The fundamental economic problem is scarcity of all resources against the unlimited needs and

wants. Hence all economic decisions and choices must involve choice in terms of what to
produce, how to produce it and for whom to produce. Choice leads to Opportunity cost which is
using resources for a certain purpose, measured by the benefit given up by not using them in
their second-best alternative. Scarcity is the is the fundamental economic problem of having
seemingly unlimited human wants in a world of limited resources. According to Zhou and
Masunungure (2006) the new government in 1980 inherited a dual economy of white large-scale
farms and a stagnant impoverished communal sector. The new black government only had one
option, to prioritize socio-economic policies and adopt state led development strategies so as to
address the colonial imbalances that were in existence. During the post-independence era (1991-
2000) there was heavy unemployment matched against the qualified and educated population,
there was shortage of money in the banking sector, shortage of arable land for agriculture. There
was also shortage of capital goods for example advanced machinery for farming such as
combined harvesters and consumer goods such as mealie meal and wheat. During these years
from 1991 to 2000 the government tried to even the imbalance between the limited resources and
its unlimited wants which included provision of employment, arable land and indigenization of
the economy and also lower the balance of payments through increased exports compared to
imports. The government set up polices such as the Economic Structural Adjustment Program
(ESAP) in 1991 which was set to liberalize the economic system which allowed for an open
market economy driven by a strong export base as compared to the command economy that was
existent before. ESAP was succeeded by the reform program popularly known as Zimbabwe
Program for Economic and Social Transformation (ZIMPREST) in 1996 whose main objective
was the creation of a stable macro-economic environment which allows increased savings and
investment in order to achieve higher growth and improvement in the standard of living for all
Zimbabweans.

In 1991 the Zimbabwean government set up the Economic Structural Adjustment Program
(ESAP). The Policy had core objectives which included

1. achieve GDP growth of 5 percent during 1991 to 1995

2. raise savings to 25 percent of GDP
3. reduce budget deficit from over 10 percent of GDP to 5 percent by 1995
4. reduce inflation from 17.7 percent to 10 percent by 1995 (Kanyenze 2004)

Mlambo (1997) asserts that Economic Structural Adjustment Programs were formerly introduced
in Zimbabwe in October 1990. Its framework was spelled out in the January 1991 document
(Zimbabwe; a framework Page 3 of 12 for Economic Recovery 1991 – 1995). The policy was
adopted for 1990-1995 period. When the new government came to power after independence in
1980, there was need to reduce Zimbabwe's deep socioeconomic disparities. Hence the
government invested heavily in health and education. Such action led to an increase in public
expenditures, which for most of the 1980s made up 45 percent of the GDP. Social indicators
improved, particularly in health and education, but per capita income stagnated because large
government spending crowded out private investment and fueled inflation, while shortages of
imported goods constrained investment and growth thus ESAP was aimed at also reducing
government public expenditure through cost sharing schemes where citizens were now supposed
to pay for their own medical and education fees. Population also grew faster than job creation,
widening the disparities in income levels.

During the ESAP era there was attempt by the government to increase forex supply into the
country, which was very scarce, so as to reduce inflation in the country and to do this the
government devalued the Zimbabwean Dollar. Foreign exchange reserves are used to back
liabilities but also influence monetary policy by the government. Due to the depreciated
exchange rate, the price of domestic exports such as wheat, maize and cotton became cheaper to
foreigners on the international market. Import prices were higher for locals, who were expected
to cut back on them, thereby improving the trade balance of payments (exports-imports).
Although the devaluation of currency through the ESAP policy was meant to increase forex
reserves in the country it had very limited success.

It was reported that an annual increase of exports 9% was projected over the years before,
exports in fact fell in both 1991-2 and may not have reached 1990 levels in 1994. The
deteriorating gains of trade from primary exports such as maize and wheat meant that Zimbabwe
was exporting more and more of its commodities to earn less and less from them. Poku (2005)
asserts that devaluation increases the cost of importing finished products and productive inputs
necessary for economic development. This is due to that as the prices of the country’s exports
continue to fall the cost of acquiring manufactured inputs from the industrialized continue to rise.
Furthermore, devaluation increases the local cost of production to an extent which may be
beyond the means of small businesses which have no direct access to foreign currency through
export earnings.

