Can Zimbabwe deliver on its investment promise?

Zimbabwe has seen renewed investor interest since the government of president Emmerson Mnangagwa took power through a soft coup in November 2017.

The country became a pariah state, isolated from the international community under former president Robert Mugabe, whose foreign and domestic policies kept away investors.

Since Mr Mugabe’s departure, the country has been visited by high-profile dignitaries including the UK’s permanent under-secretary in the Foreign and Commonwealth Office, Simon McDonald, and Africa minister Rory Stewart, as well as China’s assistant foreign minister, Chen Xiaodong.

The strong investor interest has given Mr Mnangagwa the confidence to publicly claim that his government has to date attracted more than $11bn in FDI commitments. In his inaugural speech, he promised to mend the country’s toxic relations with the global community, particularly the West.

Big promises

Topping Mr Mnangagwa's pledged major investments is the $5.2bn liquid fuels deal signed with Sikhosana Holdings, a South African firm promising to produce more than 8 million litres of liquid fuels per day from coal.

The new government also signed a platinum mining and refinery investment deal with Cyprus-based Karo Resources International, worth $4.2bn. In the integrated joint venture, Karo will inject cash while the Zimbabwean government will use mineral resources as its contribution.

Other deals include Chinese company Sinosteel Corporation’s $1bn investment to build a power plant and three chrome-smelting furnaces in Zimbabwe’s Matebeleland North province. “We have now attracted more than $11bn in FDI commitments. I will continue to work hard to bring in crucial FDI which will create more jobs,” Mr Mnangagwa has said.

However, sceptics have cast doubt on the figures, considering the Zimbabwe Investment Authority’s estimates that the country has over the past three years attracted only $400m in FDI.

Shadowy figures

There are also grave concerns that Mr Mnangagwa’s government is desperate for investment and therefore signing deals with comparatively obscure companies such as Karo Resources and Sikhosana Holdings.

Dr Prosper Chitambara, a development economist with the Labour and Economic Development Research Institute of Zimbabwe, says the $11bn could be an overstatement and derives from pledges by companies interested in investing in the country when the conditions are right, after the holding of free, fair and credible elections.

“These are not monies that have actually come into the country. Not even South Africa or Mozambique, who are two of the biggest recipients of FDI in sub-Saharan Africa, have attracted those levels of investment,” says Mr Chitambara.

Farai Maguwu, a director of Zimbabwe’s Centre for Natural Resource Governance, believes the way the new government is negotiating is no different from the Mugabe regime, when mining investments were negotiated by ministers and the Office of the President, which is essentially the Central Intelligence Organisation and the military. “Parliament is not involved and there is no due diligence in selecting the investors,” he says.  

Human rights lawyer and aspiring politician Fadzai Mahere agrees. “As Zimbabwe pushes forward many deals will be made, agreements and loans will be extended. Let’s ensure our best minds are present, negotiating, reviewing and reading through the fine print in the paperwork to ensure that the nation does not lose out,” he says.

Future hopes

Mr Chitambara also calls for greater transparency in the crafting of investment deals, but concedes that Mr Mnangagwa and his government are under immense pressure to be seen to be taking action, especially before an election.

He adds that so far there have not been many political attempts to attract investor interest, apart from the repeal of the contentious Indigenisation and Economic Empowerment Act.

“Things have not changed much on the ground because we have not really implemented any meaningful reforms,” says Mr Chitambara. “But again, there is a lot of hope on the potential of the country. Zimbabwe is underinvested. Investors are positioning themselves for huge potential rewards that can be harnessed after the elections, when we hope to see the implementation of bolder structural reforms that will improve the ease – and the cut the high cost – of doing business.”