‘We must be a destination where capital feels safe’

Source: ‘We must be a destination where capital feels safe’ | Sunday Mail (Local News)

On Thursday, President Emmerson Mnangagwa sat down for an extensive interview with Bloomberg correspondents Matthew Hill and Prinesha Naidoo to discuss his administration’s efforts to revive the local economy. Below are excerpts of the interview

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Q: We were quite interested in getting updates from yourself about specifically the economy. . . How have things been progressing with Zimbabwe’s economy since you took office in August?

A: Well, after the elections of July last year, I earned a five-year mandate to run the country and implement my own vision of what I believe is necessary in resuscitating the economy of Zimbabwe.

We have embarked on a process to reform the economy with a view to achieving an economic environment where Zimbabwe again can attract foreign direct investment into the country.

To do so, we have a three pronged approach: one, we have a new foreign policy which is critical for us to be embraced by the international community with a background that Zimbabwe has been isolated for the past two decades, and it is not prudent for us to continue in that status; it is necessary we get re-engaged with the international community and I believe that in regard to that front we have achieved significant progress in that the EU, which has slapped sanctions on us, has removed most of the sanctions against Zimbabwe.

And we are having positive contacts with major players – member states of the EU – countries like Germany, France, Belgium, Italy and so on.

Also at a bilateral level with the United Kingdom, we have exchanged envoys at ministerial level several times – I think three times at the ministerial level – so we are having positive indications from London with regard to re-establishing our warm relations with United Kingdom.

With regard to America, really there was no political and economic relations existing at all between Zimbabwe and United States of America, but since September last year – that is after the elections – I led my delegation to New York.

I am pleased to say that President Trump was able to send a team of five led by Assistant Secretary (Bureau of African Affairs at the US department of State), Ambassador Tibor Nagy, who met me in New York and we put our case to the Trump administration that we felt that we should revisit the issue of our relations with the USA, and that one of the constraints in relation to the restoration of such relations would be the removal of Zdera, which has been principal in constraining accessing lines of credit by Zimbabwe from the Bretton Woods institutions – the IMF, the World Bank, the IFIs and so on – and other institutions where America has influence.

We were, over the last 18 to 19 years, not able to secure lines of credit, so we felt that under the new dispensation, really there was no quarrel between us and the Americans.

The land reform is behind us and is irreversible, and actually it has benefitted the common person or common household back home.

But that is the political approach where we are seeking re-engagement with the international community.

But critically, we have to introspect ourselves as a country and as an economy as to what do we do because if we have to attract foreign direct investment into the country, we must be a destination where capital feels safe to come, and to do so we had to introduce various economic reform measures to attract global capital into our jurisdiction.

This involved, initially, the removal of the Indigenisation Act, which meant that any foreign investment into the country will come at a level of 51 percent domestic and 49 percent foreign; that was removed and of course we left the issue of diamonds, platinum.

And in October last year, we removed that restriction and it is now open.

Then of course we have to say on the issue of the cost and ease of doing business, what is necessary?

We identified several constraints like even the registration of business in Zimbabwe, it would take something like 90 days. . .for a person to come into the country and register a company.

Now that has been reduced; I think it can be done in a day or so in Zimbabwe.

Also we discovered that if the investor came to Zimbabwe, if he wanted to have a project which required to know what facilities existed – say with regard to the importation of machinery or input into the project – what transportation is available in terms of roads and rail, to do so the investor would move from one office to the other. . .If (he wanted) water, he had to go to the ministry of water; if it is electricity, he would move to the ministry of electricity; if it is registration of licences, a different ministry; if it is for permits, a different ministry of permits and so on.

Repatriation of dividends, a different ministry, so the investors would spend up to three to four weeks before knowing precisely what is required to set up company in Zimbabwe.

So looking at other countries that have attracted a lot of foreign direct investment in their countries, we realised that these issues are solve d by a one-stop shop, where an investor would get all the information in one place, and that we have done.

And we have created what we call Zida – Zimbabwe Investment Development Authority.

There is a Bill going through Parliament, but in terms of policy we have already implemented it and it is now easier: you come there and within two days you know whether you have to remain in Zimbabwe or you should pack up and go because you get all the information within that period.

And there are various other issues like licences, the documentation required, and so on, and the availability of information online is now possible. So all those things we have implemented.

As a result of that, of course, Zimbabwe has now been upgraded in terms of the index in the ease of doing business, but we continue to do more things.

Then, of course, we have the issue infrastructure development in the country, we have the issue of a collapsed economy, which requires to be resuscitated.

And then because of the history of the economy, we have to see which sub-sectors of the economy which lend themselves easily to the revival or resuscitation, so we identified that agriculture is easier for us to resuscitate because the land is already there.

