Chapter 2
Review of related literature
Introduction
This section of the study primarily focuses on the different researches and other literatures that focused on several aspects that will help with the progression of this study. With the topic mainly concerning on the banking financial distress in Zimbabwe, the paper’s main aim is to determine the cause of the financial distress in Zimbabwe, through this appropriate conclusions and eventually recommendations can be made. The literatures presented will come from books, journals, and reports that are deemed to be helpful in the advancement of awareness concerning the subject.
Sub-Saharan Africa
Sub-Saharan Africa is in a deep economic crisis. For instance, the World Bank reports that Africa, a region of 450 million people in 1987, had a total GDP of around 135 billion US dollars, about the same as that of Belgium, which has only 10 million inhabitants. A similar indicator of Africa’s economic performance is the fact that Singapore, a small island of only 2.7 million inhabitants, exports some 50 per cent more manufacturing products than all of Sub-Saharan Africa together (Blomström & Lundahl 1993). The situation in Africa has been bad for a long time, but during the 1980s it deteriorated much further. The continuing crisis has several dimensions. Stagnating or negative economic growth, serious balance of payments and fiscal problems and sluggish agricultural performance, coupled with rapid rates of population increases, are only some signs of the economic disaster. The social dimensions of the crisis include increasing unemployment, decreasing expenditure on social services and education, worsening nutrition and continuing high infant mortality. Environmental problems, such as desertification and deforestation, are accelerating. Moreover, the political systems are generally characterized by corruption, inefficiency and instability. And as if this was not enough, news of another round of severe drought and famine in Africa came up (Blomström & Lundahl 1993).
Today, most African countries are facing the task of achieving important structural changes in their economies. The intermediate objectives of the ongoing adjustment programs are generally to reduce inflation, to eliminate deficits in the balance of payments, in the government budget or in public enterprises, and to adjust to growing debt services. However, in the long run, the purpose is different. The long list of fundamental objectives reaches from the aim to accelerate economic growth, eliminate hunger and malnutrition and improve income distribution, to the need to lower the demographic pressure and solve environmental problems (Blomström & Lundahl 1993). The economic and social conditions in Sub-Saharan Africa have been gloomy most times since independence. After an initial period of growth, most African economies stagnated, and during the 1980s they began to decline. With only a few exceptions, per capita income has been falling during the last decade and most of the other development indicators have deteriorated in the same manner. There are few signs of improvements, despite the countries’ own efforts and the inflows of aid resources (Blomström & Lundahl 1993). Most countries have now introduced far-reaching structural adjustment programs, but the projections for growth and development are still bleak. In fact, most projections for the first half of the 1990s suggest that scheduled debt service will continue to increase in the African countries and there are no signs of an upward trend in the inflow of new financial resources. Moreover, the manufacturing sector in most African countries is still far too small to allow significant import substitution. In this perspective, growth of export earnings is presumably the only means of obtaining the foreign exchange needed to import intermediates and investment goods (Blomström & Lundahl 1993).
The economic crisis that first emerged in South Africa during the early 1970s brought an end to decades of rapid economic growth. During the half century between 1919 and 1969, South Africa’s real national income grew an average of more than 5.5 percent per year making it one of the fastest-developing countries in the world but rapid economic growth was not widely shared. The white minority, some 17 percent of the population, took 71.9 percent of the national income in 1970, which provided whites with a per capita income of more than ,000 a year and wages twenty times those of black workers. Sustained economic growth and the benefits it provided to whites were made possible by the exploitation of the country’s natural resources and human populations. South Africa’s rich natural resources, particularly its gold and diamonds, were produced cheaply because the regime used its political monopoly, which was institutionalized after 1948 in a set of laws known collectively as apartheid, to control the black labor force and supply it at low cost to industry and agriculture. Because the regime’s political power kept labor costs low and profits high, between 1963 and 1972 the rate of return on invested capital was the highest in the world. High profit rates encouraged massive foreign investment, which in turn reduced trade deficits that persisted from 1946-1971 (Schaeffer 1997). But South Africa’s ability to attract foreign investment, which fueled economic growth in the postwar period, depended on apartheid. And apartheid was both an attraction and curse to foreign investors. On the one hand, apartheid made foreign investment extremely profitable. U.S. manufacturers, for example, earned a 31.7 percent return on their investments in 1980. But apartheid also put investment at risk because it greatly antagonized the black majority, leading to conflict and violent reaction by the regime. When conflict erupted, as it did after the 1960 Sharpeville massacre, foreign investors temporarily withdrew and economic growth briefly slowed (Schaeffer 1997).
