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Unemployment

By Yass88 Apr 25, 2014 2152 Words


Table of Contents

1.0 Introduction

The past two decades have seen an uneven trend in the economic terrain of Zimbabwe. There has been a gradual turnaround of fortunes from the heydays soon after the country's independence from British colonial rule in 1980 to an economic crisis that reached its climax in the years 2006-2008 and that had far-reaching effects into almost every sector of the economy and a world topping unemployment rate of over 95% according to the CIA World Factbook (2012).

The unemployment rate is the proportion of the economically active population that is unemployed and actively looking for employment (Hussmanns, 2007). In 1990, Zimbabwe embarked on a program of Economic Reforms popularly known as Economic Structural Adjustment Program (ESAP) and 1991-1992 saw one of the worst droughts. With close to 70% of the population living in the rural areas (CSO 1992) and dependent on agriculture for their livelihood, this constituted a major disaster. One result of these events was increased migration to the urban areas by people in search of employment. A further drought in 1995-1996 compounded the effect. Worsening economic conditions plus ever increasing corruption and crime have been the norm since 1995. The high unemployment rate has been from retrenchments, business closures e.t.c. According to EMCOZ survey, about 60000 jobs in the different sectors of the economy were lost by the end of 2008.

2.0 Causes of Unemployment
2.1 Droughts (Richardson, 2007)
As highlighted in the introduction above, Zimbabwe has been hit with serious droughts in recent years and since its economy is agro-based, a lot of people in the agricultural sector were left without employment and hungry.

Fig 1: Maize Production

Fig 2: Average Rainfall

In the 1991/92 agricultural season, Zimbabwe experienced the worst drought in living memory, with complete failure of crops and devastation of the livestock sector that rendered most areas semi-deserts. The economic effects were also felt outside the agriculture sector. Largely as a result of the drought, through water and electricity shortages, manufacturing output in Zimbabwe declined by 9.3 percent, with a 25-percent reduction in volume of manufacturing output and 6-percent decline in foreign currency receipts (Benson and Clay, cited in SADC-IUCN-ZRA-SARDC, 2000). In the period 1991-97, the country experienced three major droughts requiring the importation of food to alleviate the associated food shortages. Serious reductions in agricultural output resulted in reduced economic growth and loss of the much-needed foreign exchange normally derived from agricultural exports. 2.2 Obsolete Education System

The causes of unemployment are manifold including the incompatibility between the curriculum and the needs of the industry in changing times. As a result of this disjuncture, graduates’ skills are not relevant to the needs of the communities and nation at large. But after the joy of being capped at graduation, the reality of the task of cracking an increasingly tough job market soon sets in. Labour unions say at least 100 000 jobs have been lost since 2004 (Anker et al, 2005). And while the economy has experienced some recovery over the past four years, companies have had to lay off workers to cut costs. A survey by human resources experts Industrial Psychology Consultants shows that graduates are spending more than five years after graduating without formal jobs in their field of study. Every time there is a graduation at any of Zimbabwe’s universities and colleges, the national unemployment rate goes up.

2.3 Shrinking Economy and Hyperinflation
The investment and growth of the Zimbabwe Economy has been shrinking of late. This has had a significant impact on the Zimbabwean companies. In the past 3 years, over 500 companies closed operations laying off employees. Between 2000 and December 2007, the national economy contracted by as much as 40%; inflation vaulted to over 66,000%, and there were persistent shortages of hard currency, fiat currency, fuel, medicine, and food (Munoz, 2008).

Fig 3: GDP Growth Rate

Fig 4: Zim Dollar: US Dollar annual exchange rates (2001-2009)

3.0 Arguments
Unemployment is Zimbabwe has been caused by quite a number of factors. Most of these are mainly because of political reasons. The following are some of the factors that are causing unemployment: 3.1 Weak export performance

The weak export performance was caused mainly by the droughts. Since Zimbabwe is an agro based economy, the exports of tobacco and other grains dwindled. This resulted in lower foreign currency reserves thus companies were not able to import equipment and inputs necessary for production. Companies ended up closing down and retrenching workers hence contributing to the high unemployment rate.

