It won’t be easy to clean up Bob’s mess

Eco­nomic prom­ises thick on the ground in Zim­babwe hus­tings

Sunday Times - - Business The Big Read - By RAY NDLOVU [email protected]­day­times.co.za

● For­mer pres­i­dent Robert Mu­gabe may no longer be in of­fice — his ab­sence rob­bing op­po­si­tion par­ties of the pop­u­lar elec­tion rhetoric of “Mu­gabe must go” ahead of this month’s polls — but there is still plenty left in Zim­babwe to serve as a re­minder of his 37 years at the helm.

Mu­gabe’s legacy is a bro­ken econ­omy, and who­ever is the vic­tor on July 30 will have the dif­fi­cult task of try­ing to piece it back to­gether while ad­dress­ing grow­ing im­pa­tience among cit­i­zens yearn­ing for swift eco­nomic re­lief and re­turn­ing the coun­try to the in­ter­na­tional stage.

Robert Bes­sel­ing, the di­rec­tor of busi­ness in­tel­li­gence firm Exx Africa, does not fore­see an im­me­di­ate flow of for­eign in­vest­ment into Zim­babwe af­ter the elec­tions.

“De­spite its pro-in­vest­ment rhetoric and pledges to­wards po­lit­i­cal and eco­nomic re­form, Zim­babwe’s gov­ern­ment will first need to clear the twin hur­dles of elec­tions and debt clear­ance be­fore at­tract­ing mean­ing­ful fresh in­vest­ment. As such, many in­vestors and in­ter­na­tional part­ners are main­tain­ing a ‘wait and see’ ap­proach,” he said.

If Zim­babwe is ever to gain ac­cess to sub­stan­tial credit lines, the coun­try will have to clear its ar­rears with in­ter­na­tional fi­nan­cial in­sti­tu­tions, par­tic­u­larly the World Bank and African De­vel­op­ment Bank, Bes­sel­ing said.

Zim­babwe’s ex­ter­nal debt stands at $10.2-bil­lion (R136-bil­lion). Last year, Trad­ing Eco­nom­ics val­ued the GDP of the coun­try at $17.8-bil­lion.

But pay­ing off the ex­ter­nal debt is just one piece of the puz­zle, as Zim­babwe’s eco­nomic ruin runs deep.

For al­most a decade, the coun­try has not had a cur­rency of its own, re­ly­ing on 12 cur­ren­cies — among them the US dol­lar, the rand, the Bri­tish pound and the euro — for trans­ac­tions.

In Fe­bru­ary 2009, the adop­tion of dif­fer­ent for­eign cur­ren­cies ap­peared to be a mas­ter stroke and seemed to have dealt a body blow to run­away hy­per­in­fla­tion recorded in July 2008 at 79 bil­lion per­cent. But now even for­eign cur­rency is in short sup­ply.

The se­vere liq­uid­ity cri­sis has deep­ened, lay­ing bare the ex­tent of eco­nomic col­lapse. It has been years since most bank ATMs doled out any bills to de­pos­i­tors.

On Mu­gabe’s watch, com­pa­nies folded in their hun­dreds, un­able to do busi­ness in a coun­try no­to­ri­ous for its lack of re­spect for prop­erty rights and its in­sis­tence that a 51% share of any com­pany must be held by lo­cals un­der the “in­di­geni­sa­tion” law.

For the com­pa­nies that did man­age to keep go­ing, re­main­ing afloat was an ar­du­ous task as they had to nav­i­gate the black mar­ket to buy for­eign cur­rency and use it to pro­cure raw ma­te­ri­als to keep the wheels of pro­duc­tion turn­ing.

All the while, com­pa­nies had to be wary of not be­ing on the radar of the mon­e­tary au­thor­i­ties, trig­ger-happy and ready to ac­cuse them of “ex­ter­nal­is­ing” for­eign cur­rency.

The high costs in­curred by com­pa­nies in­evitably were passed on to con­sumers, who, in a bid to stretch their mea­gre earn­ings, turned to buy­ing goods from South Africa, fuelling a bustling in­for­mal sec­tor.

Yet it is the same eco­nomic ruin left by Mu­gabe that has given a new lease of life to can­di­dates vy­ing to be the coun­try’s next pres­i­dent. The econ­omy is cen­tre stage and is the buzz­word on the lips of all 23 pres­i­den­tial can­di­dates.

The in­cum­bent, Pres­i­dent Em­mer­son Mnan­gagwa, has framed his cam­paign with the “Zim­babwe is open for busi­ness” mantra — iron­i­cally try­ing to use the years of ruin by his Zanu-PF com­rade Mu­gabe as his launch pad into high of­fice for a five-year term.

Mnan­gagwa has promised to turn Zim­babwe into a mid­dle-in­come coun­try by 2030 through a re­vival of agri­cul­ture and min­ing, and in­fra­struc­ture de­vel­op­ment.

Adopt­ing the rand

But the ace in Mnan­gagwa’s hand ap­pears to be his re­lent­less court­ing of West­ern gov­ern­ments, which were per­sonae non grata dur­ing Mu­gabe’s time.

A path to Harare is be­ing beaten by high­pro­file vis­i­tors from the UK, Ger­many, the EU, Russia, China and the United Arab Emi­rates, all will­ing to con­sider get­ting a foothold in the coun­try.

Pa­trick Cole­grave, the Africa di­rec­tor at Nor­ton Rose Ful­bright, this week said the spike in in­ter­est in Zim­babwe was from par­ties keen to get a feel of what was go­ing on, with a view to po­ten­tially in­vest­ing af­ter the elec­tions.

“The in­flux of for­eign in­vestors, this is very real and has been con­firmed by a num­ber of mem­bers of the busi­ness com­mu­nity who are also see­ing it . . . I do think that a good pro­por­tion re­lates to tan­gi­ble in­vest­ment set to flow pro­vided that the elec­tions pass off smoothly and are ad­ju­di­cated to be free and fair. So, bar­ring any ma­jor elec­tion up­set, I don’t see the in­flux of in­vestors that the coun­try is cur­rently see­ing as be­ing a pass­ing phase,” said Cole­grave.

Gary van Staden, se­nior po­lit­i­cal an­a­lyst at NKC African Eco­nom­ics, said “se­ri­ous” in­vestors would still hold back even if the poll turned out to their sat­is­fac­tion.

“It seems that real in­vest­ment will wait for pol­icy cer­tainty, some in­di­ca­tions of an en­vi­ron­ment con­ducive to mak­ing a profit, and the abil­ity of in­vestors to move cap­i­tal with­out too many re­stric­tions,” he said.

Mnan­gagwa’s arch-ri­val in the polls, Nel­son Chamisa, also has his eye on the econ­omy, promis­ing to turn it into a $100-bil­lion econ­omy by 2029.

Among the swift changes that Chamisa has promised are to have Zim­babwe join the rand mon­e­tary union and adopt the rand as le­gal ten­der, and to mod­ernise the coun­try’s di­lap­i­dated in­fra­struc­ture sys­tems.

With al­most $5-bil­lion in trade be­tween the two coun­tries last year, South Africa is Zim­babwe’s largest trad­ing part­ner.

The sheer amount of work ahead to re­pair the econ­omy means who­ever wins at the end of the month will have lit­tle time to cel­e­brate his or her vic­tory.

Vot­ers ex­pect their vote to count and the pres­i­dent will have their work cut out to de­liver eco­nomic re­cov­ery, a feat that eluded Mu­gabe for nearly four decades.

For­mer pres­i­dent Robert Mu­gabe left his coun­try’s econ­omy in ru­ins.

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