In the 1970s, and especially in the 1980s, many countries in Africa experienced economic crises of varying severity. Their economies have been characterized by weak growth in the productive sectors, with the initial spurt of industrial growth faltering, by poor export performance, reflected in the falling share of African exports in world trade and the unchanged export structure, and by increasing debt, a deteriorating economic and social infrastructure and increasing environmental degradation. This crisis has important implications for the prospects of transforming African economies, as imagined by African governments (Wangwe 1995). Debates on the causes of the crisis have centered on two categories of factors. The first category comprises exogenous factors such as bad weather, deteriorating terms of trade, fluctuating international interest rates and reduced inflows of foreign aid. The second category of explanations emphasizes endogenous factors such as inappropriate domestic policies, including incentive structures, and the mismanagement of public resources. One response to these crises has been the adoption of economic reforms. Most economic reforms have been implemented under the influence of multilateral financial institutions, notably the International Monetary Fund and the World Bank (IMF) (Wangwe 1995).
According to these institutions, the rationale of these reforms is that Africa’s slowness to respond to changing circumstances basically reflects domestic policy inadequacies, and it is these policy inadequacies that need to be addressed. In order to realize economic recovery, stabilization of the macro balance has been accorded high priority in policy-making. The conditions attached to external support have primarily been concerned with macroeconomic policy variables. The nature and content of economic reforms carried out in various countries in Africa have varied in terms of coverage and emphasis. However, the main elements of economic reform have been liberalization of internal and external trade, greater reliance on market forces, tight monetary policies mainly in the form of credit squeezes, and tight fiscal policy in the form of budget cuts and public sector reforms. These policies have primarily been designed to restore equilibrium, especially in the balance of payments and the fiscal and monetary variables (Wangwe 1995). The discussion of the events in Sub-Saharan Africa tends to serve as a background of why the country’s financial situation acts in such way. The discussion of the events in Sub-Saharan Africa serves also as a prelude to the discussion of the economy of Zimbabwe.
Zimbabwe economy and its trade policy
Zimbabwe’s economy is well balanced between market agriculture, mining, manufacturing, and tourism, with a considerable subsistence-farming sector. Before the arrival of European settlers in the late 19th century, the peoples of the region practiced mixed farming which is raising both crops and livestock, with cattle ranching predominating in the drier south and west. Gold mining and trade supplemented agriculture. The arrival of Europeans led to the growth of the commercial farming sector. Much of the best land was taken over by white settlers, who grew corn or fruit or practiced mixed farming. By the 1930s, however, the mainstay of settler agriculture was tobacco. Large numbers of low-paid Africans worked settler farms, many recruited from Mozambique. Gold mining continued, but the development of a large mining and industrial sector only took off after World War II, when Southern Rhodesia (as Zimbabwe was then called) benefited from large-scale investment that flowed into the colony. A wide range of mining enterprises were begun, exploiting the colony’s chrome, asbestos, and copper deposits, and an industrial sector developed producing consumer goods and even heavy steel manufactures such as railway locomotives (Lundahl 2001).
The international community imposed economic sanctions on Rhodesia when its white government declared independence in 1965. This resulted in further diversification of industrial production, particularly in the sector of consumer goods, as local producers sought to beat the sanctions by servicing the demands of domestic and regional markets. However, the civil wars in Mozambique and Angola in the 1970s and 1980s limited those markets and cut off direct routes to the sea. After independence in 1980, Zimbabwe joined the Southern African Development Coordination Conference (now the Southern African Development Community), a regional economic bloc. However, the country faced strong competition from South African industries and agriculture suffered from severe drought for much of the 1980s.
In the early and mid-1990s the end of the civil war in Mozambique and the transition to majority rule in South Africa coincided with improved climatic conditions and led to a rapid development of tourism as another arm of the Zimbabwean economy. Debt has risen since independence and has been accompanied by high rates of inflation, which averaged 27 percent annually in the period of 1990-2000. In 1990 Zimbabwe agreed to an International Monetary Fund (IMF) Structural Adjustment Program aimed at reducing government control over the economy, lowering inflation, and encouraging investment. Government expenditure was reduced, and unemployment rose sharply as a result. In 2000 Zimbabwe had an estimated gross domestic product (GDP) of .4 billion, or 0 per person (Lundahl 2001).
