Zimbabwe Review

Reflections on Zimbabwe

Why foreign firms tough it out in Zimbabwe

Posted by CM on July 13, 2008

Ed Davey, the Lib Dem foreign affairs spokesman, said: “With Gordon Brown making such tough noises on Zimbabwe, it would be grossly hypocritical if a Labour peer had not ensured that the company on whose board he serves is not upholding both the spirit and the letter of government policy.

“Companies like Weir need to look closely at whether their investments assist Mugabe’s regime in any way, whether through providing much-needed foreign exchange or direct revenue to the government.

“…assists Mugabe in any way” is a very tough call. Obviously these companies pay taxes, for example. Does that fit the definition of “assisting Mugabe” or not? If it does, then the UK can only be consistent if it not only encourages its companies to pull out of Zimbabwe, but orders or squeezes them to do so. Yet it is not clear that this is the policy.

The limiting of action to ‘targeted sanctions’ on the rulers and the arms embargo that were at the heart of the UN sanctions resolution were partly justified on the desire not to hurt ordinary Zimbabweans. In evaluating the effects of a company’s withdrawal, how dos one gauge between the harm in throwing people out of work versus “assisting Mugabe?”

Robertson defended the company’s deal, saying: “Weir inherited Warman’s small office in Bulawayo which has insignificant business of £500,000 a year and the group has not invested in Zimbabwe since the acquisition. In no way could this give comfort to Robert Mugabe.”

And perhaps giving a hint into the real reasons UK policy on Zimbabwe will likely continue to clash with private business does, Weir’s chief executive Mark Selway has said he believes opportunities in Zimbabwe would be “quite significant” in the medium term.

South African firms are having as tough a time operating in Zimbabwe as all other companies, although there is obviously no pressure from their government over their investing there. Despite the tough environment, an AFP report headlined South African firms tough it out in Zimbabwe reiterates the point that they are holding on for perceived lucrative future gains.

They are resisting the urge to pull out of Zimbabwe despite an increasingly hostile business climate in the hope they will be in prime position to benefit from a future upturn.

Zimbabwe has become a nightmare for foreign businesses in recent years with the annual inflation rate now well into eight figures and the government trying to impose prices for goods and services.

But analysts say the dozens of companies — ranging from mining giants and banks to tourist operators — which are still clinging on are confident that things are bound to get better at some stage.

South Africa’s largest supermarket operator, ‘Pick n Pay,’ is also keeping its foot in the door through its 25 percent stake in Zimbabwe’s TM chain even though it has not received any dividends in the last four years.

While few are making much money in the current climate, Rossouw of Vector Securities and Derivatives says many businesses are prepared to absorb short-term losses and avoid leaving the door open for their rivals.

“By pulling out now, companies are likely to find it hard to establish themselves all over again once the situation stabilises,” he said. “They also fear opening up opportunities for the competition.”

This is not the kind of news that sits easy with people who like to see things in blackand white terms. But The Zimbabwe Crisis is much more complicated, difficult shades of grey than clear cut black and white, a factor that in the over-heated media onslaught now only occasionally sneaks through reports such as the two I have cited here.

It is hard to imagine that the picture of the country that is daily painted by papers like The Times is the same one that UK companies controlled by prominent members of the British establishment are reluctant to let go of. That speaks volumes about why Zimbabwe is so significant economically, politically, symbolically and otherwise, particularly to Britain.

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