The Diaspora Infrastructure Development Group (DIDG), a consortium of Zimbabweans living outside the country has renewed its interest in turning around the fortunes of the National Railways of Zimbabwe.
The technical, operational, and financial performance of NRZ has over the years been adversely affected by the macroeconomic instability at the height of the country’s economic meltdown in 2008 and, in particular, the critical shortage of foreign exchange.
Apart from effects of an underperforming economy, which had a significant effect on railways, low availability of locomotives and other rolling stock and the old and poorly maintained track have been among the main causes of the decline in service levels of the railway. The deteriorating state of the railways infrastructure has, in turn, resulted in accidents and derailments.
Nearly three years ago, the DIDG announced its plans to inject US$400 million into the business. As part of an interim solution to NRZ resource gaps, the parastatal is leasing 13 locomotives, 200 wagons and 34 passenger coaches from Transnet. Transformation of the NRZ will not only reduce overheads for companies carrying bulk freight but will also create a strong platform for resuscitating public transport.
Early this year delays in consummating the transaction prompted government to remove the exclusivity clause for the US$400m recapitalisation deal after DIDG failed to provide proof of funding.
The NRZ deal reminds many of the resuscitation of Ziscosteel. There was pomp and fanfare when Indian investors were announced as new investors for the yesteryear steel giant. The deal collapsed due to disputes over concessions and bureaucratic red tape. Using the Dependency Theory, chances of reviving Ziscosteel are almost remote due to the benefits that industrialised countries derive from developing countries such as Zimbabwe.
In the case of NRZ, Transnet was better placed to take over the entity due to its capacity and operational advantages. DIDG represents a group of investors who do not have the requisite experience in running a company like NRZ as well as the capex for such an entity. Judging by how listed companies have struggled to raise capital on the domestic market and in some cases offshore, it would be interesting to see how DIDG would marshal resources that are adequate for the turnaround of NRZ.
The NRZ board announced that DIDG will be working with the African Export-Import Bank (Afreximbank) and this proposal is now awaiting approval from Treasury. The involvement of Afreximbank should be looked at closely given how government has been borrowing from the institution. In finalising this deal, authorities should be mindful of the debt issues and all the salient features attached to this deal.
The state of affairs at NRZ expose government’s lack of oversight on institutions it has interests in.
Former president Robert Mugabe’s death has become the most trending topic both locally and internationally. Several obituaries were penned since last Friday when he breathed his last breath aged 95. Some writers extolled the virtues of the ex-leader while others vilified him. Just two years ago Mugabe had turned into a mentor-cum-tormentor for his successor Emmerson Mnangagwa.
In this analysis we look at the highlights of Mugabe’s economic policies and what impact they have had on Zimbabwe’s economy. Mugabe, a school teacher-turned-guerrilla fighter was driven by Marxism—the class struggle ideology.
After gaining Independence from Britain in 1980, Mugabe was unequivocal on his ideology. The redistribution of land was one of the most contentious issues that resulted in his isolation despite once being seen as a Knight. During the first 10 years after Independence, Mugabe’s policy on land was bound by the Lancaster House Agreement which spoke about the willing buyer-willing seller principle. As the economy started showing signs of slowing down, Mugabe’s administration adopted the Economic Structural Adjustment Programme.
The effects of the ESAP generated a lot of debate on whether prescriptions from international monetary institutions would be a panacea for developing countries. ESAP triggered growing resentment among the labour force and in 1998 many took to the streets protesting on the rising cost of living. The food riots piled pressure on the administration which had adopted several economic blueprints since Independence. This in turn gave birth to a militant labour movement which would later transform into an opposition party that gave Mugabe sleepless nights.
During his 37 rule Mugabe deployed the army to assist regional peers that were facing conflict. Angola, Mozambique and the Democratic Republic of Congo are a case in point. During these operations Mugabe’s foreign policy focused on military might instead of creating a Launchpad that would give local companies and investors, business opportunities. Superpowers had the last laugh in the post conflict period of such countries as they seized opportunities in reconstruction. Here Mugabe failed.
After losing in the 2000 referendum, Mugabe wanted a new campaign message. His comrades in arms were getting agitated by Britain’s reneging on the land reform programme. Around 1999, the first farm invasions were reported in Svosve village. The land question became the national question and Mugabe buckled to pressure from war veterans who demanded expropriation of land from 5000 white former commercial farmers.
