Zimbabwe's Ongoing Chaos Continues to Deter Foreign InvestorsOctober 18, 18
Less than a year since Robert Mugabe was ousted from office, confidence is dimming among investors that Zimbabwe is a safe place to do business, with the country's economy again spiralling out of control.
Just five months ago, Botswana Diamonds signed a Memorandum of Understanding with gold miner, Vast Resources, with the firms agreeing to exchange information derived from past exploration on areas prospective for diamonds in Zimbabwe.
And Sergey Ivanov, ALROSA's CEO and Chairman, reportedly held meetings with Zimbabwe’s President Emmerson Mnangagwa regarding diamond exploration investment opportunities. Ivanov said that he sees huge potential for the diamond business in partnership with Zimbabwe in new projects and the use of the Russian miner's technologies and expertise in exploring for new diamond deposits in Zimbabwe.
Upon taking office, As President Emmerson Mnangagwa made a point of repeating to the media that the country is “open for business”, following decades of disastrous misrule by Mugabe. But Zimbabwe is still feeling the impact of Mugabe's wretched legacy. The dollar-linked economy was backed by practically worthless bond notes for foreign exchange.
Meanwhile, the new government’s reaction to the crisis has been disappointing, to say the least, imposing austerity measures on a population that is largely living on the edge makes little sense. It has released contradictory statements about the course it intends to chart, and that has led to an explosion of suspicion and fear among the general public.
As a Council on Foreign Relations report said this week: "The vice president has threatened and scapegoated business owners, accusing them of price gouging and hoarding. Scores of trade unionists were arrested for protesting, or planning to protest, a new two percent tax on electronic transactions – essentially an attempt to squeeze the deeply impoverished population even more to address economic shortfalls. State media trumpets headlines about breakthroughs with the international financial institutions or new investments from abroad, but closer inspection tends to reveal far less than meets the eye.
"Confusion, repression, and misdirection seem to be the distinguishing characteristics of the “new dispensation,” and they contribute to citizens’ fundamental lack of confidence in government. The recent elections were supposed to bolster the legitimacy of the government and give Zimbabwe a solid new basis on which to move forward. But little seems solid and reliable in this new era – including, as the European Union recently noted, the election results themselves."
Despite the appointment by Mnangagwa of a technocratic administration, investors are reportedly staying on the sidelines rather than entering an uncertain market.
The country is suffering from extreme foreign currency shortages and level of inflation that even descriptors like "hyper" fail to adequately describe, with inflationary pressures worsened by rising parallel-market foreign currency rates since the official exchange in meaningless.
Unfortunately, despite new ministers having been brought in from the private sector, such as the highly regarded economist Mthuli Ncube as finance minister and former Mimosa mine director Winston Chitando as mines minister, they cannot win the trust of investors under current conditions since they demand a far greater level of certainty to even simply consider the possibility of investing in the country.
And without those critical foreign investors whose capital would provide the vital skills training and employment opportunities, the downtrodden people of Zimbabwe are destined to continue to suffer.