In his large, old-style office in Bulawayo’s central business district, economist Eric Bloch reflects on Zimbabwe’s economic progress 31 years after independence — “It’s a very sad state of affairs and things are messy.”
For him, the country’s new indigenisation law, ostensibly mooted to increase local participation in the economy, is likely to set off a wave of seizures of foreign-owned companies and is further evidence of President Robert Mugabe reneging on his independence-era promises to respect property rights.
At independence in 1980 Mugabe promised that “those who have talked about the possibility of personal and other properties being nationalised and seized have not read us correctly. We will not do any such thing.”
In 2000, under threat from emerging grassroots opposition, he authorised the seizure of white-owned commercial farms under a “fast track” land reform programme that resulted in the dispossession of nearly 4Â 000 farmers.
Now Zanu-PF rhetoric in support of the takeover of foreign-owned companies is rising in volume, rattling the country’s business community. Zanu-PF spokesperson Rugare Gumbo said: “There is no turning back with indigenisation. We’ve got our land and now it’s time to distribute our mineral wealth.”
Under the Indigenisation and Empowerment Act foreign-owned companies with a value of $500Â 000 or more must cede a 51% controlling stake to indigenous Zimbabweans. In terms of recently gazetted regulations, the mining sector will be the first to be indigenised, as early as September this year. Affected companies will include mining giants Rio Tinto, Anglo Platinum and Zimplats.
Market sources said that the Zimbabwe Chamber of Mines (ZCM) was planning a “collective class action against the government over the constitutionality of the indigenisation law”. Recently the indigenisation board rejected the ZCM’s proposal of a 26% indigenous stake in the mining sector.
Uncertainty
The Zimbabwean government is no stranger to legal challenges to its expropriation policies: in 2007 farmer Mike Campbell took the seizure of his farm by war veterans to the Southern African Development Community Tribunal — and won his case for compensation. However, the government is unlikely to heed an adverse finding in any court case that could be mounted.
A further threat to a stable business climate in Zimbabwe is the possibility of fresh elections this year to end the ongoing political stalemate in the two-year-old unity government, with the probability of large-scale political violence. Already, foreign investors have been spooked by what they suspect is a gathering storm, with trade on the Zimbabwe Stock Exchange (ZSE) falling by as much as 25% this year.
Emmanuel Munyukwi, the ZSE chief executive, said: “We’ve been on a six-month low since September last year, and it’s attributable to uncertainty. People just don’t know what’s going to happen.”
At risk is the country’s tentative and fragile economic recovery. Much still remains to be done, with the Confederation of Zimbabwe Industries estimating factory capacity at about 30% and further improvements hampered by the credit crunch and the unwillingness of foreign firms to invest in their local subsidiaries.
But in 2009, under a “dollarised” economy, the country recorded a 5,1% economic growth rate after more than 10 years in the doldrums. This year the finance minister and member of the opposition Movement for Democratic Change, Tendai Biti, has forecast a growth rate of 9,3%, spurred on by the partial recovery of agriculture and increased mining output.
Although current agricultural production lags almost two-thirds behind the roaring success of the 1990s, when more than 2.2 million tonnes of maize was harvested annually, observers have recorded important shifts since the mid-2000s when farmlands were left fallow and seed stocks were consumed by resettled black farmers.
A study last year by Sussex University’s Ian Scoones, titled “Zimbabwe’s land reform: myths and realities”, argued that the land reform project was “not an abject failure”. In particular, about 40Â 000 black farmers were spearheading the revival of tobacco farming, with an expected yield of 173-million kilograms this year, up from 120-million kilograms in 2010.
‘Long way to go’
Bloch welcomed the improvement but emphasised that “we are still far from where we used to be and have a long way to go”. In 2000, production of the gold leaf had reached 236-million kilograms, accounting for almost half of Zimbabwe’s GDP.
Another trend with major implications is Zimbabwe’s “Look East” policy, embarked on after Mugabe fell out with the West. China and India have made huge inroads into Zimbabwe’s economy, with state-owned Chinese companies driving up prices by gobbling up 40% of tobacco sales, a traditional preserve of Western companies, and moving in as the government’s major partners in the diamond mining operations at Marange. A stockpile of one million carats mined by Chinese firm Anjin is now ready for sale.
India has dipped into the local steel industry, with steel manufacturer Essar buying the country’s ailing steel giant Ziscosteel in a $750million deal. Large parcels of Marange’s alluvial diamonds were bought by Indian buyers during Zimbabwe’s limited-sale auctions last year and India is reportedly spearheading the building of a diamond technology centre in Harare.
The benefits of Look East, however, have yet to reach down to ordinary Zimbabweans, whose lives are dominated by the daily struggle for work and food and the irregular supply of basic services such as electricity and water.
Civil servants earn monthly salaries of $150, compared with the poverty datum line of $500 and in contrast with top industry executives, who can earn up to $15Â 000 a month.
It is not just the poor who suffer. “The economy in the past decade has not been friendly to either middle-class or working-class Zimbabweans,” remarked one commentator. “It is people on the Zanu-PF side of government that are making it and those in the informal sector connected with them.”
Zanu-PF haunted by illness rumours
President Robert Mugabe’s ailing health has become the source of instability for his Zanu-PF party, which endorsed the 87-year-old leader as its presidential candidate at its December congress last year.
Zanu-PF sources told the Mail & Guardian that Mugabe’s recent trips to Singapore for “medical checkups” had set alarm bells ringing in the party as there is no outright successor to take over from the long-time leader.
“The problem is that there is so much speculation about his health and it has been made worse because he hasn’t opened up to senior party members about it,” said a source who requested anonymity.
There is persistent speculation that Mugabe suffers from prostate cancer and that this is the reason for his monthly trips to the Asian country.
In Zambia earlier this month, at a Southern African Development Community troika summit, reports of Mugabe being wheeled around in a golf cart in the resort town of Livingstone fuelled rumours about his health.
A medical expert told the M&G that symptoms of prostate cancer included backache and swollen feet, which make walking difficult. Treatment would require at least monthly injections and consistent reviews by specialists.
Mugabe’s office has dismissed the speculation, insisting that his trips to Singapore have been for the removal of an eye cataract and, most recently, to accompany his sick wife Grace “who had slipped in the bathroom and injured herself”.
Increasingly in recent years Mugabe has shot down any talk of succession in Zanu-PF while insisting that “proper systems and procedures” must be followed in dealing with the issue. It has been construed to mean that he has no intention of relinquishing power. A “succession committee” appointed by Mugabe in 2009 disbanded without ever taking off.
In spite of his stonewalling tactics, two factions in Zanu-PF have emerged, both jockeying to land the country’s top job.
One favours Deputy President Joyce Mujuru, seen as more liberal in outlook, more likely to adopt investor-friendly policies and willing to negotiate with the opposition Movement for Democratic Change. Pitted against her is Defence Minister Emmerson Mnangagwa, the hardliners’ choice.
The questions about Mugabe’s health have created a conundrum for Zanu-PF’s election campaign planners. Another Zanu-PF official, who also asked to remain anonymous, said: “It’s hard to plan the way forward. Will he really be able to cope with a busy political schedule?