Maravi

(TALKZIMBABWE) The Future of Zimbabwe

The Future of Zimbabwe
By: Prepared by Mike Moon - World Economic Forum
Posted: Sunday, May 9, 2010 3:48 pm

THIS session brings together the three leaders of the Government of National Unity at a critical moment in Zimbabwe’s history. With progress being made in reconciling historic differences, Zimbabwe's economy has shown signs of recovery largely driven by the introduction of dollarization in January 2009, which helped to stabilize inflation and increase investment.

(However, concerns remain as to the cohesion of the current government. The recent indigenization bill passed in parliament has caused concern for both international and local businesses.)

What is the future of Zimbabwe under the current Government of National Unity, and how are investors and businesses adjusting their operational strategies to recent developments?

This session is on the record.

Key Points

• Zimbabwe’s Government of National Unity has declared a unity of purpose and direction and says much progress has been made in reconciliation between former adversaries

• The government is calling for the removal of targeted sanctions against selected individuals in the administration, saying this is essential to attract much-needed investment

• The controversial “indigenization” programme of transferring control of foreign-owned companies into Zimbabwean hands is said by the government to be essential to prevent Zimbabwe’s people being onlookers in their own economy – though its implementation is still under discussion

• The economy has been stabilized through dollarization and new economic policy frameworks are being put in place

• There are a number of positives for potential investors in Zimbabwe, but also perceptions of risk arising from policy uncertainty

• Preparations are being made to ensure that the results of future elections will not be contested – as happened in 2008

Synopsis

Political leaders in Zimbabwe are working together to turn around the country’s economy, which shrank by about 50% in a decade. While there are differences of opinion on detail, there is a willingness to progress.

The government says the fact that certain people in the coalition cannot travel abroad due to targeted sanctions imposed by Western governments does not acknowledge or endorse the progress that is being made in Zimbabwe and, therefore, creates the impression among potential investors that the country is dysfunctional and an international renegade. Factory plant companies and arms manufacturers are also refusing to provide spare parts for Zimbabwe’s ageing machinery and weapons systems.

The unity government has been working on what it terms “stabilization economics” and is now concentrating on growth economics, which it says require sanctions to be removed. The Southern African Development Community, the African Union and its neighbour South Africa have all called for an end to sanctions.

The indigenization programme is seen by the government as an essential empowerment strategy for the people of Zimbabwe, confirming their ownership of all aspects of the country following colonial rule. However, while they might support its intentions, Zimbabwean business people believe it sends out the wrong message to potential investors. It was stated in the session that empowerment of the citizenry through indigenization does not constitute nationalization of private companies. Discussions are underway to try to ensure that it is applied in a broad-based way, benefiting as many people as possible and avoiding an elitist exercise. A framework could be established to set sector-by-sector thresholds for local ownership to avoid a one-size-fits-all rule for the transfer of shareholding – though some elements in the government have said 51% local ownership will apply generally.

Dollarization of the currency has halted rampant inflation and the government is working hard to create a welcoming environment for foreign investors. Policy consistency and certainty are preoccupations of the administration. Local companies might well be undervalued and present attractive opportunities to those who ignore risk warnings and take the plunge by investing in Zimbabwe. Likely return on investment is higher than in most countries in the region.

From an investor’s perspective, Zimbabwe might not present a particularly large market, or currently have the levels of economic growth available in other countries on the continent, but it does have some competitive advantages. Foremost among these is a well-educated population that provides rich managerial potential. Also favourable is the large number of good companies that have come through tough times in lean, mean shape. While dollarization has stabilized the currency, perceptions of macroeconomic instability remain. These are mainly the result of policy uncertainty, which makes it difficult for investors to make earnings projections.

While the government is currently displaying a show of unity, many Zimbabweans are concerned about what will happen when new elections are called – dissolving the unity pact and throwing political parties into opposition with each other again. The government said a future election date had deliberately not been set as the country is in a healing phase that might be destroyed by going into election mode. Negotiations will try to level the electoral playing fields to ensure that voting results cannot be disputed.

Runa Alam, Chief Executive Officer, Developing Partners International, United Kingdom
Kuseni Douglas Dlamini, Chief Executive Officer, Old Mutual, South Africa; Co-Chair of the 2010 World Economic Forum on Africa; Young Global Leader
Shingi A. Munyeza, Group Chief Executive Officer, African Sun Limited, Zimbabwe
Robert G. Mugabe, President of Zimbabwe
Arthur G. Mutambara, Deputy Prime Minister of Zimbabwe; Young Global Leader
Bongani Ncube, Global Changemaker
Morgan Tsvangirai, Prime Minister of Zimbabwe

Moderated by
Julie Gichuru, Group Digital Business Manager and TV Host, Royal Media Services, Kenya; Young Global Leader
Klaus Schwab, Founder and Executive Chairman, World Economic Forum

Contributors

Runa Alam
Kuseni Douglas Dlamini
Shingi A. Munyeza
Bongani Ncube
Julie Gichuru
Klaus Schwab
Robert G. Mugabe
Arthur G. Mutambara
Morgan TsvangiraI

Labels: WORLD ECONOMIC FORUM

posted by MrK @ 6:37 PM