'Open for business' Zimbabwe has little to show for $27 billion

When Emmerson Mnangagwa took over the leadership of Zimbabwe from Robert Mugabe in November 2017, he promised to revive the moribund economy and adopted a mantra he’s repeated regularly ever since - “Zimbabwe is open for business.”

Mnangagwa, always wearing a scarf in the colours of the Zimbabwean flag, quickly set about traversing the globe to woo investment needed to revive the heavily indebted economy. By March, he’d been on at least 30 foreign visits, including trips to the US, Russia, China, the Middle East and the World Economic Forum in Davos.

Together with the enthusiastic support of state media, Mnangagwa and his officials have announced more than $27bn of planned investment ranging from new platinum mines to steel mills and hydropower dams.

Eighteen months into his rule, he has little to show for it.

Economic Contraction

The economy is in its most dire state since 2008, when inflation surged to an estimated 500 billion percent.

Medicines, fuel and foreign currency are in short supply, prices of basic goods such as bread are surging and the International Monetary Fund has forecast the first economic contraction in 11 years. And many of the investment projects announced by the government haven’t progressed beyond the memorandum of understanding or feasibility stage.

“We are still very confident that the bulk of the investments and expressions of interest will materialize,” said Nick Mangwana, the government spokesperson. “Of course there will be those that fail to get finances to invest in Zimbabwe because of the blight of sanctions, and there will be those who also delay whilst they monitor the success of our current reforms, but in the whole we are very optimistic.”

Zimbabwe has plenty to offer, with a cornucopia of minerals including the world’s third-biggest platinum-group-metal reserves, and some of the best transport infrastructure in the region. Local ownership rules have been relaxed, as has a currency regime that hindered access to dollars.

The RTGS, a quasi-currency that isn’t used outside Zimbabwe, fell 30% on the three-month-old interbank market today to 4.55 per dollar, bringing it closer to the black market rate of 6.10. On May 18, the government said it had secured a $500m loan that it would use to boost liquidity in the interbank market.

Still, a disputed 2018 election, in which Mnangagwa retained power, and the violent suppression of protests earlier this year have underscored the country’s instability.

Risk Appetite 

Few companies with a “rational level of risk appetite” will invest in the country in its current state, said Jee-A van der Linde, an economist at NKC African Economics.

The African Development Bank estimated foreign direct investment last year at $470m, about a third of the $1.1bn attracted by northern neighbour Zambia and a fraction of the $2.3bn that flowed into Mozambique, which lies to the east.

For some Zimbabweans, the investment pledges evoke memories of Mugabe, who was prone to announcing mega-deals that didn’t materialise. For example, in September 2017 Mugabe announced plans to revive Zimbabwe Iron & Steel Works, once the second-largest steelmaker in sub-Saharan Africa. The project never got off the ground.

“Mega-deals may be mega-deals, they may be mega-nonsense,” said Joe Chabikwa, who sells potted plants to passing motorists in the capital, Harare. “These days you believe what you see with your own eyes.”

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