In September 2008, a Global Political Agreement (GPA) was signed between the then ruling Zimbabwe African National Union-Patriotic Front (ZANU-PF) and the two MDC factions of the Movement for Democratic Change (MDC), which made up the opposition. Five months later on February 11, 2009, a Government of National Unity (GNU) was formed with Morgan Tsvangirai, as Prime Minister, and a new Cabinet was sworn in on February 13, 2009.
On February 11, 2011, Zimbabwe marked two years of its Coalition government without an indication when the government of national unity will end. Outstanding issues from the GPA are yet to be resolved.
Economic Overview
Zimbabwe’s economy has started to recover from a decade-long crisis that saw economic output decline every single year during the period 1999 to 2008, for a cumulative decline of more than 45 percent. In 2010, real GDP is estimated to have grown by 9 percent following on a 6.4 percent growth in 2009. The agriculture and mining sectors are at the front of recovery, with manufacturing and services also registering some growth. Agricultural output grew by 34 percent in 2010 and is expected to grow by 19 percent in 2011, led by recovery in the production of small-holders, principally in the tobacco and cotton sector. In mining, output (value) grew by 8.5 percent in 2009 and 47 percent in 2010. Production surged in platinum (64 percent increase between 2008 and 2010) and gold (125 percent increase in two years). Levels of productions have however not yet recovered to 2000 levels. Growth in manufacturing continues to be sluggish. The sector is heavily undercapitalized, with an important need to refurbish equipments and restore depleted working capital, and is constrained by insufficient and unreliable electricity supply, high labor costs and rigidities, the overall tax and regulatory burden.
Inflation remains low by historical standards; despite upward pressure on domestic prices. In July 2011 the Consumer Price Index (CPI) was 3.3 percent higher than in July 2010,and 0.3 percent higher than in June 2011 (seasonally unadjusted). The external position remains precarious. The current account deficit at the end of 2010 was about 20 percent of Gross Domestic Product (GDP) compared with 26 percent of GDP in 2009. The current account deficit is financed by external arrears and short-run capital inflows. Usable international reserves were at $197 million in December 2010, representing 0.4 months of imports. Financial intermediation continues to improve as evidenced by the increase in deposits from US$2.4 billion in December 2010 to US$2.9 billion in June 2011. On the back of improved utilization by the private sector, the loans-to-deposit ratio also improved from 50 percent in January 2010 to 81 percent in June 2011, and is comparable with international lending benchmarks that are conducive to private sector-led growth. However, vulnerabilities in the banking sector continue to remain a concern. One merchant Bank was placed under curatorship following a probe into the bank by the Reserve Bank; six banks are reported to be undercapitalized, having failed to meet their capital requirement of $12.5 million by end -June 2011.
The onset of recovery followed significant policy reforms undertaken by the unity government. The formation of a government, in itself, was a strong positive signal to investors with long-term interest in Zimbabwe. One key aspect of the reforms was to reverse a large number of counter-productive policy actions taken during the period of crisis, but reforms went well beyond that. Several important policy reforms such as authorization to use multiple convertible currencies, removal of price controls, commitment to fiscal discipline including control on quasi-fiscal activities of the RBZ, allowing parastatals and government agencies to charge cost-reflective prices, liberalization of foreign exchange regulations, and liberalization of grain marketing ushered in a regime of stable prices and market-oriented policies. The reforms also restored incentives for the private sector to produce and trade.
Even though the economy has begun to recover, the recovery remains precarious as a number of issues stand in the way of sustainable economic growth. These relate to (i) continued political uncertainty around the roadmap to elections resulting in low business confidence, (ii) lack of domestic liquidity and very high real interest rates on short-term credit; (iii) high wage costs and unrealistic wage demands driven by transportation, accommodation, utilities among others; (iv) ailing infrastructure (lack of resources to rehabilitate infrastructure); (v) unreliable power supply; (vii) indigenization policies and the uncertainty around their application, heightened by the recent controversial fast-track implementation guidelines for the mining and banking sectors.
The government has recently presented a Medium-Term Plan for 2011-2015, which will help set the stage for Zimbabwe’s further recovery.
