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									   ZIMBABWE: THE 11TH PROVINCE OF SOUTH AFRICA
    – FROM ONE FORM OF DOMINATION TO ANOTHER


                         ‘Horse and rider relationship’




                                      By



                                A. Makochekanwa
                                    M. Tekere




                Trades & Development Studies (Trades) Centre




                                 February 2010




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                        1
                                        TABLE OF CONTENTS


1  INTRODUCTION AND BACKGROUND ........................................................ 4
 1.1    Introduction ............................................................................................. 4
 1.2    Background ............................................................................................ 4
   1.2.1     Colonization of Zimbabwe by Britain and South Africa’s role .......... 4
 1.2.2     Sanctions on apartheid South Africa ................................................... 7
2 EVOLUTION SA DOMINANCE OF RHODESIA AND ZIMBABWE ............... 8
 2.1    South Africa Investments in Zimbabwe................................................... 8
 2.2    South Africa’s stake in Zimbabwe’s mining sector ................................ 10
 2.3    South Africa – Zimbabwe trade ............................................................ 11
 2.4    Labour Migration into South Africa ....................................................... 13
3 2000 - 2009: ZIMBABWE CRISIS AND ROLE OF SOUTH AFRICA ........... 15
 3.1    Origin of the crisis and extent of the crisis ............................................ 15
 3.2    Land Reform ......................................................................................... 16
 3.3    Elections ............................................................................................... 17
 3.4    Economic Meltdown; Zimbabwe’s declining Economic Trend .............. 18
 3.5    South Africa and quiet diplomacy ......................................................... 21
4 COMPLETE DEPENDENCE OF ZIMBABWE ON SOUTH AFRICA ........... 24
 4.1    Political dependence ............................................................................ 24
 4.2    Economic dependence ......................................................................... 24
 4.3    Transport access to the sea ................................................................. 25
 4.4    Aid Dependence ................................................................................... 26
 4.5    Busting of the targeted sanctions ......................................................... 26
 4.6    Employment dependency on South Africa ............................................ 27
 4.7    Collapse of the Zimbabwean Dollar and dependence on South African
 Rand in Zimbabwe .......................................................................................... 27
5 PROS AND CONS OF ZIMBABWE BEING THE 11TH PROVINCE OF
SOUTH AFRICA ................................................................................................. 29
 5.1    Advantages........................................................................................... 29
 5.2    Disadvantages ...................................................................................... 30
6 CONCLUSION ............................................................................................. 31
REFERENCES ................................................................................................... 32




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                           2
                                      Acronyms


BSAC             British South Africa Company
ESAP             Economic Structural Adjustment Programme
FLS              Front Line States
IMF              International Monetary Fund
MDC              Movement for Democratic Change
NCA              National Constitutional Assembly
NGOs             Non-Governmental Organizations
SA               South Africa
SADC             Southern African Development Community
SADCC            Southern African Development Co-ordination Conference
UDI              Unilateral Declaration of Independence
ZANU-PF          Zimbabwe African National Union – Patriotic Front
ZAPU             Zimbabwe African People’s Union




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                        3
1       INTRODUCTION AND BACKGROUND

1.1     Introduction

South Africa and Zimbabwe, besides their geographic proximity, have a common
and long history of mutual ties in the areas spanning from politics, economic and
socio-cultural, among others. The ties between South Africa and Zimbabwe were
built in the early 1900s when Cecil Rhodes set up his British South Africa
Company (B.S.A.C) in the then Rhodesia and were strengthened during the
Unilateral Declaration of Independence period (1965-80). Historically, Zimbabwe
played an important role in the liberation struggle in South Africa against the
system of apartheid.

However the relationship between Zimbabwe and RSA has more and more
turned to resemble the one of the horse and the rider as the relationship is
asymmetrical and has over the decades been characterized largely by increasing
dependence of the former on the latter. It would be recalled that when the Union
of South Africa was created in the 1920s, the then Rhodesia was invited to join
as the 5th Province of SA. As such, Zimbabwe’s increased and solemn
dependence on South Africa, especially since its political and economic
meltdown in 2000 to date has resulted in it being considered a de facto 11th
province of the Republic of South Africa. This stems from Zimbabwe’s reliance
on South Africa in almost all aspects of its survival, that is, from social, economic,
infrastructure and lately political. This reliance has implicitly cemented the
influence of South Africa on the political situation in the Zimbabwe. This has been
evidenced by the extent to which the former country has been blamed by the
world and other stakeholders for the political meltdown in Zimbabwe especially
under the leadership of its former president, Thabo Mbeki.

1.2     Background

1.2.1 Colonization of Zimbabwe by Britain and South Africa’s role

South Africa was used as a conduit for the colonization of Zimbabwe by Britain
when a former Premier of the Cape Province and businessman, Cecil John
Rhodes and his British South Africa Company (B.S.A.C) occupied Zimbabwe,
then known as Southern Rhodesia under the backing of a Royal Charter from
Britain. The B.S.A.C proceeded to introduce white settlers, a cash economy,




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                        4
mining ventures and commercial farming enterprises until its mandate expired in
1922 when the white-settler Responsible Government took over1.

 The B.S.A.C armed with the Royal Charter provided the cover for realising
profits not only for itself but also enabling primitive capital accumulation to take
place amongst the white-settler community. At least three elements were relied
upon to effect the above.

    1. Firstly, theft strategy was employed and this resulted in cattle looted after
       raids on the Shona and Ndebele communities by white brigands using
       modern weapons and techniques. These cattle were easily disposed of
       after a short march on the thriving Rand and Transvaal meat market
       surrounding the bourgeoning mines.
    2. Secondly, the B.S.A.Company forced the Africans to work in their mines,
       farms as well as engaging in public works programme for meager, if any,
       pay.
    3. Finally, when the Second Rand2 failed to materialise, the B.S.A.C. turned
       towards evicting indigenous peoples from fertile lands and passing this on
       to white farmers and enterprises completing the circle of deprivation for
       the local inhabitants.

Furthermore, even after the mandate of the Royal Charter had expired in 1922,
the B.S.A.C continued to influence the policies of the Responsible Government
facilitating the spreading of colonial tentacles to embrace both Northern
Rhodesia and Nyasaland, Zambia and Malawi, respectively. Between 1953 until
1963, white political control was formalised under the Federation of Rhodesia
and Nyasaland. The land, minerals, livestock and labour surpluses of the three
countries continued to be exploited by the then Union of South Africa through
Salisbury, reflecting the traditional metro-pole and periphery syndrome.

Not only did this consolidate the white gains in Southern Rhodesia but this also
provided the surplus funds needed to establish important infrastructure such as
roads, including tarred strip roads criss-crossing the commercial farms, grain
storage silos, mining, industrialisation, manufacturing, rail network, extensive
aerodromes and runways with related engineering and support services, dams
and bridges. These developments saw the country at independence in 1980
having endowed with a well developed agro-based economy with limited


1
  The 25 year mandate had been scheduled to expire in 1914 but was extended as a result of the outbreak of
the First World War.
2
  Part of the rationale in occupying this area was to open up a Second Rand, similar to the gold rush that
had occurred in the Transvaal in the 1860s.

