Economic comeback is faltering in the wake of the unity government’s collapse, writes Jason Moyo.
The flashes of red across the trading board of the Zimbabwe stock exchange and a roomful of panic-stricken brokers told a tale this week of a nascent economic recovery in danger.
Shares were down more than 12% on the week last Friday, the market’s largest weekly fall since the unity government was formed.
On news that Prime Minister Morgan Tsvangirai was ending cooperation with President Robert Mugabe to press for more reforms, the risk-hungry foreign investors that have carried the stock exchange for months took flight.
The stock exchange has been a barometer of local and foreign investor confidence in Zimbabwe, rising sharply once the coalition introduced economic reforms that helped halt Zimbabwe’s world-record inflation and restored some confidence.
But as a standoff between Zimbabwe’s two main leaders continues, with little sign of an early resolution amid reports of rising violence, Zimbabwe’s efforts to escape years of ruin have been shaken.
Zimbabweans’ greatest fear is a return to the economic crisis that peaked last year, when shop shelves were bare, basic services collapsed and a cholera epidemic killed thousands.
The most visible achievement of the unity government had been to stop the decline. For the first time in years, Zimbabwe’s economic statistics no longer made dire reading; according to the IMF last month, the economy would grow 3% this year.
Confidence was also returning to local industry. A report by the Confederation of Zimbabwe Industries showed factory-capacity utilisation up to 32% from less than 10% before the unity government, more than doubling output in the first six months of the coalition.
Tempted by the prospects, a procession of foreign investors looked to snap up Zim’s private businesses and state enterprises on the cheap. Investors ploughed $1,5-billion into plant rehabilitation and expansion.
Now investors are standing back. Shoprite has delayed a planned investment in Zimbabwe. ArcelorMittal remains one of two bidders shortlisted for a stake in Zisco, the state steel company, but industry minister Welshman Ncube concedes there is now hesitation.
”Investors who were keen to invest in Zisco are now phoning to ask if it is worthwhile, given Tsvangirai’s announcements,” Ncube said.
Some confidence remains that the economy will ride out the standoff. Leading investment fund Renaissance Capital this week projected Zimbabwean share prices will still climb 70% by 2011. But that is only if the standoff ends early.
”We think any extended political impasse may cause a more severe downward correction, but only if there are any potential negative changes to economic policy,” fund analyst Dzika Danha said. ”Economic recovery in the short term is likely to be unaffected.”
But the IMF warned that recovery would only be sustained if there was ”political consensus” and respect for ”property rights, and maintaining the rule of law” — both now under threat, with rifts widening and farm violence on the rise.
An MDC staffer was this week charged with involvement in the theft of weapons from an army barracks outside Harare. The MDC says attacks on its supporters in the countryside are rising.
On the farms, attackers are becoming more brazen. This week, three people were seriously wounded when rubber bullets — usually issued to security forces — were fired at a group of farm workers at a farm targeted for seizure by a deputy reserve bank governor.
Such violence dramatises the rising political temperatures and further threatens Zimbabwe’s food security.
Zimbabwe has raised only $5,7-million of the $48-million it hoped to raise for farm support in the new farming season, according to agriculture secretary Ngoni Masoka. Less than half of the fertiliser required has been acquired, he said on Tuesday. Much of this was expected from donors, but aid was unlikely to come as long as the farm attacks continue.
Further worry on the economic front concerns the 2010 budget that finance minister Tendai Biti is due to present to Parliament this month. Biti will have to consult his Zanu-PF colleagues, including Mugabe himself, before he can table his budget, which could be delayed by the government standoff.
The MDC hoped regional leaders would ”do the right thing” and put pressure on Mugabe to honour his commitments to the agreement, after a visit to Zimbabwe by SADC chairman and DRC president Joseph Kabila failed to ease tensions.
Kabila remains indebted to Mugabe, who sent in the Zimbabwe army to defend the Congo against Rwandan and Ugandan-backed rebels in 1998.