Zimbabwe's Economic Background and Colonial History

• Southern African country with natural beauty: Victoria Falls (twice Niagara's height), 11th century stone ruins, Big Five wildlife
• Cursed with abundant natural resources: gold, platinum, coal, diamonds
• Cecil Rhodes/British South Africa Company invaded with Maxim Gun (late 19th century)
• Territory governed/exploited by tiny white minority
• Two rival independence factions emerged:
  • Zimbabwe's African People's Union (Soviet-backed)
  • National Union (China/Mao-backed)

Robert Mugabe's Rise and Authoritarian Rule

• 1980: Zimbabwe gained independence, National Party won first election
• Mugabe consolidated power using standard dictator tactics:
  • Army trained by North Korea under Kim Il Sung
  • Murdered dissidents
  • Granted himself power to dissolve parliament, declare martial law
  • Removed all term limits
• 37-year authoritarian rule (4 years short of Africa's record)
• Rampant corruption throughout regime
• Once accidentally revealed opponent won 73% of vote before correcting himself

Land Reform and Economic Collapse

• 2000: Government began forcibly seizing land from white farmers
• Official goal: correct colonial injustices
• Reality: buy political support
• Devastating effects:
  • New farmers had little/no agricultural experience or interest
  • 2000-2009: total agricultural output cut in half
  • Some farms produced only 1/10th previous output
  • Destroyed two largest crops: corn and tobacco
  • Skilled farmers fled for safety
  • Decimated food supply while destroying economy

Hyperinflation Crisis (Mid-2000s)

• 2007: Zimbabwe experienced second highest inflation in history (after Post-War Hungary)
• Government stopped reporting after 100,000% inflation
• Loaf of bread cost 30 billion Zimbabwean dollars
• Employees stopped working when annual salary wouldn't cover bus ride home
• Vending machines shut down - couldn't hold billions of coins for single soda
• Central bank printed increasingly large denominations:
  • 1 million dollars
  • 100 billion dollars
  • 100 trillion dollars (worth 40 US cents)
• Daily survival routine:
  • Wake at 2 AM
  • Trek to nearest ATM
  • Wait in line for hours
  • Maximum withdrawal: equivalent of $1-2 USD
  • Often no money left after waiting

Government's Failed Response to Inflation

• Two requirements to stop inflation:
  • Stop printing money
  • Convince people currency has value
• Mugabe did neither
• Continued printing to fund Second Congo War involvement
• Reserve Bank spent $500,000 USD weekly ordering banknotes from Germany
• Banknotes worthless by arrival time
• Two redenominations:
  • 2008: removed 10 zeros from all banknotes
  • 2009: removed 12 zeros
• Both failed - Zimbabweans didn't believe currency had value
• Prices kept rising due to expectations
• Physical cash shortage - not enough bills in circulation

Africa's Banking Infrastructure Gap

• Vast majority of African population unbanked
• Advanced economies: 92% have bank accounts
• Sub-Saharan Africa: only 20% have bank accounts
• High transaction volume but low balances make branches/ATMs unprofitable
• ATMs per 100,000 people comparison:
  • Zimbabwe: 6.5
  • Uganda: 4.2
  • Niger: 1.7
  • United States: 174
  • Macao: 324
• Lack of infrastructure creates problems:
  • Hides money flow from government regulation/taxation
  • Provides cover for criminals
  • Physical danger for money transfers
  • Requires 1-2 day journeys to send money to family

Mobile Money Revolution

• High mobile phone penetration: 80% in many African countries
• Allowed leapfrogging over checks/credit cards
• Surpassed advanced economies in mobile payments
• US/advanced economies held back by existing banking infrastructure
• Multiple competing apps in US: Chase Pay, Google Pay, Square Wallet, PayPal, Apple Cash, Cash App, Zelle, Venmo
• Critical mass adoption challenge in developed countries

M-PESA Kenya Case Study (2007)

• Launched by Safaricom (Kenya's largest mobile network operator)
• 'M' for mobile, 'pesa' meaning money
• Each user associated with SIM card
• Text-based money transfers
• No signup/deposit charges, minimal fees
• Revolutionary feature: no bank account required
• Agent network: 100,000+ middle-men
  • Collect/bring cash to banks
  • Provide cash for withdrawals/transfers
• Used for everything: school fees, water, electricity, food

Zimbabwe's EcoCash Success

• 2017 statistics:
  • 6.7 million EcoCash users
  • Only 2 million bank accounts
  • Digital payments: 90% of $97.5 billion total transactions
  • Virtually cashless economy

Ongoing Challenges and Political Instability

• Landlocked country depends on rivers for water/electricity
• Kariba dam provides 50%+ of national electricity
• Frequent droughts extremely dangerous
• July incident: Econet generators failed after power outage
  • Disabled mobile payment platform
  • Effectively shut down national economy
• 2017: Mugabe deposed after nearly 4 decades
• 2019: Zimbabwe reintroduced its Dollar, inflation began increasing again

Innovation Through Necessity

• Solutions require deep political changes for lasting impact
• Challenges become ingredients for innovation
• Mobile money convenience vs. life-changing necessity
• M-PESA increases money value by:
  • Reducing theft
  • Less waiting/delivery time
  • More accessible credit for entrepreneurs
  • Increased savings
  • Improved accountability
• Africa leads mobile money because had furthest to come
• Youngest continent receiving massive loans - financial revolution just beginning