African, mostly absentee landowners or to smallholder producers poorly supported by agricultural extension and support services; c. Cash handouts to appease grievances of War Veterans in 1997 sparking an inflationary spiral; d. Military intervention in the conflict in the Democratic Republic of Congo leading to budgetary constraints and overspending; and e. Persistent drought. Food shortages, a negative balance of payments, budget deficits, and chronic shortages of foreign exchange led to a contraction of the economy and rising urban and rural poverty. Urbanization accelerated rapidly leading to 6 to 8% per annum increases of the urban population, explosive growth of the urban informal economy, and the proliferation of alternative housing solutions, many of them informal and unauthorised. Table 2: Urbanization trends, exchange rates, inflation and per capita income trends, Zimbabwe, 1985-2005 Total Population (000s) Urban Population (000s) Urbanization level (%) Households (000s) Household average size Z$ to 1 USD Inflation % GDP per cap. (const. Z$) % GDP growth pa. per cap. 1985 1990 1995 2000 8,392 2,116 25.2 10,241 2,797 28.4 2,031 4.88 2.64 17.38 2,099 4 11,190 3,556 31.8 2,331 4.83 9.31 22.59 1,988 -2 12,627 4,387 35.3 2,664 4.70 55.07 55.86 1,986 -7 1.64 8.49 1,995 3 2005 (est’d) 13,805 5,370 38.9 3,088 4.48 9,896.02 140 <1,000 -7 Source: UNHABITAT, Global Report 2003, Financial Gazette, IMF 2.2 The Rise of the Informal Urban Economy, Conflicts and Crisis in Urban Governance By the mid 1990s, the major cities of Zimbabwe began to witness rising unemployment. Government provided the impetus for the ascendance of the informal sector through a series of policies. These included reducing regulatory bottlenecks to allow new players to enter into the production and distribution of goods and services, supporting indigenous business development and black empowerment, and relaxing physical planning requirements. Statutory Instrument 216 of 1994 of the Regional Town and Country Planning Act effectively allowed for the development of non-residential activities in residential areas. Many activities such as hairdressing, tailoring, book-binding, wood or stone carving were deregulated. Similarly, small and medium enterprises employing 5-10 people in such areas as welding, carpentry, tin-smithing, shoe repair and small scale car repair were accorded special consent. While these latter activities were subject to local planning permission, Statutory Instrument 216 sent a clear signal to local authorities of the government’s desire to promote the informal economy in residential areas. Statutory Instrument 216 was a centrally driven policy that was not espoused by all local authorities as it was perceived as taking away part of their powers to regulate and control the development process within their respective jurisdictions. However, as the economic crisis continued unabated, Statutory Instrument 216 provided a pretext for many local authorities, including the City of Harare, to turn a blind eye to what could best be described as an explosion 23