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                         5
industrialization as well as expanding commercial and manufacturing sectors that
mirrored the apartheid system in South Africa.

This development was further entrenched after both Zambia and Nyasaland had
achieved their political independence in 1964. At the time, Rhodesia had
Unilaterally Declared its Independence (UDI) under white-minority-rule. UDI was
internationally condemned, and at the behest of Britain, Rhodesia was placed
under the first United Nations Security Council authorised sanctions, beginning in
1965 and lasting until the restoration of British rule in December 1979. The terms
of these sanctions forbade most forms of trade or financial exchange with
Rhodesia. Sanctions were not universally adhered to, and it managed to survive
through the largesse of the Union of South Africa, a country that continued to
trade, invest and relate to Rhodesia until 1980. In the immediate term, Rhodesia
was able to evade sanctions by various means and the means of evasion
typically involved selling at a discount and buying at a premium. Also, few
outsiders would invest in Rhodesia.

 The collusion of the white-minority pariah states during the 1970s further
strengthened the ‘fifth province’ phenomenon. By 1980, on the eve of
Zimbabwe's independence, the country had nearly 250 000 whites whose cultural
identity and sporting inclinations in rugby, hockey, cricket, squash and golf was
linked to SA schools and other senior leagues. The Southern Rhodesia also
boasted of a sophisticated economy second to and closely integrated to that of
SA.

When Zimbabwe gained independence, one of the early questions asked of
Zimbabwe was whether or not she was going to join the South Africa dominated
Customs Union or the competing Southern African Development Coordination
Conference (SADCC). Imbued with liberation credentials, the new government of
Zimbabwe not only opted for SADCC but also embraced its exclusive security
version that sought to confront the apartheid regime in all spheres especially
under the auspices of the Front Line States (FLS). In the mid-1980s, South
Africa launched the now well documented regional Destabilisation Policy under
its Total Military Strategy. This virtually created considerable havoc with the
economies and infrastructure of countries such as Angola, Zambia, Mozambique
and Zimbabwe.

Zimbabwe was, therefore, pivotal in the success or failure of either SADCC or the
regional Customs Union. The fact that the country chose the SADCC and FLS
routes, in retrospect, demonstrates that the country sacrificed more than many
other Southern African countries in those groupings.


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                        6
1.2.2 Sanctions on apartheid South Africa

Since 1985, there was sporadic movement towards international sanctions
against South Africa, in the wake of widespread unrest in that country and its
experience of economic sanctions against Poland, the USSR and Rhodesia. The
demand for universal sanctions was led by some Third World Commonwealth
countries such as India, Zambia and Zimbabwe. Zimbabwe’s reasons for
demanding sanctions was premised on its government’s sense of solidarity with
South African blacks and its memories of both guerrilla war and near-apartheid
colonial system which preceded Zimbabwean independence.

Even during the early 1980s, a large proportion of Zimbabwean industry was in
whole or part, in South African ownership. South Africa earned substantial
revenues from it and used its ownership as an effective lever against any serious
attempts to oppose Pretoria’s interest during the apartheid era. This was a major
facet of Zimbabwe’s economic dependence on South Africa and it fraught with
complications and as a result Zimbabwe could not do anything against the
apartheid South Africa since the potential effects caused to the national economy
could have been severe.

If sanctions were to be imposed on South Africa, they would have brought both
costs and benefits to the imposing party. The essential benefit to Zimbabwe of
these sanctions would have been the foreign policy gain of isolating South
Africa’s economy and thereby undermining its white supremacist government.
This was of course well beyond the power of Zimbabwe alone. The Rhodesia of
Unilateral Declaration of Independence (UDI) period (1965-80), against which
sanctions were imposed, was a small, landlocked country with an only partially
developed economy and limited manufacturing capacity. It could be isolated
internationally by blocking its external trade routes through Mozambique and
South Africa, and the world lost little more than some good quality tobacco and
chromium ore as a result.




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                        7
2    EVOLUTION SOUTH AFRICA’S DOMINANCE OF RHODESIA AND
ZIMBABWE


2.1     South Africa Investments in Zimbabwe

Over the past century, South Africa has emerged to be an economic powerhouse
in the region as well as on the African continent. South Africa has also become
the largest foreign investor in Southern Africa by taking advantage of its relative
competitive advantages comprising of, among other things, abundant investible
capital, marketing and technological know-how, advanced public infrastructure,
and human resources. The country has used the global push for economic
liberalisation and deregulation to exploit business opportunities in Africa. South
African direct investment in the SADC countries exceeded US$5.4 billion by 2000
(Games, 2003).

Despite Zimbabwe’s political and economic problems, trade and investment ties
between South Africa and Zimbabwe remain very strong. Zimbabwe remains
South Africa's most important trading partner in Africa and the strong economic
ties between the two countries are poised to continue into the future. This is
buttressed by recent different business delegations from South Africa who had
visited and shown interests in doing business in Zimbabwe April 2009, just soon
after the entry of existence of Zimbabwe’s government of national unity (GNU).
Further more, the two countries are on the verge of signing a new bilateral
investment promotion and protection agreement (BIPPA)3 which will outline new
measures that could help Zimbabwe secure fresh capital from Africa's largest
economy.

Despite the pending signing of the BIPPA, many South African firms believe
Zimbabwe is still a better and easier place in which to do business than many
other African countries because of its infrastructure as compared to other African
countries. In addition, there are a lot of untapped opportunities in Zimbabwe
which South African firms are eyeing. The South African firms took advantage of
the problems bedeviling Zimbabwe’s economy to find their way, maintaining and
strengthening their presence in expectation of changes in the political situation
that will lead to economic recovery.

3
  The Zimbabwe- South Africa Bilateral Investment Promotion and Protection Agreement (BIPPA) was
initially negotiated in 2003 and an agreed text was initialed, however disagreement arose due to the fact
that Zimbabwe want the BIPPA NOT to cover investments related to agriculture and land.

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                        8
In Zimbabwe, South African investment, mainly limited to the mining sector, has
been substantial over the past years. Most of South Africa’s biggest firms have
investments, subsidiaries and interests in Zimbabwe and the business linkages
are extensive on every level. It estimated that close to 27 of South Africa's
biggest listed companies have operations in Zimbabwe, and some of them are
also listed on the Zimbabwe Stock Exchange (ZSE). Of all the companies listed
on the ZSE, 60% are of South African origin. For instance,
     Old Mutual, a South Africa company, which is the biggest company
        registered on the ZSE has approximately 18% of the ZSE market
        capitalisation index as at mid- May 20064
     About 90% of the platinum mines in Zimbabwe are in the hands of South
        African firms, whilst Metallon Gold (South African firm) owns 60% of the
        formal sector gold mines in Zimbabwe. Imbada is into diamonds mining.
     South African firms have also major investments in the Zimbabwean
        banking sector with banks of South African origin having significant stakes
        in Zimbabwean banks (subsidiaries) such as Stanbic and the Commercial
        Bank of Zimbabwe (CBZ) which had 26% shares owned by ABSA Bank;
     There are also some sizeable South African stakeholders in the
        Zimbabwean clothing retail sector, sugar, brewing and pulp and paper
        manufacturing.
     Other notable South African investments in Zimbabwe includes
            o Cafca which is 76% owned by South Africa’s African Cables;
            o Delta with 34% owned by SABMiller;
            o South Africa’s Edcon owns 43% of Edgars;
            o Anglo American owns 80% of Hippo Valley Sugar;
            o Nampak owns 40% of Hunyani;
            o Truworths is 33% owned by South Africans and
            o South African shareholders own 48% of Murray & Roberts.5
            o TM supermarkets is owned by pick and Pay SA

Some South African firms have taken advantage of the economic crises in
Zimbabwe to strengthen their shareholdings while some have maintained limited
ownership or, in the case of Anglo American, selling off non-core assets. This
has reduced the overall impact of the South African links, although South African-
linked firms are still strongly represented in the Zimbabwean economy.