The controversial land reform programme became his election trump card. His re-election was a pyrrhic victory though. It came at too great a cost—the chaotic land reform programme, noble as it was disrupted agriculture output. Vertical and horizontal linkages between agriculture and other productive sectors suffered a knock. The sector which used to be mainstay of the economy contributing a fifth of the GDP is yet to fully recover due to unresolved issues relating to the land reform programme.
In 2008, Mugabe adopted the policy of nationalisation. The Indigenisation and Economic Empowerment Act was another radical policy shift which compelled foreign owned investors to cede 51 percent stakes to locals. Investors fretted when the Bill was enacted and Zimbabwe’s economy plunged. Between 2000 and 2008, the economy contracted by 40 percent and it is yet to fully recover.
Mnangagwa took a neo-liberal approach. Through his Open for Business mantra, he reassured investors that their assets would be profitable and secure in Zimbabwe. That policy has not yielded much though. Evicted farmers are yet to be compensated and studies show that it is through radical policies that a developing country can break the shackles of dependency. Zimbabwe’s vicious circle of poverty will be in perpetuity unless radical steps are taken to transform the economy and also when she attracts concessionary funding from her allies.
The Zimbabwe dollar this week weakened against the United States as authorities struggle to defend the value of the domestic currency. The local currency, which was trading at ZW$11.11: US$1 lost 30 percent of its value.
With gold deliveries declining due to side-marketing triggered by unfavourable prices, the depreciation of the domestic currency is seen continuing in the short to medium term. Gold is the single largest foreign currency earner after overtaking tobacco last year. As the tobacco marketing season ends and mop up sales are completed, Zimbabwe will transit to a cyclical period of low foreign currency reserves, weakening domestic currency and rising inflation.
After announcing that the price of fuel will be FOB costs and foreign exchange movements, the price of fuel marginally declined and pushed demand. Resultantly long queues which had almost disappeared last week have re-emerged. This is expected to continue in the coming weeks as schools re-open. With increased demand for fuel, demand for foreign currency is also expected to surge. The growing number of bureau de changes in Zimbabwe also speaks on how government wants to widen avenues for buying foreign currency on the market. Mobile phone companies like Econet and NetOne have also joined the fray.
In our view, as Zimbabwe enters a lean period of foreign currency scarcity, government should avoid the temptations of announcing any policy measure that will prejudice foreign currency earners. Going forward, remittances from Zimbabweans living in the diaspora will be a vital source of foreign currency. Ongoing xenophobic attacks in South Africa will however affect these remittances as many locals living in South Africa are on the knife edge. We don’t anticipate any financial package for Zimbabwe during the last quarter of the year.
Apart from fuel, treasury will seek more foreign currency to settle arrears owed to regional power utilities such as Eskom of South Africa. Eskom has given Zimbabwe strict conditions for power imports to ensure that she doesn’t default. Should negotiations with HCB of Mozambique succeed, Zimbabwe will need more foreign currency for new imports. With nearly a third of the population in need of food assistance, grain imports will compete with other critical requirements for the scarce foreign currency reserves.
In this all, one can argue that Zimbabwe’s concentration of exports exposes the economy to both domestic and exogenous factors. Diversification of exports, value addition is what government should be seriously working on to ensure that the economy manoeuvres turbulent cycles. These cycles are inflationary and may cause civil unrest as the cost of living soars.
Zimbabwe was on Wednesday ranked 114 out of 140 economies on the World Economic Forum Travel and Tourism Index.
Spain was the top-ranked economy while Yemen was at the tails end.
President Emmerson Mnangagwa is joining over 1000 global leaders, start-up founders, development experts, artists and innovators who are in Cape Town, South Africa for the World Economic Forum (WEF)-Africa meetings.
One of the key highlights of these meetings is the Travel and Tourism Competitiveness Index which was released on Wednesday.
Covering 140 economies, the Travel & Tourism Competitiveness Index measures the set of factors and policies that enable the sustainable development of the travel and tourism sector, which contributes to the development and competitiveness of a country.
The Travel and Tourism Competitive Index captures the general conditions necessary for operating in a country: business environment; safety and security; health and hygiene; ICT readiness; prioritisation of travel and tourism; international openness; price competitiveness; environmental sustainability; air transport infrastructure; ground and port infrastructure; tourist service infrastructure; natural resources and cultural resources and business travel.
The Travel & Tourism Competitiveness Report is a flagship product of the Platform for Shaping the Future of Mobility, which brings together world leaders to ensure travel and transportation systems meet 21st century demands.
