ZIMBABWE’S economic recovery prospects look bright if Finance minister Tendai Biti and the International Monetary Fund (IMF) predictions are anything to go by.
But several challenges, including cheap politicking and general discord within the government of national unity, might derail any such prospects.
Top of the list is President Robert Mugabe’s continued calls for polls, government’s failure to revise controversial indigenisation regulations, high utility bills and energy costs, and power outage.
A quick glance at listed companies’ financials will show that energy bills and incessant power cuts have proven to be costly and further inhibit companies’ growth, and resultantly the economic recovery.
Power is vital to any economy’s survival and growth. This seemingly obvious and globally accepted fact unfortunately needs to be knocked into government’s head. Despite a predicted power shortage in the region more than a decade ago, government did not do anything to address this grave challenge. Instead, government quickly went into an auto-destructive mode which saw inflation spiraling out of control.
Indigenisation regulations compelling foreign-owned companies with a net asset value of US$500 000 to dispose of 51% of shareholding to black Zimbabweans have also not helped the situation. International fund managers and investors have simply made the logical choice: withholding capital to Zimbabwe until the government talks a little more sense.
Imara Asset management boss David Lenigat could not have captured the problems the economy is facing better at a Mandel Economic Outlook Symposium on Monday in the capital.
He said: “There is no shortage of capital in the world, there is plenty of it. But it wants to go where it can achieve the highest returns for the level of risk that is taken. I think indigenisation is one major area that is restricting the availability of capital.”
This is not the first time such advice has been granted. Last year, a senior Johannesburg Stock Exchange boss Russell Loubser offered the same advice during his visit. He, like Legat, hammered the same point home: investors have a choice and can go anywhere else.
But curiously such advice has not been heeded. Worse still, the invasion of lakeshore properties in Harare has not helped Zimbabwe’s reputation as a safe investment decision. Though apologies from the likes of Vice President Joice Mujuru are welcome, damage unfortunately would have been done.
As such, our government needs to deal decisively with such issues as indigenisation laws.
Another area that needs urgent attention is our electricity sector.
Without adequate power supplies, economic growth will remain but a pipe dream. As such it is important for government to ensure that a conducive investment climate prevails in order to attract investors with deep pockets, such as the ones needed for Rio Zim’s Sengwa electricity project, to invest in our power industry.
Economic Planning and Investment Promotion minister Tapiwa Mashakada might know what needs to be done, but as long as he is handicapped by the continuing feuding in government, Zimbabwe will continue to suffer as an investment destination.
He too fears that there are people in and outside government bent on arbitrarily taking over companies under the guise of empowerment and has rightly warned that the plan could paralyse the economy.
Stanbic Bank chairman and renowned corporate lawyer, Sternford Moyo, told delegates at the symposium on Monday that empowerment regulations could trigger expropriation of properties, a development that could result in massive capital flight.
“It (indigenisation) has raised the ugly possibility of violation of property rights,” said Moyo. “It has been received with such a strong mixture of emotion, suspicion and fear that it has been very difficult for rational discussion on the way forward to take place. Very little attention has been given to possible ways in which to respond to and mitigate the negative effects of the legislation.”
While government projects strong economic growth, that won’t be possible so long as property is vulnerable to opportunistic attacks and ministers are pulling in different directions.