Zimbabwe Review

Reflections on Zimbabwe

Investors waiting for political change to rush in

Posted by CM on July 21, 2007

Amidst the depressing deluge of negative news from and about Zimbabwe, there are also the occasional signs to give one hope about the country’s future should positive change take place before it is completely ruined.

Some hard nosed international investors who acknowledge how bad things are now but also recognise the things that it has going for it are waiting in the wings to pick up good deals cheap and benefit from an expected post-Mugabe recover period. Some foreign companies who already have a presence try as much as possible to keep at least a nominal presence to make building up their portfolios again easier than starting from scratch.

One recent report : Edgars, a leading South African clothing retailer with stores in neighbouring Zimbabwe, saw its chief executive in Zimbabwe arrested for “tardiness in changing prices” as the government ordered last month. He was released, and while Edgars’s management says times are difficult, it is not pulling out of Zimbabwe.

In fact, analysts predict that those who can afford to wait – even if it takes years – will see good returns on investments.

“Zimbabwe’s difficulties are a reality,” said Goolam Ballim, chief economist for Standard Bank, one of South Africa’s leading banks with interests in Zimbabwe. “But any rebound will benefit entrepreneurs,” he added, saying he was confident in the ability of the southern African country rich in minerals to generate wealth.

Some analysts believe that for entrepreneurs with deep pockets and strong nerves, this is the time to invest in Zimbabwe, saying tobacco farms and mineral rights can be picked up dirt cheap. They point to the examples of the mineral and oil rich Congo and Angola, where the first hint of political stability saw investments reap massive returns.

“As prices fall you are able to buy more assets with incredible potential,” said Tony Twine, senior economist at Econometrix, an economic consulting firm.

The downside of this vote of confidence by investment analysts in a Mugabe-less future :

(Political analyst Brian) Raftopolous warned that the economic collapse presents a threat to Zimbabwe’s sovereignty — especially with the massive reconstruction that a post-Mugabe Zimbabwe would need. “Mugabe has been shouting about the imperialist influence over Zimbabwe but he has run the economy down so badly that the country is so dependent on foreign aid,” he said.

He also cautioned against letting Zimbabwe become a “bonanza” for foreign investors eager to take advantage of the desperate situation.

A separate analysis says much the same thing, that while some will steer clear of Zimbabwe for a long time no matter what happens politically, there are those who believe it will be a very good place to do business again :

Foreign investors tend to avoid imploding African economies. But a small crew are bucking the trend in Zimbabwe, lured by plunging asset prices and a belief that once 83-year-old President Robert Mugabe goes, recovery could be swift.

Leading the charge is Lonrho, the conglomerate that has been seeking to rebuild the African empire created by the late Tiny Rowland. It announced that it had raised an initial £32.3m ($66.4m, €48m) from shareholders towards a new subsidiary – Lonzim – to buy up assets in Zimbabwe with a “significant opportunity for future growth.”

David Lenigas, Lonrho’s executive chairman, looking beyond current figures for Zimbabwe – 15,000 per cent inflation and an economy shrinking by 12 per cent a year – said the country’s infrastructure, skilled workforce and farming potential provided the basis for a solid recovery.

Kola Karim, chief executive of Shoreline Energy International, a Nigerian group, says he hopes to seal two deals in Zimbabwe in the next month – both with European companies who have had enough there. “We are not going to asset-strip. We can buy big international names for cheap and stay in partnership with locals to drive the business,” he said. In one case he hoped to acquire a company for roughly a tenth of its 1997 value.

There is concern among some Zimbabwean businessmen that properties will be sold off at rock-bottom prices.

“But the investors are not seen as vultures,” said the chief executive of a Bulawayo-based small manufacturing firm. “It gives us hope for the future that people from the outside are interested.”

At a Bulawayo business forum this week, many members seemed determined to batten down the hatches and not to sell.

Dianna Games, director of Africa@Work, a southern African business consultancy, expressed caution. “There is a lot of talk around dinner party tables [in South Africa and Zimbabwe]” about opportunities, she said. But it was far from clear that
the situation would be transformed when Mr Mugabe finally left power. “Everyone seems to think that when he goes, all kinds of doors may open . . . but we don’t know.”

These debates remind us of some of what makes Zimbabwe special, and why its troubles have garnered such widespread attention. Raftopolous’ makes a good point in pointing out the irony of a despot who shouts “sovereignty” every chance he gets, but will leave behind a weakened economy on its knees that may be less “sovereign” than ever as international creditors and investors dictate their terms of engagement.

Apart from the inevitable painful compromises that will have to be made by a post-Mugabe dispensation of any flavour, if either or both factions of the MDC are in the drivers’ seat of such a dispensation, then we may see a real rape of the economy in the name of attracting foreign investment! That worry reflects my worry about and my lack of confidence in the MDC.

But aside from the speculative games about what will or will not happen, the various sentiments expressed by investors and analysts with no sentimental attachment to the country are a reminder to us the citizens that we should not get so despondent about the present that we fail to plan for and be hopeful about the future.

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