Fears for dam­aged Zim econ­omy

Weekend Argus (Saturday Edition) - - BUSINESS - CRIS CHI­NAKA

CHEGUTU, Zim­babwe: Across Zim­babwe, dozens of fac­to­ries lie idle with peel­ing paint, rust­ing ma­chines and bro­ken roofs in once bustling in­dus­trial dis­tricts, sym­bols of the huge eco­nomic prob­lems fac­ing Pres­i­dent Robert Mu­gabe and his Zanu-PF party.

On the sur­face, things look rosy: growth fore­casts are more pos­i­tive as agri­cul­ture re­cov­ers, in­fla­tion has been tamed and the stock mar­ket is start­ing to buzz again af­ter a lull.

But the na­tion’s man­u­fac­tur­ing heart­lands, which ac­counted for a quar­ter of the econ­omy a gen­er­a­tion ago, are now waste­lands – and some fear the de­cay is per­ma­nent.

From Harare to the sec­ond city of Bu­l­awayo, com­pa­nies are work­ing at a third of ca­pac- ity, re­veals the Con­fed­er­a­tion of Zim­babwe In­dus­tries (CZI).

“Busi­nesses are col­laps­ing, and the econ­omy will need a real big push-start to get go­ing again,” said an ac­coun­tant wind­ing down tube- mak­ing firm BMA Fas­ten­ers and Tube and Pipe in Harare.

“At this rate, it’s fright­en­ing to think what the fu­ture holds. I don’t think it is an ex­ag­ger­a­tion to say it might just be hell.”

Al­though they are care­ful not to blame pol­i­tics, in­dus­try bosses say busi­ness con­fi­dence has fallen since Mu­gabe was de­clared the over­whelm­ing vic­tor in the July 31 elec­tion, which the op­po­si­tion MDC re­jected as rigged.

New fi­nance min­is­ter Pa­trick Chi­na­masa ex­pects the econ­omy to grow 6.1 per­cent in 2014 from 3.4 per­cent this year but that will make no dent in the 80 per­cent un­em­ploy­ment.

The econ­omy shrank by 45 per­cent dur­ing a decade-long cri­sis blamed on Zanu-PF, but bounced back in 2009 af­ter Mu­gabe was forced to share power with arch ri­val Mor­gan Ts­van­gi­rai.

The July elec­tion put paid to that coali­tion, and with it what some crit­ics saw as the MDC’s mod­er­at­ing in­flu­ence on ZanuPF na­tion­al­ism.

That na­tion­al­ism was man­i­fest in Mu­gabe’s “in­di­geni­sa­tion” push, un­der which for­eign-owned firms have been forced to sell ma­jor­ity stakes to lo­cal blacks.

How­ever, with the econ­omy so des­per­ate for cap­i­tal – some es­ti­mates put do­mes­tic credit de­mand at $12 bil­lion (122.6bn), more than dou­ble to­tal bank de­posits – Mu­gabe may be forced to soften his anti-for­eigner stance.

“We are likely to see a more prag­matic ap­proach by the politi­cians,” said Grant Flana­gan of Amigo Part­ners, which man­ages an in­vest­ment fund.

In his new cab­i­net, Mu­gabe swopped com­bat­ive in­di­geni­sa­tion min­is­ter Saviour Ka­sukuwere for a mild-man­nered tech­no­crat who has al­ready sug­gested re­open­ing dis­cus­sion about the ex­tent and tim­ing of black own­er­ship.

With­out a de­cent pe­riod of clar­ity and con­sis­tency, in­vestors are un­likely to be writ­ing any cheques.

“Zanu-PF must re­alise they are in trou­ble over the econ­omy,” in­de­pen­dent eco­nomic com­men­ta­tor John Robert­son said. “In­vestors, par­tic­u­larly in min­ing, where they have an op­por­tu­nity, will want to see whether there re­ally is any soft­en­ing. If there is, then def­i­nitely the econ­omy stands some chance.”

Even then, turn­ing the ship around will be dif­fi­cult.

The African De­vel­op­ment Bank es­ti­mates that fix­ing the in­fra­struc­ture needs $ 14 bil­lion, a sum that in re­al­ity can only be met by the World Bank and IMF, which stopped lend­ing to Harare in 1999 be­cause of un­paid debts.

Pri­vate in­vestors will then have to ad­dress a man­u­fac­tur­ing vac­uum filled by cheap im­ports, mostly from China.

In 1986 man­u­fac­tur­ing con­trib­uted 26 per­cent of GDP. To­day it is just over 2 per­cent.

Chegutu’s in­dus­trial grave­yard in­cludes Zis­cos­teel, once the largest in­te­grated steel works in the re­gion, which was forced to shut in 2008. – Reuters

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