Zimbabwe is one of the low-income developing countries, and it is also a country having a small population. Its population is only 9 million, with a per capita income of well under US,000. It also suffered severe restrictions on its output in 1991-1993 because of drought. This directly affected its agricultural production and its manufactured output. It also had indirect effects on markets, confidence, and policy-making. The resulting 9% fall in GDP in 1992 means that any appraisal of the structure of the economy must use a combination of recent and more normal figures. Throughout most of the period since independence, the Zimbabwe economy has been highly regulated internally, with controls on both exporters and importers. The period of sanctions had seen very close cooperation of the government with private industry, followed by equally strong intervention by the new government in the 1980s, but with different objectives and less support from the private sector. Foreign-exchange controls, import licenses, and domestic price fixing for the major export commodities were used. It is against this background that exporters’ and official reactions to conditions in external markets must be assessed (Page 1994).
Since 1990, Zimbabwe has greatly altered the conditions for exporters, partly directly by removing some of the foreign-exchange controls and also the subsidies, but also by liberalizing the import regime. As most exporters of manufactures are principally producers for the home market and all depend on imported inputs, they have, faced potentially offsetting changes. The objectives of the economic program explicitly included stimulating exports of manufactures, to increase income and to aid development. It included a phased increase in the amount of export revenue which could be retained by companies to finance their own imports, from 7% in the first half of 1991 to 35% by 1993, a gradual freeing of imports from restrictions, accompanied by higher tariffs for those on the unrestricted list, and financial liberalization which resulted in higher interest rates, including on credits needed by exporters. There was also a large devaluation, followed by a year of exchange-rate stability and a further devaluation at the beginning of 1993. The effects on individual exporters varied with the extent to which they had been able to obtain imports under the previous restrictions. Some large firms therefore found that the higher tariffs on derestricted imports and the higher interest rates offset any gains from freer imports. This failure to benefit large exporters by removing restrictions parallels that in Colombia, and suggests that programs of liberalization may have very different effects on large and small producers. The total effect also depended on the extent to which producers’ own output faced greater competition in the Zimbabwean market (Page 1994). The discussion of the economy of Zimbabwe gives more information on why Zimbabwe’s finance is in that state of condition. The next discussion focuses on economic distress and financial distress. Through this discussion more understanding of why such situations occurs and how the situation came to be.
Economic Distress and Financial Distress
In economic distress, the net present value of a firm’s assets is negative and, from a financial valuation point of view, the firm should be shut down in its present form. It is possible, however, that under different management the physical assets would produce a positive net present value. If so, it would be efficient to auction or sell the firm as a going concern to new owners who would be able to improve management. Under financial distress, the net present value of the assets is positive but the value of debts exceeds the present value of cash flows generated by assets. Thus, a firm in financial distress is insolvent but its assets produce a positive value from a social point of view. In this case, debt reduction and rehabilitation, possibly in combination with more fundamental restructuring, such as a change in control, would be efficient. A firm may also find itself in financial distress because of liquidity constraints, even if the present value of cash flows from assets exceeds the debts. This situation presumes that the financial system for one reason or another is failing in its role of providing liquidity to solvent firms. The obvious remedy is rescheduling of debt or liquidity infusion (Kayizzi-Mugerwa 2003) .Financial distress is generated by the presence of debt in the sense that the larger the fixed interest charges created by the use of leverage, the greater the probability of decline in earnings and the greater the probability of incurrence of costs of financial distress (Riahi-Belkaoui 1999). An existing crisis may be deepened and prolonged if financially distressed firms are not rehabilitated but are forced to shut down. Similarly, a crisis is deepened if liquidity problems cause the shutdown of operations in a credit crunch. Widespread financial distress in a country may be caused by severe macroeconomic shock, large exchange rate changes or increases in interest rates (Kayizzi-Mugerwa 2003). From the discussion of what economic distress and financial distress is and why it occur; measures can be developed to solve the financial crisis of Zimbabwe. Related to the discussion of the economic distress and financial distress is the sector that is highly affected by such and that sector is the banking sector.
The banking sector
Banking is the business of providing financial services to consumers and businesses. The basic services a bank provides are checking accounts, which can be used like money to make payments and purchase goods and services; savings accounts and time deposits that can be used to save money for future use; loans that consumers and businesses can use to purchase goods and services; and basic cash management services such as check cashing and foreign currency exchange. Four types of banks specialize in offering these basic banking services: commercial banks, savings and loan associations, savings banks, and credit unions. Banking services are extremely important in a free market economy such as that found in Canada and the United States.
