Investors seek national credibility
By Eric Bloch
A RECENT article in a state-controlled daily newspaper bewailed the fact that Zimbabwe’s “investment promotion initiative has been disappointing”. It noted that President Rob
ert Mugabe had decreed that 2005 would be a year of investment, and that “the Minister of Finance, Herbert Murerwa, and Reserve Bank governor, Gideon Gono, were also guided by this pronouncement when they presented their fiscal and monetary policies late last year and early this year”.
The article claims “government did its part when it pledged to adhere to bilateral and international obligations, as well as the protection of foreign investments covered by Bilateral Investment Protection and Promotion Agreements”. But it then scathingly attacks others for not ensuring that “local and foreign investors set up shop in this country”, stating that “sadly there is not much on the ground to reflect the seriousness and total commitment towards attracting investment”.
In particular, the article castigates the Zimbabwe Investment Centre (ZIC) and the Export Processing Zones Authority (EPZA) for failure to deliver on investments, and claims that those organisations are shielding behind a “myriad of reasons” for “the seeming lack of progress”. In belittling the defences cited by ZIC and EPZA, the article’s author particularly rebuts any suggestion that fuel shortages are in any manner a deterrent to investment.
She contends that the “National Oil Company of Zimbabwe has kept key institutions of the economy well oiled”. If that is so, then Air Zimbabwe is not a “key institution”, for it is recurrently cancelling flights due to lack of fuel. In like manner, if Noczim is assuring fuel supplies to key institutions, then all enterprises in the manufacturing sector, most mines and almost the entirety of the tourism operators are not key institutions.
In fact, it is not surprising that so few presently see Zimbabwe as an investment haven. The first negative is the economic environment, for years of ongoing hyperinflation, exacerbated by the reversal of the 2004 decline in inflation rates, despite the efforts of the governor of the Reserve Bank, massive scarcities of foreign exchange and, therefore, of manufacturing and other operational inputs, endless governmental regulation and threats of price controls and of punitive actions against those spuriously accused of creating product shortages, are major investment deterrents.
A second key factor is the widespread scepticism as to the genuineness of the government’s assurances. Admittedly it has stated the intent to honour Bilateral Investment Protection Agreements (BIPAs), but has yet to be seen to be doing so. Farms and conservancies acquired by the state by compulsion, as distinct from a “willing buyer, willing seller” basis, have yet to be returned to their rightful owners who were entitled to BIPA protection, although in some instances more than four years have elapsed since the government acquired them, and nearly a year since it said that it would respect BIPAs.
Moreover, in cases where farms owned by foreign nationals to whom BIPAs apply were not acquired by the state, but were unlawfully occupied by those who “helped themselves”, the government has failed to act. This is even the case in some instances where the courts have justly given eviction orders, but six or more months later the police have steadfastly refused to implement the orders, and provincial administrators disdainfully ignore appeals for assistance in having the law enforced.
But currently the greatest factor in discouraging investment is that the government continues to erode any confidence in its good faith, its ability to govern in the best interests of the country and its populace, and in particular in its credibility. This has become especially pronounced in its reactions to the report of Anna Tibaijuka, special envoy of the United Nations Secretary-General Kofi Annan on Operation Murambatsvina. That operation was an unmitigated disgrace, for even if the objectives, which it sought to attain, were sound, the uncalled for violence, cruelty, abuse of power and inhumanity cannot be condoned.
Had Operation Garikai been launched first, bringing into being the necessary housing and trading areas, and had Operation Murambatsvina then been implemented after, first according its victims the opportunity to relocate to the then constructed houses and trading sites, and that implementation been carried out humanely, none could complain.
However, with Operation Murambatsvina preceding Operation Garikai, with the wanton destruction of property, including the slashing of bags of food, the burning of carvings and curios, of clothing and many other goods, and the beating of people occupying shanties and unauthorised trading zones solely because of their extreme poverty, the government demonstrated a lack of forward thinking and planning, and an inability or unwillingness to control and contain its supposed enforcers of law and order.
Then, instead of maturely admitting to its errors and defaults, the government sought vigorously to justify the wrongs. When the UN secretary-general sent his special envoy, the government enthusiastically welcomed her; the president and his ministers met extensively with her, and ensured that the state-controlled media would sing her praises vociferously.
However, after she had departed Zimbabwe, and issued her report, which was highly condemnatory of the government, there was an immediate transformation in the government’s attitude. In sharp contrast to their previously expressed immense regard for her, they vilified her and her report. With great lack of originality, they cast blame upon British Prime Minister Tony Blair, alleging that he had influenced her into producing a false report.
That the government did so was not surprising, despite being devoid of credibility, for it has for years attributed blame for virtually everything to its most disliked critic, Blair.
All these actions, and many more have virtually destroyed investor confidence in the credibility of the government, and a key factor that any potential investor considers is whether it can believe in statements and assurances given by the government, and whether it can trust the government.