HomeLettersZITF: Economy bears brunt of disastrous govt policies

SMS The Independent

Now in its 53rd year, ZITF still ranks as one of sub-Saharan Africa’s top trade expos despite a significant decline in exhibitors from 800, in 2011, to 675 this year, a general trend over the years.

 

Trade fairs are marketing events at which the fundamental products and innovations of an industry or sector are exhibited by a variety of companies, exhibitors, targeting interested buyers and industry participants – the visitors. Trade fairs are usually organised by governments, chambers, industry associations or specialised exhibition companies.

The events represent a real-time, interactive environment bringing together supply and demand, promoting the formation and growth of markets and market segments. The three main economic functions of trade fairs include the exchange of goods, sharing of information and promotion of products and organisations.

The largest and most important trade fairs on the African continent take place in the southern part of Africa, especially in South Africa. The southern African exhibition programme of the agricultural sector, for instance, is manifold. There are trade fairs for the timber industry, exhibitions of the commercial foods sector and, of course, internationally renowned wine fairs.

The food, agriculture and consumer protection section of the German embassy in South Africa provides a listing and information about agricultural trade fairs and exhibitions in Southern Africa.

Zimbabwe is one of the major players in trade fairs in the region. During the current trade fair in Bulawayo, the most notable thing is the return of European countries, namely Italy, Germany and Poland to showcase their companies and products. Strained diplomatic relations between Zimbabwe and the West is one of the key reasons why American and European companies are barely represented, while China’s 170-strong delegation dominates partly because of the government’s “Look East policy” which has helped strengthen trade relations between the two countries.

Themed “Investing Locally, Reaping Globally”, the trade fair echoes government’s current indigenisation and empowerment policy which, in principle, seeks to offer more equitable economic ownership to Zimbabweans, but in reality, has the look and feel of a disastrous expropriation or nationalisation policy.

Although ZITF is widely expected to attract foreign investment and business partnerships for local industry, Zimbabwe, which has so many opportunities, does not provide an attractive business climate. The current indigenisation policy which requires foreign-owned companies to cede 51% of their shares to indigenous Zimbabweans has created deep rifts within the coalition government, particularly between Indigenisation and Empowerment minister Saviour Kasukuwere and Prime Minister Morgan Tsvangirai. Kasukuwere insists the policy would be applied across the board while Tsvangirai and Finance minister Tendai Biti have strongly criticised that.

Reserve Bank governor Gideon Gono, while emphasising he supports the principle of indigenisation, has vowed to resist any plans to indigenise the “sensitive” banking sector. Gono has said the sector is already in local hands and anyone who wants to open a bank is free to come and get a licence. Recently, Biti and Gono, apparently targeting Kasukuwere, said those clamouring to take over the banking sector must first show that they are able to run banks already under their control instead of grabbing and ruining more institutions.

Kasukuwere’s refusal to pay for mining shares in foreign-owned companies, saying “why should we pay for minerals that belong to us?” all but confirmed the indigenisation campaign is a poorly-disguised expropriation or nationalisation agenda similar to the land reform programme in many respects.

Globally, Zimbabwe ranks 171 on the World Bank’s Ease of Doing Business Index 2012, down three places from 168 in 2011 and a few bars above struggling countries like Eritrea, the DRC, Chad and Haiti.

Restrictive and regressive government laws, a simmering liquidity crisis in the banking sector and an unsustainably high trade deficit of more than US$3 billion and many other socio-economic factors, as well as a US$9 billion debt, make it difficult to do business in Zimbabwe, unlike in Mauritius, the island of economic success, currently ranked at 23 or South Africa, the continent’s economic powerhouse, placed at 35.

The situation is made worse by the protracted political stalemate caused by disputed elections which has been dragging for more than a decade. The looming elections further exacerbate the crisis.

All these factors, including macro-economic instability, combined have ensured Zimbabwe has a high political or sovereign risk profile, something which investors fear.
At the opening of the South African exhibition stand at ZITF, the country’s deputy Trade and Industry minister Elizabeth Thabethe praised Zimbabwe for its trade policies and saw ZITF as an opportunity for “concerted African regional integration and value addition to our businesses”.

Thabethe also encouraged local industry to partner with South Africa, whose delegation comprises more than 30 exhibitors. Although Thabethe’s views were encouraging, the trouble remains ensconced in the business environment and legal framework  which makes investing in Zimbabwe difficult.
Once the industrial hub of Zimbabwe, Bulawayo’s industries now function at 60% operational capacity. Analysts say up to 100 companies have closed or relocated from the city at the height of the economic meltdown and hyperinflation, leaving over 20 000 workers jobless. The city hosting the trade fair is now virtually a “ghost town” as companies shutdown en masse.

Acknowledging the crisis Bulawayo mayor Thaba Moyo said: “The trade fair is coming at a time when we are having many challenges as most companies in the city are finding it difficult to operate. A total of 87 companies have closed or relocated from the city.”

For the time being, the fair will provide a short-term economic relief to the city as hotels are booked up and leading shops record high sales. However, the much-needed long-term benefits like investment will remain unattainable as investors are repelled by the hostile business environment and laws like the indigenisation statute.

The closure of companies has also affected Bulawayo city council itself as this has led to loss of revenue. Council, which is in dire straits, is currently negotiating to end a strike by 3 200 council workers over unpaid salaries that amount to US$700 000.

Refuse collection has come to a standstill in some areas and council-run clinics in poorer high-density areas are turning away patients. At a time when Zimbabwe is trying to showcase itself to international visitors, frequent city-wide water and power cuts and unrepaired burst water pipes in the City of Kings paint a dismal picture of the situation. The Bulawayo situation reflects the state of the nation.

Chinese exhibitors have been hailed as “investors” in official circles, but exhibitors and visitors who usually pack the trade fair do not necessarily translate into investors.

Although China’s US$560 million investment has brought immense benefits for Zimbabwe, the country’s controversial approach to resource extraction in Africa has sparked criticism of it operating like an exploiter of wealth rather than an investor.

At ZITF 2012, China hosted a Zim/China business seminar and reports say the China Development Bank may invest up to US$10 billion in the country’s agriculture and mining sectors.

Claiming its title as an emerging world business power, China currently hosts the world’s largest trade fair, the Canton Fair in the Olympic city of Guangzhou. The fair usually has 23 000 exhibitors from all over China and beyond and has a holding capacity of 1,2 million people, which is 10 times more than ZITF’s 146 000 visitor peak of 2011.

While China reaps the benefits from its trade fairs, Zimbabwe is struggling to due to the political situation, business environment and legal framework which are not investor-friendly.

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