Besides providing capital, South African companies are significant providers of
employment in Zimbabwe. It is estimated that the 27 South African firms

4
    Zfn Realtime Financial Intelligence, a Zimbabwe financial information service
5
    ibid.-

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                           9
operating in Zimbabwe (and which are listed on the Johannesburg Securities
Exchange) employ about 20 000 people and most of these companies are run by
Zimbabweans.

Some of the reasons for increased investments by South Africa in Zimbabwe and
other African economies could be explained by lack of capital in the African
continent which resulted in other African leaders seeing South Africa ‘as the
continent’s last best economic hope’ (The Solidarity Peace Trust, 2007). Some
international companies have taken advantage of South Africa’s bilateral
investment agreements with Zimbabwe and other African countries to set up their
businesses in Zimbabwe and other African countries.


2.2     South Africa’s stake in Zimbabwe’s mining sector

Zimbabwe’s mining industry is very diverse, characterized by relatively small
deposits and as many as forty mined products. It is dominated by multinational
companies such as Lonrho, Rio Tinto and South Africa’s powerful Anglo
American group. Of these, the largest and most inextricably entwined in the
Zimbabwean economy is Anglo-American, whose operations are centered on its
holding company, the Anglo American Corporation of Zimbabwe. Anglo
American’s first move in Zimbabwe was the part ownership of a new ferrochrome
smelter set up in the Midlands in 1949 by the Rhodesian Alloys (now Zimbabwe
Alloys, or Zimalloys). In 1953, it took a controlling stake in the Wankie Colliery,
but its major expansion took place during the UDI period, when the Rhodesian
government was keen to bring any available capital into the country to build up
manufacturing industry for import substitution and minerals production for export.

Publicly available statistical figures (Hanlon, 1986) shows that by 1986 South
African firms owned one-third of publicly quoted companies in Zimbabwe with the
breakdown in the mining sector as shown in the figure below. In 2005, Implats’
total investment in Zimbabwe estimated to be around US$220 million, while
Metallon Gold spent US$15 million on its mining interests and Anglo started work
on the US$92 million Unki mine in 2005 (Singh, 2005).




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                       10
Figure1: Control of the Mining sector in Zimbabwe in 1986

          50
          45
          40
          35
          30
      %




          25
          20
          15
          10
           5
           0
                Domestic        South      British    Other
                               African               Foreign

                                     Ownership

Source: Hanlon 1986

Currently, a lot of South African investors are willing to take large stakes in the
Zimbabwean mining sector. For instance, Zimbabwe’s Herald newspaper
reported that a South African investor intends to inject US$100 million into gold,
coal, diamond and emerald mining ventures through a joint venture initiative with
a local partner6. Presently the investor is working in partnership with 15 gold
mines in Kadoma in a development expected to breathe life into the ailing mining
sector. Such latest development shows how serious South Africa is concerning
its involvement in the Zimbabwean economy.



2.3       South Africa – Zimbabwe trade

Despite the economic challenges that have bedeviled the Zimbabwean economy,
Zimbabwe has remained one of the largest African market for South African
goods (Isa, 2007), though its purchasing power has been declining due to
hyperinflation especially in the past decade. Information presented in Table 1 and
for the period covering 2000 to 2006 shows that South Africa exported an annual
of goods worth US$3.5 billion to all SADC countries, with Zimbabwe’s share
accounting for nearly one-quarter of those exports. Conversely, South Africa
imported, on average, US$1 billion worth of products annual from its regional

6
    The Herald , Friday 14 August 2009

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                        11
member states and Zimbabwe’s annual average contribution to those imports
was 37 percent. At the same time, annual statistical figures (not presented here)
for the same period indicates shows that for the same period, Zimbabwe’s
imports from South Africa represented more than 45 percent of its total imports,
while exports to South Africa accounted for more than 30 percent of its total
exports. These figures clearly show the importance of the two countries’ trade
relations.

Table 1: South Africa’s trade with Zimbabwe and SADC region
                       Exports to                       Imports from
          SADC              Zimbabwe           SADC          Zimbabwe
Year      US$ m US$ m % share in SADC US$ m US$ m % share in SADC
 2000      2,941     661            22.5        362     186          51.3
 2001      2,764     584            21.1        520     169          32.5
 2002      2,845     659            23.2        534     208          39.0
 2003      3,407     832            24.4        745     355          47.7
 2004      3,889     913            23.5       1,182    436          36.9
 2005      4,143     987            23.8       1,933    513          26.6
 2006      4,519     973            21.5       2,152    600          27.9
Average 3,501        801             23        1,061    352           37
Source: constructed using data from TIPS

The bulk of South African goods imported into Zimbabwe are minerals, chemicals
or manufactured goods like electrical equipment, machinery, appliances and
television sets. In recent years, Zimbabwe has increasingly relied on South Africa
for essentials like electricity, fuel and food. This is because supply elsewhere has
dried up due to payment reasons. The other explanation for the increased
imports from South Africa is that South African companies have been more
willing to delay payment dates. In some cases, as Bond and Kapuya (2005) note,
‘debts to South African companies and other creditors such as Eskom have been
translated into equity in natural resources concessions…’ As the authors note, in
2003 ABSA bank sold to the South African company, Implats, a 29.3% stake it
had acquired in Zimbabwe’s platinum mining giant, Zimplats. It then arranged for
R972 million rand takeover of Zimplats by Implats in January 2006 (Bond and
Kapuya, 2005).

Besides the above formal recorded figures, growth of informal trade taking place
across South Africa's borders with Zimbabwe since the beginning of the
economic and political crisis in 2000 has risen sharply. With more than 94




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                       12
percent7 unemployment in Zimbabwe (as of end of January 2009), informal
cross-border trade has become probably the only viable source of sustenance for
millions of its citizens. This trade is driven by Zimbabweans abroad who provide
foreign exchange for goods required by relatives at home, and most imports from
South Africa are mainly by informal traders.