The government also addressed the shortage of agricultural inputs such as advanced machinery
for farming by removing import restrictions and liberalizing agricultural input markets in 1993.
This was aimed at increasing agricultural produce in the country thus increasing food security in
the nation and forex through exporting of surplus. The liberalization of input markets was a draw
back to the development of small scale and communal agriculture, and agriculture in general. In
1996 farmers were allowed to buy tractors and other farming technology without having to pay
duty and taxes. In 1993 government lifted price controls for all except two fertilisers, ammonia
nitrate and compound D (recommended for maize). These are important for communal farmers.
However, all price controls were removed with effect from mid-1995.A noticeable impact of the
liberalisation of the input market is the increase in the import of tractors from an average of
1,300 during 1988-93 to more than 3,000 during 1994-96 (Gisselquist & Rusike, 1998). These
developments benefited large- scale farmers. Annual imports of compound fertilisers also
increased sharply from less than 500 tons (average) during 1990-93 to 12,000 tons in 1994,
14,000 tons in 1995 and 48,000 tons in 1996. Most of these imports are high analysis fertilisers
used by large-scale farmers.

However, With the removal of price controls the prices of vital agricultural inputs rose
significantly negatively affecting small-scale and communal farmers. It was also observed that in
late 1995, urea sold in Zimbabwe at almost US $300, compared to an international FOB price of
nearly US$200.Due to the importation of agricultural inputs many Zimbabwean farmers began to
buy them abroad for resale at a higher price. This negatively affected small-scale and communal
farmers as they had no foreign currency to buy in other countries. It is also observed that
regardless of the low-cost local phosphate rock, phosphate fertilisers prices were high. The cost
of cotton production went up by 130% per hectare between 1998 and 1999. The cost of
producing one hectare of wheat rose by 68.54% between 1998 and 1999 (Makamure, 2001). As a
result of rising input costs and high interest rates, small-scale and communal farmers who do not
enjoy economies of scale due to bulk buying cut back on use of these inputs, resulting in lower
yields. Arnaiz and Sibanda [1998] observed that ESAP had a negative impact on institutions that
had been created by the small-scale producers.

During the ESAP era the government introduced a cost sharing policy where the government was
to concentrate on profitable parts of the economy such as boosting the agricultural, mining and
manufacturing sectors and reducing government expenditure on unprofitable social costs and
channel it towards. This was anticipated to increase the GDP of the country and also earn the
scarce foreign currency. Dhliwayo (2001) noted that, user fees in health services were
introduced. However, this had minimal success as cost of living for the poor Zimbabweans’
increased. Citizens were expected to pay for their own medical expenses and educational fees.
According to Chakaodza (1993), public expenditure on health declined by 39% in 1994. This
decrease implied diminished spending on drugs, extension and preventative health services,
specialist facilities and treatment and other components of quality health care delivery.
Immediately after fees were raised in 1991 and 1994 declines were noted in hospital out patience
attendance, prescriptions dispensed, admissions X-Rays, Lab and dental services (Renfew 1992;
Hongoro and Chandiwana 1994). Citizens began dying of curable diseases as they could not
afford the hospital fees. By 1992, the situation had deteriorated to the extent that the then
Minister of Health, Timothy Stamps commented that “the biggest health crisis is the inevitable
decline in the standard of living as a result of ESAP. We have this deal that health care should be
paid for, but these costs cannot be borne by the average family

