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

Disappointing Report on China's Economy Shakes Markets

In London and New York shares lost 3 percent, while Paris and Germany dropped around 2.4 percent More

DRC Tries Mega-Farms to Feed Population

Park at Boukanga Lonzo currently has 5,000 hectares under cultivation, crops stretching as far as eye can see, and is start of ambitious large-scale agriculture plan More

Video War, Drought Threaten Iraq's Marshlands

Areas are spawning ground for Gulf fisheries, a resting place for migrating wildfowl, source of livelihood for fishermen and herders who have called the marshes home for generations 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.
Nobel Prize Winner Malala Talks to VOAi
X
August 31, 2015 2:17 AM
Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.

VOA Blogs