Credit and finance

Our book covers the decade from 2000 to 2010, and only really touches on the post dollarization period from 2009. The change in currency has had a massive impact. Many outside Zimbabwe still have the vision of empty supermarkets, barter trade and people lugging around suitcases of old Zimbabwe dollars. No-one seems to know how fast the Zimbabwean economy is growing, but Tendai Biti estimates around 9%, driven in particular by the growth of the mining and agricultural sectors. The Economist ( last week had an article on the growth potential of African economies, and highlighted Ethiopia, Angola, Nigeria, Zambia among others. Zimbabwe, intriguingly, was left off the map of growth stats, as it would probably have registered the highest level of all. Too awkward perhaps for the Economist’s map makers. Of course Zimbabwe’s economy is growing from a very low base, but nevertheless things are happening.

In our book we did an enterprise survey, and the story while positive was not startling. Businesses established soon after land reform had closed down during the hyperinflation period, and were only just being opened up. A year or two on, now they are fully open for business, and others are getting set up. There are new entrants into rural markets, and those with cash and capital are returning bit by bit. These include black business elites as well as former white farmers and businessmen who are all active in establishing new operations – abbatoirs, transport businesses, small shops and so on. Small-scale Chinese and Asian business is much evident too, although only in the towns.

The rural businesses are the usual staples of grocery shops, bars and butcheries, but they are complemented with other businesses, such as mobile phone repairs, tailoring, farm equipment repair and manufacture, veterinary medicine sales and many others. There appears a new confidence, and business people are sure there is money to be made. The restrictive regulations and political interference that characterised the period from around 2006, peaking around 2008, have gone, and gung-ho entrepreneurialism is evident?

What is driving this? There is certainly more money in the economy. The flash cars in Harare are witness to this. Small scale mining has taken off big time, and many are making a mint. And of course there are diamonds. Not only in the famous Marange mines, but also elsewhere. The well connected elite are making a fortune, and many are concerned about the diversion of resources away from the finance ministry towards private individuals and the party machinery of ZANU-PF. But even corrupt money has an influence on the local economy, improving flows of resources, creating demand, generating investment and so on, and this is having a tangible effect.

Yet the repeated complaint from small-scale rural business people is that, while the ‘chefs’ may have access to cash through whatever means, they don’t – and the banking and credit system is not helping. This is hampering them from getting going. This is the complaint of A2 farmers, as well as shop owners and business people across our study areas. While the absurdities of the Gono era where the Reserve Bank, working with the army, tried to direct the agricultural economy, has thankfully gone, credit and banking institutions are not functioning well. This is limiting the opportunities of new farmers to scale up operations, to invest in irrigation, mechanisation and inputs, and to re-connect with higher value chains, which requires attention to standards, marketing and so on. This lack of rural finance is holding the sector back, and particularly the more entrepreneurial A2 farmers (and larger A1 farmers too) and the array of rural businesses linked to agriculture in the rural areas that can generate the spin-off benefits and multipliers that land reform can bring.

This needs urgent policy attention, bringing the public and private sectors together. But who is working on this? Not the donors, not the government, not the banks. Some claim that the lack of collateral through leasehold title is limiting loan-making and credit offers, but this is only part of the story. The lack of policy thinking is a gaping hole. Some more effective rural economic policy, with new or rebuilt finance institutions is a top priority right now, if the new commodity boom and the post dollarization financial environment is to be capitalised upon.


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4 responses to “Credit and finance

  1. this is bang on the money – i work with rural farmers in Zimbabwe and this is by far the biggest need they have. tx for posting

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