Economic management has recently become more difficult and fractured, with some policy setbacks associated with the attempt to fast-track mining indigenization, fiscal slippages, and financing of non-priority expenditures. The public wage bill has been growing fast, and there are growing vulnerabilities in the banking sector arising from rapid expansion of credit in a dollarized economy, especially by small domestic banks, and institutional weaknesses and financial difficulties of the Reserve Bank.
Movement towards an IMF Staff Monitored Program (SMP) has lost momentum as there has been insufficient progress towards key benchmarks, including closing the fiscal financing gap, addressing liquidity issues in the banking system, and concrete steps toward elimination of ghost workers.
The A-MDTF Results So Far
Over the last two years, the MDTF has supported analytical work and technical assistance across the following six sectors: Economics; PFM; Governance and Anti Corruption; Agrarian issues; Infrastructure; Basic Services; and Social Protection. The MDTF has also supported a broad range of workshops and conferences to share and disseminate study results, as well as two Cabinet Retreats (Victoria Falls, April 2009, and Nyanga in August 2009). The MDTF provided technical support to the preparation of the 2010 and 2011 budgets and the ongoing development of the Medium-Term Plan. Current work includes support to a Payroll Audit and an Integrated Financial Management Information System/Country Integrated Fiduciary Assessment.
The Work Programme
Over the period 2011-12 the thematic focus of MDTF work will be primarily on three sectors: (i) economic management and governance, including private sector development, public sector management, and public financial management; (ii) the agrarian sector; and (iii) infrastructure. Within these sectors, the MDTF will:
- Conduct analytical work on issues such as: medium-term planning; public financial management; agricultural development; improving water and power supply; investment climate for business; civil service reform; management of mining assets; and regulatory reform.
- Help build government capacities
- Promote donor synergies, share knowledge and facilitate greater harmonization of efforts relating to investment planning and implementation.
- Contribute to aid effectiveness in Zimbabwe, and where possible reinforce the aid coordination architecture in the country.
Economic policy
The Analytic Multi-Donor Trust Fund (A-MDTF) resources are being used to finance analytical work to help inform government’s economic policies, support business environment reforms, as well as for helping to enhance government capacity. As mentioned above, the A-MDTF supported the first Government of National Unity Cabinet retreat which assisted the Zimbabwe Government to formulate action plans for the Short-Term Emergency Recovery Plan (STERP). This was followed by a consultative meeting with stakeholders -- a process which gave Government an opportunity to hear stakeholders “views and concerns regarding economic stability, food security, restoration of basic services, guaranteeing of rights and freedoms and improving international relations”. The outcome of the meeting was a 100-Day Action Plan which was officially launched by the Prime Minister, Morgan Tsvangirai, on May 13, 2009.
The Bank is leading donor efforts to help build up the stock of knowledge about the economic situation and develop policy options for reform.
Work on Economics and Governance has aimed to:
- Make substantial progress in initiating re-building of PFM systems,
- Provide strategic advice on prioritization of public expenditures (budget preparation, Infrastructure and social spending)
- Initiate dialogue in key and sensitive sectors of public management (civil sector reform, management of mineral resources, and management of parastatals)
- Promote initial knowledge generation by promoting the first complete firms dataset on Zimbabwe’s competitiveness and private sector development
Building on the current progress in building better governance and public sector capacity, further work has been planned on the following: (a) "Phase 2" of the process of strengthening the PFM/procurement systems and support to Auditor and Accountant Generals offices; (b) Next steps in HR management and public sector performance. Further work to support increased competitiveness and employment includes helping buildeconomic management capacity as a key ingredient to improving the economy’s competitiveness and employment-generating capacity, specifically through helping to: (a) Strengthen institutions and data for sound economic management; (b) Strengthen parastatals policy; (c) Manage mineral resources for long-term development. (d) Capital budget implementation as a key element for future recovery, (e) Further building knowledge of opportunity for future growth by exploring challenges and opportunities for Regional dynamics (SADC and COMESA).
