News / Africa

Economists Predict Bleak Future After Mugabe Re-Election

Traders work at the Zimbabwe Stock Exchange in Harare, Aug. 6, 2013. The country's stock exchange lost more than $650 million in value after plunging 11 percent on its first trade following the announcement of the country's election results.
Traders work at the Zimbabwe Stock Exchange in Harare, Aug. 6, 2013. The country's stock exchange lost more than $650 million in value after plunging 11 percent on its first trade following the announcement of the country's election results.
Robert Mugabe's re-election as president of Zimbabwe last week raised concerns for many economists who believe the country's foreign investment will greatly diminish under the 89-year-old's economic policies.

Those concerns took on greater significance Monday when the nation’s stock market suffered its largest one-day decline since 2009.

Harare-based economist John Robertson believes the hopes of business leaders there were quashed when Mugabe took a 61 percent majority of votes last Wednesday in a heavily-criticized election.

Indigenization concerns

"I believe the whole business sector was very much hoping for a change that would've led to a different political party with different policies," Robertson said. "And so there's a lot of dismay, and a lot of seriously discouraged business people right now who are wondering what step they can take to survive. And those that were contemplating coming here, I believe that every one of them has decided not to."
 
Robertson expects investment in Zimbabwe to slow as Mugabe and his ZANU-PF party implement further economic policies aimed at handing foreign business interests over to Zimbabweans.

The party’s signature policy, called indigenization, aims to transfer the majority share of any business operations to black Zimbabweans without financial compensation. Critics of that policy said it also favors Mugabe loyalists.  

Mugabe's re-election and ZANU-PF's win of two-thirds of parliament seats seem to be a clear mandate for indigenization to proceed at full pace. The Zimbabwe Stock Market's 11 percent decline Monday appeared to verify the predictions by critics of the policy.

Zimbabwe endured years of economic turmoil, with hyperinflation making the country's currency almost worthless in 2008.

Economic upswing

But the economy stabilized after a conversion to the U.S. dollar and the formation of a coalition government between the ruling ZANU-PF party and the opposition Movement for Democratic Change.

Over the past few years, Zimbabwe's economy grew, expanding at around nine percent in 2010 and 2011, and five percent in 2012.

Some analysts, however, sid unwise economic policies could hinder such progress.

Some experts said Zimbabwe could have a vibrant economy if not for its current policies.

"Without doubt Zimbabwe would be a very much more enticing place," said Azar Jammine, chief economist at the Johannesburg-based consulting firm Econometrix. "It has a very strong mineral sector unlike South Africa…Zimbabwe to some extent could be regarded much more as virgin territory that has not yet fulfilled its full potential by any means both in term of minerals and in terms of agricultural development."

The political intent to further indigenize industry and commerce in Zimbabwe could scare investors away.

"For people looking at investing in Zimbabwe, it’s certainly going to be a short sell for now," said George Nicholls, chief executive of the global consulting firm Pasco Risk Management. "If people are invested, they do face the distinct possibility of having to compromise and do deals, local indigenization deals, under pressure of losing assets for little or no return...The prospects facing potential investors are slim to unattractive."
 
Investment rose after the formation of the coalition government. From 2008 to 2011, foreign direct investment grew from around $50 million to nearly $400 million. But Robertson said now outside companies will not be eager to hand over a 51 percent stake to Zimbabwean shareholders.

"The new investors are supposed to bring in 100 percent of the capital, provide 100 percent of the technology, take 100 percent of the risk," he said. "And in turn, in five years time, they are to settle for 49 percent of the equity and, of course, pay taxes on that as well … all of this has been enough to say to every investor 'We're just not coming.'"

Business benefits

But while some business might be scared off, others could benefit.

"I would anticipate an in-swing of people who supported ZANU-PF," said Nicholls, "such as Chinese investors, Indian investors, Russians, the BRICS nations in general, will be looking to take up opportunities there on the basis of the support they've rendered to the Zimbabwe government over the past four years."
 
At this point, however, it is not clear when or how such investment will be forthcoming.

You May Like

Brutality Eroding IS Financial Support

Director of National Intelligence James Clapper says IS's penchant for publicizing beheadings, other brutal forms of punishment hurts group’s bottom line More

Studies: Climate Change a Factor in Disasters in Syria, California

Studies point to possibility of clear and present dangers from a threat often considered to be far in the future More

Video Afghan Refugees Complain of Harassment in Pakistan

Afghan officials and human rights organizations assert that Pakistani authorities are using deadly attack at school in Peshawar as pretext to push out Afghan refugees More

This forum has been closed.
Comment Sorting
Comments
     
by: Ken Girtz
August 06, 2013 12:57 PM
Economists! I recall they predicted Zimbabwe would collapse in 2006. The economy did not collapse although it suffered badly through to 2009 when USD became legal tender and the economic activity stabilised around the currency beyond control of local reserve bank. We have had such predictions on our economy, on our elections and even on life of our President. Some of the predictors actual try to bring about their predictions. We will not counter predict. Instead we will diligently get to work and structure our economy on firm local foundations, for posterity. Those willing to work with us are welcome and I challenge these economists to find better returns on funds invested elsewhere in the world. Smart money to Harare!