Putting aside the issue of climate change, water is there; it is a question of us crafting a policy for agriculture to modernise it and to mechanise it in order to have each single hectare to produce more.

Now, in that regard, in the area of agriculture, for instance, we produce cotton and tobacco.

With regard to cotton, we introduced a support scheme for our farmers by Government, where we provide inputs for growing cotton, and production has gone up.

But then, we only have capacity to utilise 30 percent of the production; that is processing cotton, but the other 70 percent we have to export raw.

Now, that is exporting not only revenue and income, but it is also exporting jobs.

So it is necessary that we have to see what is necessary for us to attract textile industries to come into Zimbabwe so that we beneficiate our cotton on that regard.

If we look at tobacco, again we are producing more tobacco now than ever produced before we were independent – under Ian Smith.

Again, with regard to that, we export our tobacco raw; there is very little that we do in regard to processing the tobacco into cigarettes, so we are saying that in agriculture, we should identify production – what is necessary to do production. We must also identify agro-processing.

Firstly, what can be processed? What can be beneficiated out of the production?

Thirdly, the marketing – who is responsible for marketing our finished goods and so on, and how do we find a market? So that chain we are addressing it and we have to look for best practice elsewhere so that we understand what is happening.

Then the other sub-sector which I think does not require much travel is the mining sector because fortunately Zimbabwe is endowed with huge minerals of various types.

I think it is easier to ask our people what minerals we don’t have. . .Whatever you mention in terms of minerals, we have.

Recently, I have been happily surprised. I was talking to some of the American businesspeople who are at this conference (12th US-Africa Business Summit) who were saying, look, besides China, I think Zimbabwe is second in having what they call rare-earth minerals, and they say these are very valuable, but we have been sleeping on them; we didn’t know that they were useful. . .

Anyway, this is an early discovery as far as we are concerned at Government level and policy level, but I am informed that this is a very lucrative discovery and we should begin to look at how we can exploit (them) because; one, we don’t have the technology; two, we don’t have the skills; three, we don’t even know what we have, except what we were told by other people that we have, so it is quite pleasant that we have that, but generally the mining side, the same that I have said about agriculture applies.

If we look at our diamonds, we have now introduced a new diamond policy in the country, but it is necessary that we go through the beneficiation process. We don’t have the skills, we don’t have the capital, but we know where we want to go, so we are cooperating with countries like Botswana, which already have a long history in the diamond industry and see how much assistance they can give us, but as we move, perhaps we will also be able to do the mining, the polishing and the marketing, but as of present, we are trying to improve ourselves on the issue of mining the diamonds, because in the past people who would herd cattle would use the diamonds with catapults to kill birds; they didn’t know they were useful.

Now we know that diamonds are very useful and so it is necessary that we establish polishing entities in the country and to do so we need skilled labour, skilled technology for that purpose, but if we do it at our own pace it might take longer.

So it is necessary that we go to our neighbours who we think can assist us grow and modernise that sector . . .

Q: Have you been talking with major companies? The obvious thing is De Beers to come in with technological aspects of extracting those diamonds?

A: Unfortunately, we are not talking to De Beers. We are talking to Botswana, which uses De Beers.

The reason is very simple. For a long time we didn’t know we had diamonds, but De Beers was in Zimbabwe and was carrying our soil to go find out whether the soil had diamonds or not for many years, with trains carrying soils to South Africa. We thought they were stupid: how can people carry soil? But we now know that that soil was possibly with some diamonds. . .Then the former administration banned the participation of De Beers in our country.

But now we are using Botswana and Botswana is predominantly assisted by De Beers, so again we are accessing De Beers’ technology through Botswana.

We are also going to have Russia’s Alrosa. When I visited Moscow, I discussed with Alrosa and they are willing to come and also use their expertise in that area.

Then of course we have platinum.

In the past platinum was being exploited by Anglo American, but now we have one or two new companies that have come in in that sector and we believe that besides South Africa, on the continent, we are number two in the availability of proved quantities of platinum in our country.

Then gold, we have plenty of gold. What was happening in the past, we didn’t have the capacity or the machinery to mine gold, but now it is increasing on a yearly basis.

Two years ago we were around 18 tonnes, the following year we went to 23 tonnes, last year we went to 33 tonnes.

This year we are likely to go to 40 tonnes. And we believe that in four years’ time, if our projection and programme with regards to the exploitation of gold stays on course, we are likely to reach 100 tonnes.

So again, with that, despite the sanctions which we are having, the economy can actually grow.

Our GDP has now increased. He (Professor Mthuli Ncube) tells me there has been growth, and I believe him.

So we are happy with that, but beyond that we have chrome in abundance and we were exporting both as lump chrome and as well as ferro-chrome.

