Causes of unemployment in Zimbabwe and possible solutions
“For every action, there is a consequence” but the fact stands, an economy will always have natural unemployment, which is considered healthy for the economy. The cyclical unemployment is the most dangerous unemployment an economy would want to experience because it is caused by recessions. Therefore, this paper aims at explaining the causes of unemployment in Zimbabwe and possible actions that may be taken to assist the economy to work towards decreasing the unemployment rate.
Background of Zimbabwe’s situation
To commence with, unemployment in Zimbabwe is defined as people over 16 years of age who are actively looking for a job, on the other hand, it includes subsistence farming as employment, and other foreign organizations have higher rates than the Zimstats. Zimbabwe was under the rule of Robert Mugabe for over 38 years since independence in 1980. Zimbabwe was hit with economic sanctions after the land reform act in the 2000s by the U.S and Europe. The informal sector is dominating and the formal economy is shrinking as many companies have been shutting down. Also, for over a decade the current government and opposition party have been fighting tooth and nail in most instances causing political instability in the nation. According to the World Bank, Zimbabwe’s unemployment is about 95% which is overall high showing the rust in the economy’s engine.
Causes of unemployment
Firstly, poor governance and implementation of unappropriated policies has caused a negative multiplier effect in all sectors of the economy , in 2000 the Zimbabwean government passed the Fast Land Reform Act that saw many white farmers being driven out of their farms that were flourishing and contributing heavily to the economy and, thus, led to Zimbabwe being the breadbasket of Africa in that time, but the confiscation of land caused loss of jobs to farm workers and those in the export sector and the war veterans that took over the lands had no knowledge on how to manage commercial farms nor did they have capital to keep these farms running and this caused a huge loss in grains for the factories to be able to produce consumer products and also forcing the firms to lay off workers because of low productivity as people turned to importation of consumer goods and also, even forced some firms to shut down factories and, thus, lead to importation of grains and cost of production rose, the prices for basic commodities rose to lead to a cost-push inflation.
Furthermore, in 2006 Zimbabwe suffered hyperinflation, most formal industries shut down, moving most people into the informal sector, the Zimbabwean currency had lost tremendous value as the government kept printing huge sum of money supply as they were assisting in the war in DRC and the soldiers and army demanded high wages, devastating their own economy leading to an economic boom and bust many people lost their jobs especially civil servants. In the government institutions, corruption is high that mismanagement of funds is a huge barrier to any success of economic growth.
In 2016, USD$15 billion of government revenues from the mining sector went missing and no one has been accounted for it, huge balance of payments deficits to IMF and World Bank to settle over USD2 billion foreign debts, this limits the government from having any money left to invest in infrastructure to try resuscitate jobs for the locals, according to the world bank government spending was 2.05% of GDP and continued to increase all the way up to 2016. In 2008 the unemployment rate was 5%, as the government adopted the Indigenization and Empowerment Act as a fiscal policy to help aid, employment and empower the locals and generate revenue for the government as exports were low, the act was propagated to make foreign companies offer at least 51% of their shares to Zimbabweans and this lead to many FDI firms to close firms and in return people employed by those private firms lost jobs and discouraged other potential investors like Aliko Dangote.
The Chinese Government has been investing in Zimbabwe after Zimbabwe propagated the Look East policy but still the Zimbabwean economy is still decimating because of bogus deals by the officials for example the Gwanda solar Farm, tender awarded to a Zimbabwean company Intertek that was in partnership with a Chinese firm for over 3 years no productivity had been done, the state parastatal transferred the official funds of USD$5 million to ground break the project, this was going to offer employment to over 1000 Zimbabweans but because state funds are mismanaged and no government follow up little has been down to account. The demographics have increased, the population has continued to increase at a rate of 2.35% yearly and there is no creation of new jobs and, thus, the new generation will not have formal jobs as the retirement age is high, it will take years before a university graduate secures a job and giving a huge rise to frictional unemployment rate and also slows economic growth.
Furthermore, Zimbabwe being landlocked sets a comparative disadvantage on the cost of raw materials and grains e.g. gas and maize because of less cost of transportation on foreign goods from other continents, making Zimbabwe less competitive in the region and, less economic growth and increasing unemployment.
Additionally, education, Zimbabwe is ranked amongst the high literate African countries, as the world evolves and new technology is being invented because many graduates have been unemployed or rather never employed for years they have no update or retraining, the academic curriculum has not been revised effectively to match the worldly fast-moving technological skills these new inventions of using software’s like blockchain leading to a generation with a huge number of graduates, willing to work but with mismatched skills or no skills because what they learned back then it’s not what is required on the job anymore or new skills are required. In another circumstance mobile money transfers are rising as well as plastic money, most people don’t go to the banks anymore and for firms have few expenses and more profits they lay off some bank tellers because of the cash crisis and more online transactions contributes to increasing rate of structural unemployment because the tellers have no transferable skills.
First, the Finance Ministry and Reserve bank have to implement a new currency that is valuable for international trade and decrease cash shortages after they have earned the people’s trust so to discourage hoarding of currency giving incentive to investors to want to engage as the currency will hold value and security to help jump-start the industries. Moreover, government institutions need to be reformed to create a pure separation of power and all institutions are enforced to make sure there are transparent this will enable the functioning of the economy and stimulate growth as investors will have trust in the agencies and the collected taxes they will create funds to reinvest in the economy by revising the education curriculum and the building of roads and schools to create jobs. The government should decrease its spending on the President, Ministers and other parastatal seniors because these funds can be redirected to the growth of the economy than buy luxurious cars and real estate for institution officials.
Also, Zimbabwe has to look towards regulating the informal sector as it will contribute more to the government revenues as over 70% of the people are involved in informal business. The mining sector should have agencies that will make sure their strategic plans for the revenues generated from the main mineral resources the country, diamond, and platinum, the funds should be redistributed to other sectors to ensure stability and function, creating jobs, as well as the minerals, are scarce when they deplete the economy will not crash like it’s been hit with a Dutch disease because it will still have other industrial sectors to rely on to keep the economy running.
On top of that when foreign firms invest in the country the government should also have strict rules if there to lower their tax they must employ at list a certain number of workers from the locals because as the situation states most foreign companies especially those in Chiyadzwa diamond mines and the Hwange electric plant few Zimbabweans are employed because of lack of knowledge and if vocational schools are to be enacted by the government to teach Chinese and some of the skills needed in engineering despite educational level the unemployment rate would decrease
To sum it up all, as Ellen Wilkinson said, “Unemployment is bigger than a political party. It is a national scandal”, Zimbabwe has suffered devastating unemployment, inconsistency, and mismanagement of both monetary and fiscal policies implemented by the Zimbabwean government has caused a great decline of economic growth and, in turn, the unemployment rate increased. Political turmoil and unfriendly international relations with the U.S, U.K has left Zimbabwe with few capable countries to assist revamped its economy. The solutions are on the table, but it will take the Zimbabwean people as well as those in power to choose if they want to change as one political party has been in power for decades and no change has been seen for over 39 years and unemployment keeps increasing.
Causes of unemployment in Zimbabwe and possible solutions