Think Zimbabwe is a basket case? Just wait; it could become region’s hottest economy

via Think Zimbabwe is a basket case? Just wait; it could become region’s hottest economy – NewsDay Zimbabwe July 7, 2015

IT might not look likely today, but the unique circumstances in Zimbabwe give it the potential to become one of the most economically successful countries in Southern Africa. Rich in minerals, human capital, and opportunities in technology and finance, it has the raw materials to create a wildly successful economic environment.

Unfortunately, Zimbabwe is standing in its own way when it comes to economic success. The political environment has a heavy and often negative influence on the free market. Unemployment and underemployment are high.

According to government statistics, over half of the population is unemployed, and jobs for new graduates and students are almost impossible to find.

Although assets are inexpensive, the global market sees these obstacles as insurmountable, and chooses to invest capital elsewhere. For instance, in 2009 PepsiCo looked at both Zambia and Zimbabwe as locations for their new plant, but chose to invest in Zambia where the economic environment was more stable compared to Zimbabwe.

A PR problem

Zimbabwe has a big public relations problem. Investors are uncomfortable and lack confidence in the economy, and in the government’s ability to maintain control. It is perceived as one of the least attractive investment destinations in the world. Yet the country has the ingredients to bounce back to success – with the right policies, it could dramatically change the investment landscape in Africa.

The first step is to create consistent policies to pull the economy from the brink of its liquidity crisis.

Zimbabwe needs to attract capital to address this challenge and achieve economic growth. The mining, manufacturing, and agricultural industries are poised for explosive actualisation.

The diamonds and mining industry is particularly ripe for change. More stringent mining regulations would ensure that only competent, globally proven players are given licenses to mine alluvial deposits, rather than politically-connected individuals without the relevant experience. Mining laws emphasising transparency would increase the confidence of investors. Diamonds are a unique and rare resource, and more time and money should be spent exploring potential mines. Because this industry is fraught with corruption and potential dire environmental outcomes, any expansion should be accompanied by stringent laws and regulations regarding the technical capabilities of mining companies. This would give Zimbabwe far more revenue from this precious resource.

Pick from Botswana’s book

Zimbabwe can attract more global investors by following the lead of other countries. Botswana, for example, has implemented low taxation that allows for tax-deductible royalties. If Zimbabwe followed suit in the mining industry, it would encourage potential investors to explore opportunities here. Although profits might decrease in the short term, the additional investors that would be lured to the country would make up for those losses in the long run.

One of the biggest obstacles to the implementation of these policies is widespread political corruption. In 2012, for example, former South African president Thabo Mbeki claimed that senior government ministers had tried to extort ten million dollars from investors linked to the African National Congress (ANC).

And in 2014, an international group of investors came close to suspending a $750 million investment in New Zimbabwe Steel (formerly Zisco Steel) because of corruption and demands for bribes by cabinet leaders.

Although President Robert Mugabe has stated in the government’s new economic blueprint for the next five years – the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIM ASSET) – that combating corruption and fostering good governance is a primary goal for the government, much more must be done. The government needs to aggressively root out, pursue, and punish the perpetrators via a criminal court specifically charged with this task. This will send a clear message to investors: we are serious about this transformation.

Sort out the courts

An efficient, fair judicial system is a prerequisite for growth in any developing country. While this may not appear to directly impact the economy, the influence will create a hospitable business climate and contribute to altering global perception of Zimbabwe.

With a credible system of law and the reduction of corruption, Zimbabwe will be able to reduce the bureaucratic red tape that currently inhibits and intimidates investors. A streamlined government bureaucracy will ensure that policy changes can be made smoothly and efficiently, increasing confidence in the Zimbabwean government and leveling the playing field for all potential and current investors.

These changes are only half the battle. The country must evangelise and market the new policies. The challenges faced by Zimbabwe have been well-documented and publicised around the world. An updated global perception of Zimbabwe will encourage investment.

Zimbabwe needs to partner with international investors to succeed, but we can’t expect others to invest unless our house is in order.

COMMENTS

WORDPRESS: 11
  • comment-avatar
    spiralx 6 years ago

    Dream on. These absolutely basic requirements are clearly utterly beyond the scope of the current regime.

  • comment-avatar

    I am utterly sick of hearing about the “potential” 35 years ago Zimbabwe WAS the second largest economy after SA (and I think per capita GDP was higher)

    Yes, of course we have the potential – but what we really need is an end to a criminal dictatorship and racism that thwarts all efforts toward economic growth.

