Zim on shaky ground
21 August 2013
Zimbabwe's plan to fast-track black ownership of the economy following Zanu-PF's landslide election victory a week ago had set its economy on a "slippery slope", which could see that economy retreating to its earlier doldrums.
While analysts warned of jumping on the consensus bandwagon that the Zimbabwean economy faced the prospect of implosion - more muddling along was likely, there was a general perception that the country was slipping back behind an iron curtain.
Nic Borain, a political analyst at BNP Paribas Cadiz Securities, said the "big questions" for investors included whether a reinvigorated Zanu-PF would implement the indigenisation programme - possibly snatching the remaining investment of foreign companies, and whether the party would implement the "catastrophic monetary and fiscal policies".
President Robert Mugabe has already indicated that he would like the country to return to the Zimbabwean dollar, which was abolished shortly before the 2008 national election, after it had done a spectacular Weimar-Republic-like dive in the mid-2000s.
"Without attempting to answer those questions... we should treat Zanu-PF and Mugabe as conscious and politically-aware players in their game," Borain said.
Borain believed a more lunatic approach was not politically necessary now - because Zanu-PF had consolidated its power base significantly and did not need to use the economy for political leverage.
"They are likely to seek a degree of economic stability," he suggested.
This didn't mean, however, that they would back off from threats of further indigenisation. "It (the policy) appears to have worked for them, up to a point. But it does mean that they are unlikely to implement indigenisation that breaks international norms and standards about property or in a manner that causes a stampede out of the economy."
Steven Friedman, a political analyst at the University of Johannesburg, said he believed the investment climate in Zimbabwe was very bleak and it could actually retreat back to the level of the pre-2008 unity government agreement.
Any investor who considered investing in the country at this stage "pretty much needs his head read", although he believed that existing companies that had assets in the country already would be "making deals" to try to hang on to them.
A blacks-only stock exchange was likely to benefit a small elite who had access to the small pool of wealth - and would exclude the broad mass of black citizens.
"I see a very bleak investment climate until the political problems are resolved," said Friedman, pointing out that the imperilled power sharing agreement had seen certain economic progress being made.
"Even in that climate you had economic recovery... more optimism and greater investment, as there was at least a hope of political stability."
That appeared to have been rolled back significantly, if not reversed, Friedman said.
Borain tried to be more upbeat about the prospects of another five years of Zanu-PF rule. "What's important to me is that we would be making a mistake if we thought of Zanu-PF and its leadership as purely a gang of thugs who got lucky... and cheated (the recent election).
"While that might have elements of the truth, it is also true that Zanu-PF... fought a very extensive and unusually robust military war of liberation; that the central leadership brutally and efficiently crushed opposition in the 1990s."
It had also learnt from mistakes, he said, such as using the fiscus to claw back political control by recapitalising the military veterans pension fund.
Analysts pointed out that the abolition of the Zimbabwean dollar - and replacing it with the US dollar and rand - had been carried out by a Zanu-PF minister before the MDC's Tendai Biti took over the finance ministry.
Frontier Advisory analyst John de Villiers was cautious about a secondary exchange ever materialising. "There is no economic rationale to its implementation," he said.
Acknowledging that a number of Zimbabwe government policy decisions had not enjoyed a sensible rationale in the past, he argued that a blacks-only secondary exchange would not have the impact of expanding the economic cake.
Elite government officials are expected to benefit from the plan as in the first empowerment plan that involved seizing farms.
"Whether this secondary exchange even materialises remains to be seen, as there is no economic rationale to its implementation... but this particular policy cannot hope to have any effect on wealth," De Villiers said on Friday.
The main bourse in Zimbabwe had 69 listed companies, with marginal liquidity.
"To segregate the participants in the... equity market would be pointless. So I do believe there is a degree of politicking occurring under the guise of wealth transfer," he added.
Saviour Kasukuwere, the Youth, Development, Indigenisation and Empowerment Minister, said the government would take 51 percent of the shares of major foreign-owned companies. No compensation would be paid.
During the election period, Zanu-PF ran adverts in which it said it would target foreign owned companies including banks and mines.
Vuyo Mtawa, Edcon's media relations manager, said the company had not been approached by any official or regulator and declined to comment.
Impala Platinum had also not been approached by the government, spokesman Bob Gilmour said on Friday.