It’s wait-and-see for Zim’s international finance to return

FORMER President Robert Mugabe’s exit this week is the right tonic that international companies needed to kick-start massive capital projects while the assumption of power by Emmerson Mnangagwa, coupled with expected reform policies, could help lenders such as the International Monetary Fund (IMF) to resume lending programmes, experts say.

Zimbabwe is desperate for foreign direct investment and fresh lines of credit after efforts with multilateral funders got stuck after economic reforms agreed to by the government stalled.

“The perceived change in regime is expected to unlock the massive potential of a country that was once considered a shining light for the African continent,” Lehlohonolo Mokenela, an analyst at Frost & Sullivan, said.

Policies that scared off investors include the indigenisation law, a 15 percent levy on unrefined platinum exports and state moves to reserve areas such as retail and agro-processing for locals, among others.

Mnangagwa, Mugabe’s former deputy whom he fired early this month, will be sworn in tomorrow, following a week of dramatic political upheavals. He will have an uphill task to right an economy suffering rising commodity prices and hobbled by low investor sentiment.

Better still, he is highly regarded as a reformist and his allies say he will kick-start his rule with re-engagements with China.

“We sat in meetings with investors over the past few months and it always boiled down to one issue: the leadership of the party.

“It was apparent that there had to be change at the top and this was holding us back because we have all the ingredients as a country to start growing the economy out of the woods,” Terrence Mukupe, a Zanu-PF parliamentarian and top ally of Mnangagwa said.

Other senior Zanu-PF officials confirmed to Business Report that Mnangagwa would roll out a re-engagement plan with the IMF to negotiate a soft loan to boost Zimbabwe’s finances. It is expected that he will come up with a new cabinet.

Diaspora

“The positive sentiment that has greeted this change could see not only the highly educated diaspora flock back to Zimbabwe, but may also attract the interest of international companies in the country as well,” said Mokenela.

Investors have started to curtail new projects as they adopt a wait-and-see attitude given the uncertainty that characterised Mugabe’s misrule, especially in the past 10 years.

Hasnain Malik, the head of equity research at Exotix Capital, said that the transition of power marked “a major and positive shift” and would help “put Zimbabwe back on the foreign investor” radar.

“While there is much to be done on the government wage bill, recapitalisation of the economy and the banking system, the starting point for investor expectations is very low. Many of the ingredients of a great frontier market are in place in Zimbabwe: human capital, infrastructure, natural resources and diaspora,” Malik said.

But this will not be a day’s work, experts agree, as a “more normal environment for foreign capital is a necessary first step to unlock” the potential of the country. Foreign investors in Zimbabwe include Impala Platinum, Anglo Platinum, Pick n Pay and Puma.

“International companies may still adopt a wait-and-see approach,” said Frost & Sullivan.