3.2 Poor macroeconomic policy environment

From February 2000, when the government lost a national referendum on the constitution, there was a definitive change in the orientation of economic policy. The chaotic ‘fast track’ land reform program was accompanied by frequently changing but essentially pro-inflationary, anti-export macroeconomic policies. The investment/business climate was unfriendly as well as the Government was pushing for an Indigenization policy which would see foreign own companies cede 51% ownership to locals.

3.3 Geography
Zimbabwe, being a landlocked country, has no access to the sea. This affects the import/export business as the commodities and products being exported or imported have to pass through other countries with seaports hence creating employment in those countries at their seaports at the expense of Zimbabwe.

4.0 Impacts of unemployment
4.1 Rise of the informal sector (black market)
Due to a lack of jobs in the formal sector, many youths with university degrees resorted to the informal sector where they were buying and selling goods without licenses. Even foreign currency exchange markets flourished during the hyperinflationary years. 4.2 High Crime Rates

Unemployment resulted in some people resorting to stealing to make ends meet and this resulted in a surge in crime rates. 4.3 People leaving the country (Brain Drain)
Many university degree holders in the country ended up leaving the country to neighboring countries such as South Africa and Botswana in search of employment and greener pastures. This has resulted in brain drain.

5.0 What the government did
In the context of high structural unemployment and endemic poverty, the government adopted the Zimbabwe National Employment Policy Framework (ZiNEPF) in June 2010 which integrates Youth Employment Initiatives. This policy framework was developed through a consultative process that included key stakeholders, such as the Zimbabwe Congress of Trade Unions (ZCTU), the Employers’ Confederation of Zimbabwe (EMCOZ), the Zimbabwe Youth Council and the National Association of Non-Governmental Organisations (NANGO). Government participation in the development of ZiNEPF was co-ordinated by the Ministry of Labour and Social Services and the Ministry of Youth, Indigenization and Economic Empowerment. The overall objective of the ZiNEPF is to promote and secure sustainable, full, productive and freely chosen decent employment for all under conditions of freedom, equity, security and human dignity. It seeks to mainstream employment objectives across all policy frameworks (macro, fiscal, monetary and sectoral); promote growth in labour-intensive sectors; transition informality to formality; promote the development of small- and medium-sized enterprises (SMEs) and their integration into the value chains and systems of established (large) firms and exploitation of economies of scale through clustering; improve the quality of labour supply (employability); enhance employment services; and to achieve better co-ordination across various sectors and agencies. 6.0 Recommendations

A similar situation of hyperinflation did occur in Germany in 1923 after the First World War. People were paid by the hour and rushed to pass money to loved ones so that it could be spent before its value meant it was worthless. People had to shop with wheel barrows full of money. Bartering became common - exchanging something for something else but not accepting money for it. Bartering had been common. Pensioners on fixed incomes suffered as pensions became worthless. Companies were shutting down due to price controls by the Government. This is exactly what happened in Zimbabwe as well in the mid 2000’s. However, Germany managed to get itself out of the mess and had a viable industry and very low unemployment rate by 1929, barely 6 years after the record topping hyperinflation. The mark was replaced with the Rentenmark which was backed with American gold. In 1924, the Dawes Plan was announced. This plan, created by Charles Dawes, an American, set realistic targets for German reparation payments. For example, in 1924, the figure was set at £50 million as opposed to the £2 billion of 1922 (Tokman, 1978). The American government also loaned Germany $200 million. This one action stabilized Weimar Germany and over the next five years, 25 million gold marks was invested in Germany (Sen, 1981). The economy quickly got back to strength, new factories were built, employment returned and things appeared to be returning to normal. Therefore, Zimbabwe did well by dumping its own currency in 2009 and adopting the US dollar to curb inflation and restore business confidence. The next step, as in the case of Germany, will be to work with the international community, especially the World Bank and IMF to access loans to finance the resuscitation of the economy and job creation. The next step would be the issue of financing the ideas and innovations of the youth. While it is appreciated that the local financial system is still recovering from the effects of the decade long economic meltdown, they have a pivotal role in ensuring the sustenance of the entrepreneurial efforts of the youths. Timely and flexible credit lines as well as availability of risk willing capital (venture capital) are essential to guarantee adequate funding for the various youth initiatives. The relevant stakeholders in this regard such as banks and micro-finance institutions all need to come on board and support youth projects.

