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.
TEXT SIZE - +
— 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

Multimedia Relatives of South Korean Ferry Victims Fire at Authorities

46 people are confirmed dead, but some 250 remain trapped inside sunken ferry More

War Legacy Haunts Vietnam, US Relations

$84 million project aims to clean up soil contaminated by Agent Orange More

Wikipedia Proves Useful for Tracking Flu

Technique gave better results than Center for Disease Control (CDC) and Google’s Flu Trends 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.
Ukraine, Russia, United in Faith, Divided in Politicsi
X
Michael Eckels
April 19, 2014
There is a strong historical religious connection between Russia and Ukraine. But what role is religion playing in the current conflict? In the run-up to Easter, Michael Eckels in Moscow reports for VOA.
Video

Video Ukraine, Russia, United in Faith, Divided in Politics

There is a strong historical religious connection between Russia and Ukraine. But what role is religion playing in the current conflict? In the run-up to Easter, Michael Eckels in Moscow reports for VOA.
Video

Video Face of American Farmer is Changing

The average American farmer is now 58 years old, and farmers 65 and older are the fastest growing segment of the population. It’s a troubling trend signaling big changes ahead for American agriculture as aging farmers retire. Reporter Mike Osborne says a new report from the U.S. Census Bureau is suggesting what some of those changes might look like... and why they might not be so troubling.
Video

Video Donetsk Governor: Ukraine Military Assault 'Delicate But Necessary'

Around a dozen state buildings in eastern Ukraine remain in the hands of pro-Russian protesters who are demanding a referendum on self-rule. The governor of the whole Donetsk region is among those forced out by the protesters. He spoke to VOA's Henry Ridgwell from his temporary new office in Donetsk city.
Video

Video Drones May Soon Send Data From High Seas

Drones are usually associated with unmanned flying vehicles, but autonomous watercraft are also becoming useful tools for jobs ranging from scientific exploration to law enforcement to searching for a missing airliner in the Indian Ocean. VOA’s George Putic reports on sea-faring drones.
Video

Video New Earth-Size Planet Found

Not too big, not too small. Not too hot, not too cold. A newly discovered planet looks just right for life as we know it, according to an international group of astronomers. VOA’s Steve Baragona has more.
Video

Video Copts in Diaspora Worry About Future in Egypt

Around 10 percent of Egypt’s population belong to the Coptic faith, making them the largest Christian minority in the Middle East. But they have become targets of violence since the revolution three years ago. With elections scheduled for May and the struggle between the Egyptian military and Islamists continuing, many Copts abroad are deeply worried about the future of their ancient church. VOA religion correspondent Jerome Socolovsky visited a Coptic church outside Washington DC.
Video

Video Critics Say Venezuelan Protests Test Limits of Military's Support

During the two months of deadly anti-government protests that have rocked the oil-rich nation of Venezuela, President Nicolas Maduro has accused the opposition of trying to initiate a coup. Though a small number of military officers have been arrested for allegedly plotting against the government, VOA’s Brian Padden reports the leadership of the armed forces continues to support the president, at least for now.
Video

Video More Millenials Unplug to Embrace Board Games

A big new trend in the U.S. toy industry has more consumers switching off their high-tech gadgets to play with classic toys, like board games. This is especially true among the so-called millenial generation - those born in the 1980's and 90's. Elizabeth Lee has more from an unusual café in Los Angeles, where the new trend is popular and business is booming.
Video

Video Google Buys Drone Company

In its latest purchase of high-tech companies, Google has acquired a manufacturer of solar-powered drones that can stay in the air almost indefinitely, relaying broadband Internet connection to remote areas. It is seen as yet another step in the U.S. based Web giant’s bid to bring Internet to the whole world. VOA’s George Putic reports.
AppleAndroid