The rapid proliferation of new modes of mobility and disruptive business models provides us with the opportunity to reinvent mobility systems by using policy and technological innovations to address societal, economic and environmental risks.
This year government sees tourism as one of the key drivers of economic growth despite indications that Zimbabwe’s economy will contract by up to 5.7 percent this year. For a country endowed with vast natural resources and an educated human capital, the current rankings should be a wakeup call for authorities to overhaul the tourism sector’s model.
The Victoria Falls is one of the Seven Wonders of the World but reports show that tourists from across the world are no longer spending nights in the resort town but are instead flying into the town to view the majestic attractions before flying back to either Zambia or South Africa. Factors such as accessibility and the cost of the tourism product have often been cited as some of the reasons affecting arrivals.
The report further shows that Sub-Saharan Africa outpaces the global average for growth in tourism receipts and arrivals, with the island nation of Mauritius (54th) outscoring last year’s top performer South Africa (61st) to rank as top scorer in the region. Due to historically lower levels of economic development, the region continues to face difficulties in health and hygiene, overall infrastructure and the effective selling of cultural and business travel.
According to the WEF, growth in T&T competitiveness has traditionally offered tremendous returns, from increases to GDP and labour absorption, to local economic development for more remote communities. However, competitiveness for competitiveness sake may become a burgeoning constraint on the sector as a whole.
Foreign policy is a complex area of study in Zimbabwe and across the globe. After taking over power following the resignation of the country’s first post-Independence executive leader Robert Mugabe, incumbent President Emmerson Mnangagwa promised several reforms—all in the bid to shake off the monkey behind Zimbabwe’s back. He had international goodwill.
Former colonial power, Britain, was one of the developed countries to endorse Zimbabwe’s transition. UK Foreign Office officials pleaded with the world to give Zimbabwe a chance after years of international isolation. The world listened. But not for long. Zimbabwe’s Foreign Affairs ministry on the other hand worked around the clock, trying to normalize relations with the west.
This was government’s admission that the Look East Policy which had been widely credited as a counterbalance to western isolation was not enough. After all, the architecture of international financial institutions is controlled by the west.
The Finance ministry on the other hand was part of Zimbabwe’s Foreign Policy actors, promising the world that the southern African country was reforming. Institutions like the International Monetary Fund commended the first steps that were taken by the Finance ministry while the Foreign Affairs ministry convinced the world that the political reform agenda was in motion.
Fast forward to August 1 2018. Eyebrows were raised when government deployed security forces to quell post-election violence which claimed six lives. Realists argue that the decision to deploy members of the security forces justified the end—safeguarding President Mnangagwa’s election victory which the MDC trashed as flawed.
The United States, which is at the centre of Zimbabwe’s reengagement efforts has raised the red flag. Relations between the US and Zimbabwe are now souring, again. This is certainly not what Harare had anticipated nearly two years after Mugabe’s fall. US ambassador to Zimbabwe Brian Nichols has been a subject of ridicule as former freedom fighters fight from Zanu PF’s corner.
The European Union representative in Zimbabwe said that Zimbabwe could have a foreign policy failure if it continues on a diplomatic warpath with the US. Zimbabwe needs allies now than before. While SADC has thrown its weight behind the anti-sanctions lobby, more support specifically from western powers is what Zimbabwe needs. After all we have walked that path before.
Ongoing xenophobic attacks in South Africa also highlight the need to deepen reengagement with the international community. Fears are that such attacks could result into a regional crisis which could have far-reaching consequences.
In our view the vitriol being spawned on creditors should end and allow diplomatic channels to manage the growing animosity between Harare and western powers. In the absence of this Zimbabwe may continue to be in a vicious circle of isolation, underdevelopment and worsening levels of poverty.
SA violence Zim companies
The Zimbabwe Cross Borders Transport Association has warned that it will stop all South African cross border transport if reported attacks by South African nationals on foreign truck drivers proceed.
Ongoing xenophobic attacks in South Africa have the potential to explode into a regional crisis. Regional leaders should move in to avert the looming crisis.
Ex-ZPC boss jailed
Former Zimbabwe Power Company chairperson Stanley Kazhanje was yesterday sentenced to three years in jail after he was convicted of concealing a US$10 000 bribe he received from controversial businessman Wicknell Chivayo’s company, Intratrek Zimbabwe.
The country’s power utility has since independence been rocked by a series of corruption scandals. While government appears to have struck the right chord in fighting corruption, there is need for corporate governance reforms at institutions such as ZESA.
