Investors drool over Zimbabwe


    The once-flourishing Southern African country, which has recently been competing with a handful of countries for the "polecat of the year" title, is again showing promise.

    The more stable political situation and the acceptance of the American dollar suggested the two biggest investment risks in African countries – politics and exchange rates – have been eliminated.

    Does this mean that everything is now hunky-dory in Uncle Bob’s domain?

    Official indicators certainly paint such a picture: hyperinflation is relegated to the past and the government hopes to see double-digit growth by next year (admittedly from a very low base).

    The dollar’s acceptance has led to much improved prices and this means that food is once more on shops’ shelves.

    What is more, inhabitants now have money to buy food – public servants’ salaries are duly deposited and no one needs to haul wheelbarrows full of Zimbabwean dollars to the shops to buy a loaf of bread.

    The government is demonstrating that it is trying hard to encourage investment. "We want investors to see that the situation is not what it was a year ago," said Elton Mangoma, Zimbabwe’s Minister of Economic Planning.

    His statement is supported by all the incentives that government has instituted to attract investments.

    Roelof Horne, head of Investec Asset Management’s Africa Fund, conceded the point. "The business sector can now focus on its enterprises. Its greatest emphasis was previously to control inflation, as no one could understand the figures."

    Businesses are certainly pleased with the availability of basic services.

    Unstable from the outset

    "The situation has improved greatly from where it was. But things are not yet ideal, one can expect some political instability at the outset," said Celeste Fauconnier, Africa analyst at Rand Merchant Bank.

    Is this the best time to invest? "It will be too late if investors wait until things have fully stabilised," she reckoned.

    Other analysts are more sceptical. Lynette Chen, chief executive of the Nepad Business Foundation, regarded the land-reform issue and political instability as among the major reasons why investors have not yet all returned to Zimbabwe.

    "The political situation changes from week to week. Until the Bilateral Investment-Promotion and -Protection Agreement (Bippa) between South Africa and Zimbabwe has been signed, investors will not be entirely satisfied with the situation," Chen said.

    Judy Smith-Höhn, an analyst at the Institute for Security Studies, was also not convinced. "The big problem with Zimbabwe is that it’s a moving target. The agricultural situation, for example, is particularly unstable. There are still players who, unaware of the agreement, are occupying farms to which they are not entitled."

    This property rights issue is evidently still a thorn in the flesh for many. Speaking in Johannesburg, Mangoma recently declared that Zimbabwe respected property rights, including intellectual property, except for agricultural land acquired through the land reform process, for which compensation would be paid.

    When asked the meaning of this statement, he responded that people who previously settled on this land would not receive compensation for these farms, only for improvements made.

    Power-sharing dilemma

    Horne said ultimately the biggest problem is that the power-sharing government could run aground.

    "During my recent visit to the country it appeared that the parties in government were cooperating well."

    But, he added, "there are various points in the agreement that have so far not been complied with and the MDC is still unhappy over important issues. For instance, there appears to be an orchestrated attempt to detain certain MDC MPs."

    But in general analysts agree that this is a good time to invest in Zimbabwe, as long as investors have a good stomach for risk. They might even have rich pickings.