Democracy key to economic revival
RESERVE Bank of Zimbabwe (RBZ) governor Gideon Gono recently said at the launch of the African Policy Institutes’ Forum (APIF) that the year ahead would be of mobilising foreign direct investment (FDI). With his virtually unlimite
d optimism and positiveness, he proclaimed that “2005 will mark the beginning of the seven years of plenty”.
However, with considerable realism, he qualified his forecast by correctly saying that we give foreign investors the highest assurance that their investments will be fully protected from any “obstructive practices by any untoward elements of society, individuals or groups”. He also
acknowledged that Zimbabwe has been hampered by lack of implementation capacity in both the private sector and in government to fully drive various economic policies and also that “the confidence of the international community” must be regained.
The governor is very correct that Zimbabwe has great potential to attract investment, both FDI and domestic. After all, it has long been proven that it can have an immensely virile agricultural sector.
Before government virtually destroyed Zimbabwe’s agricultural sector, that sector was the foundation of the entire economy. It provided employment and a livelihood for many hundreds of thousands of people. It generated vast amounts of foreign currency needed for a highly import-dependent country, providing more than two million kg of top quality tobacco, exporting beef, pork, sugar, citrus, tea, coffee, cotton of world-renowned quality and much else.
It was the source of the resources of much of the consumer spending that assured continuing demand for manufactured products flowing out of diverse Zimbabwean industries. And despite the catastrophic state to which government has reduced agriculture, with overall output at best equaling about 30% of former levels, the sector can recover, if government belatedly acquires the maturity to admit errors and transform.
But Zimbabwe’s economic potential does not stem from agriculture alone. Below its fertile soils, Zimbabwe has a vast, as yet only very minimally tapped, mineral wealth. That wealth includes the 360 million ounces of platinum reserves to which the governor referred when addressing APIF, having a present day potential value of more than US$290 billion.
The same is true of the tourism industry. With the splendour of Victoria Falls, the grandeur of the Matopos, and abundance of wildlife (although now being critically eroded by almost wholly uncontrolled poaching and irresponsibly great numbers of killings by trophy-hungry international
hunters), the beauty of Nyanga, Bvumba and the Save conservancies, the magnificence of Lake Kariba, and great opportunities of ethnic and eco-tourism, the potential of Zimbabwean tourism is almost without bounds.
And, despite the ravages of government’s ill-conceived acts, Zimbabwe’s manufacturing sector is still the second greatest industrial infrastructure within the region, capable of being restored to former glory, and more, and being a key supplier to the population of more than 320 million people within the region. Moreover, despite the many disasters within the financial sector during the last year, Zimbabwe nevertheless has a large and viable financial sector, reinforced by many high-calibre service sector enterprises.
Notwithstanding, unless there is a dramatic metamorphosis within the arena of political perceptions, and in the acts and deeds of government, in contrast to its declarations of intent, the concept that 2005 will herald marked investment into Zimbabwe’s near derelict economy will be nothing but a concept and unfilled wishful thinking.
Although the tangible components of an investment stimulatory environment exist, nevertheless an investment conducive and welcoming environment has yet to be created, for there is much that ails the economy to an extent as deters investors from even contemplating investment. The missing elements include that referred to by the governor, that there must be full protection of investment from “obstructive” practices of society, individuals and groups.
Government’s track record of providing that protection is abysmal. It seized more than 11 million hectares of agricultural lands, disregarding international bilateral agreements, contemptuously dismissing that most of those lands had been lawfully purchased, as distinct from government’s spurious justifications of alleged theft of the land by colonialists. And it paid no compensation. Instead, it turned vast private sector investment into zero value, impoverished great numbers, and brought agriculture to its knees.
Now it is creating widespread fears that it is about to do likewise to the mining sector. A few months ago the president threatened forced disinvestments, in favour of the “indigenous” population, of 50% of the mines. Since then the level of that disinvestment has been reduced to 20%, but the mining sector is still left in a state of suspension as to its future.
In turn, this is fuelling investor fears as to government’s future intentions in respect of the manufacturing, distributive, tourism, and financial sectors. Such an environment does not promote investment. Who will invest with an expectation that a portion, if not all, of that investment will be expropriated?
An investor also wishes to know that he will be “the master of his own destiny”. He wants to know that if the investment is fruitful, it is primarily due to him and his actions, and that if it fails, its failure is in consequence of circumstances other than as created by government. To that end, the intending investor seeks economies where there will be a minimum of state interference into the private sector.
He favours the economies which are heavily deregulated, and driven by market forces rather than by oppressive and excessive governmental dictates. Such an economic environment is that which will be necessary if the confidence of the international community is to be regained, correctly identified by the governor as an essential.
And international confidence centres upon a combination of the economy driven by good and sound economic fundamentals and by positive and constructive monetary and fiscal policies together with an expectation of continuing political stability, good governance and investment security.
With much foundation, the perspective of most of the international community, and most of those Zimbabweans endowed with investment wherewithal, is that whilst the last year has witnessed very pronounced and — in the main — highly constructive monetary policies, and some tentative but meaningful moves to towards a substantive fiscal policies, the other essential ingredients do not exist. Few internationally, and equally few in the domestic economy, perceive there to be prospects of economically supportive political stability and good governance.
The overriding view is that for that to exist, and therefore for the economy to develop and grow and to be attractive to investors, government will have to demonstrate a genuine adherence to the basic and essential principles of democracy. To that end, it will have to prove to a sceptical world, that the forthcoming parliamentary election will be genuinely free and fair.