An analysis by Hattingh (2005) on South Africa-Zimbabwe relations noted that
South Africa mainly exports manufactured goods to Zimbabwe, while it imports
raw materials. Hattingh (2005) argued that the pattern of trade between South
Africa and Zimbabwe replicates the type of trade between an industrialized
country and a developing country. This implies the over reliance of Zimbabwe on
South Africa which makes it vulnerable for exploitation. Moreover on the basis of
evidence on South Africa’s recent business dealings with Zimbabwe, Hattingh
concluded that through the combination of trade and loans, Zimbabwe is being
exploited to the advantage of South Africa. Money is flowing out of Zimbabwe to
buy imports, such as fuel, electricity and maize from South African companies
and the state. To raise this money, in many instances, Zimbabwe is borrowing
from South African banks. It has to pay back these loans at high interest rates
which are very profitable for the banks. If it fails to do so, these companies will
take ownership of the assets that the Zimbabwe government has offered as
collateral.


2.4     Labour Migration into South Africa

Part of South Africa’s dominance over Zimbabwe and other countries in the
region was mainly due to its reliance on the supply of migrant labour for her
mining, agricultural and manufacturing industries from most of other countries of
the region, Zimbabwe included. Flows of Zimbabwean migrant workers into
South Africa were unlocked by colonial administrations into mines and
plantations in apartheid South Africa. The opening of diamond mines in Kimberly
in the late 1890s saw large numbers of workers from Zimbabwe flock to South
Africa. This history of labour migration left a deep imprint in the rural sectors of
the supplier states. Agricultural production and other facets of local industry were
crippled, by and large, while accumulation in the recipient state (South Africa)
was consolidated resulting in growth of South Africa’s relative wealth.

 In 1969, the distribution of migrant labour in the South African gold mines from
some of the Southern African countries was as follows:

7
 The Zimbabwean Newspaper (29 January 2009), “Zim unemployment skyrockets”, available at:
http://www.thezimbabwean.co.uk/index.php?option=com_content&task=view&id=18101&Itemid=103


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                       13
Figure 2: Number of Migrant Workers in South Africa in 1969


                                  100000
      Number of migrant workers

                                   90000
                                   80000
                                   70000
                                   60000
                                   50000
                                   40000
                                   30000
                                   20000
                                   10000
                                       0




                                                                                                   e
                                                                             i
                                                         na




                                                                                          e
                                                                    nd
                                              o




                                                                            aw




                                                                                                 bw
                                                                                        qu
                                            th




                                                                  la
                                                      wa
                                          so




                                                                         al



                                                                                     bi



                                                                                               ba
                                                                   i
                                                                az




                                                                         M
                                                    ts




                                                                                    am
                                       Le




                                                                                              m
                                                  Bo



                                                              Sw




                                                                                              Zi
                                                                                 oz
                                                                                 M
Source: ILO, 2000

At independence, Zimbabwe placed restrictions on flows of migrant workers into
apartheid South Africa. However, this did not restrict, both legal and clandestine
into South Africa as economic conditions in South Africa remained attractive as
compared to that of Zimbabwe. As economic reforms started in the early 1990s,
the volume of its migrant workers into South Africa also increased. In 1998, the
number of Zimbabwean migrants into South Africa was estimated at one million.8
Whatever the more plausible estimates of migrants may be, it is not worthy that
flows have continued in quest for jobs and better economic conditions. Currently,
it is estimated that about three million Zimbabweans are working in South Africa
as most skilled and unskilled personnel have crossed into South Africa during the
past ten years of economic crisis in the country. Furthermore, a sizeable number
of more workers have crossed into South Africa especially since the 4th of May
2009 after South Africa a temporary suspension or removal of visa restrictions on
Zimbabweans traveling to its territory.




8
    The Star, 27 March 1998

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                                                  14
3       2000 - 2009: ZIMBABWE CRISIS AND ROLE OF SOUTH AFRICA

3.1     Origin of the crisis and extent of the crisis

The origin of the Zimbabwean crisis can be explained by political intolerance
coupled with ethnic divisions, constitutional frustration, the land policy and
militarized governance. These have defined the continuous fall of the
Zimbabwean economy especially in the period between 2000 and 20098 in which
these events took place.

The ZANU PF regime used intense, repressive actions to defeat any political
opposition. This started in the 1980s when more than 20,000 civilians in
Matabeleland were massacred in a successful drive to eliminate ZAPU by the
militants of 5th brigade. This genocide-style was popularly known as the
“Gukurahundi”. Following the establishment of the Movement for Democratic
Change (MDC) on the 11th of September 1999 and its increasing voluminous
majority support over the years, has resulted in ZAN-PF intensifying state
sponsored subjugation in order to eliminate this new political party.

The demand for a constitution to replace the Lancaster House constitution that
had been repressively amended several times in the post 1980 period by the
ZANU PF regime also exacerbated the crisis in Zimbabwe. The constitutional
referendum of February 2000 was the most notable one. The wake of democracy
in South Africa in the 1990s coupled with a series of repressive constitutional
amendments in Zimbabwe led the civil society to demand a new constitution,
under the auspices of the National Constitutional Assembly (NCA). The
government hurriedly formed its own Constitutional Commission which came up
with a constitution that was subjected to a referendum. The constitution sought to
strengthen the president’s executive powers. The electorate through the
guidance of the NCA refused the imposed constitution and that handed ZANU-
PF (Mugabe) a first defeat at the polls in twenty years. The major conclusion of
the referendum was a heave of hope that change could be fashioned through a
democratic process.

The so called fast track land reform programme which started in February 2000
was another driver of the crisis in Zimbabwe. Having identified that inequitable
patterns of land ownership were fundamentally left unaddressed for almost two
decades into independence, the Zanu-pf regime used this as a campaigning tool
to win the elections. This resulted in several years of violent seizures of white-
owned farms by government sponsored militia since 2000 to date. The crisis

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                       15
manifested itself in the scarcity of food, resulting in the country falling from the
top position of being the bread basket of Southern Africa to the bottom position of
being the bread beggar of the same region.

The withdrawal of balance-of-payments (BOP) support by the International
Monetary Fund (IMF), the World Bank, African Development Bank and other
lending institutions and individual countries exposed the Zimbabwean economy
to a myriad of financial problems. This withdrawal was a result of government’s
failure to stick to targets that it had agreed with IMF under ESAP. The
government’s home-grown successor to ESAP; the Zimbabwe Programme for
Economic and Social Transformation (ZIMPREST) also failed to meet its
objectives and the Bretton Woods institutions justified their withdrawal for BOP
support based on such developments. This reflected the government’s negative
response from the 1980s to be constrained by budget considerations 9.


3.2     Land Reform

The land reform being a noble idea of redistributing land in order to change the
pattern of land distribution from the minority whites to the majority blacks was
used as a political tool by ZANU PF in order to win the 2002 elections. The
government started implementing the fast track resettlement programme in
February 2000 with the objective to accelerate both land acquisition and land
redistribution (Marongwe, 2003). The noble objectives of land reform are to
ensure equity, improve productivity and employment, and achieving market
surplus. Nevertheless, the way in which the programme was instituted resulted in
Zimbabwe, once a bread basket becoming a basket case after the ill-planned
land redistribution code-named the fast track land reform or the “third
chimurenga” as it is sometimes referred in the country.

