Succession politics worsens country risk

Source: Succession politics worsens country risk | The Financial Gazette July 7, 2016

THE on-going  infighting within the ruling ZANU-PF party over who should succeed President Robert Mugabe, should the aged leader leave office for whatever reason, has made the country a worse place for both local and foreign investors.
As a result, Zimbabwe’s ratings have taken a nosedive.
United Kingdom-based BMI Research, early this year ranked Zimbabwe number 27 out of a poll of 48 African economies that were covered by a survey that sought to give global investors pointers towards individual countries’ prospects in the medium to long-term.
However, barely six months down the line, Zimbabwe has slid  12 places to number 39 on the MBI Research’s Country Risk Report.
The research think-tank, which is part of the Fitch Group, cited the fluid succession politics raging in the country as the main risk factor.
“The succession of President   Mugabe risks turning violent if plans are not put in place and set in motion prior to his departure, as competing vested interests struggle to fill the power vacuum left in his wake,” the group pointed out in its report.
“Further progress in Zimbabwe’s efforts to re-establish itself with international lenders will be largely dependent on political considerations, as the expected increase in political instability associated with President Mugabe’s succession will encourage populist measures,” the report added.
When it previously ranked the country at position 27, the think-tank cited endemic corruption, policy uncertainty, bureaucratic red tape, poor weather, the targeted sanctions imposed on the country by the West as well as a dilapidated infrastructure as some of the main factors that are militating against meaningful investment in the Zimbabwean economy.
However, because the country’s risk has of late deteriorated further, as a result of the political uncertainty resulting from the succession fights taking place within the ruling ZANU-PF party,  the country plummeted to position 39.
The other major risk factors that the research considered are the already precarious state of the economy as well as the dire food situation.
“Inflationary pressures will return to the Zimbabwean economy before year-end 2016, on the back of an increase in the money supply as a result of the government’s policy to begin printing its own version of US dollars and the reestablishment of relations with multilateral lenders.
“The effects will be compounded by the ongoing drought across southern Africa, driving up food prices, but the persistence of low fuel prices will help limit the extent to which inflation returns.
“Severe drought across much of southern Africa following the onset of El Niño will ensure Zimbabwe’s current account deficit remains deep despite a severe shortage of dollars in the first half of 2016.
“Although commodity prices are expected to stabilise over 2016, this will be insufficient to offer any buoy to exports, which will see another year of negative growth, thanks to poor production.”