Human Development
In the education sector, the Bank has focused on supporting the Ministry of Education, Sports, Art and Culture (MOESAC) to develop a strategic and financeable Education Sector Plan which includes a one-year “emergency plan” to serve as an input for the FY 11 budget discussions, and concurrently the five-year Medium Term Plan (2011-2015). To do this, the Bank financed and organized with the MOESAC a series of stakeholder consultations across the country, and provided Technical Assistance to a Core Team to analyze progress against previous plans, existing data, and establish key priorities for investment. The outcome of this support to date is the draft one-year plan which was presented to the Cabinet in early September.
Moving forward, the Bank intends to continue working with the MOESAC and development partners to finalize the one-year plan and budget and to develop the information-base to ensure accurate costing and implementation plans support the five-year plan. To this end, the Bank is discussing with the MOESAC and donors the following activities and analytical work:
- Continued Technical Assistance for developing the Sector Plan and Budget: The team will work with the MOESAC and development partners to complete the five-year plan and its supporting budget. The same team which helped the MOESAC team generate the draft one-year plan will provide guidance and ensure analytical rigor.
- Nationally Representative School and Facilities Survey: This survey would be conducted as early as feasible in 2011 and would include modules on existing infrastructure and other physical assets, teachers, enrolments vs. attendance, the collection and use of fees and levies, and student learning. The survey will produce reliable and valid information to allow for costing an investment and rehabilitation program, and to provide the Ministry of Finance and Donors the confidence that the plan is credible and financeable.
- Strengthening the Education Management Information System (EMIS: With UNESCO and ADEA, the Bank will help re-build and capacitate the existing system in order to allow for generating accurate and timely school-level information on teachers, students, learning materials, funds flow, etc. which would improve overall system monitoring and reporting.
It is urgent that the MOESAC provide its final clearance to allow the Survey and EMIS work to proceed.
In social protection the main mechanism for the Bank’s engagement and support to date has been through Trust Funds. The Analytical MDTF fund supported a number of studies through the Social Protection Technical Review Group SPTRG) that comprised of a number of DP active in the sector. The current program is structured around the following components:
- Policy and Capacity Development – A-MDTF (US$ 100,000) – provides TA for development of a national social transfer policy framework and training for the development of the administrative and implementation capacity of the Department of Social Welfare at the central and local level.
- Public Works - RSR TF (US$ 1 million) – will provide TA to government for the design of a productive safety net -public works program (PSN- PWP) that will be prepared in cooperation with DPs using the funding obtained from the Rapid Social Response (RSR) TF. The programme will be piloted in the country’s two selected districts.
Community driven approaches:
The Bank is also currently technically supporting government in designing Community Demand Driven Social Protection mechanisms, this is in the realization that in the current political and institutional fragile situation of the country, community based approaches are the most viable way for developing rural economies as it would empower communities to take charge and community based investments. A Constituency Development Fund program developed with this concept is currently under discussion within government.
Going Forward, given the increasing demand for social protection visa viz the limited government funding, the Bank will continue to technically assist government to help prioritize high impact social protection mechanism that empower able bodied households to take charge of their own livelihoods and at the same time identifying the most viable projects for the labor constrained individuals and households. The Bank will focus towards helping Zimbabwe to build a sustainable social protection system.
In the health sector, the Bank is preparing a new project with funding from the Results Based Financing Trust Fund. With the aim of increasing the capacity for service delivery in the areas of maternal and child health, the US$15 million RBF grant to restore primary health service will be designed and implemented in all rural districts. This grant will support the abolishment of user-fees for selected services and thereby increase access to health services for the poor. Financing will be channeled through a Non-State Entity which will directly contract public and mission health service providers. The grant is targeted to increase the coverage of key maternal and child health interventions, build capacity and improve accountability in health service delivery with the aim of revitalizing the health system and increasing its results-focus.
The ongoing analytical work in the health sector has focused on key issues in the sector. This includes the ‘investment case for health’ analysis, providing an analysis and costing of priority interventions in the sector and human resources for health. Ongoing analytical work has a focus on health financing, human resources for health and private sector approaches to health care. The following studies are planned for:
- National representative Health Facility Survey: Will be used to inform policy on health system issues, particularly human resources for health, supply chain, quality of care, infrastructure and user fees. The results will also support the development of new health projects (RBF, Infrastructure project).
