R otting food scraps picked out of the dirt and the bins of the backstreets of Harare are piled together in a slimy heap on the ground with torn cardboard as a serving plate.

Elias, 15, squats and pushes both hands into the pile, scooping out a chunk of something pink. He gnaws on it, then shouts: "Dinner! Come and eat."

The other boys shush him. "The police will come," says Lloyd, "and we will have to run." There are more than 20 of them, gathered on a small piece of waste ground around a thin fire. The youngest is 8, the eldest 18. Lloyd used to have a blanket, but the police took it last time he was rounded up. He is among the older children who have been living on the streets since President Robert Mugabe's infamous Operation Murambatsvina, the slum clearances that began in 2005 and left hundreds homeless. But now they are seeing new, younger kids drifting in day after day from the countryside, looking for protection and a share of whatever has been scavenged or stolen or begged.

"Zimbabwean society is splintering, breaking, the family is not working the way it used to," said an official at the ministry of health. "The gap is increasing between the rich and the poor, the middle classes are moving out into the high-density suburbs where the poor used to live, and the poor are ending up on the streets."

At the Makumbi children's home, half an hour's drive from the city, Sister Alois is upset to report she has had to turn away three abandoned babies brought in by social workers in the last week.

"More and more children abandoned, it's not the African way. There are so many now. They are being left in the bush, some are eaten by the ants," said the nun, who has always been strict on taking in a manageable number of orphans to give each child the best possible chance: 10 children to each of her "house mothers". She says "poverty, and poverty leading to girls being abused", is the cause.

But after years of financial mismanagement at the hands of an ageing dictator and his corrupt cronies that saw this country decline into chaos amid food and energy shortages, sky-high inflation and political violence, Zimbabwe is entering a new era. In the two years since the election that nearly tore the country apart before resulting in a national unity government between Mugabe and opposition leaders Morgan Tsvangirai and Arthur Mutambara, there have been dramatic changes.

There is food on the shelves now, and the trillion-dollar banknotes are gone. Since 2009 citizens have been free to use the South African rand or the US dollar, and all do. A human rights commission has been sworn in. A media commission has licensed newspapers independent of government control and one, Newsday, began publishing this month. There are more cars on the road, some traffic lights work and the big four-wheeled drives no longer mainly have white faces behind the wheel. Vast diamond fields discovered at Marange have the potential to bring prosperity, and work on a new constitution is under way.

But what has really changed? Zimbabweans still top the world list of asylum-seekers. On Monday, Mugabe was ranked the world's second-worst dictator behind Kim Jong-il of North Korea, and Zimbabwe rated in the top 10 failed states.

The report by the US-based Fund for Peace stated: "Mugabe has arrested and tortured the opposition, squeezed his economy into astounding negative growth and billion-percent inflation, and funnelled off a juicy cut for himself using currency manipulation and offshore accounts."

On Thursday, the international watchdog, the Kimberley Process, failed to reach agreement on Zimbabwe's diamonds, concerned at human rights abuses and corruption. So the ban on the country exporting diamonds remains in place. And Mugabe's government remains disdainful of international opinion. The mines minister, Obert Mpofu, responded by saying Zimbabwe would sell them anyway. "Those of you who dream of regime change," he told his critics, "there will never be regime change in Zimbabwe. We fought for our liberation and we are ready to fight again."

Tsvangirai has been accused of ineffectual leadership, of doing the "Mugabe shuffle" – making small changes that mean nothing for the people. As one businessman told the Observer: "There is a saying in Shona, 'It's best to take an enemy inside your hut and there kill him'. That is what Mugabe has done to Tsvangirai. We are betrayed."

The government is in another paralysis of disagreement, with reports that Tsvangirai and Mugabe are not speaking. The state newspaper last week ran a front-page picture of the recently widowed Tsvangirai sitting near a woman it alleged was his new girlfriend. Rumours abound of MDC officials accepting farms from Mugabe just as he rewards the loyalty of his own Zanu-PF officials. The suggestion is denied vehemently, but worn-out Zimbabweans believe it.

The controversies and rumours are helping to raise the profile of a new player on the field. Zapu, the party of the late liberation hero Joshua Nkomo, has officially extricated itself from Zanu-PF and is showing signs of winning support outside its Matabeleland stronghold.

"Their pockets and their necks are getting fatter, there is no difference between the MDC and Zanu any more," Dr Dumiso Dabengwa, interim chairman of Zapu, said, insisting that cross-tribal support was already coming their way.

And while the political leaders are failing to fix a broken Zimbabwe, those who try to help on the streets are overwhelmed by the scale of the country's problems. A charity operating to help the growing bands of homeless children, Streets Ahead, is a drop-in day centre where kids can come and wash, attend art and drama classes, have a meal. Staff used to do night outreach work to find kids newly arrived on the city streets before the pimps and the abusers got to them, but donations are drying up. "So many kids we could take back home now, but we don't have the money or the truck to take them," said outreach worker Pauline Manigo, close to tears.

Duduzile Moyo, executive director of the centre, said: "We are soldiering on. The donations are scaling back big time, economic pressures everywhere. But it is the same pressures that are causing the problems that mean we cannot fix them." A census in August found 705 children living in Harare's city centre. "Poverty is the underlying cause and the economic downturn is making everything worse. We are seeing new kids arriving all the time now. The gap between the rich and the poor is getting very wide now."

A 34-year-old woman, in a retail management job, told of her despair that she was about to give up her small flat to move to the sprawling townships around the city where electricity and running water are seen as a luxury, not a necessity.

"I have always worked hard, always. But now I just don't know how I can manage any more, so I am going to have to move out. My wages have been cut and cut and now my rent is $300 a month and my income is $320.

"I am middle-class, my parents had a nice house, but if I want my kids to go to school then they're not going to have a nice house."

But her two children are still luckier than some. A few streets away, at a bus stop, a row of bodies are huddled under thin sheets. Connie Tatianashe is four months pregnant. Her three-year-old son sleeps by her side. They lost their home because her husband had to take a pay cut while the rents just kept on rising. Beside her, a shivering girl called Memory Muringai looks younger than the 13 she claims to be and has been here only a few days. So far none of the older boys has claimed her as a "girlfriend".

"I asked the bus driver and he brought me here, to Harare," she says. "My father died and my stepmother poured hot water on my back, so I ran away to find my aunt, but I can't find her. The shop owners gave me something to eat, but the boys chase me away. I am cold and I am scared."

The UK-based charity Street Invest supports Streets Ahead and other similar projects worldwide.