We are looking now at chrome fines for export also. I understand 70 percent of our chrome is in the category of fine chrome, but in the past we were focusing on lump chrome.

Then we have lithium; it’s a new discovery. We only began late last year.

We don’t know what impact it will bring onto the economy. And we have other minerals.

Then we have the issue of the necessity of infrastructure development.

Now, it’s an area we want investment in – the road infrastructure, the rail infrastructure.

In the past, we used to export cargo up to 23-million metric tonnes per year, but this had come down to about four million metric tonnes per year, but it is projected to grow very rapidly to about 12 and 14-million metric tonnes within the next two years or so.

But we believe that before five years is out, we may reach 20 million metric tonnes when we do export our coal, our chrome and other service goods or cargo.

Q: Would that be via road or via rail?

A: Those are about rail; this is why today I spent about one-and-a-half hours or so at Maputo Port.

There was a time when Zimbabwe was the predominant user of this Maputo Port, but now as a result of two decades of isolation and the collapse of the economy, South Africa is now the predominant user of this port, primarily because most the ports in South Africa are now congested, so they are moving their cargo northwards to ports like Maputo, but the Maputo Port is fortunately expanding and getting modernised, and they are deepening the berth at the port and the projections are that the cargo from Zimbabwe, according to them, is continuously rising.

We export our chrome, our sugar and so on. So we are happy with that but we are also looking at the possibility – not actually the possibility – but at the joint cooperation with Mozambique and Botswana for the construction of two new ports: one north of Beira and one south of Maputo.

And the discussions are quite advanced with regard to those two projects.

Now, with regards to climate change, yes, we have several, I think nearly 10 000 water bodies inside Zimbabwe, but our weakness is that we do not have adequate irrigation infrastructure in the country and for that reason we have determined after research – our feasibility study – that it is necessary that we have something beyond 350 000 to 400 000 hectares under irrigation.

If we do that, we guarantee the production of adequate food security in the country, so we are on that programme and Spain is assisting us in that direction and with regard to the provision of centre pivots.

It is a slow process, not because Spain has no capacity, but we have limited financial capacity to increase the pace of making our irrigation programme move fast.

But we are on course, we know what we want to achieve. Once we have that 400 000 hectares under irrigation, we are guaranteed – whether there is good rain or there is no rain – we can irrigate.

And of course we have also identified areas around the Zambezi Valley, where we may have 100 000 hectares being cleared and we have many companies from India and China who are interested to come and take pieces of land there. The Zambezi River has lots of water for irrigation both in summer and in winter seasons, and that process is on.

The delay has been of course the construction of roads and we are busy now.

I think the road is now advanced towards Kanyemba, where we would like to open roads so that there is infrastructure towards that area, then agricultural projects will then function because in the past there was no way to reach the area. It was only by air.

Then there is the issue of energy. We realise that the projection which we have, if are going to attain middle-income status by 2030, we need a minimum of 4 000 MW of power, so we have several projects in the country which are aimed at achieving that objective.

Yes, we already have the Kariba South project which is now giving us (an additional) 300MW, but unfortunately Kariba Dam itself has gone down because of water levels and generation has, in terms of those that advise us, been reduced drastically and we are now suffering lack of adequate energy in the country.

Also China is supporting us with thermal power generation project at Hwange, which will give us another 600MW of power, but we still need more.

This is why this morning (Thursday) I had discussions with GE – General Electric.

This is an American company. We have given them a project on the Zambezi – the Batoka Gorge.

That one will give us 2 400MW and of the 2 400MW, half of that will go to Zambia; half of that to Zimbabwe.

And Zimbabwe and Zambia have agreed on this project.

We have already agreed that we give it to China Power and GE together – it’s a consortium of those two companies. So we are happy. But it is critical that we move fast on that front because it is necessary that as we industrialise, we need electricity. . .

With regard to the issue of electricity, barring the issue of climate change, things were on course.

We had seen the need for generating more electricity; this is why we have those various projects I have mentioned.

There are smaller ones which I have not mentioned, but that was the issue: to make sure that we have adequate energy generation, but since I have been here, I have discussed with my counterpart, the President of Mozambique (Filipe Nyusi) to look at Cahora Bassa assisting us.

Yes, we are weak on the financial side, but it is possible for us to strike a relationship where we can access the amount of power we need, the deficit we need to cover from Cahora Bassa and I think that is going to be consummated very soon so that we go back on course, but also we continue to implement our own projects in regard to that.

Then of course there is an issue which is critical also for any economy: this is the question of currency.

I am not aware of any country which has no currency of its own, but that is not my field – I am a lawyer – but except for Zimbabwe I haven’t been told of another country which doesn’t have its own currency.

Even poor countries have currencies from what I hear, so we intend to introduce our own currency.