At the peak of this land crisis the government unilaterally gazetted white owned
farms for compulsory acquisition. More than 90 percent of farms those were
given on the basis of total allegiance to the ZANU PF government. The
government also during this period nationalized all the land and started the idea
of 99-year lease to try and address the issue of property rights. However minimal
development was anticipated since no meaningful development could occur on
the farms without property rights in the form of title deeds. The majority of
farmers affected were those who were major contributors to the national food
9
  ZANU-PF’s naïve propaganda preach that the inaccessibility to foreign loans were actually economic
sanctions on the ZANU PF regime pushed for by Britain and her allies to effect regime change in
Zimbabwe.


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                       16
basket, some of whom fled into neighboring Mozambique, Zambia, Malawi and
South Africa. The majority of farmers who were given offer letters for acquired
land were the so called liberation war veterans who did not have adequate
knowledge about farming and also did not have farming implements. The
government had forgotten so soon than farming was a professional business that
requires expertise.

Having identified that the majority of new farmers who had acquired land had no
implements and even basic inputs, the government embarked on a Reserve
Bank of Zimbabwe (RBZ) administered farm mechanization programme. This
came in phases to try and empower farmers with inputs such as seed and
fertilizers, and farming machinery such as tractors, combine harvesters, disc
harrows, ox-drawn ploughs and scorch carts among others. The process of
distribution of implements was marred with corrupt activities by the responsible
officials and other top government officials to such an extent that most people
who get that equipment were either not deserving or were mostly senior
politicians. This was the main reason why the process that seemed to be noble
ended up achieving no results.

When the new government of national unity came into power it only managed to
reduce the extent of farm invasions and propose a serious land audit. However
the process of land audit was stalled by the ZANU PF officials who are not willing
to let go of their multiple land portions.


3.3     Elections

Zimbabweans went to vote in a referendum in February 2000 in which the
majority denied the proposed constitution. Parliamentary elections were also held
in the same year and the opposition won a considerable number of seats. The
parliamentary elections in 2000 thus saw the ruling party subjected to
extraordinary challenge from the newly established MDC, which swept the urban
vote and won 57 of the 120 contested seats. In 2002 presidential elections were
held and the main opposition leader accused the incumbent of having rigged the
elections. Some observer missions like the European Union (EU) shared similar
sentiments. Parliamentary elections were held 2005 and were marred with
relatively little incidences of violence as the opposition MDC increased their
representation in parliament.

At the same time, the period in between bi-elections was marked by the
proliferation of repressive legislation, including the disreputable Public Order
Security Act (POSA) and the Access to Information Protection of Privacy Act

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(AIPPA), which destabilized civil liberties such as the right to freedom of
assembly and participation in democratic debate on national issues. The ruling
part introduced senatorial elections in November 2005 and this led to the
breaking of the MDC part as the main wing boycotted the elections while the
minority welcomed the idea. This gave birth to the two MDC formations the main
one led by Morgan Tsvangirai and the smaller faction led by Arthur Mutambara.
Three months after the elections, government instituted Operation
Murambatsvina (literally, “Clean up the filth”), a military approach destruction of
the homes and livelihoods of an estimated 700 000 Zimbabweans in urban and
peri-urban areas that had literally voted for the opposition.

The harmonized elections followed on March 28 2008 under the blessing of the
then South African president’s (Thabo Mbeki) mediation. These elections were
conducted in a free and fair environment although the final results were also
believed to have been rigged. One distinguishing feature of these elections was
that results were counted and displayed at each polling station in the presence of
all part officials so as to avoid tempering with the figures. No one achieved the
absolute majority and hence the need to go for a runoff.

A run off election was planned for June 27 of the same year (2008). The period
before, during and after elections was characterized by widespread political
violence. This involves the harassment and in some areas the killing of MDC
supporters. Because of the violence, the MDC leader boycotted the elections and
eventually it was described as a sham ‘one-man’ election race as Mugabe went it
alone and claimed a landslide victory.

Overall, since 2000, when the ZANU PF regime realized that it cannot get dirt
free votes, they resorted to militarization of all priority institutions of the economy.
Almost all the government and quasi-government institutions were now headed
by retired army officials so as to strengthen ZANU PF patronage. They also
engage in activities that were tantamount to human rights abuse thereby
angering both local and international human rights advocates. The Europeans
and Americans as champions of democracy responded by imposing targeted
sanctions on the ZANU PF leadership and companies that sponsor them.

3.4     Economic Meltdown; Zimbabwe’s declining Economic Trend

The fall down of the Zimbabwean economy in recent years has been disastrous.
Zimbabwe’s GDP tumbled by 40% between 1999 and 2003. The severe
contraction of the economy has been ascribed to the crumple of the major
contributors to the country’s GDP namely agriculture, manufacturing and tourism.
This was mainly a result of the introduction of the government’s controversial

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                       18
fast-track land reorganization programme in 2000. The economic growth rate for
Zimbabwe was continuously and consistently negative from 2000 to 2007. On the
other hand the South African economy has been performing fairly well during the
same period with growth rates being positive during the comparison period.
Table 2 shows how the two economies were performing.

Table 2: Growth rates of the Zimbabwe and SA economies
 Year           Zimbabwe's growth rate             South Africa's growth rate
 2000                     -7.6                                 4.2
 2001                     -2.7                                 2.7
 2002                     -4.9                                 3.7
 2003                     -9.7                                 3.1
 2004                     -0.7                                 4.9
 2005                      -4                                   5
 2006                     -5.4                                 5.4
 2007                     -6.1                                 5.1
                                a
 2008                    -14.1                                 3.1b
Sources: United Nations Statistical Database
       : ‘a’ IMF (2009) and ‘b’ http://www.uneca.org/era2009/chap2.pdf.

The Zimbabwean economy experienced world record hyperinflation during the
period 2000 to 2008. It’s widely believed that ZANU PF’s policies towards land
reform were the cause of the pressure on the economy that led to internal
upheavals, population displacements and poverty. As pointed by to the scarcity
of foreign currency, the government through the RBZ resorted to the printing of
money to purchase foreign currency on the domestic market causing money
supply to skyrocket leading to hyperinflation (Makochekanwa, 2007). The quasi-
fiscal activities were also financed through unbudgeted printing of money also
resulting in inflation. On the other hand inflation was stable in South Africa as
shown by an-all one digit inflation throughout the analytical period. This was
achieved through good governance and prudential regulation of the economy.
The table below compares the two economies’ inflation figures.

Table 3: A comparison of Zimbabwe and South Africa’s inflation figures
 Year         Zimbabwe's inflation rate      South Africa's inflation rate
 2000                   55                               8.8
 2001                  112                                9
 2002                  199                               9.2
 2003                  599                               6.8
 2004                  133                               5.9
 2005                  586                               5.2


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 2006                     1,281                                 7.2
 2007                    66,212                                 8.9
 2008                231,150,889                                8.7
Source: Central Statistical Office of Zimbabwe and Statistics South Africa.

Significant developments have affected the Zimbabwean economy in 2007 with
one notable instance being Operation Reduce Prices which began in June 2007.
This has had appalling effects on the economy with most basic goods
disappearing on the shelves. In his Mid- Year Monetary Policy Statement on 1st
October 2007 the Reserve Bank of Zimbabwe (RBZ) governor stresses that
some parts of the government’s intervention in this policy fell prey to selfish
predatory tendencies of some senior civil servants and business people who
disrupted the noble intentions of the programme through an unequal course of
activities geared to promote personal interests.