  • comment-avatar
    Simon 6 years ago

    Its easy to talk about potential and plan on what needs to be done. What do you expect when everyone expects a bribe for doing their job! CVR, Police, even to get a job. Stop talking and start acting

  • comment-avatar
    Fallenz 6 years ago

    “Investors are uncomfortable and lack confidence in the economy, and in the government’s ability to maintain control.”

    No… the problem is that the government, such as it is, is maintaining control so the crooks that run it can suck it dry.

    Completely agree with @spiralx and @kwv. The potential is OBVIOUSLY there… the proof is to remember what Zim was pre-Mugabe. Jobs, exports, infrastructure expansions, education, medical attention, investments, security, stability, modernation, civilation… but now all that is gone. Zim has sunk below a 3rd world, banana republic status into the ZANU-PF mire of corruption and diseased minds. The leaders steal from the people so they can live in luxury… and advertize themselves to be saviors of the nation. Their stolen wealth has blinded them to the shame… but, nevertheless, God will judge them every one, and they will have no defense for the murders, violence, and theft. Consider their fate, and repent lest you spend eternity joining your own screams of torment with theirs.

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    R Judd 6 years ago

    This article is a variation on “the land is the economy” rubbish pedaled by the heroes from ZANU.

    Nobody of any consequence is going to invest in any meaningful way as long as ZANU or any other like minded thieves rule this country. This is very simple, but even seemingly intelligent people do not seem to understand.

    Investments from Russia, China, Isreal and India will be by people who are even bigger thieves than our ZANU’s. Rape and plunder will be the name of the game. We have seen this business model with our diamonds.

  • comment-avatar

    The tragedy of academic arguments is that they are based on the myopic pyramid economic model schemes developed in US/UK/etc.

    Innovation is no longer an independent event but it directed from debt ridden nations. People still believe in utopian theories where the rich use script and the poor sell their resources for zero benefit.

    DEVELOP Africa USING African cENTRAL b

  • comment-avatar

    The tragedy of academic arguments is that they are based on the myopic pyramid economic model schemes developed in US/UK/etc.

    Innovation is no longer an independent event but it directed from debt ridden nations. People still believe in utopian theories where the rich use script and the poor sell their resources for zero benefit.

    Work for Africa using African fiscal initiatives only.

  • comment-avatar
    Michael 6 years ago

    John’s theory is in a way right – use African initiative to get investment – but then the country involved must be governed on a sound basis and not by people set on looting the resources and enriching only themselves.

    Unfortunately the investment in development comes from the wealthier nations in the world and is aimed at making a profit for themselves and their shareholders – but also benefit the country where investment is made through viable employment creation and payment of taxes and other charges in the country where investment is made.

    Nobody would ever invest in Zimbabwe as long as 51% of the investment capital is immediately looted by the senior participants in Government. That is the long and the short of the matter. If you invest $100 million and ends up with having only $49 million to make a profit on – you are immediately a dead duck. If the investment aimed at making a 10% profit ultimately you get a return of #10 million per year – at $49 million the return is $4,9 million an amount easily surpassed by investment elsewhere.

    I have worked for many years with economic development promotion and the trick is always the same – the investment environment you offer must be better than that of your competitors. The same principle applies in the case of Zimbabwe and that is where Zimbabwe falls short. They have a Government more interested in thieving and the main crooks in the country remains Mugabe, his family and his Mafia cronies. Get rid of them – set in a Government not interested in looting and huge investments will follow if you can make a better investment environment than other countries have.

  • comment-avatar
    Will I am Tell 6 years ago

    I’ve been hearing that ‘change is just round the corner’ since 1980. And what? Nothing.

  • comment-avatar
    Johann. 6 years ago

    Mugabe lied to investors like myself telling them to “come and invest” Sure the potential was there, the bilateral investment protection agreement was there.I was young. Yet when his police comissioner came to take my home and business my embassy told me to move off assuring me I would be back with my business or compensated. That was 11 years ago.

    The dilemma the corrupt zimbabwean government has is how to convince any investor that they won’t steal again.
    1st priority is to compensate those that had invested and been robbed.

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    Clive Sutherland 6 years ago

    Afraid it is to late for Zimbabwe to ever regain what it had 35 years ago, over the last 35 years skilled Zimbabweans across all fields have set up home and become citizens of other Countries around the world and most would not be keen to ever return and start life all over again, Zimbabwe may bounce back one day but it will be on the back of skilled foreign expatriates who will be in it for the money not patriotism.