By Bernard Bwoni
On the 13th July 2015, news website Newzimbabwe.com posted an article entitled “Zimbabwe now poorest country in the world, Survey, http://www.newzimbabwe.com/news-23697-Zim+now+poorest+country+in+the+world/news.aspx “ The article claimed that a ‘Global business magazine had ranked Zimbabwe one of the two poorest countries in the world in a damning verdict of President Robert Mugabe’s 35 year rule”. The report claimed to have used a “Purchasing Power Parity (PPP) analysis, which takes into account the living cost and inflation rates in order to compare living standards between different countries”. The report made some spurious claims that on average people in Zimbabwe earned US$589.25 per year, which is roughly US$49.10 per month on average. Any right thinking Zimbabwean will tell you those are ridiculous claims. Zimbabwe is nowhere near the poorest country in the world. It makes you wonder why a Zimbabwean would even think of publishing such nonsense from an online Global business magazine probably being run and edited by a young internet hacker in his bedroom and probably still living at home with mum and dad somewhere in suburbia.
PPP is used to compare income levels in different countries and it aims to determine the adjustments needed to be made in the exchange rates of two currencies to make them at par with the purchasing power of each other. What this means is that the expenditure on a similar commodity in Zimbabwe and Botswana for example must be the same in both currencies, for example a bag of fertiliser in Zimbabwe cost roughly US$32 and then it should cost BWP327.93 when the exchange rate is 10.25 between the US$ and the Botswana Pula. It means equalising the purchasing power of the two currencies taking into account the cost of living and inflation differences between Zimbabwe and Botswana in this instance.
The 2014 data from IMF indicate that Zimbabwe’s income per person per year is in fact US$2046 and that is nowhere near the poorest country in Africa claim as indicated by Global business magazine in his mum’s basement. The use of wealth per capita calculations can be misleading and do not necessarily reflect the general state of wealth of the ordinary person. ‘Per capita wealth, which is the means of the people in any economic unit is calculated by taking a measure of all sources of income on the aggregate such as GDP and dividing that by the total population’ Archer, 2008. In Zimbabwe there is a thriving informal economy coexisting alongside a formal economy yet not contributing towards national fiscus and GDP figures. The reason why we have such flawed analyses as this ridiculous Global Business claim rating Zimbabwe as the poorest in the world is that the country has billions in the country but not circulating in the economy. It is either some people have buried their money (Narcos comes into mind) or shipped it out. There is no precise set of economic data indicative of present realities on the ground and an accurate estimate of the size and structure of the Zimbabwe economy. The size of the Zimbabwe economy is not currently correctly measured and hence these inaccurate and mischievous rankings we end up having.