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Kerry Seeks Assurances of Russian Non-Interference in Ukrainei
X
March 03, 2015 3:11 AM
U.S. Secretary of State John Kerry has told his Russian counterpart, Sergei Lavrov, that his country could face further consequences to what he called its “already strained economy” if Moscow does not fully comply with a cease-fire in Ukraine. The two met, on Monday, on the sidelines of a U.N. Human Rights Council meeting in Geneva, where Kerry outlined human rights violations in Russian-annexed Crimea and eastern Ukraine. VOA State Department correspondent Pam Dockins reports from Geneva.
Video

Video Kerry Seeks Assurances of Russian Non-Interference in Ukraine

U.S. Secretary of State John Kerry has told his Russian counterpart, Sergei Lavrov, that his country could face further consequences to what he called its “already strained economy” if Moscow does not fully comply with a cease-fire in Ukraine. The two met, on Monday, on the sidelines of a U.N. Human Rights Council meeting in Geneva, where Kerry outlined human rights violations in Russian-annexed Crimea and eastern Ukraine. VOA State Department correspondent Pam Dockins reports from Geneva.
Video

Video Smartphones May Help in Diagnosing HIV

Diagnosing infections such as HIV requires expensive clinical tests, making the procedure too costly for many poor patients or those living in remote areas. But a new technology called lab-on-a-chip may make the tests more accessible to many. VOA’s George Putic reports.
Video

Video Afghan Refugees Complain of Harassment in Pakistan

Afghan officials have expressed concern over reports of a crackdown on Afghan refugees in Pakistan following the Peshawar school attack in December. Reports of mass arrests and police harassment coupled with fear of an uncertain future are making life difficult for a population that fled its homeland to escape war. VOA’s Ayesha Tanzeem reports from Islamabad.
Video

Video Ukrainian Volunteers Prepare to Defend Mariupol

Despite the ongoing ceasefire in Ukraine, soldiers in the city of Mariupol fear that pro-Russian separatists may be getting ready to attack. The separatists must take or encircle the city if they wish to gain land access to Crimea, which was annexed by Russia early last year. But Ukrainian forces, many of them volunteers, say they are determined to defend it. Patrick Wells reports from Mariupol.
Video

Video Moscow Restaurants Suffer in Bad Economy, Look for Opportunity

As low oil prices and Western sanctions force Russia's economy into recession, thousands of Moscow restaurants are expected to close their doors. Restaurant owners face rents tied to foreign currency, while rising food prices mean Russians are spending less when they dine out. One entrepreneur in Moscow has started a dinner kit delivery service for those who want to cook at home to save money but not skimp on quality. VOA's Daniel Schearf reports.
Video

Video US, Cuba Report Progress in Latest Talks to Restore Ties

The United States and Cuba say they have made progress in the second round of talks on restoring diplomatic relations more than 50 years after breaking off ties. Delegations from both sides met in Washington on Friday to work on opening embassies in Havana and Washington and iron out key obstacles to historic change. VOA’s Mary Alice Salinas reports from the State Department.
Video

Video Presidential Hopefuls Battle for Conservative Hearts and Minds

One after another, presumptive Republican presidential contenders auditioned for conservative support this week at the Conservative Political Action Conference held outside Washington. The rhetoric was tough as a large field of potential candidates tried to woo conservative support with red-meat attacks on President Barack Obama and Democrats in Congress. VOA Political Columnist Jim Malone takes a look.
Video

Video NYC's Restaurant Week: An Economic Boom in Fine Dining

New Yorkers take pride in setting world trends — in fashion, the arts and fine dining. The city’s famous biannual Restaurant Week plays a significant role in a booming tourism industry that sustains 359,000 jobs and generates $61 billion in yearly revenue. VOA's Ramon Taylor reports.
Video

Video Brookhaven at Cutting Edge of US Energy Research

Issues like the Keystone XL pipeline, fracking and instability in the Middle East are driving debate in the U.S. about making America energy independent. Recently, the American Energy Innovation Council urged Congress and the White House to make expanded energy research a priority. One beneficiary of increased energy spending would be the Brookhaven National Lab, where clean, renewable, efficient energy is the goal. VOA's Bernard Shusman reports.
Video

Video Southern US Cities Preserve Civil Rights Heritage to Boost Tourism

There has been a surge of interest in the American civil rights movement of the 1950s and '60s, thanks in part to the Hollywood motion picture "Selma." Five decades later, communities in the South are embracing the dark chapters of their past with hopes of luring tourism dollars. VOA's Chris Simkins reports.
Video

Video Deep Under Antarctic Ice Sheet, Life!

With the end of summer in the Southern hemisphere, the Antarctic research season is over. Scientists from Northern Illinois University are back in their laboratory after a 3-month expedition on the Ross Ice Shelf, the world’s largest floating ice sheet. As VOA’s Rosanne Skirble reports, they hope to find clues to explain the dynamics of the rapidly melting ice and its impact on sea level rise.
Video

Video Lao Dam Project Runs Into Opposition

A Lao dam project on a section of the Mekong River is drawing opposition from local fishermen, international environmental groups and neighboring countries. VOA's Say Mony visited the region to investigate the concerns. Colin Lovett narrates.

All About America

Circumventing Censorship

An Internet Primer for Healthy Web Habits

As surveillance and censoring technologies advance, so, too, do new tools for your computer or mobile device that help protect your privacy and break through Internet censorship.
More