Banking services serve two primary purposes. First, by supplying customers with the basic mediums-of-exchange which include cash, checking accounts, and credit cards, banks play a key role in the way goods and services are purchased. Without these familiar methods of payment, goods could only be exchanged by barter or trading of one good for another, which is extremely time-consuming and inefficient. Second, by accepting money deposits from savers and then lending the money to borrowers, banks encourage the flow of money to productive use and investments. This in turn allows the economy to grow. Without this flow, savings would sit idle in someone’s safe or pocket, money would not be available to borrow, people would not be able to purchase cars or houses, and businesses would not be able to build the new factories the economy needs to produce more goods and grow. Enabling the flow of money from savers to investors is called financial intermediation, and it is extremely important to a free market economy (Butler, B, Butler D, & Isaacs 1997).
The banking sector is constantly and rapidly evolving; the last two decades, in particular, represent a substantial metamorphosis for banking sectors in countries around the world. For example, the Norwegian banking sector was deregulated in the 1980s, while U.K. banks faced increased competition due to the entry of other non-bank lending institutions. Meanwhile, in the United States, the deregulation movement, which began in the 1970s, expanded to many industries including banks in the 1980s. Under the loosening of regulatory constraints, which continues into the 1990s, U.S. banks have found greater versatility in their operations. In addition, the industry now has available many new financial instruments and technological advances. Finally, the restructuring and consolidation wave of the 1980s, which engulfed the industry, has continued into the present with the recent trend toward mega-mergers generating empirical evidence that fuels the debate on nationwide branching (Semenick Alam 2001). The next discussion is a more specific discussion of the banking sector particularly the banking sector of Zimbabwe and related articles that can further the need to find the solution for the financial problem of the country.
Zimbabwe and the Banking Sector
In an article from Machipisa (1998), the banking sector of Zimbabwe was becoming concerned of the closure of the United Merchant Bank (UMB). Because of these instances several banks in the country are on the brink of collapse. UMB’s collapse comes at a time when Zimbabwe is facing serious labor unrest, and the macro-economic environment is unstable. Trading was thin on the money market amid uncertainties surrounding the banking industry. The key Industrial Index lost a massive 145 points yesterday to close at 7409 as industrials and financials on the Zimbabwe Stock Exchange (ZSE) remained depressed. A number of counters, including the bourse’s largest quoted counter, Delta, which shed 25 cents to 1,175, went down as the market hobbled on without direction. The UMB closure jeopardizes the future stability of the sector. It’s really a bad development in the sense that there is loss of confidence in the sector at the moment. What really disturbs banking experts is that the crisis could have been avoided had the relevant authorities acted earlier. In the last three years, many new banks have opened in the Zimbabwean capital of Harare, as the government continues to open up the market and deregulate the financial sector. But in the case of UMB, it was not the cut-throat competition that forced the bank to collapse. It simply lacked portfolio and risk management skills. Another mistake was the UMB was just giving loans without respecting the principals of prudent bank management, which are profitability, prudence, solvency and liquidity. The whole thing raises a question of poor management of the banking sector and also raises issues of supervision by the relevant authorities (Machipisa 1998)
In another article from Agence France Presse English (9 January 2004) Prices of some commodities, particularly furniture and electrical goods, have started dropping drastically in Zimbabwe, but a crisis in the banking sector continues to hound depositors. Zimbabwe’s prices have been on an upward trend since the 1990s, with inflation galloping from around 50 percent 30 months ago to more than 600 percent now. Some retailers are reducing prices due to the introduction of a value added tax (VAT) which is seeing some goods that were taxed at 25 percent under the old sales tax system now attracting a lower rate of 15 percent. Foreign exchange rates on the parallel market on which virtually all foreign currency business is traded have plunged with one greenback now buying about 4,500 Zimbabwe dollars, compared to 6,200 early last month. The banking sector, which has been gripped by a crisis since the closure of a leading asset management firm which allegedly defrauded its clients of billions of Zimbabwean dollars, has left many current account holders in the cold as their cheques are no longer accepted for payment of goods and services. Supermarkets, companies and the capital city’s municipality have blacklisted at least six recently established commercial banks, rejecting cheques drawn on them. Several banks have been experiencing liquidity difficulties in recent days after the central bank recently launched a probe into their operations believing they were involved in clandestine speculative activities.
