAZ, 2013). Individuals and companies are struggling to repay loans (ICAZ, 2013). Approximately 60–70% of the Zimbabwean population does not have access to banking facilities (RBZ, 2013).
The Zimbabwean retail sector is growing significantly, particularly supermarkets and fast food outlets (Robertson, 2012; RBZ, 2013). The demand for food is high due to the low levels of agricultural production in Zimbabwe (Robertson, 2012; RBZ, 2013; RBZ, 2014b).
Zimbabwe imports food products from countries like Botswana, South Africa and Mozambique. South African retailers like Shoprite and Pick ‘n Pay have opened businesses in Zimbabwe (RBZ, 2013).
Zimbabwe is rich in natural resources such as coal, chromium ore, asbestos, gold, nickel, copper, iron ore, vanadium, lithium, tin, and the platinum group metals (USAID, 2010; RBZ, 2013; Kwaramba et al., 2015). Zimbabwe has the second largest platinum deposit in the world and its gold deposits are viewed as among the largest on the African continent (RBZ, 2013). However, production in the mining sector is decelerating due to the decreasing prices of minerals on the world market and increasing mining costs (World Bank, 2014a). For example, the production of platinum and palladium is decreasing (RBZ, 2014). Declining mining production is also attributable to poor economic policies, political influence and interference, and lack of infrastructure (Shangahaidonhi & Gundani, 2014).
Exports declined by 8. 7% in 2014, and for 2015 they were expected to remain low due to the lack of access to export finance, competition in the international market, the high costs of exporting, the high standards of export products, and limited access to imported inputs (Robertson, 2012; World Economic Forum (WEF), 2014, cited in KPMG, 2014). Imports also declined by 7. 4 % in 2014. Importers are confronted with challenges such as high tariffs on imports, corruption at the border posts, the high costs of importing, and the lack of access to funding (WEF, 2014, cited in KPMG, 2014). According to a 2014 survey conducted by the WEF, Zimbabwe was ranked as one of the least efficient countries in the clearing process at border posts. The processes involved in importing and exporting are administratively tedious and are thus partly responsible for the decline in import and export activity.
The health delivery system has been deeply affected by the current socio-economic and political climate. The GoZ provides about 60 % of the country’s health services (RBZ, 2013).
However, the health sector is characterised by critical shortages of drugs, demotivated staff
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due to the late payment of salaries and the increasing cost of living, a shortage of hospital beds, and inadequate and inexperienced staff. Some qualified personnel have left the country for greener pastures in neighbouring countries, while others have found their way to Western developed countries (GoZ & UN, 2011).
Regionally, Zimbabwe is a member of the Common Market for Eastern and Southern Africa (COMESA) and the Southern African Development Community (SADC), and continentally, the country is a member of the African Union (AU) (GoZ & UN, 2011; Deloitte, 2012;
KPMG, 2014).
1.7.5.2 The study site
The study was conducted in Harare, the capital city of Zimbabwe. Data was collected from the city, the light industrial areas, and the high-density as well as low-density residential areas. Areas outside the city centre included in the study were High Glen Shopping Complex, Glen View, Mufakose, Kuwadzana, Dzivarasekwa, Mabvuku, Tafara, Mbare (Siyaso), Epworth, Hatfield, Willowvale, Glen Nora and Greendale. Harare is the commercial nerve centre of Zimbabwe and has SMEs in the primary, secondary and tertiary sectors of the economy. Therefore, the results would be representative of SMEs in Zimbabwe. The SMEs involved in this study are registered, pay tax, and have specific premises or plots of land where they conduct business.