7.0 Conclusion
Zimbabwe’s unemployment rate is high, reaching levels above 90% according to some reliable but unofficial sources. That is a distressing statistic. Somehow Zimbabweans have managed to ‘make a plan’ and sustain themselves. Many people have gone into the informal sector, selling goods at open air markets. There is no agreement on exactly what Zimbabwe’s unemployment rate is. Various sources put it at anything between 70% and 80%. However, the government says these figures ignore the contribution of the informal sector, and it counts the self-employed among the employed. Zimstat says unemployment actually stands at 10.7%, a figure dismissed by economists and unionists. This document looked at the cause of high unemployment in Zimbabwe which were identified as droughts, hyperinflation and a shrinking economy as well as under-skilled graduates. The government reaction to this high rate of unemployment is also highlighted and the document ends up by comparing post war Germany, which also recorded high inflation, to Zimbabwe’s situation and recommendations are suggested on how Zimbabwe can overcome the unemployment debacle.

8.0 References
Anker, R.; Chernyshev, I.; Egger, P.; Mehran, F.; Ritter, J. (2005), Measuring decent work with statistical indicators, Integration Working Paper No. 2 (Geneva, International Labour Office). Central Statistical Office (CSO) (2002), Report of the Consensus Building Workshop for the 2004 IM-LFS, Hussmanns, R. (2007), Measurement of employment, unemployment and underemployment – Current international standards and issues in their application (Geneva, International Labour Office). Magalhaeas, A.R. and M.H. Glantz (1992), Socieconomic Impacts of Climate Variations and Policy Responses in Germany. Berlin: Fondacao Grupo Esquel Germany. Muñoz, S. (2008). Suppressed Inflation and Money Demand in Zimbabwe. IMF Working Paper WP/06/15 (Washington, DC, IMF). Peek, P.; Dewan, S. (2007), Beyond the Employment/Unemployment Dichotomy: Measuring the Quality of Employment in Low Income Countries, Integration Working Paper No. 83 (Geneva, International Labour Office). Preston-Whyte, R.A. and P.D. Tyson. 1988. The Atmosphere and Weather of Southern Africa. Cape Town, South Africa: Oxford University Press. Richardson, C.J. (2007), ‘How much did droughts matter? Linking rainfall and GDP growth in Zimbabwe’, African Affairs, Vol. 106, No. 424, pp. 463-78. Sen, A. 1981. Poverty and Famines: An Essay on Entitlement and Deprivation. Oxford: Clarendon Press. Tokman, V.E. (1978), ‘An exploration into the nature of the informal-formal sector relationship’, World Development, Vol. 6. No. 9/10, pp. 1065-75. Webb, P. and J. von Braun. 1994. Famine and Food Security in Ethiopia: Lessons for Africa. Chichester: John Wiley & Sons. https://www.cia.gov/library/publications/the-world-factbook/geos/zi.html 9.0 Appendix

Real GDP Growth in Zimbabwe

Industry VS % of GDP

Employment by Industry

Zimbabwe National Employment Policy Framework (ZiNEPF)
Abstract from:
International Journal of Politics and Good Governance
Volume 2, No 2.2, Quarter II 2011
ISSN : 0976 - 1195

To facilitate implementation of ZiNEPF, the Tripartite Negotiating Forum encompassing government, business and labor, with the support of the ILO, launched an Employment Forum on 20 May 2011, a vehicle for monitoring the implementation of the policy. A key mandate of the Employment Forum is to organize annual job summits at which status reports on the implementation of the policy will be presented. The National Youth Policy was reviewed in 2010 in line with the ZiNEPF and the African Youth Charter by the Ministry of Youth Development, Indigenization and Empowerment. The National youth policy action plan was developed to facilitate its implementation. The Youth Employment Support, Jobs for the Unemployed and Marginalized Young People (YES-JUMP) Project was adopted in April 2009 by government, Workers’ and Employers’ representatives, in conjunction with the ILO. It is an ongoing project where 1,018 jobs have been created in Gokwe South, Goromonzi and Norton.

Zimbabwean Currency during Hyperinflation

All those bundles of money were only equal to US$100 in 2006. The situation got even worse and by the end of 2008, there was a new 100 trillion dollar note as shown above.

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