Although the Indigenization Bill which was passed in parliament in October 2007
stated that all foreign owned businesses must now have 51% indigenous
ownership, processing surrounding this bill into it become a law have been
halted. The problem around this issue pertains to the way in which such
legislation will be used to extend the patronage of the then ruling party. The RBZ
governor also recently expressed concerns about the evils of this legislation in
his Mid-Year Statement of 2007 in which he stressed that schemes which create
perceptions of instant satisfaction through ‘grab, take and run’ instead of win-win
type of acquisitions that promote good relations should be avoided.

The manufacturing, mining and export sectors have declined sharply. At its peak,
the manufacturing constituted 16% of GDP, but it contracted by more than 35%
by the end of 2007. The rate of unemployment hovers above 94% as of January
2009. The Zimbabwean dollar had become valueless due to hyperinflation to
such an extent that it was officially suspended by government on the 12th of April
200910 . Tourism which was once Zimbabwe’s second largest source of foreign
currency has continued declining, with both foreign visitors and foreign currency
earning having dwindled largely since 2000. For instance, tourism growth
indicates that the sector’s growth trend was consistently negative, recording a
growth rate of around negative 10 percent (-10%) in 2000, negative 30 percent (-
30%) in 2003 and negative 10 percent (-10%) in 2008 (Government of
Zimbabwe, 16 July 2009). On the other hand, the mining sector has been faced
with severe shortages of raw materials due to the scarcity of foreign currency.
Production capacity has declined sharply and production costs have increased

10
  The Zimbabwean Newspaper (14 April 2009), “Zim suspends own currency for 12 months”. Available at
http://www.thezimbabwean.co.uk/index.php?option=com_content&task=view&id=20402&Itemid=103

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                       20
immensely. The weakening of agriculture, the mainstay of Zimbabwe’s economy
which at its prime constituted 50% of exports, has had a disastrous impact on the
economy. An incredible drop in agricultural production was experienced, with
maize, groundnuts, cotton, wheat, soybean, sunflowers, and coffee production
contracting between 50% and 90% since 2000 to end of August 2009.

Foreign direct investment dropped by 99% between 1998 and 2001. The risk
premium on investment increased from 3.4% in 2000 to 153.2% by 2004. The
country’s financial institutions were also affected with almost all banks
experiencing banking runs due to the worthlessness of the Zimbabwean dollar as
a result of hyperinflation. The other reasons for financial sector crisis included
weak supervision and regulation of banks, as well as unprofessional behavior of
businesses and inappropriate governance structures in certain banking
institutions. Governance failures in the financial sector have contributed to the
propagation of corrupt activities such as money-laundering, externalization of
foreign currency and capital by banking executives, and the involvement of
financial institutions in the parallel market.

The year 2008 saw the total collapse of the Zimbabwean dollar as most goods
and services were denominated in foreign currency. The RBZ started by
licensing over a thousand shops to sell in foreign currency. However the birth of
the new Government of National Unit which started to operate in February
recommended the demonetization of the Zimbabwean dollar.


3.5     South Africa and quiet diplomacy

The role of South Africa has become so paramount since the onset of the crisis,
both as helper and an obstruction. There has been certain skepticism about
South Africa’s policy of “quiet diplomacy” being driven by the economic interests
of the South African state and its corporate sector. South Africa’s policy has been
guided by the broader political concerns of the South African state on the
continent. But however it has been clear that South African business concerns
were exploiting the conditions of the Zimbabwean crisis in terms of its on-going
effects of South Africa’s strategy on Zimbabwe.

South Africa's persistence in its policy of 'quiet diplomacy' has revealed its double
standards to Zimbabwe. Its incompetence on Zimbabwe raised more questions
than answers. The roots of the South African government’s policy of ‘quiet
diplomacy’ or constructive engagement towards Zimbabwe can be traced to 1999
when Thabo Mbeki became South Africa’s president. The main objective of the
policy was to use peaceful means to persuade the ZANU PF government to bring

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                       21
about democratic change in Zimbabwe. Additionally, the policy has been
calculated with the objective of preventing a complete collapse of authority in
Zimbabwe, which would not only be disastrous for Zimbabwe but also for South
Africa. Although former president Nelson Mandela initially supported a quiet
diplomatic approach to Zimbabwe, he later denounced President Mugabe for
letting down the people who had put him in power by wanting to stay in power
forever. However, in spite of all this, Mandela faithfully continued to back Mbeki’s
policy of quiet diplomacy even though he had differed with him on the issue of
Zimbabwe.

The South African government has argued that the situation in Zimbabwe
represented a number of crises namely a crisis of legitimacy as a result of the
eating away of the post colonial agreement constructed during the course of the
liberation struggle; a crisis of expectations stemming from the worsening
economic situation in Zimbabwe; the failure of structural adjustment to reverse
the erosion of social and economic gains of the independence period; and a
crisis of confidence in the institutions of the state, inspired by the actions of the
security forces and intimidation of the judiciary.

The policy of ‘quiet diplomacy’ failed a hard test during Zimbabwe’s presidential
election of March 2002. The election was widely condemned as not free and fair
by a number of international observer teams, including, the parliamentary
mission of the SADC, and the Commonwealth observer mission, among other
stakeholders. However, the election outcome was endorsed by the South African
observer mission, which described the poll as “legitimate” but not necessarily
“free and fair.”

Hamill (2002) argues that South Africa’s (Mbeki) policy towards Zimbabwe drew
severe criticism in Zimbabwe, South Africa and the worldwide at large. Some
believed that South Africa’s diplomacy was a collaboration exercise with the
Mugabe regime. The majority of the people raised concerns that there was
incompatibility between Mbeki’s Zimbabwe policy with his proclaimed vision of
the New Partnerships for Africa’s Development (NEPAD) and an African
Renaissance. NEPAD pressures African countries to guarantee themselves to
applying self-regulatory measures, which include isolating members who
deliberately take no notice of good governance and egalitarianism.

South Africa’s strategy of ‘constructive engagement’ also received domestic
criticism for example from the Congress of South African Trade Unions
(COSATU), South African Communist Party (SACP) and from former Archbishop
Desmond Tutu. They purport that high levels of intimidation, violence, abuse of
state resources, as well as the passing of repressive laws since the Zimbabwean

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parliamentary elections in 2000 were a cause for concern. The South African
Reserve Bank governor, Tito Mboweni also acknowledged that Zimbabwe would
never be moved by diplomacy (Graham, 2006).

Even if the policy of quiet diplomacy proved fruitless, President Thabo Mbeki was
not willing to abandon it. This was mainly due to South Africa not willing to adopt
a ‘big brother’ attitude on the continent. He wanted South Africa not to have any
right to impose its will on any country and hence only act within the context of its
international agreements, thus a refusal to interfere in the internal affairs of
another sovereign state. South Africa’s Mbeki also preferred multilateral as
opposed to unilateral approaches to conflict resolution and believed in African
solutions by Africans. This was South Africa’s African Identity according to
President Mbeki and he claimed that it was in the interest of black Africans even
of his ANC party.

