HomeOpinion & AnalysisZim's political risk mars investment climate

Zim’s political risk mars investment climate

By Tawanda Hondora

I LAUD Eric Bloch’s article in the Zimbabwe Independent of May 7 in which he criticised a Herald report which claimed that Zimbabwe offers an attractive investment climate. This delusional

drivel denies the population an honest introspection about our political and economic choices, our prospects of economic development, and our short- and long-term strategic goals.




In response to the Herald article, I propose to evaluate just one factor; the country’s political risk factor and the effect it has on investment. Political risk refers to the policies of the Zimbabwe government that adversely affect inward investment. What governmental policies are likely to dissuade investors from investing in Zimbabwe?


As a general rule, investors avoid countries that do not respect, and that expropriate and/or nationalise, private property. Zimbabwe is currently expropriating commercial farms owned by white farmers to redress past land imbalances. The policy of land expropriation rather than its implementation strikes a chord with the majority of Zimbabweans. After all a war in which thousands died was fought culminating in a majority government in 1980.

But in the real world, what message do we send by killing, raping, displacing and dispossessing mainly poor black farm workers in the name of land redistribution? Wouldn’t use of law and a concerted foreign relations exercise have achieved the same “indigenisation” result without all the barbarity?


In Zimbabwe private property rights are not secure, in particular in two industries: agriculture and mining. These industries constitute the backbone of the Zimbabwean economy. Using militia, and usually in violation of court orders, it has been the government’s policy since 1999 to use grotesque violence in acquiring commercial farming land, for which Zimbabwe has gained international notoriety. Recently Kondozi Farm, an agricultural enterprise, was invaded by government militia and police in violation of a prohibitory High Court order and legislation that outlaws the acquisition by government of Export Processing Zone enterprises.


Undisputed reports indicate that the government has also set its expropriation sights on Triangle Sugar Estates.


The message: don’t bother investing in agriculture, the Zimbabwe government is nationalising all agricultural enterprises in the country. It is immaterial that the acquisition violates the appropriate legislation. In addition, its parliament will not discuss the merits or legality of executive plunder of private enterprises. For as long as it is in the name of the ruling party, then it is kosher.


Recent reports that mining companies will be compulsorily forced to off-load shares to black Zimbabweans caused panic in the industry and a bear-effect on mining counters. No doubt this is an attempt to ape the South African programme. But is it not 24 years too late, lacking in international and local good will, and likely to lead to massive disinvestment and depreciating output from the mining industry? A look at commercial agriculture will bear testimony to this argument. And why doesn’t the government simply issue more prospective licences to black Zimbabweans, coupled with increased financial and technical aid in their avowed efforts to economically empower them? No, it is better to take an ongoing mining venture, particularly when equipment, know how and personnel can also be forcibly expropriated!


Investors demand security of investments, the existence and respect of the rule of law, government respect of court orders, and above all protection from expropriation. This is hardly the scintillating investment environment suggested by the Herald report.


And with neighbouring countries offering infinitely better investment security, are there any redeeming features that would make Zimbabwe attractive?

People invest because they want to make money; they seek a positive return. A core element of investment due diligence is the aspect of repatriation of capital and returns. Until recently – and the new regime is by no means ideal – we had a deranged exchange-rate regime, under which the Zimbabwe dollar was overvalued in excess of 6 000%. Mugabe accused those that sought to devalue the currency as saboteurs and traitors, only to allow the new Reserve Bank governor to do so several months later. What explains this behaviour? Is it inconsistency in policy formulation or a strategic turnaround of fiscal policy; dementia, or simply an inability to understand modern economics?


Chronic foreign currency shortages coupled with an equally complicated and convoluted foreign exchange control-bureaucracy scare away investors. In a country where important decisions have been notoriously short-term in nature, what kind of investor would lock-up a precious foreign currency investment in a Zimbabwe-dollar denominated market? The country’s inflation, shrinking GDP, continuous devaluation of the local unit, political instability and uncertainty, and a junk-investment rating, make Zimbabwe an investor’s nightmare market.


Without detracting from the RBZ governor’s well-meaning efforts, the fact that he has to resort to devaluing the Zimbabwe dollar by stealth – he has offered holders of foreign currency a rate higher than the auction rate – to channel foreign currency dealings through the formal market betrays the political sensitivities involved and precariousness of his discretion from political influence. Question: what message does this send to potential investors?


Whatever the merits of government’s gripe with private schools’ fees regime, the image of armed police guards preventing primary school children from attending school because of unapproved fee-hikes is unnerving. The Minister of Education does not have the power under the Education Act to close down, or prevent schools from opening in the event of an unauthorised school fees hike. What signals does this send to investors? Zimbabweans are uncivilised, do not respect human life, particularly that of their children. Why else would a policeman guarding school premises be armed if not to use arms of war against a child or parent or teacher that attempts to go to a classroom?


Zimbabwean ministers are a law unto themselves, unrestrained by legal strictures. Think of immigrant investors: would they relocate to such a country with their children where school fees disputes are forcibly resolved through the barrel of a gun?


How the Herald could report that Zimbabwe has an attractive investment climate and a positive GDP when the country’s international investment rating is unanimously ranked junk is mind-boggling.


Tawanda Hondora is a lawyer and can be contacted at hondst@hotmail.com

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