- National representative Household survey: Will focus on demand side issues in health, including out of pocket expenditures and health seeking behaviour. The results will inform the policy dialogue and contribute to the design of new health projects.
- Private Sector Investments for Health: Given the investment needs to revitalize the health system, the World Bank, in collaboration with IFC, will explore innovative mechanisms to attract investments to the health sector through e.g. Public Private Partnerships. As part of this work a Private hospital assessment will be conducted.
- Nutrition: Stunting among children has increased to alarming levels in recent years with adverse consequences for mortality, long-term cognitive development, school performance and adult economic productivity. The World Bank will continue to be involved in this strategic area and ensure that nutrition interventions become an integrated part of the RBF intervention and the service delivery package provided at the primary level.
- Report on Observance of Standards and Codes in Accounting and Auditing (ROSC A&A) In collaboration with the Government of Zimbabwe, the Development partners led by the World Bank a baseline review of adoption, implementation, monitoring and enforcement of standards and codes in accounting and auditing in the corporate sector of the country. The final draft report on observance of standards and codes in accounting and auditing has been submitted to the government for review, approval and permission to publish.
Public Sector Management and Governance
Over the last two years, the Bank has focused on undertaking a number of analytical studies under the A-MDTF and providing technical assistance to a Civil Service Audit. Going forward, the Bank is planning to provide support in four complementary areas of public sector management:
- Implementation of the Civil Service Audit and broader HRM reform: Following the completion of a Payroll and Skills Audit, the Bank will assist the government in implementing the recommendations to ensure: a clean payroll; adequate controls to maintain the integrity of the payroll; and comprehensive HR records. Once there is consensus within government, the Bank is prepared to design a project to modernize the payroll system through integration of payroll with the Integrated Financial Management Information System. To support HR and payroll management, an electronic records management system will be put in place, designed with the ability to provide a records-management function to all departments across government.
- Compensation and Employment: The wage bill has reached an all high of 66 percent of revenues in 2011, crowding out capital spending and other recurrent costs. The Bank will provide technical assistance to the development of a medium-term framework on compensation and employment to achieve a sustainable wage bill. The support is intended to facilitate multi-stakeholder policy dialogue and improved policy making on wage and employment issues.
- Public Investment Management: The under-execution of the capital budget, and thus limited support for the social and economic recovery of the country, is of increasing concern. It is within this context that the Minister of Finance in early 2011 asked the World Bank to assist in strengthening the capacity of Government to manage and implement the capital budget. From a public sector governance perspective, the Bank will support Government with implementation support for a few strategic public investment projects under the 2011 budget, drawing on a rapid results approach. In addition, a diagnostic assessment will provide an initial review of the prevailing systems, policies and procedures for public investment management; i.e. the strengths and weaknesses of the implementation arrangements for the Public Sector Investment Programme, drawing on a pragmatic and objective diagnostic approach to assess public investment management systems in government.
- The report on Observance of Standards and Codes in Accounting and Auditing (ROSC) in Zimbabwe has been completed, approved by the government and published. A country action plan for the implementation of the policy recommendations of the ROSC report is currently awaiting the approval of the Ministry of Finance.
Strengthened Service Delivery: In collaboration with sector team’s community score cards or other social accountability mechanisms will be developed; starting with collaboration in the health sector. Furthermore, options will be explored through policy dialogue with Government departments on Service Charters and performance management.
Infrastructure
Low levels of infrastructure investment over the past decade have lead to a dramatic deterioration of the country’s competitiveness and poor service delivery. Energy demand – estimated at over 2,000 MW – far outstrips supply, at less than 1,200 MW, leading to black-outs and unreliable services. Half the trunk road system is in a poor state. Water supply and sanitation services, once the envy of the continent, have deteriorated dramatically resulting in the 2009 cholera epidemic that caused 4,300 deaths and over 100,000 cholera cases.