To some extent, the South African president’s ‘quietly diplomacy’ managed to
bring peace and stability in the Zimbabwean economy. This culminated in the
signing of the so called Global Political Agreement (GPA) on 15 September
2008. Although this agreement was not a perfect deal it was the best possible
outcome given the political polarization that was there before, during and after
elections. The signing of this agreement was subsequently followed by the
formation of the GNU on the13 February 2009. The majority of political and
economic analysts refer to this agreement as very fragile since a lot of issues
agreed on 15 September 2008 still remain unresolved of end of August 2009.
This includes the issue of the RBZ governor, the attorney general, the derailment
of the constitution making process, the human rights abuse of political supporters
and the swearing in of resident ministers and ambassadors among others. To
date there is mounting tension within the inclusive government with political
parties accusing each other of failing to failing to fulfill their various obligations.




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4       COMPLETE DEPENDENCE OF ZIMBABWE ON SOUTH AFRICA


4.1     Political dependence

Zimbabwe as member of SADC in which South Africa is also a member
depended much on the latter to address its political problems. The political role
played by South Africa for Zimbabwe became distinct in 1999 when Thabo Mbeki
became South Africa’s president. He brought in a doctrine of constructive
engagement popularly known as the “quietly diplomacy” in which he seek to use
non-violent means to persuade the ZANU-PF regime to bring about democratic
change in Zimbabwe. Moreover, the policy was designed with the objective of
preventing a complete collapse of authority in Zimbabwe.

The Zimbabwean government also depended on South Africa for the
transportation of its weapons from overseas countries. Since Zimbabwe is a land
locked country (no access to the sea), she depends on the developed ports of
South Africa to move its weapons. This means that South Africa is aware of all
the defense weapons which get into Zimbabwe.

The South African’s foreign policy on Zimbabwe provides an indication of
Zimbabwe’s dependence on South Africa. A belief by South Africa to solve
African problems by Africans and South Africa’s sensitive to black opinion makes
Zimbabwe depend on South Africa for political support (Mbeki T, 2002). They
both believed that western countries should not determine an African country’s
future.

It should also be noted that Zimbabwe’s political dependence of SA has taken
new heights more recently given that SA is the guarantor of the GPA. The Parties
to the Zimbabwe GPA have often turned to SA for mediation and guidance when
they face deadlock in their engagement.


4.2     Economic dependence

Trade and business ties between South Africa and Zimbabwe have existed for
many decades dating back to pre-independent Zimbabwe. The importance of
these linkages to both countries is underlined by the fact that bilateral trade
remained strong despite political antagonism at the height of the apartheid

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                       24
system in South Africa. South Africa’s powerful position in the region enabled it to
ensure that Zimbabwe remained dependent on its trade corridors to the sea-ports
by destabilising the alternative routes through Mozambique and Botswana. As
such, when Zimbabwe became independent South Africa was its largest trade
partner, though this declined in the 1980’s. Perhaps because of its problems,
Zimbabwe remains South Africa's most important trading partner in Africa, and
one of the fifteen countries globally with which South Africa exchanges the
highest volume of trade.

Zimbabwe having not signed the Bilateral Investments Promotion and Protection
Agreements (BIPPAS) with South Africa makes South African Companies feel
vulnerable to the impulses of Zimbabwe's economic policy, especially in so far as
it concerns property and nationalization of assets. Since some South African
companies’ investments were in the form of land which the Zimbabwean
government had nationalized, these companies felt their investments were not
protected by the laws of Zimbabwe. This means that such agreements have to
be in place since Zimbabwe depended much on them for its economic
turnaround efforts.

The retail industry has also depended much on South Africa for its survival owing
to the scarcity of commodities in Zimbabwe. Most shops in Zimbabwe obtained
their goods from the South African market leading to a rash to Musina (Mafu,
2007). However some commodities were sub-standard they were tailor made to
service an economy that did not have enough money.


4.3     Transport access to the sea

Zimbabwe is a landlocked country and depends on countries such as South
Africa (Port Elizabeth, Port of Durban), Mozambique (Beira) and Namibia (Walvis
Bay). South Africa made an aggressive expansion of its sea ports for the long
term purpose of inducing continued dependence by neighbouring countries,
Zimbabwe included. Zimbabwe has always depended on these ports for
movement of goods from its major trading partners. Zimbabwe would be better
off moving its goods through Beira due to proximity but however the port has not
developed to a capacity sufficient to cater for a growing economy in that part of
the region. Transport access through road and rail has also resulted in
movement of goods between Durban and Beitbridge much easier.




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4.4     Aid Dependence

Although aid critics have recently been blaming aid as the source of Africa’s
poverty it was desperately needed in Zimbabwe to jump start the economy that
had collapsed. South Africa was the first country to respond to Zimbabwe’s call
for aid by virtue of being a brotherly neighbour. South Africa gave Zimbabwe
some money amounting to more than R300 million as well as agricultural inputs
for the 2008/2009 agricultural season through the banner of SADC. The South
Africans believed that a problem for Zimbabwe was also a problem for them.

When Zimbabwe also faced the cholera pandemic in 2008, South Africa was also
among the many countries that responded to Zimbabwe’s call for international
assistance to alleviate the problem. They also accelerated the process of helping
Harare because the pandemic was fast spreading into South Africa through the
Beit-Bridge border post. The case for Musina refugee camp and the Methodist
church in Johannesburg are good examples.


4.5     Busting of the targeted sanctions

The Breton Woods Institutions together with other lending institutions suspended
loans to the Zimbabwean government and the private sector. This was mainly
due indebtedness of the country and failure to implement prescribed policies
such as ESAP and ZIMPREST. Targeted sanctions which were directed against
political leaders and the government officials from ZANU-PF party affected
vulnerable groups of society who suffer and not the targeted group. The former
United Nations, Secretary General, Kofi Annan once lamented the adverse
effects of sanctions, when he said ‘sanctions remain a blunt instrument, which
hurt large numbers of people who are not their primary targets’.

Therefore South Africa was the first respondent to the idea of sanctions busting
in order to provide avenues for external BOP support to the country. When
Zimbabwe called for some initial funds to kick start the economy in mid 2008,
South Africa, together with other SADC members provided more than one billion
United States dollars to resuscitate the industrial sector. The bulk of the funds
came from South Africa and Botswana. The Zimbabwean government also
negotiated separate lines of credit with the South African financial institutions
also in an effort to revive the economy.

The South African government together with other SADC countries advocated
that sanctions negatively affected the image of the country through negative
perceptions by international financial institutions. Such trade restrictions

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                       26
compressed imports, resulting in declining industrial productivity and dwindling
exports. Zimbabwean companies were finding it progressively more difficult to
access lines of credit because of the perceived country risk. Thus, they wanted
these sanctions to be busted for development to occur in Zimbabwe.


4.6        Employment dependency on South Africa

The political crisis in Zimbabwe caused many businesses to close, especially the
British owned companies. As a result of this, unemployment escalated to
unprecedented levels of above 94% as of year January 2009. This meant that
most Zimbabweans became unemployed and therefore opted to look for jobs
elsewhere with most youngsters leaving for South Africa.

