The post-UDI sanctions actually helped the economy diversify. Prior to 1965, the Southern Rhodesia economy was overly dependent on the export of tobacco. With the sanctions, agriculture diversified and industrialized due to import substitution. So between 1967 and 1972 the economy actually enjoyed a boom, this can explain the record number of white immigrants arriving in the country in 1972. However, in 1973 the oil crisis hit Rhodesia hard (as it did most non-oil producing developing nations). Also, until 1975 the guerrilla threat had been mostly confined to the area west of Kariba dam, the sparsely populated Zambezia escarpment. Even here the threat had been fairly negligible as most of the nationalist leaders had been imprisoned since 1964 (Mugabe, Sithole Nkomo etc).
However, in September of 1974 when the Portuguese announced their intention to grant Angola and Mozambique independence, South Africa's policy towards black Africa radically shifted. Until then the South African government had considered the Portuguese colonies along with Rhodesia to form a "cordon sanitaire" around South Africa and Southwest Africa. The South African government paid little heed to unfriendly African nations. Beginning in 1974 however, they sought to surround their country with friendly or at least neutral black-ruled countries (like Malawi, Swaziland). To that end Vorster put pressure on Rhodesia to release the nationalist leaders from prison, hoping that a friendly multi-racial state would emerge in Rhodesia. Now completely dependent on South Africa, Ian Smith's government gave in and released the nationalist leaders.
The first thing the Zimbabwean nationalist leaders did was head to Zambia and now-independent Mozambique to establish bases with which to fight the Rhodesian government. Rhodesia was surrounded and had no choice but to give in by 1980. The economy also suffered heavily due to the loss of Portuguese Mozambique as a conduit to the outside world. One has to remember that the Portuguese government had cordial relations with many more Latin American, African and Asian countries that South Africa did. Also, the ports of Lourenço Marques and Beira were much shorter conduits for Rhodesian trade.
As for Mugabe, he showed his true colors early on by allowing attacks on the Ndebele minority. In 1987 he reneged on the Lancaster House agreement which had guaranteed whites 20 seats in the House of Assembly. What kept his regime going throughout the Cold War was the fact that it was able to court both sides of the iron curtain.
Finally, once the iron curtain fell, one has to remember that the third world suffered greatly. Until then, the Communist Bloc and the West had both vied with each other to buy influence in African and Asian countries. In Africa, this was especially true, African leaders (usually dictators) pitted cold war rivals against each other in return for aid. Much of it went to line their own pockets, however usually just enough of it trickled down to keep the citizens happy. With the end of the cold war, the flow of aid ended (U.S. aid to Africa peaked in 1985). Much of the aid had been military aid, this too dried up, making the survival of the despotic regimes precarious (Mobutu in Zaire). At the same time this was coupled with a precipitous decline of world commodity prices after 1975 and a rise in energy prices that would last in 1983 (in 1983 oil prices collapsed). Due to the combination of less aid and lower commodity, by the late 90s all commodity prices were at record lows and most African countries heavily indebted.
By the late 1990s discontent was brewing in Zimbabwe. The seizure of white farms beginning in 1999 can be seen primarily as a diversionary tactic. Mugabe wanted to be seen to be doing something constructive. Also, he did not want to end up out of power like Kenneth Kaunda in neighbouring Zambia. The irony of this was by the late 1990s Zimbabwe's black population was among the most highly urbanised and educated in Africa. Most simply wanted wage jobs, not farmland. By taking over the large commercial farms, Mugabe also destroyed many of jobs of rural blacks, who were wage earners. Instead, the farms ended up in the hands of people with little funds to invest in anything bust subsistence farming. Though Mugabe knew he'd face little opposition from other African countries and he could portray himself as a martyr stating that "sanctions" were what was destroying the economy. Ironically though, countries like Zambia, Nigeria and Mozambique courted white Zimbabwean farmers granting them land, knowing that commercial farming provides wages and export earnings.