The Government recognizes the centrality of infrastructure to its future growth as shown the 2012 budget allocation for capital works. The Government is trying to attract investment to address the estimated $14 billion capital works needed over the next decade to restore the countries’ infrastructure and attract investors. The Bank is supporting the infrastructure sector through analytical work funded under the A-MDTF and the Beitbridge Urgent Water Supply and Sanitation Project funded by the State and Peace-building Fund.
To date, analytical work has focused on critical activities in the water sector, whereas it is proposed that future A-MDTF funding addresses all infrastructure sub-sectors, including energy, transport and urban development. In order shift from the emergency/humanitarian focus to the more transformational agenda, it is proposed to scale-up activities in the water and energy sector and add activities in transport and other infrastructure areas such as urban development and improvements to the regulatory framework and PPPs. Development of future activities in support of the strategic priorities of the MDTF will be undertaken over the next two months as part of the development of the ISN, and the review of the Government’s 2012 capital budget.
While there are common themes across infrastructure sectors, the following are specific issues within the key infrastructure sectors: energy, water and transport.
Energy
Zimbabwe’s power sector plays a strategic role in enabling and promoting economic activity across the economy and in the delivery of key social services. Because of its geographic location, Zimbabwe’s power network infrastructure is also vital to the movement, or “wheeling” of power to and from neighboring countries within the Southern Africa Power Pool. While the Zimbabwe Electric Power Supply Authority (ZESA) was amongst the top three performing utilities in sub-Saharan Africa until about 2000, today the power sector in Zimbabwe is in a seriously compromised physical and eroded financial state. This situation is mainly due to: (i) several years of rapid and continued deterioration of the power sector’s financial and cash flow position; (ii) dilapidated infrastructure conditions on account of a lack of resources to meet current expenditures and to perform required maintenance of generation, transmission and distribution systems on a timely basis; (iii) the severe economic crisis (hyperinflation and price controls) also rendered the utility technically insolvent and unable to pay either its trade creditors (electricity imports) or to service its external debt; and, (iv) the dramatic loss of “brain power” in the country led to a deterioration of institutional capacity, which has gradually eroded ZESA’ s prior reputation for efficient management and financial practices.
There is an urgent need to rehabilitate existing energy asserts to restore system stability and security; as well as to improve the financial performance of the utility.
Rehabilitation of Energy Assets: There is a risk to the Hwange power station due to the weakened ash dam retention wall which requires urgent maintenance. Investments are needed to (a) repair the ash dam retention wall at the Hwange power station to avert potentially serious damage to plant and life; and (b) repair critical items at Kariba to ensure dam wall safety. Investments are also needed to restore generation capacity at Hwange (from about 400MW to 700MW), and ensure continued reliability at Kariba and transmission and distribution system investments are required to reduce outages, limit damage due to malfunctions and restore system stability.
Improving financial viability:Due to a long history of uneconomic tariffs, and despite recent tariff adjustments, the power sector utility is still financially insolvent (ZESA revenues this year are not enough even to cover payroll costs). One of the main priorities is to restore the financial viability of the utility by improving electricity cash flows/revenue generation. There is also a need to implement broad policies and institutional reforms to create and support a commercially oriented business environment. Sustainable development of the sector also requires an assessment of opportunity costs of supplying electricity factoring in efficiency improvements when taking decisions about capacity expansion.
Possible Bank Support: The AfDB is financing an emergency power rehabilitation project. Under the A-MDTF the Bank is developing a Concept Note for a comprehensive energy sector study to identify critical energy investments and identify options for renewable energy.
Water
Zimbabwe’s water sector faces formidable challenges. It has been badly hit by the economic down turn and the lack of investment has reversed many of the sector reform gains. Many major towns and cities in Zimbabwe are upstream of their drinking water sources and this has led to high pumping and water treatment costs and huge pollution loads, Government figures for 2008, estimate coverage in the range of 46 percent access to improved drinking water and 30 percent to improved sanitation facilities. National levels of open levels have soared to 48 percent. The deterioration of water and sanitation services in Zimbabwe resulted in a cholera outbreak in 2008-2009. Beitbridge, located along the border with South Africa was one of the worst affected towns, accounting for 26 percent of all cholera cases recorded nationally.
