The two ministers, together with prominent businessmen, on Wednesday faced each other during a Zimbabwe Independent-sponsored “Independent Dialogue” meeting — a forum which engages business, academia and policymakers on key issues affecting the country.
Guided by a theme, “Doing Business in Zimbabwe: Who is welcome?” Kasukuwere, quite predictably made the provocative remark that British investors were unwelcome to do business in the country. This was when it was badly in need of foreign direct investment and currently at the tail end of global competitiveness.
His vitriol towards the former colonial master could leave British billionaire Richard Branson reconsidering his recent positive remarks on Zimbabwe.
Branson was in September quoted by wire services as saying : “Zimbabwe, of all the African countries, it’s got the best chance of getting back … it just needs a bit of help getting kick-started. Only time will tell.”
Seemingly guided by the “Look East Policy”— a desperate investment bid undertaken by the Zanu PF-led government to bust Zimbabwe’s economic isolation from the Western bloc — Kasukuwere said the Brits could eat Zimbabwe’s cake last.
As the tiff within the inclusive government escalates, capital remains scarce and a huge proportion of Zimbabwe’s “bellwether friends” from the East are rolling up their sleeves to compete for relatively low-income investments with locals.
Said Kasukuwere in the presence of British ambassador Mark Canning: “Any investment that will be coming from Britain will be looked at very negatively. If you want to invest in this country, fine. But with British investment, I would use the Malaysian parlance, “Buy British Last.” He omitted to mention the quote came from Mugabe’s old friend Mahathir, long since out of office.
“You ask me why?” he said. “They come here to invest and put you under sanctions again.”
Foreign Direct Investment, which at the peak of Zimbabwe’s economic fortunes in the mid-90s averaged 20% now stands at 5% as investors look elsewhere in the region.
The government, especially Zanu PF politicians, blame controversial sanctions imposed on President Mugabe and his inner circle.
That the inclusive government represented by the main political parties — Zanu PF and the two MDC formations — is engaged in frantic diplomatic efforts to warm frosty relations between Harare and the European Union — was not enough to stop the Zanu PF minister from making maladroit remarks that are likely to scupper British investment of any kind.
Kasukuwere’s position on British investors vindicates the International Finance Corporation (IFC), a private sector lender of the World Bank which ranked Zimbabwe among the worst investment destinations in the world.
The current IFC Doing Business Report showed that Zimbabwe slipped one position to 157 out of the 183 countries surveyed owing to its reported limited commitment to enforce contracts.
Zimbabwe should play its political cards right before investment comes, business leaders said in response to Kasukuwere’s remarks.
Fred Mutanda, chairman of the American Business Association of Zimbabwe, said the politicisation of corporates by the government was enough to scare away investors. He said the country needs economic empowerment policies that will survive politics to attract capital inflows.
Mutanda said: “Government should allay concerns about political risk regarding expropriation. This applies to local investors, especially if one looks at the seizure of black-owned farms, 2004 bank closures, the Shabanie Mashaba Mines-Mutumwa Mawere matter and how the Kingdom Meikles issue was made political.”
Mutanda has business interests in the motor industry, finance, pharmaceuticals and real estate.
“The bone of contention with the indigenisation regulations is that it becomes a deterrent to new investment,” he said. “It is difficult to find a local partner with the capacity to start new projects. The policy should allow an initial 100% ownership and then a gradual reduction to 49% through an initial public offering to encourage broader empowerment. The introduction of the multicurrency system has seen Zimbabweans unable to access capital and therefore can easily partner with foreign investors,” he added.
In his bid to curry the controversial empowerment regulations which came to force in March this year, Kasukuwere cited OK Zimbabwe and NMB whose ownership structures were altered during capital-raising initiatives as examples of how government can be “flexible” on the prescribed indigenisation threshold that tallies with the “national interest”.
He however reiterated that government would not budge on the mining sector.
“We need indigenisation because how can a company export minerals worth over US$1 billion and only remit US$44 million to the state. Let’s stop living in dreamland,” Kasukuwere said.
Mashakada said Zimbabwe should remove the bad-boy tag attached to it by investors owing to dirty politics.
In a veiled attack on Zanu PF politicians, Mashakada, the deputy secretary-general of the Morgan Tsvangirai-led MDC, said no political party should claim ownership of the indigenisation exercise which came after parliament passed the empowerment bill three years ago.
Zanu PF has since announced that it will use indigenisation as an election trump card in polls President Robert Mugabe wants held by June next year.
“As politicians we tend to politicise an otherwise necessary piece of legislation. Those who are politicking the indigenisation law are saboteurs because they are vulgarising the law,” Mashakada said. “That is cannibalism. The most important issue is the sovereign risk of the country — that is in the realm of politics. People haven’t forgotten the land reform exercise that is perceived as expropriation and grabbing.”
At the turn of the millennium, the Zanu PF-led government embarked on an arbitrary land exercise that resulted in white commercial farmers owning vast tracts of land losing farms to what critics say were politically-connected black Zimbabweans.
The two ministers, however, found common ground on mining. Like Kasukuwere, Mashakada admitted that mining companies were not significantly contributing to the fiscus.
“The largest influx of investors are Chinese but their interest is extraction of raw materials. They are extracting chrome, they are in Marange (diamond fields) but we are saying they should add value,” Mashakada said. Statistics from the Chamber of Mines of Zimbabwe, project that chrome mining will outgrow other mining sectors after projecting a 147,6% growth.
Gold was ranked second with a 62% growth forecast. On the downside the chamber expects a contraction of -21% in black diamonds output. Judging by projections, financing the empowerment policy in the mining sector could be a herculean task for the cash-strapped government, currently struggling to pay the civil service modest incomes.
The CMZ says the mining industry requires up to US$5 billion in the next five years to recapitalise local mines.
On the contrary, mining companies operating in the country argue that the country’s perennial energy crisis and unsustainable costs of alternative energy stifle their efforts to beneficiate minerals.
As the two ministers critiqued each other and emotions flared, businessman Pattison Sithole frankly discouraged the apparent incoherence between the two bureaucrats.
“We have a problem in this country. We have so much emphasis on political positions and in trying to outdo one another at the expense of business. To me it’s wrong, I think we should really spell out as a country what we need to do. We need to put the economy first ahead of political interests.”
Kasukuwere however in response to politicisation of economic policies said: “I am a political animal and I need votes. So I feel that indigenisation will bring votes, I will discuss it at rallies.”
British ambassador Mark Canning was clearly dismayed with Kasukuwere’s disrespect for British investors.
“Indigenisation should be the rule of law. I can only express my disappointment at what I heard. I have worked to have British companies come to Zimbabwe,” Canning said.