During the ESAP era the government commercialised the Dairy Marketing Board (DMB) in
1994, the Cold Storage Commission (CSC), and the Cotton Marketing Board (CMB), which
went on to become prosperous commercial entities. The government also zeroed their debts of
approximately $4 billion. These agricultural marketing boards had been moved from the Public
Act of Parliament and incorporated under the Companies Act thereby becoming fully
commercialised companies, although they were 100% state-owned. In line with their new
legal status, the Dairy Marketing Board (DMB) became Dairiboard Zimbabwe Limited (DZL),
the Cotton Marketing Board (CMB) became the Cotton Company of Zimbabwe (Cottco) and the
Cold Storage Corporation (CSC) became the Cold Storage Company (CSC). Commercialization
was meant to increase GDP and create employment in the country. The outsourcing and
commercialisation of services in local authorities resulted in low quality services as well as the
increasing of prices beyond the reach of the ordinary people. For example, the outsourcing of
refuse collection in Harare for instance resulted in the non-collection of refuse for days, however
with contractor continuing to receive fees. The commercialisation of ZESA resulted in a massive
increase in electricity tariff rates to market rates as a way of cost-recovery beyond the reach of
most people.
After independence there was sever shortage of arable land owned by blacks. Blacks were
concentrated in the poor soil and rainfall agro-ecological regions. The communal areas were
overcrowded and overgrazed such that by 1980, they were already carrying 700,000 families,
against a carrying capacity of 275,000 families (Riddell, 1979; Moyo, 1987). This inequitable
distribution of land was a result of the Lancaster Agreement that was signed during
Independence to protect white farmers from losing their land under the new government. The
agreement was to last for ten years and assured white farmers that land would not be taken from
them for land resettlement programs without compensation. After 1990, the Lancaster
Agreement was no longer valid, and the government slowly began to redistribute land while
compensating the white farmers but however, the government in 1994 began to distribute the
land that was set for resettlement, among the government ministers and ruling party loyalists.

The redistribution of arable land to blacks by the government was unsuccessful in solving land
shortages and overcrowding because by 1997 much of Zimbabwe’s very fertile land was still in
the hands of the thousands of white farmers that resided in Zimbabwe and also now in the hands
of corrupt government officials who were mainly benefitting from initial land redistribution
efforts rather than the ordinary people. One of the main challenges associated with land
acquisition act in1992 in Zimbabwe is the fact that although the black Zimbabweans were able to
get the land, there was no transference of skill and knowledge about how to run these farms. The
white farmers were forced to leave the farms taking their managerial knowledge with them and
in some cases their tools, leaving the unskilled once communal Zimbabwean farmers with a
piece of land and no skills to farm it. In retrospect, would it have been more efficient if instead of
partitioning these farms, the government had allowed a tenancy situation whereby the white
farmers remain and offer their managerial skills and then the black majority would ‘rent’ some of
the land

Overally ESAP was a failure due to that there was no coordination of the policy between the
government and other sectors of the economy. Mumvuma (2006) noted that the failure to consult
with stakeholders was a mistake since there was no awareness about the policy reforms
hence resulted in ignorance and lack of ownership on the part of many relevant interest groups.
There were also exogeneous factors such as the drought in 1992.This led to the government
diverting funds to food shortages. Too many reforms were intended to be done in a short period
of time. Corruption by officials also led to the failure of ESAP. However, ESAP succeded to
boost the agricultural produce which was much needed by then and also in an interview with Zfn
published in the Banks and Banking Survey, former permanent secretary in the Ministry of
Finance during the ESAP era Elisha Mushayakarara had this to say “. before ESAP shelves were
empty but through reform measures shops restocked again. The dual carriageway from Harare
to Chitungwiza was constructed during that time while bigger commuter vehicles were
introduced after transport liberalisation to compete with ZUPCO to ease urban transport
problems.

ESAP was succeeded by the reform program, popularly known as Zimbabwe Programme for
Economic and Social Transformation (ZIMPREST) (1996 –2000) whose main objective was the
creation of a stable macro-economic environment which allows increased savings and
investment in order to achieve higher growth and improvement of living standards of all
Zimbabweans. The major themes of ZIMPREST were to achieve a low inflation and interest
rates, stable exchange rate; facilitating the public and private savings and investment needed to
attain growth; pursuing economic empowerment and poverty alleviation by generating the
opportunities for employment and encouraging entrepreneurial initiative; investing in human
resources development; and providing a safety net for the disadvantaged.

In an attempt to the Zimbabwe unemployment crisis the government set into action the
privatisation program. The goal was to provide employment through indigenisation by
privatisation. The government viewed the privatisation process as an opportunity to expand
private sector participation and advocated a free-for-all privatisation process. The IMF and the
WB were also actively involved, in some cases directing PEs that should be either
commercialised or privatized. In the year 1997 witnessed the privatisation of two major
agricultural marketing boards, namely Dairiboard Zimbabwe Limited (DZL) and Cotton
Company of Zimbabwe (Cottco). DZL was the first to be privatised. DZL through a public sale
of 336 661 000 government shares to the public. Share distribution structure was as shown
below:
SHARE DISTRIBUTION STRUCTURE

Category of Shareholder Percentage

Public (Individual Investors) 15
Technical Partner 25
Small Scale Producers 5
Employees (DZL 10
Large Scale Producers 10
National Investment Trust 10
Government 25
Total 100

Source: DZL Prelisting Document, 1997

Table 1

As shown above on table one there was participation of basic individuals.