These problems have been exacerbated by dated policies and strategies and complex institutional arrangements. Zimbabwe has been isolated from engagement in sector and regional debate in recent years and many of its policies do not reflect current sector thinking. The Government acknowledges the existence of these problems and is prepared to update and/or put in place new water policies and strategies, and regulations for the water sector
Bank Support to the Water Sector: With the objective of building the Bank’s knowledge and facilitating dialogue in the water sector, the Bank supports the government in selected high-priority technical assistance activities. Activities are divided into analytic work and limited direct support to WSS services. Analytical activities include:
- TA to the Ministry of Water Resources for preparing a National Water Policy
- Urban Water Tariff Study
- Dam Safety Inspection
- TA to the City of Harare for its water and wastewater treatment plants
- Rapid Assessment of Small Urban Centers and Growth Centers.
With grant of US$ 2.65 million from the State and Peace Building Fund (SPF), the World Bank is supporting an emergency water supply and sanitation operation in Beitbridge. The project was launched in March 2011 and is expected to be completed in 18- 24 months and will benefit 20,000 people with improved water supply and sanitation services.
Transport
The Bank has maintained an infrastructure sector dialogue since Zimbabwe went into non-accrual status in 2000 that includes specific focus on transport, with the main objective of continually filling the knowledge gap and guiding policy and investment choices where possible. The dialogue has taken different formats and the first tangible result was the Zimbabwe Infrastructure Assessment Note (ZIAN) of 2006 which reviewed and identified policy, capacity and financing concerns in roads, railways, water and sanitation. Following Government’s request for an expanded review, the Bank prepared the Zimbabwe Infrastructure Dialogue (ZID) report in June 2008. ZID dwelt on policy and infrastructure matters, focusing on roads, railways, water, energy and telecommunication sub-sectors. ZIAN and ZID formed the basis for subsequent consultations with the infrastructure sectors during the Public Sector Investment Program (PSIP) review of 2009. The output was the consolidated report which included investment and policy recommendations for the transport sector that informed the compilation of the 2010/11 PSIP. One of the outcomes of these consultations was the need to improve road sector revenues through a review of the existing road user charging system, but this work could not be funded due to MTDF financial constraints and priorities. The importance of a well performing transport sector especially to underpin Zimbabwe’s economic turnaround cannot be overstated. Furthermore, it would be expected that a more robust economy would induce additional strains and stresses on the transport infrastructure. This interplay between the transport infrastructure and Zimbabwe’s economic performance requires judicious management.
Agriculture
A three pronged approach has been taken to facilitate the country’s agricultural recovery. First, the Bank has provided essential support for the strengthening of maize based production in the country’s traditional smallholder faring areas. In 2008, Zimbabwe harvested less than 30 percent of its cereal grain requirements as a result of drought, and a shortage of farm inputs. While grain harvests increased the following year to 65 percent of national requirements, most smallholders were still struggling to purchase seed and fertilizer, and availability of these inputs on retail markets was severely limited. A grant from the Global Food Crisis Response Program (GFRP) supported the supply of fresh maize seed to over 300,000 farmers. This contributed to the 20 percent increase in national maize area during the 2009/10 cropping season. In an experimental program, ten percent of the seed was provided through vouchers redeemable through retail shops. This was successful enough to convince government and development partners to allocate most inputs to smallholders through voucher based systems during the 2010/11 cropping season. Since the 2009 harvest was affected by drought, a State and Peace Building Fund (SPF) grant is supporting the delivery of fertilizer through vouchers redeemable at retail shops to at least 125,000 smallholder farmers at the beginning of the 2010/11 summer cropping season. Of particular importance now is to address the issue of how to move from humanitarian based assistance to market based responses to spur agricultural growth in the country.
