Zimbabwe: Zanu-PF softens economic approach desperate for international investment

By IndepthAfrica
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Jul 2nd, 2014
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By Nkululeko Sibanda
As Zimbabwe approaches a year since the re-election of President Robert Mugabe and the end of the Government of National Unity, we asked journalist Nkululeko Sibanda to assess some of the key policy and political developments in the country over the past 12 months.

Indigenisation

Zimbabwe is currently in something of a Catch-22 regarding its much discussed Indigenisation and Economic Empowerment Act. The sooner the government of ZANU-PF realises this, the better.

The country’s ailing economy is crying out for foreign investment, but the government is trying to pass a piece of legislation that ensures that Zimbabweans, despite the fact that few have put a single cent into the country’s biggest companies, has the controlling share in them.

Under the Act, Zimbabweans must own 51% stake in all companies, while foreigners, who bring in the majority of investment, are only permitted a 49% share.

Harare-based economist, John Robertson believes the indigenisation legislation is counterproductive:

“No investor will put his money in a country where he is not sure whether there is any security of the investment. The investors will continue to take their money elsewhere to countries where there are no such restrictive measures and counterproductive policies such as what we have in Zimbabwe.”

Softening stance

Recent statements from government officials, including the President himself, have given hope that ZANU-PF has begun its long-overdue climb-down on indigenisation.

Finance Minister, Patrick Chinamasa, in an interview with South Africa’s Business Day newspaper, recently said that government was willing to review the indigenisation legislation:

“For the resources sector, like mining, it is 51%. That sticks and there is no compromise, but this can change for other sectors outside the resources sector.”

Chinamasa was also quoted telling participants at a business conference in Bulawayo last month that a-one-size-fits-all approach to the indigenisation programme was not sustainable when Zimbabwe was desperate to lure investors into the country. “I want a sector-by-sector approach. We should have more local participation in our economy,” said Chinamasa.

President Mugabe told an Independence Day celebration in April that his government was now ready to negotiate with potential investors. “If an outside investor brings to the country his resources to establish a company, we will not stick to the 51-49 shareholding, but would negotiate.”

Most sectors of the Zimbabwean economy remain severely under-funded owing to a serious cash crisis due to a lack of international support.

Openness to investment and investors

Statistics provided by the United Nations Conference on Trade and Investment (UNCTAD) World Investment Report 2014 show that since last year Zimbabwe has realised investment inflows of $400 million. This is an insignificant figure for a country with an economy desperately in need of a jump-start.

Robertson argues: “These are simply agreements that have been signed, mainly with the Chinese, which do not add to anything as these investors are bound to simply put these agreements on the shelves for them to gather dust.

“What is required is for the government to open up and do more reaching out with tangible promises that are going to convince the investors that there is value in doing business in Zimbabwe and that there is security of the business and the investment.”

Who is running the economy?

While it is crucial that Zimbabwe increases its foreign investment inflows, doubts remain over the credibility of the man in charge of economic policy, the confrontational Finance Minister, Patrick Chinamasa.

Chinamasa fares badly when compared to his predecessor, Movement for Democratic Change (MDC) Secretary-General, Tendai Biti. At the formation of the inclusive government, Biti was thrust into the finance portfolio at a time when Zimbabwe was experiencing its worst economic conditions since independence. Shops were empty of goods and the Zimbabwean currency became almost worthless.

Biti, listening to advice from an array of stakeholders both in and outside Zimbabwe, managed to steer the country back towards a semblance of stability and credibility. He has been much missed as ZANU-PF has floundered on economic matters and Chinamasa has not showed the same touch.

On policy issues, Biti believed there was no need to be extravagant on the part of the government: the country would have to “eat what it killed” as far as resource utilisation was concerned. In contrast, Chinamasa’s belief is that there needs to be donor and international support to drive government expenditure. Hence the desperate desire to attract investors.

In any healthy economy, the Central Bank is crucial to economic prosperity. And the Reserve Bank of Zimbabwe, headed since May 1st by the experienced former Commercial Bank of Zimbabwe (CBZ) chief, John Panonetsa Mangudya, now seems to be under better leadership than for several years. Given the manner in which the former governor, Gideon Gono (now thought to be back in favour), ran affairs at the Central Bank, rising to become a pseudo Prime Minister, Mangudya is certain to provide a more sober and less politicised approach.

In particular, it is thought that Mangudya fought hard to prevent the banking sector being infected by indigenisation – an exemption that has now been formalised.

These days the President is frequently out of the country either attending to his health issues or participating in international and regional conferences. Who is running the country when Mugabe is not around?

As things stand, this responsibility falls to Vice President Joyce Mujuru, who along with Justice Minister Emmerson Mnangagwa, is one of the leading candidates to succeed the 90-year old Mugabe when he steps down or is incapacitated in office. In the event of Mugabe’s death, Mujuru would only take over for a 90 day interregnum as President whilst a successor was chosen.

Building bridges

The new(ish) Zanu-PF administration is reportedly trying to build bridges internationally as it realises it cannot save Zimbabwe from its socio-political and economic meltdown on its own. Of late, Mugabe and his officials have been on whirlwind international tours and locally engaged with ambassadors from various countries. The eventual aim is for Zimbabwe to be allowed to fully re-engage with the outside world.

Addressing delegates at a recent Southern Africa Political Economy Series (SAPES) Trust conference, Chinamasa said that Zimbabwe was now bent on building bridges it had burnt more than a decade ago as it fought the West over its land reforms, political violence and electoral malpractice.

Nkululeko Sibanda is a journalist based in Zimbabwe.

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