However, Chakaodza (1993) states that while privatization may improve efficiency it will do so
at the socio-economic and political cost of unemployment as well as depletion of needed foreign
currency reserves. Whilst the prime goal of privatization is to unload enterprises the hemorrhage
public money, it is no panacea for sustainable growth in the economy of African countries.
Dashwood (1993) also states that privatisation also allows private owners to discharge staff, alter
wage payment systems and discontinue parts of enterprises. Privatisation in Zimbabwe was
accompanied by retrenchments of workers as well as changes in the employment conditions.
Since profit maximization is the primary objective of private enterprises, it is inevitable that
there would be attempts to cut costs by retrenching workers. Permanent, good quality jobs in the
formal sector were replaced by contract jobs without job security and benefits. Over 300 workers
were retrenched when Air Zimbabwe was commercialised in 1994, the Cotton Company of
Zimbabwe reduced its permanent workforce from 3000 to 500 between 1994 and 1998 and the
Grain Marketing Board retrenched half of its 2500 workers within a year in 1998. Most
retrenched workers were forced into the informal sector to survive. To add insult to injury, there
was no established social safety net mechanism to deal with these retrenched workers
However, one outstanding achievement during the first 3 years of ZIMPREST was the marked
improvement in Zimbabwe’s fiscal performance. Zimbabwe managed to reduce its budget deficit
as percentage of GDP from 12.9% in fiscal year 1994/95, to 9.7% in 1995/96, 6.7% in
1996/997and 6.4% in 1997/8. This improvement in fiscal performance was due to improved
revenue collection and enhanced expenditure management which was the major focus of the
ZIMPREST. The strong fiscal position laid the groundwork for a stable macro-economic
environment which was achievable once the balance of payments positions improved.

However, ZIMPREST had very limited success due to that there were unexpected and
unbudgeted public expenditures hence the under prevailing conditions, the program was not
adequately resourced. Civil society groups began to agitate for their rights as these had been
eroded under ESAP. In 1997 alone, 232 strikes were recorded, the largest number in any year
since independence (Kanyenze 2004). During the first half of 1997, the war veterans organized
themselves and demonstrations that were initially ignored by the government. As the intensity of
the strikes grew, the government was forced to pay the war veterans a once-off gratuity of ZWD
$50,000 by December 31, 1997 and a monthly pension of $2,000USD beginning January 1998
(Kanyenze 2004). To raise money for this unbudgeted expense, the government tried to
introduce a ‘war veterans’ levy,’ but they faced much opposition from the labor force and had to
effectively borrow money to meet these obligations. ZIMPREST was too multi-focused. It
sought to achieve too diverse issues, namely employment creation, institutional reforms, land
reform, decentralisation and poverty reduction. While its targets were clearly spelt out,
ZIMPREST did not have clear-cut plans to realise its intents.

There were also other factors that led to the failure of ZIMPREST which included a sharp
depreciation of the Zimbabwe dollar in 1998, which was mainly due to low prices of
Zimbabwe’s major minerals on the international market as well as low international prices of
tobacco which reduced foreign exchange earnings; the slowdown in global economic
performance in 1998 which reduced demand for exports, A sporadic rainfall pattern during the
1997/98 season which reduced agricultural output; and an unstable macro-economic
environment, characterized by high inflation rates, high interest rates and a weak currency which
negatively affected performance in most sectors of the economy particularly, the manufacturing
sector. Zimbabwe intervention in the civil war in the Democratic Republic of Congo also led to
the failure of ZIMPREST as it strained the Zimbabwean budget leaving less to support the
policy. The costs to Zimbabwe were estimated to have been almost 3 million USD per day, and
analysts state that the government spent ZWD 6 billion in unbudgeted expenditure on the war.

