HomeBusiness DigestProtests could deter potential investors

Protests could deter potential investors

In the past couple of weeks, Zimbabwe has seen a handful of relatively violence-free, but quite interesting, acts of protest.

Report by Collins Rudzuna

In one instance a political protester stripped down to her underwear in front of a foreign diplomat, while elsewhere a group of disgruntled wives of mine workers blocked the entrance to a mine.

While these two unrelated incidents make for both curious and interesting news, the question is whether they are just passing occurrences or the initial flickers of what may become a raging inferno.

Why would one expect these two acts of protest to blossom into something more than they are now? Well, to begin with, in an election year, the stripping may signal the start of more active political activism which may become more widespread as the polls draw near.

At the same time, the mine workers’ wives’ strike is bound to be compared to the violent strikes that have rocked our neighbour South Africa’s mining sector. Even though the strike involved dancing and not shooting, investors, particularly foreigners, are bound to draw parallels.

This year an old cliché applies to Zimbabwe: It is a make-or-break year, both politically and economically. It is the year in which the economy can build on the recovery achieved so far or fizzle out in an inglorious anti-climax.

It is the year in which the political compromise that is the unity government can be strengthened into a widely accepted and legitimately elected government or remain something less than that.
It must therefore be borne in mind the world is watching — an act of political protest involving stripping may be wrongly construed to be the start of 2008-esque political violence. A strike like the one at Rio Zim’s Renco Mine operation may be taken as the start of Marikana-style chaos.

Zimbabwe needs all the support it can get, and maintaining the right image is important in attracting investors and other partners. Already we are far behind our neighbours in attracting foreign investment.

Recently, Wesizwe Platinum of South Africa managed to secure a US$650 million loan from China Development Bank despite tumultuous labour relations in the country’s mining industry.

Development projects in Mozambique’s coal fields have reportedly received funding to the tune of billions in recent years. By comparison Zimbabwe’s mining and other industries have so far received limited funding from outside. Pundits point to the high risk premium which is, rightly or wrongly, attached to Zimbabwe by foreign investors.

In a world economy that is still battling to find a firm footing, economies such as ours which are largely commodity-based, relying on primary industries such as mining and agriculture, would do well to attract as much support as they can.

The annual World Economic Forum is currently underway in the Swiss mountain resort of Davos and is running under the theme “Resilient Dynamism”.

Players in the world economy are focused on the risks presented, particularly by the current precarious state of the Western economies and how to survive them. The big economies are feeling the pinch and the effect will be even more pronounced for small vulnerable economies like Zimbabwe.

Still at home, some sections of the media suggest an agreement has been reached regarding the draft constitution. Most people have not yet had a chance to see exactly what the new proposed constitution says, but the fact an agreement has been reached at all is positive.
Hopefully this is the first sign uncontested free and fair elections are on the way.

Should this come to pass, then it will pave the way for relaxation of the negative perception on the country and reduction of the much-talked-about political risk premium. With some luck an increase in investor traffic will follow, especially if unclothed protesters do not up the ante and turn their protests into the violent ones similar to those that rocked the country in 2008.

At Renco, the strike continues, but has not turned violent. Any hint of violence may see investors fleeing, as some did when violence broke out at mines in South Africa.

Apparently, a member of parliament has reportedly joined in and declared that he has “taken over” the mine and is now the new general manager. For the sake of maintaining investor confidence we hope these reports are untrue. Investors do not take such actions lightly and can be quick to take their money elsewhere.

Activity on the stock market in recent weeks suggests that so far foreign investors are unfazed by these isolated acts of protest and have not read more into them than is obviously apparent. Blue chip stocks have enjoyed bullish trading, driven by demand from foreign investors.

Hopefully, things will remain peaceful and investors will continue to support the local stock exchange and the economy at large.

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