Southern African Regional Poverty Network (SARPN) SARPN thematic photo
Regional themes > Land Last update: 2008-12-17  
leftnavspacer
Search





 Related documents


The loss of property rights and the collapse of Zimbabwe

Craig Richardson
Contact: cjr@salem.edu

Salem College

Posted with permission of the author. This paper will shortly be published in the Cato Journal, Vol 25, No. 2 (Spring/Summer 2005).
Readers might be interested in a lengthier analysis contained in the author's recent book: The Collapse of Zimbabwe in the Wake of the 2000-2003 Land Reforms (Edwin Mellen Press, 2004).
[Download complete version - 272Kb ~ 2 min (35 pages)]     [ Share with a friend  ]

Introduction

What in the world happened to Zimbabwe? Although the country certainly had its share of difficulties during the first 25 years since independence in 1980, it largely dodged the famines, civil strife, and grossly mismanaged government policies so common in other sub-Saharan African countries. Through the 1980s, its annual real GDP growth averaged over 5 percent, and unlike other African countries agricultural yields were large enough to allow the country to export grain. In the following decade, economic growth slowed, and government policies were less than efficient, but Zimbabwe still managed to grow an average of 4.3 percent, in real terms.1 The government also offered free education and relatively good access to medical care. Population growth was slowing, and foreign direct investment increasing. With rich mineral assets, an educated workforce, and beautiful natural wonders, Zimbabwe appeared to have the best chance to be an African success story.

However, in 2000 through 2003, the Zimbabwean government initiated a land reform policy that involved forcibly taking over white-owned commercial farms, ostensibly to redistribute this property to landless blacks. The rationale for this policy was to redress the British seizure of fertile farmland in the late 1890s, which resulted in hundreds of thousands of blacks being pushed onto lower grade communal lands.

No compensation was paid to the commercial farmers, and hundreds of thousands of employed black farm workers were left without jobs. Despite a ruling from Zimbabwe's Supreme Court that the action was illegal, the Mugabe-led government continued with the land takings. These land reforms marked an important turning point for Zimbabwe. It was the first time in its 20-year history that laws regarding property rights were no longer respected or defended. Property titles, which once served as a key insurance mechanism for guaranteeing bank lending, no longer were recognized by the Mugabe government.

Within a short period, Zimbabwe went from a place of hope to one of the grimmest places on Earth. The economy collapsed by 5 percent in 2000, 8 percent in 2001, 12 percent in 2002, and an estimated 18 percent by 2003 (OECD 2004: 357). Inflation reached 500 percent and Zimbabwean dollars lost more than 99 percent of their real exchange value (IMF 2003: 28). The International Monetary Fund, the United Nations, and the Organization for Economic Cooperation and Development blamed the "severe drought" in 2001-02 along with a host of other factors-including AIDS, poor fiscal and monetary policies, and rigid price controls-for causing much of the food shortages and resulting economic difficulties. Although the other factors certainly contributed negatively to Zimbabwe's economy, the land reforms and the changes in rainfall were the only variables that appeared to change dramatically during the 2000-03 period. Thus, they are the primary suspects in plumbing the reasons for Zimbabwe's quick collapse.

In this article, I argue that the land reforms were the primary driver of Zimbabwe's sudden collapse, not the lack of rainfall. After giving a brief overview of the literature that covers the link between property rights and economic growth, I correlate official Zimbabwe government rainfall data with GDP growth, and also use this data to rank the severity of the 2001-02 drought versus other droughts in the past 50 years. Next, I illustrate the precise mechanics of Zimbabwe's collapse, by showing how the damage to property rights destroyed three key, yet invisible, components of the marketplace: investor trust, land equity, and entrepreneurial knowledge and incentives. Finally, I use ordinary least squares regression analysis to independently assess the impact of the rainfall, land reforms, political strife, labor productivity, capital formation, and foreign aid on Zimbabwe's economic growth. I conclude that over 2000-03 period, the land reforms alone were responsible for an estimated 12.5 percent average annual decline in GDP growth. Rainfall played a minimal role in the GDP contraction. Perhaps most dramatically, estimates made in this paper indicate that after the revoking of commercial farm property titles, the aggregate value of Zimbabwean farmland dropped so quickly that the net loss in one year was nearly three and a half times larger than all the World Bank aid ever given to Zimbabwe. This loss in wealth rippled throughout the economy, severely strained the banking sector, and led to a rapid downward spiral in the economy.

The collapse of Zimbabwe is thus a dramatic natural experiment that serves as a compelling case study on the economic consequences of damaging property rights.


Footnote:

  1. This excludes 1992, during which Zimbabwe experienced its worst drought in 50 years, causing GDP to drop by 9 percent. There were no other years of negative growth during the 1990s, except 1999, in which GDP declined by 0.7 percent.



Octoplus Information Solutions Top of page | Home | Contact SARPN | Disclaimer