Fuel prices to track FOB, exchange rate
Zimbabwe’s energy regulator said the country’s fuel prices will now be indexed against FOB movement and foreign exchange movements.
Consumers this week got a reprieve when fuel prices were slashed by up to 15 cents due to the above measure. This approach will however be short-lived due to the weakening local currency going forward.
Economic zone limits widened
The Special Economic Zones Authority has extended boundaries of Belmont, Donnington and Kelvin special economic zones in Bulawayo to include the Westondale industrial area.
Government sees special economic zones as one of the solutions in restoring Zimbabwe’s second largest city as the industrial hub of the country. This however can only be completed if government improves on the ease of doing business among other reforms.
President Emmerson Mnangagwa this week launched investment blueprint for Zimbabwe during the Tokyo International Conference on African Development which is underway in Japan. Under the neo-liberal document, Zimbabwe promised to stop policy inconsistency, respect property rights, protect and promote foreign direct investments among other issues.
According to the new document, the new policy is a departure from the Dependency Theory centred approach where the role of developing countries is to provide raw materials for developed countries and serve as a market for the industrialised nations. This ambitious policy document is anchored on improved governance and rule of law, upholding freedoms of expression and association, political and economic reforms with the international community and fighting corruption both within the public and private sectors.
The launch of the investment policy also coincided with the commissioning of the Zimbabwe Investment Development Agency which seeks to improve the country’s ease of doing business. It is our hope that this agency will turn the MOUs signed in Japan into actual deals.
For Zimbabwe, the proof of the pudding is in the eating. Key issues addressed in the National Investment Policy are all covered by the Transitional Stabilisation Programme (2018-2020) which is the country’s main developmental plan. Zimbabwe’s record of implementing well-thought out policy has been appalling, specifically on political reforms.
In 2016, Japan promised to increase its investment in Africa but at current levels has not fully committed to its pledges. Official figures show that China and India are the leading Asian countries that have increased investments in emerging countries. Zimbabwe’s efforts in attracting foreign direct investment from Japan and the rest of the world should go beyond rhetoric. The TICAD conference comes at a time Zimbabwe has been criticised by the European Union and the United States for growing human rights violations on dissenting voices. Government has denied any violations despite media reports.
Official statistics from the Embassy of Japan show that only two companies from the East Asian island country are now operating in the country from a peak of 40. The two are; Kansai Plascon which acquired former Zimbabwe Stock Exchange listed manufacturing concern Astra and Toyota Zimbabwe. The divestment of Japanese companies in Zimbabwe speaks to housekeeping issues in Zimbabwe.
Hyperinflation in 2008 coupled with challenges in repatriating foreign currency, uncertainty, Indigenisation Policy among other economic challenges had unnerved investors from Japan.
Zimbabwe ditched its local currency for a basket of foreign currencies mainly dominated by the United States dollar in 2009 due to runaway inflation.
In 10 years the country reintroduced its domestic currency at a time inflation had reached triple-digit figures. The reintroduction of the local currency was not consistent with the TSP which spelt out that the multicurrency system would be maintained. These are some the issues that investors fret over.
The economy of Japan is a highly developed and market-oriented economy. It is the third-largest in the world by nominal GDP and the fourth-largest by purchasing power parity and is the world's second largest developed economy.
By improving its international relations with Japan, Zimbabwe could also win allies in convincing the G7 countries to extend a loan to Harare to settle arrears to the World Bank. Currently France is taking a leading position on this front.
Latest statistics from the country’s statistical agency indicate that Zimbabwe recorded a trade deficit of $605 million between February and July this year, down 62 percent compared to the same period last year.
According to the Zimbabwe Statistics Agency (ZimStat) between February and July, the country exported goods and services worth $2.4 billion against imports of $1.8 billion. During the same period last year, imports stood at $3.54 billion and exports at $1.58 billion.
What is worrisome though is that exports were down 8 percent during the period under review, a situation that has a huge impact on the country’s balance of payment. Growing exports and boosting domestic output is one of the cocktail of measures that spur growth of the domestic economy which is currently facing serious headwinds.
Attracting foreign direct investments should be another key priority. FDI follows improvements in the ease of doing business in the economy. It has been observed that Zimbabwe’s investment attractiveness has somewhat declined over the year, largely due to monetary instability.
On the part of government, this is sweet news given that this development indirectly favours demand for local products which do not require foreign currency. We have consistently said stimulating domestic production is one of the key pillars of stimulating economic growth but this is only sustainable in an environment where policy is consistent and fresh capital is attracted.
