HomeBusiness DigestAid is Good, but Investment is Better

Aid is Good, but Investment is Better

AT least he tried. This is probably the best that can be said about Prime Minister Morgan Tsvangirai’s trip to the West.

Sadly some of his colleagues, or perhaps rivals, in the coalition government are trying to downplay the importance of that visit. To measure the success or failure of the trip by the amount of money received will be completely missing the point.

In any case the US$500 million financial support pledged by the West, although falling far short of the required US$8 billion, is not a small amount considering that the projected total revenue for the year is US$1 billion.

According to the recent revelations by the Ministry of Finance total collections for the five months to May this year were US$174 million, which makes half a billion a fortune.

Whereas aid or some financial support is required to jumpstart the economy, an improvement in the world’s perception of Zimbabwe is paramount. In fact, a good perception can be much more important than aid because it enhances the country’s ability to attract investment.

To have top government leaders hosted by leaders in influential countries in the West, after almost a decade of isolation, should be seen as a first step in unlocking the co-operation of these countries.

One hopes that during the meetings both sides had an opportunity to spell out their expectations and what they would do to build on the renewed relations.

For Western countries re-engagement provides an opportunity to play a key role in the reconstruction of the country.

While their concerns on outstanding matters of the global political agreement are genuine and have to be expeditiously resolved, withholding support to the country because of these issues would have been tantamount to missing a good chance to influence progress in the country’s rehabilitation.

With the pledges they gave during the PM’s visit and promise of more support if the country adopts more reforms, it would be unfair to say the West did not respond positively to the call for re-engagement.

It is imperative for leadership in the country to show commitment to fully implementing its own agreement if it wants to be taken seriously.

The deliberate delays in resolving those issues which come on the back of the alleged lack of the rule of law; disrespect for investment agreements; and supposed violation of property rights do not give confidence to prospective financiers.

It is for this reason that the West is demanding more reforms before more aid can be availed. Even in banking, clients with a history of defaulting on their loans and other untoward behaviour are subjected to tighter borrowing conditions.

Whilst the debate on the merits of the trip to the West was going on, there were two instances of rare positive development this week. The first was the announcement of a US$950 million loan facility from China and the second the successful hosting of an investor conference by Imara.

What was intriguing about the Chinese loan was that it was announced by the PM at a press conference in which he was giving feedback on his trip to Europe, Scandinavia and the US.

It is not clear whether or not the facility is a result of the Look East Policy embarked upon by the government when relations with Europe and the US soured.

If it is, then why would those who championed it have missed an opportunity to claim its success, especially after the West pledged a “paltry” US$500million? Or was it a shift in allegiance by the wise men from the East?

Unlike the Europeans and Americans who openly refuse to give assistance to countries led by perceived enemies, the Chinese consistently maintain that they support the people without trying to influence the politics of this country.

The pledged loan of US$950 million, if it materialises, will further strengthen Chinese involvement in the country given their appeal to both sides of the political divide.

The second positive occurrence during the week was the staging of an investor’s conference which attracted several investors from across the globe who wanted to hear the Zimbabwean story.

Local companies had an opportunity to showcase their businesses to prospective foreign investors, most of whom did not know what to expect given the negative reportage in the media of their countries.

Presentations by most companies were impressive with the ones from Delta, Murray & Roberts and PG exceptional as they were detailed and had carefully thought out strategies.

Many companies expressed cautious optimism on the political and economic reforms undertaken this year which they said had had a positive impact on their business. Capacity utilisation for many improved from 5%-10% in January this year to around 30%.

This is good for the country as government revenue dramatically improved from US$4m in January to US$65m in May as economic activity increased. This shows that promoting investment in the country through supportive regulation; reducing taxes; and guaranteed private property rights can turnaround the economy quicker than aid.

That should not be too much to ask for. However, with politicians even simple things can sometimes turn out to be difficult to achieve.


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