In complement, with funding from the A-MDTF, the Bank is supporting a national dialogue on the revitalization of the agricultural sector. This funding supported drafting of a series of papers reviewing the status of the agricultural sector, and strategies for food security and market development which provided a foundation for a national agricultural conference in late 2009. This was the first time in recent years that the government has pursued an open discussion on national agricultural strategies with a wide range of national stakeholders. A-MDTF funding has allowed this to be followed up with a major agricultural sector assessment study which offered a strategic review of sub-sectoral growth opportunities. The government has also requested assistance of the A-MDTF for technical support in drafting a new agricultural sector investment plan – in line with the objectives of the Comprehensive Africa Agriculture Development Program (CAADP). In addition, studies to support the revitalization of the sector through studying access of small farmers to market and sub-sectoral analysis (such as irrigation subsector, contract farming, rural finance, etc.) will continue. These studies will provide solid analytical underpinnings of the CAADP process and the prioritized agricultural investment plan, which in turn will help ensure coordinated efforts in the sector by government and development partners.
Finally, A-MDTF support has facilitated an opening of dialogue on land reform. The Bank funded a major review of agricultural land reform process and result to date, leading into a discussion amongst development partners about policy options for stabilizing land markets and improving utilization. This has led to a request from government for assistance in outlining policy options and international best practices on key issues such as land tenure, land compensation and land administration.
In addition, the Bank is working closely with donors in establishing a harmonized and comprehensive approach to the agricultural sector.
Environment and Natural Resources
Zimbabwe’s economy is highly dependent on its vast natural resources base that is facing increased degradation. Large proportions of the poor rely heavily on natural resources for their livelihoods. This is more pronounced in rural areas where 70 percent of the population and the majority of the poor live. In fact, in rural areas, access to natural resources will remain an important determining factor in improving the livelihood of the rural population. To a large extent, the economic recovery is now driven by the performance of natural resources-based sectors. Thus, at least in the short run, the overall economic revitalization of Zimbabwe will depend on these sectors.
The economic crisis that the country underwent in the 2000s has resulted in low capacity utilization of productive sectors, such as agriculture and manufacturing, which in turn has intensified the exploitation of the natural resources base. As a result, the environment sector is facing a number of problems: (i) deforestation and forest degradation; (ii) land, air and water pollution; (iii) soil erosion; (iv) land degradation; (v) loss of biodiversity; including poaching; and (vi) contamination and pollution from poor mining practices with toxic waste.
Increased degradation of the natural resources base is already taxing the economy. Loss of productivity attributable to land degradation alone is estimated at 13 percent of the entire national potential. The degradation is concentrated in the heavily-utilized communal areas, which complicates further the task of improving the living standard of the poor.
In addition, Zimbabwe is faced with frequent droughts and there is a wide consensus that droughts would become frequent and intense as a result of climatic change. There are also signs of reduction in water replenishment and intensification of exploitation of groundwater that has increasingly become the main source of water. Given the degradation that the forest resource of the country experienced coupled with the impact of climate change, the UNFCC made the observation that: “the rivers in the Eastern Highlands of Zimbabwe that are today well watered and perennial [will] develop flow regimes similar to those currently experienced in the dry regions i.e seasonal rivers…”
Additional important issues facing the environment and the sustainable management of the natural resources include: the management of POPs, incursion into PA and parks and an increasing tendency to shift land to farm especially in the sleepy slops where farming is not supportive of sustainable use of the resource. Weak institutional capacity and lack of enforcement of existing laws is also contributing to the problem in that those activities that have a lasting negative impact could proceed unregulated and uncontrolled. These factors jointly have a high probability of endangering sustainable economic development of the country in the future. To complicate the issue further no major work has been done on the state of the environment since 1998 and as a result available information is dispersed and incomplete.
To support the government’s effort in addressing the problems facing the environment sector, the Bank has initiated discussion with the government, NGOs (both international and local), the private sector and other relevant stakeholders to identify key priority areas for intervention. The Bank jointly with the Ministry of Environment and Natural Resources is at an early stage of project formulation to be financed through GEF. The Bank will work closely with other donors to complement/finance the proposed project. The Bank also will work closely with the Ministry of Environment in improving institutional capacity of the climate unit of the Ministry to position Zimbabwe much better to benefit from Clean Development Mechanisms (CDM).
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