We also contend that the drop in imports is attributable to various factors which include foreign currency shortages, smuggling and the new currency framework. In February, the Reserve Bank of Zimbabwe effectively introduced the local currency when it announced it had scrapped the parity policy of the domestic currency with the United States dollar.
The floating of the local currency was driven by movements on the parallel market as well as foreign exchange shortages in the informal sector. The central bank, by floating the Zimbabwe dollar, admitted that it had failed to meet the demands of a priority list of importers. If anything, the list kept on growing since Zimbabwe is a net importer.
Rising inflation since the start of the year also resulted in many Zimbabweans travelling to neighbouring countries like South Africa, Botswana, Zambia and Mozambique to buy basic commodities. Goods worth millions of dollars could have been smuggled into the country due to the porous state of our ports of entry and corruption. Resultantly, import figures released by ZimStat may not be accurate.
The introduction of the mono-currency system in June also had an impact on the country’s import bill. This major policy shift has resulted in the scarcity of foreign currency as seen by fuel shortages and difficulties in paying arrears owed to regional power utilities.
President Mnangagwa meets regional leaders in Japan
President Mnangagwa arrived in Japan to attend the 7th Tokyo International Conference on African Development which begins Wednesday with principal focus on business and investment.
View: While it is noble for Zimbabwe to diversify its export destinations we contend that Zimbabwe should first strengthen is domestic policy before she can aggressively pursue her foreign. The country’s foreign policy should an extension of its domestic policy. As it stands local firms are in limbo and more needs to be done to stimulate growth.
Chamisa key in talks: EU
The European Union has urged government to open dialogue with leader of the country’s main opposition party Nelson Chamisa to end the current socio-political impasse.
View:The growing calls by the international community on the Zanu PF government will pile pressure on government to come to the table with the opposition as the economy continues to suffer.
Zim saddens Trump, world
The United States is getting increasingly disappointed by President Emmerson Mnangagwa’s administration over its vicious clampdown on dissenting voices.
View:The US is now ratcheting pressure on regional leaders to resolve the complex socio-political situation in Zimbabwe. Zimbabwe is a landlocked country and an escalation of the domestic situation will have ripple effects in the region.
Civil servants in salary U-turn
Zimbabwe’s civil servants yesterday made a U-turn and embraced a 76 percent salary adjustment by their employer hardly a week after they scoffed at the offer, describing it as falling too short of their expectations.
View:Government could be using the divide and rule strategy to avert calls for paralysing industrial action by members of the civil service.
Zimbabwe is considering pulling out of the Convention on International Trade in Endangered Species of Fauna and Flora (CITES) to fully benefit from its conservation of natural resources after the just ended 18th meeting of the Conference of the parties to CITES in Geneva this week rejected a proposal by SADC countries to open trade to clear existing stockpiles of ivory. Zimbabwe is sitting on US$600 million worth of stock is battling a floundering economy.
Before this Conference debate on whether or not a ban on ban on ivory trade should be lifted intensified as the issue became a talking point for the international political economy.
Just last month, Botswana was lobbying Kenya in an effort to convince the East African country to change its position and support ivory trade at the CITES. Kenya position to back western powers has divided opinion on the advantages and disadvantages of global public goods. The question here would be “Why should Zimbabwe suffer from the wrongs of others public goods?”
While President Emmerson Mnangagwa’s position, to some extent is justifiable, it is the aftermath that requires assessment. On face value the issue of classifying elephants as African elephants appears ludicrous for hardliners who posit that cases of human-wildlife conflict may be eased by the trading of ivory. In this school of thought some argue that Zimbabwe, which is involved in conservation work, should benefit from its natural resources.
Zimbabwe’s Marxist stance of revolting against the CITES may lead to two things---force reforms or the country may return to the state of nature. It is the latter which has dire consequences. Zimbabwe’s allies--China and other eastern nations are in CITES, so who will Zimbabwe turn to when she pulls out.
It is our view that through fragmentation of CITES, Zimbabwe, should build for a strong case on its position to open ivory trades instead of pulling out of CITES. In driving this agenda, institutional inertia will however emerge as one of the biggest challenges.
In 2003, Mnangagwa’s predecessor, Robert Mugabe, took an almost similar decision when he pulled out of the Commonwealth after accusing then Secretary General Don McKinnon and former British Prime Minister Tony Blair of taking a harsh foreign policy stance on Zimbabwe. The consequences of this hardline position have been documented. Now Mnangagwa is making frantic efforts to be readmitted into Commonwealth.