The record economic crisis besetting Zimbabwe has forced many highly
educated citizens to leave the country. Doctors, nurses, lawyers, bankers,
teachers, civil servants and many other professionals have immigrated to
countries such as Australia, Britain, Botswana and South Africa in search of a
better life. The mass departure of professionals has resulted in critical staff
shortages and the collapse of key public service sectors, notably education and
health. In the health sector the government resorted to re-employing retired
nurses to help alleviate staff deficiencies in government hospitals.

South Africa’s preparation on the 2010 soccer world show case required that
they get both technical expertise and unskilled labour. In its effort to achieve the
required standard of infrastructure, their only option was to make use of
redundant labour in Zimbabwe. To successfully host this event, the country
needed to construct soccer sports grounds, roads and up-market hotels and
therefore Zimbabweans, by virtue of being hard workers, were so indispensably
needed by the South African government. As time seemed to be running out, the
South African Home Affairs scrapped visa requirements for Zimbabweans that
allowed them to stay in that country for a maximum of three months per visit 11.


4.7        Collapse of the Zimbabwean Dollar and dependence on South
           African Rand in Zimbabwe

Apart from significantly eroding the buying power of incomes, inflation had
suppressed economic growth, triggered general uncertainty as business planning
has become almost impossible, encouraged speculative activities, rent-seeking

11
     Visa scrap were announced on 4 may 2009

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                        27
and other non-productive economic activities, and exerted a huge strain on the
country’s foreign exchange due to high import demand. The high inflation has
also redistributed income away from those unable to protect themselves against
it, and this relates predominantly to the poor. The state’s response to the problem
of inflation, apart from the disastrous Operation Reduce Prices in June 2007, has
been to continuously print more money.

The RBZ governor removed three zeros on the Zimbabwean currency on 1st of
August 2006 and further 10 zeros in late January 2009 in an effort to battle with
hyperinflation. Each time zeros were removed prices were controlled but
commodities disappeared on the shelves and only reappear on the black market
priced in South Africa currency, rands and US dollars. Most shops closed down.
The fiscal policy of 2009 by acting finance minister introduced the use of multiple
currencies, the SA Rand and US dollar being the widely preferred currencies.
The new finance minister in his budget review in April 2009 announced the death
of the Zimbabwean dollar as a medium of exchange




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                       28
5          PROS AND CONS OF ZIMBABWE BEING THE 11TH PROVINCE OF
           SOUTH AFRICA


5.1        Advantages

     i.    Stable economic environment

           Becoming part of South Africa may result in stability in the economic
           environment. Since independence, Zimbabwe’s economic environment
           has not yet enjoyed a continuous stable economic environment. For
           instance, the 1980s were affected by shortages of foreign currency which
           impeded imports of essential production inputs, while 1990s were affected
           by droughts (1991-92), increase in balance of problem (BOP) in the mid
           1990s and the set in of high inflation trend in the late 1990s. From 2000, to
           date, performance in all economic sectors, from production (agriculture,
           mining and manufacturing) and financial sectors have been rapidly
           declining. Thus, in the case of the country becoming an 11th province of
           South Africa, the country which is the powerhouse, not only of SADC
           region, but African continent, there is a higher possibility of borrowed
           economic stability spilling over to Zimbabwe.


    ii.    Guaranteed closer product market

           An arrangement where Zimbabwe becomes a province of South Africa will
           imply that all trade barriers; both tariff and non-tariff will be scratched. This
           will open wide the South African market to Zimbabwean products, thus
           providing an extended market for the latter country’s goods.


    iii.   Enhanced possibility of quick development

           There is no doubt that once Zimbabwe becomes an 11 th province of South
           Africa, developmental projects extended from the latter country will start to
           inundate the former country at a rapid scale. This will result in the ‘new’
           province witnessing quick developments ranging from transport
           infrastructure, manufacturing hubs, tourism centers, and financial sector
           hubs, among other sectoral developments.
 iv.       Higher chances of attracting FDI

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        The possibility of foreign direct investments (FDI) from other countries,
        especially the developed world, will increase given the better perception
        placed on South Africa (in comparison to Zimbabwe) by foreign investors.
        Thus, with this enhanced perception in terms of monetary stability (low
        inflation, flexible but stable currency, convertible currency etc), better
        democracy and political stability, changes of FDI flowing into Zimbabwe
        (or 11th province) will be very higher.


5.2     Disadvantages

  i.    Loss of sovereignty

        Politically, this will literally mean ‘closing the doors of Zimbabwe and
        proclamation of its death’. All the sovereignty in terms of determining its
        destiny, values and social norms will be reduced, if not totally wiped.


  ii.   Loss of policy decision making

        The country (or the 11th province)’s decision making powers will be
        clipped. These powers ranges from decisions regarding the functions or
        running of the economy as that will be ceded to South Africa and its
        institutions such as the South African Reserve Bank (SARB), and its
        ministry of finance. Thus, Zimbabwean policy makers will be reduced to
        spectators.




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6       CONCLUSION

The study analyzed the relationship between South African and Zimbabwe which
dates back to early 1900. The research showed that these two countries have
clued political and economic ties, with dependence of Zimbabwe on South Africa
especially in the new millennium having been increased as a result of increased
political turmoil and economic meltdown that the country has been experiencing.
All the existing evidence on the ground clearly shows that Zimbabwe has been a
de facto 11th province of South Africa. This emanates from the following facts,

       Around three million Zimbabweans (which is approximately 20-25% of
        Zimbabwe population) are currently living in South Africa, either as
        political or economic refuges. Apart from that most of the people currently
        settled in Zimbabwe mostly the Ndebele and whites come from SA during
        the late 1800 and early 1900s.
       SA investments dominate and continue to grow in all sectors of the
        Zimbabwe economy especially mining, industry, agriculture, banking, retail
        sub-sectors.
       Trade between the two countries is largely and increasingly in favor of SA.
       Zimbabwe is land locked and depends mostly on SA routes and ports for
        access to overseas markets
       the South African rand is being used in Zimbabwe for the past seven or so
        years, with the currency formally allowed to be used in Zimbabwe since
        April 2009 after Zimbabwean dollar was suspended;
       Political developments in Zimbabwe both past and contemporary are
        largely guided by South Africa which is the main mediator of the political
        impasse bedeviling Zimbabwe’s political situation.
       SA has recently played the leading role of a donor to Zimbabwe with
        sizeable aid and loans having been advanced to Zimbabwe in recent
        years, the most publicized been the R300 million grant which was meant
        for agriculture inputs;

Given the foregoing this paper concludes that Zimbabwe is a ‘de facto’ 11th
province of SA. However this does not necessarily mean that such status should
be confirmed 'de jure' because there are political sensitivities including the issue
of sovereignty. What the paper simply does is to state the facts and thus point to
the need to take policies in the know of the realities on the ground. The reality
being that Zimbabwe has largely lost its competiveness in the region to South
Africa and has in turn become increasingly tied in an asymmetrical dependence
relationship with its big neighbour. This outcome is largely a result of good


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economic and political governance in SA while the reverse was true in
Zimbabwe.




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                       32
for Applied Social Sciences, University of Zimbabwe and Land Tenure Centre,
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