In a related article from Xinhua News Agency (7 July 2005), the Parliament of Zimbabwe passed a banking amendment bill, which intends to see that the Minister of Finance is to be consulted on the registration of banks. The bill seeks to amend the Banking Act by making provisions for the Minister of Finance to be consulted on the registration, cancellation of registration, changes in ownership or the placement of banking institutions under the management of curators. A total of eight financial institutions, including Time Bank, three Intermarket Holdings subsidiaries, Royal Bank, Barbican Bank and Trust Bank were for various reasons put under the management of curators last year while Century Discount House, Barbican Asset Management and Rapid Discount House were liquidated. The Reserve Bank of Zimbabwe said the move was taken to foster stability and confidence in the financial sector.
The Xinhua News Agency (3 January 2004) reported that the Reserve Bank of Zimbabwe (RBZ) said that it would intervene to end a devastating banking crisis that has led to the closure of a discount house and the arrest of two top bank executives. In a statement, the central bank said the measures would be taken to ensure that depositors were not unduly inconvenienced. The RBZ did not give details of the measures to be taken but said some banks were experiencing liquidity problems as a result of their involvement in non-core and speculative activities. Zimbabwe’s banking sector is facing severe strain after central bank governor Gideon Gono threatened to get tough with offending institutions. While delivering the 2004 monetary policy statement, Gono said liquidity support to faltering banks would no longer be delivered on a silver platter as some of them abused it for speculative purposes. Gono said support to under-performing banks would only be for the purpose of protecting investors. He threatened to fire boards, managements and treasury departments of failing banks in exchange for RBZ support. Zimbabwe has 17 commercial banks with assets amounting to 2.9 trillion Zimbabwean dollars. Average liquidity ratio as at Sept. 30 was 58.2 percent.
In an article from Hartnack (2004), Zimbabwe faces its worst economic crisis since independence from Britain in 1980, with acute shortages of food, gasoline, medicines and other essential imports. Foreign loans, aid and investment have dried up since the often violent seizure of thousands of white-owned farms for redistribution to impoverished blacks plunged the country into political and economic turmoil. More than a third of Zimbabwe’s commercial banks are unable to honor their customers’ checks, threatening to cause gridlock in the southern African nation’s already troubled financial sector, for the past two weeks, six of the financial institutions have been suspended from the daily clearing of inter-bank debt because they do not have the cash to pay other banks. John Robertson an economist has said that the crisis was in the making for the past few years and that certain stores were already issuing list of banks whose checks they would not accept (Hartnack 2004)
Robertson said that many Zimbabwean businessmen were borrowing money at cheap rates and buying forward in expectation of a quick profit as prices increase due to inflation. These businessmen were investing in limousines, real estate, building materials and foreign currency. But a sudden drop in demand coupled with sharply rising interest rates at the end of last year left many unable to repay their loans, he said. The reserve bank governor in an earlier statement said that the institution would no longer intervene to keep interest rates down. This resulted to lending rates surging from below 100 percent to over 500 percent. The information minister of the country countered South African and British media reports that the banking crisis could trigger economic meltdown; he said a slump in the black market rates for foreign currency showed the economy of the country was recovering. The information minister also said that a government clampdown on cross-border traders who buy comparatively cheap Zimbabwean goods for resale in neighboring countries was behind the drop. While Analysts said the troubled banks and indebted businesses were selling hard currency and other assets to try to repay their loans, contributing to the drop in the unofficial exchange rate and to the economic problems the country is currently experiencing (Hartnack 2004).
In an article from Johwa (2003), Zimbabwe has an acute shortage of its own bank notes and inflation is not slowing. Inflation currently stands at 400 percent but it was projected to exceed 800 percent. It seems the economic situation cannot get any worse. Yet all over the country bank queues have become a permanent fixture, it has become an ample evidence of the economic crisis that has made Zimbabwe the world’s fastest declining economy. Automated teller machines have become obsolete; it takes days to withdraw enough to live on. Many parents are queuing up to amass enough cash for their children’s school fees which have increased substantially. The shortage is self-perpetuating as those with cash, both individuals and corporate, see no point in going to the bank since gaining access to it at a later stage would be difficult, if not impossible. In any case, money in the bank earns a negative interest rate of at least 360 percent so there is little to be gained from banking it. Across the country, finding cash has become an activity on its own, resulting in a loss of valuable productive hours for the relatively few businesses still operating. With no benefit from banking the cash, an underground market has emerged. Middlemen have sprouted to share the 20 percent commission that is often the cost of cashing a cheque. For retailers it has not been all sighs though, as some insist on a customer spending at least a sizeable percentage of the value of a cheque if he is to be rewarded with the change. Analysts point to Zimbabwe’s sizeable budget deficit as the main cause of the country’s hyper-inflation. The second major cause of Zimbabwe’s inflation is the loss of export earnings which has created a foreign currency shortage that is driving the parallel market. The Zimbabwe dollar is on a free fall, with values plummeting almost daily. To restore confidence in the banking sector, experts said that the government has to raise interest rates and attract savings and lessen the cash deficit. In the meantime, Zimbabweans are bracing for increasing hardships since prospects for recovery are a distant prospect.