In 2000, President Mugabe initiated the ‘Fast Track Land Reform in Zimbabwe .The government
supported the seizure of white population's land and property without giving any form of
compensation to its owners. This according to Mugabe was the "only" way to even out and
equalise the economy for the black majority in Zimbabwe. The Fast Track Land Reform aimed
to close the gap between the 6,000 white farmers who owned almost 70% of all the productive
land in Zimbabwe, and the remaining 30% owned by black farmers in poor rainfall agro-
ecological regions. The government under Mugabe also asked Britain to pay for reparations for
the land they seized from the black population during their colonisation. The government
claimed that they would seize the British land in Zimbabwe if they did not agree to pay. Farms
were taken by force and many farmers were given a one-day ultimatum to evacuate their farms
without prior warning. The government undertook the first of the white owned farm invasions in
a bid to reclaim land that was in the hands of the white minority. Hawkins (2008) states however
that the disorderly and hurried way in which the program was carried out contributed greatly to a
decrease in production. From then on, agricultural output, which was once Zimbabwe’s pride,
began to fall drastically.

However, there was slow progress of land redistribution. The land that was promised to be
unbiasedly distributed ended up still being used for political relations and support despite the
promise of giving landless peasants the priority to receive this land. This is proven when Mugabe
appealed to other countries for help to donate money for their land distribution, but the countries
would only agree to help if the money donated was used to help the poor rural areas. Knowing
this, Mugabe cut off the deal. This failed policy ruined not only their economy, but also broke off
foreign relations between not only Britain but other countries as well. The fast track land reform
resulted in massive displacement of white commercial farmers, violence and general lawlessness
which drew wide condemnation from other countries with Western countries imposing sanctions
on the country’s political leadership. From then on it was a rollercoaster ride as the economy
descended deeper into depression. Many economic interventions were put in place to address the
problems which came as a result of that. These included rising inflation and interest rates,
foreign currency shortages and growing national debt. Nevertheless, some of the positive
outcomes specifically attributable.

In conclusion during the 1991 to 2000 era the government tried to address the problem of
scarcity. The period can be divided into the ESAP era which is from 1991 to 1995 and the
ZIMPREST era from to 2000.During the ESAP era far-reaching reforms were implemented in
the areas of trade policy, foreign exchange management, credit policy, deregulation (labour
market, agricultural marketing and interest rates) and price liberalization. Reforms were also
instituted in fiscal and financial sector policy and management with the aims of reducing the
large budget deficit and increasing financial sector competition, all to scarcity of the limited
resources against the fast-growing Zimbabwean population. Noticing that ESAP was a total
failure the government came up with the Zimbabwe Program for Economic and Social
Transformation (ZIMPREST) (1996 –2000). ZIMPREST acted more of correcting the shortfalls
of ESAP.ZIMPREST had limited success in solving the problem of scarcity of resources in
Zimbabwe as it was aimed at solving very diverse issues in a short period of time. The problem
of scarcity can never be resolved. It is the fundamental problem that makes the study of
economics possible. All people, in all places and times, are faced with scarcity. Scarcity is the
condition that arises because people have unlimited wants but only have limited resources with
which to fulfill those wants.
References
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Publications. Harare, Zimbabwe

Dhliwayo R. (2001), The Impact of Public Expenditure Management Under ESAP On Basic
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Gisselquist D. & Rusike J. (1998); Zimbabwe’s Agricultural Inputs Industries, 1990- 96:
Regulations, Reforms and Impacts, Paper presented at the Conference on: “Zimbabwe:
Macroeconomic Policy, Management and Performance Since Independence (1980-98): Lessons
for the 21st Century, 19-21 August

Government of Zimbabwe, (1998b), Zimbabwe Program for Economic and Social

Transformation (ZIMPREST), Government Printer, Harare

Government of Zimbabwe (GoZ), (1991); Framework for Economic Reform, 1991-95, Harare,
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Hawkins, Tony, G. Kanyenze, D. Dore, D. Makina, D.Ndlela. “Comprehensive Economic

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Munangagwa, Chidochashe L. (2009) "The Economic Decline of Zimbabwe," Gettysburg

Economic Review: Vol. 3, Article 9.
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Makamure J, Jowa J. & Muzuva H, (2001); Liberalisation of Agricultural Markets, SAPRI,

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Case of Zimbabwe, 1990-95 (Harare, University of Zimbabwe Publications).

Poku A K (2005), Aids In Africa, How Poor People are Dying, UK, Universe Press.

Riddell R. C. (1979); “Alternative Development Strategies for Zimbabwe”, in Zimbabwe Journal

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