The global economic growth relies heavily on the economic status of individual countries across the globe. However, there is an existence in inequality in economic growth and development whereby some countries are more economically advanced than others. Several factors such as political wrangles, inflation and ineffective economic policies and low economic development among other factors, attributes to the inequality. As a result, poor countries have suffered a high level of poverty and other related problems such as unemployment and social issues such as poor education and health systems.
Despite the existence of low economic development among the poor countries, some countries have adopted policies and measures aimed at eradicating the poverty level thus improving the economic status. This paper, therefore provides a comparison of the economic status of Zimbabwe and Swaziland in terms of the current economic development and the factors that have attributed to the slow growth in each country’s economy. The paper also analyzes some of the existing policies governing the state of economic growth as well as provides suggestions on the types of policies that each country could implement so as to achieve development from the current economic status.
Like many other poor countries, Zimbabwe’s economic growth is faced by various challenges with 78 percent of the total country’s population living under the poverty line. During the early 90s, the country had a stable economic development but factors such as deflation, political wrangles, and poor climate led to the country experiencing the worst economic downfall. The current economic status of Zimbabwe stands at 7.8 billion dollars GDP with the government spending rated at 97.8 percent of the country’s GDP (World Bank). Despite the tremendous growth in GDP between 2008 and 2011 where the rate was 20.1 percent, the country started experiencing a sluggish growth with the current growth rate standing at 1.8 percent. This is attributed by the decline in economic development of the various sectors that support the country’s economy including commercial farming, mining and manufacturing sectors as well as the existence of bad economic policies that influence the operations of various sectors.
Various contributors of the economy of Zimbabwe include agriculture at 20.3 percent, manufacturing industries at 25.1 percent and service industry at 52 percent. The country boasts of high literacy level where approximately 70 percent of the people are educated. Despite this achievement, the unemployment rate is still rampant especially due to the fiscal challenges and slow development of the employment sectors.
The economic development of Swaziland is no different from that of Zimbabwe especially in terms of the high poverty level and unemployment rate. As of the year 2013, Swaziland’s gross domestic product (GDP) was 6.3 billion dollars and GDP per capita of 5807 dollars. The country’s GDP growth rate ranks at 3 percent that is rather a very slow rate as compared to the early 90s when the country experienced a high growth rate of over 6 percent. Despite being a small country with around 1.1 million people, the unemployment rate stands at 40 percent while 60 percent of the people live below the poverty line. Swaziland’s economic growth relies heavily on agriculture and agro-manufacturing industries with the country’s main exports being coal, wood pulp, sugar and textile products.
Factors that impacted the current status of economic growth
The economic growth of both Swaziland and Zimbabwe is highly dependent on the agricultural practices in the country. However, the increased climatic conditions have suppressed the level of agriculture, thus reducing the total farm produce for export and also for the manufacturing industries such as pulp and cotton respectively. In addition, decentralization of the large scale farms has caused a reduction in total farm production (Chenery, 3076). As for the case of Swaziland, agriculture and agro-businesses contribute to 70 percent of the total employment opportunities, yet, 80 percent of the total land is used for subsistence farming. In addition, changing climate changes have deteriorated the agricultural sector, thus leading to reductions in the financial contributions attained from the sector as well as a massive loss of employment (Khayum, 65).
Global financial crisis experienced in the year 2008 had a great impact on the economy of developing countries with Zimbabwe and Swaziland being in this category. As a result of the crisis, the level of exports that is the highest source of income for the two countries dropped by 57 and 45 percent respectively. Reduction in the foreign direct investment in both countries has also affected the total government revenues in the past years. This is attributed by the presence of unfavorable investment policies and low return on investment. In addition, the reduction of the international market for the country’s products and services has reduced the total revenues obtained from direct exports.
Over involvement of the government and politics in decision-making process on matters of economic development and existence of high corruption rates is one of the major contributions of slow economic growth in both countries. For instance, the policy of indigenizing over 51 percent of land and companies owned by non-black Zimbabweans affected the total production in the country. This policy has resulted to a massive reduction in agricultural productions that are the main sources of raw materials for the industries in the country. High government expenditure has also deteriorated the country whereby the government expenditure of Zimbabwe is at 4 billion while the revenues stood at 3.7 billion (World Bank). This has prompted the government to rely heavily on borrowing so as to finance the expenditure. As of the fiscal year 2013/2014, the country’s total debts remain at 70 percent of the total GDP, thus making a country lag behind in financing internal development.
Policies that could increase country’s economic wellbeing
Monetary policies regulating private companies borrowing and tax rates are one of the key policies that could ease the current economic situation. For instance, the average loan to the deposit ratio stands at 94 percent while the level of non-performing loans stands at 15.9 percent in Zimbabwe. Easing the current policies that regulate foreign direct investment so that they encourage foreign investors could also help alleviate the current financial returns (Khaayum, 127). For instance, the subsequent results of indigenization policy could be reversed by allowing more foreign investors in the country instead of focusing more on the need to give major production and agricultural sectors to the black-Zimbabweans.
One of the ways that Swaziland could adopt is to enact flexible land allocation policies that will ease access to land by the investors for commercial agriculture. This is because, the current land allocation policies involve a situation whereby approximately 80 percent of the total land is controlled by the king and local leaders and this land I mostly used for subsistence farming. Flexible FDI policies could also help the country improve their economic position especially in the manufacturing sector which is the country’s highest source of income.
In considering the economic benefits of each country in relation to the other country’s economic wellbeing, Zimbabwe’s policy of commercialization of large-scale farming that was used before indigenization could help Swaziland in improving farming techniques. Indigenization policies, on the other hand, limit foreign investment, and such policy could affect the economic development if applied in Swaziland.
The Swaziland’s policy that monopolizes the telecommunication infrastructure could have a negative economic development while the trade union policy would have a positive contribution to the Zimbabwe’s economic development. This is because; introducing such a policy will result to limiting the freedom of telecommunication. It will also limit the industries in the country from communicating with the rest of the world especially those regions that provide market for the products and services. Monopolized communication infrastructure is likely to limit the type of information to be used in cases such as marketing thus limiting the level of competition that is essential in economic growth.
Economic growth of Zimbabwe and Swaziland serves as examples of the slow economic growth being experienced by poor countries in relations to that of developed countries. As seen in these two countries, poor governance resulting to corruption and bad economic choices has alleviated the problem of slow economic growth. This indicates a need for the developing countries to enact flexible measures such as improving the level of foreign investment especially in manufacturing and service industries. In addition, adopting advanced mechanisms of farming to improve agribusiness as well as balancing government revenues and expenditure will help in increasing government returns and reduction of total country’s debts respectively, thus improving the current state of economic growth.
The Wold Bank. Zimbabwe Overview. Retrieved from http://www.worldbank.org/en/country/zimbabwe/overview.
Khayum, Mohamed. “Contemporary Economic Issues in Developing Countries”. NY: Greenwood Publishing Group, 2003.
Chenery, Hollis, et al. “Handbook of Development Economics, Volume 4”. NY: Elsevier, 2008.
Maarsdorp, Gavin &Adam, Badurally. Economic Issues and Policy Options for Swaziland in the WTO Negotiations. Agritrade Publications, 2012. Retrieved from http://www.agritrade.org/Publications/DW%20Book/PDFs/adammass.pdf