In an article from Rob (2004), Zimbabwe’s Reserve Bank governor, Gideon Gono has had a torrid two months in office as the country’s banking system came close to the brink of collapse at the beginning of January. The crisis was shocking in its intensity and even caused ripples in the stable banking sector of neighboring South Africa. Gideon Gono’s rapid and bold steps appeared to have calmed the stormy waters at the moment but public confidence in the country’s banking system has been severely shaken. At the crisis’ worst point, Zimbabwe’s Reserve Bank had suspended seven of the 17 banks operating in the country from settling inter-bank debts through the central bank’s settlement system due to concerns that these struggling institutions did not have sufficient money to pay the other banks. As liquidity problems became apparent at these banks the problem spread tentacle-like into an economy already suffering a recession. Companies, fearing that their cheques would not be honored, began refusing to accept any form of cheques and with confidence in the banking system starting to crumble, public fears began to spread. One of the institutions involved admitted that consumers had withdrawn up to 30% of their deposits during the crisis while the independent Zimbabwean media reported runs on some of the other new banks. As the crisis escalated, South African banking giants Absa, Nedcor and Standard Bank, all of which have major stakes in Zimbabwean banks, voiced their public concerns that the brewing banking crisis could spark a systemic collapse of public confidence in the banking system; it is a worst case scenario that would have affected all the banks operating in the country. Although Gono has already acted to stem the banking crisis, Zimbabwe’s fragile economy is more vulnerable than most to any radical policy changes (Rob 2004).
In an article from Shaw (2004), the state central bank tried to stem panic withdrawals from several troubled banks, saying it won’t let the finance houses collapse. A run on banks has been triggered by a deadline set by the Reserve Bank for all financial institutions to declare their capital reserves and show they have enough liquidity to continue operating, or face being shut down. The market was advised to continue conducting banking business in a calm manner. The deadline would not translate into a free-fall Armageddon for the banking system as some have been speculating. A rush for cash emptied many automatic teller machines during the weekend. Some lines have formed outside banks during business hours since the closure Thursday of the locally owned Trust Bank. The central bank put Trust Bank under the curator ship of an independent accounting expert and said its assets were being frozen for six months. Three other locally owned banks have been closed while being put under fiscal supervision this year, with central bank-appointed curators sent in to try and resuscitate them. The central bank said Trust Bank’s own plans to seek new investors and shore up its viability had failed. The agriculture-based economy has been crippled by the often violent seizure of thousands of white-owned commercial farms. Shortages of gasoline, food, hard currency and even local bank notes spurred speculation that gave finance houses a boom. Businessmen were borrowing money to invest in cars, scarce imports, building materials and hard currency in expectation of quick profits as prices rose with inflation. But a sudden drop in consumer demand, coupled with sharply rising interest rates at the end of last year, left many speculators unable to repay their bank loans (Shaw 2004). The different articles showed the different financial problems the country continuously faced. Through the articles the gravity of the country’s situation can be seen and what is being done and what should be done to improve the situation can be formulated.
Conclusion
To identify the root of the financial problem the country has, backgrounds of the Sub Saharan Africa, Zimbabwe’s economy, was discussed. Through these discussions the factors that caused the problem was found out. Through situation of the continent and the economic situation of Zimbabwe trends of why such problems occur was determined. To understand more the problem discussion of financial and economic distress was discussed. Through the discussion of the economic and financial distress the need for the study was strengthened. The last part of the discussion focused on the articles that focused on the banking sector of Zimbabwe. This part tends to determine how grave the situation is and it tries to explain the need for solution to the problem. This chapter dissected probable reasons for the problem. It discussed the different caused problems of the problem.
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