This is the instruction I gave to my Minister of Finance – “can you work towards the realisation of the objective to have our own currency!”

He says, yes, he can do it. And I said can it be achieved by end of year or first quarter of next year?

He said, “yes”. With time we will tell whether it’s true or not.

He says there are still fundamentals that must be out in place, one of which is it must be anchored by reserves . . . at the end of the day, we need a currency of own. . .We give them the political objectives which we want to achieve and they must produce results.

Q: How confident are you that you will have a new currency introduced by the end of the year or early next year as you target and what form will that currency take? Will it take over from the RTGS or will it be something completely new??

A: Currently, we have a basket of currencies. . .My objective is that all these will not be legal tender in Zimbabwe.

It won’t be unlawful for anyone to possess these type of currencies, but to use them as a medium of transaction in our economy will not be lawful.

You need to go to the bank or to the bureau de change and change the money to a local currency.

The name of the local currency? You know Deng Xiaoping of China? The cat doesn’t need to be white or black as long as it catches mice, so the name of the currency to me is not a critical issue; the critical issue is we must have a domestic currency by whatever name.

We must have a domestic currency so that that will be the currency which we will use for transactions in the country.

Anybody who has US dollars or a tonne of pounds must go to the bank and change and transact. . .the money supply will relate also to our GDP; it will relate to the volume of assets we have; to development of infrastructure in the country.

But now with these other currencies there is nothing we can do, except we earn it by exports, Diaspora remittances, FDI, or we have a plethora of NGOs. But again it’s problematic.

You cannot determine the amount of money supply in the economy.

So it is necessary that we have our own currency, and we are on that programme.

My ministers and the Governor of the Reserve Bank are on that programme. And they assure me that (all) things remaining equal there should be able to achieve that.

For instance, I have been in Government for 38 years as minister, I cannot remember a time we had a budget surplus and now this young man (Professor Mthuli Ncube) has been able to achieve a budget surplus in less than eight months, so I think what he tells me is possibly true.

I have said that we would achieve that either before the end of the year or by the end of the first quarter of next year.

Q: Your Excellency, given the economy has rebased to the RTGS dollar, will that, from a practical standpoint, be the frontrunner when it comes to having Zimbabwe’s own currency?

A: I think at the time it was rebased the RTGS dollar and the US dollar was 1:1, so there was really no difference.

Now that we are on the task to revive the economy, it was necessary for us to rebase the economy and it went up to about US$25 billion now.

And I believe that with the things we are doing in various sectors of the economy – in industry, in tourism, in agriculture and so on and so on – I think that our GDP is going to grow, and I have no doubt that the issue of it being RTGS or not is not critically important. But the fact of the matter will be that, you see, wealth creation is in progress. We are having our volumes in platinum going up on a monthly basis; in diamonds, on a daily basis; in chrome, on a daily basis; in other minerals, on a daily basis. So I don’t see any constraint that will again drive us back, unless we change our policies.

For now we are focused on reforming our economy so that we become competitive in the world market. . .

For the last 20 years, the machinery in our manufacturing sector became obsolete – you cannot use this machinery now in place of new technology.

To catch up with the rest of the world, the rest of the global market, we need not to depend on our own resources to grow – we need to be attractive so that we can leapfrog the growth of our economy through lucractive engagement of foreign investments into our country. . .

And of course there is the need for skills. We are also discussing with the institutions of higher learning so that they churn out students that relate to the level of economic development and skills, and also approach friendly countries to assist us in that direction. Today is a world of ICT, so Zimbabwe cannot remain behind. We have to speak to the young generation who understand what the ICTs are about . . .

The issue of smart cities, smart agriculture, smart manufacturing, we would want to know what that means. We can only do it by bringing into our economy those countries or those companies who are already in that sphere of development into our country. . .

Q: On the ownership of Darwendale (platinum project), is the Zimbabwe Defence Industries still a shareholder in the project?

A: No! They have since moved out. We have removed the Zimbabwe Defence Forces.

It’s now owned by a private company. We moved out the army, which had initially been part of the shareholders. So it’s now 50-50: fifty percent is now owned by the Russian company and then (the other 50 percent) by a local company which bought out the army. . .I think we consummated this a few weeks ago. . .

COMMENTS

WORDPRESS: 1
  • comment-avatar
    Ndebele 2 years ago

    Eddie Cross has now metemorphed into a new Nutty Professor Jonathon Moyo. Everything that ED and Zanu do is the work of a genius and the new currency will solve all the problems. The 20 000 genocide is not an issue and the destruction of agriculture by Zanu is a wonderful new order. Load shedding for 18 hours a day, with no fuel and 100% inflation are all excellent for the people of Zimbabwe we are now told.