Davos: Promises & limitations

What Zimbabwe’s President Emmerson Mnangagwa is offering investors at WEF Davos  

CNBC by Chris Bishop

22 January 2018

What a contrast; just two months after Emmerson Mnangagwa was in hiding in South Africa, in fear of his life while battle tanks rumbled through his capital, he is going to walk, chin-up, into the World Economic Forum in Davos, Switzerland, on  Monday  with a new investment brochure under his arm in the hope of persuading the world to pour hard currency into what is left of his economy. The document, in the possession of CNBC Africa, promises much, but bears little close scrutiny.

Zimbabwe has suffered an economic meltdown over the last 15 years and struggles on with crumbling infrastructure and no currency to call its own. Confidence fell during the dwindling economic fortunes in the painful last years of President Robert Mugabe’s 37-year rule hastened by a military takeover.

The canny crocodile – his nom de guerre from the liberation war– was being forced out by Mugabe. Now he has a new lease on life and knows that his survival past the elections this year hinges upon reviving the economy and putting money back into the pockets of an increasingly restive population.

The investment document is well intentioned and gets off on the right foot. It promises reform to become more attractive to foreign investors with the streamlining of legal frameworks, respect for bilateral trade agreements. There is also a promise of good governance and compensation when it all goes wrong.

It falls down a bit with an ambiguous line dealing with the protection of property.

“The government commits to the protection of all investments from expropriation, or from measures taken that will have a similar effect, except for a public purpose…”

What exactly a “public purpose” means in this document is open to debate. Does it mean that when the public – or the government on their behalf – needs property, it can take it? Wasn’t that the justification for the disastrous land seizures from commercial farmers that began in 2000? The investment document also promises investors: “adequate and effective compensation”.  Unlikely, to say the least, from a cash-strapped Treasury in a country where foreign currency is rationed.

Yet the document persists with a promise to compensate farmers in Zimbabwe who lost their land and is considering setting up a tribunal to determine how much should be paid. The farmers, a number of whom were chased off their land by armed mobs, are likely to be sceptical. Many voters who supported the land seizures are likely to be flummoxed.

The document for Davos also promises to drop the infamous indigenisation requirement, that is 51% ownership by Zimbabweans, that has discouraged many investors. Yet, it says this unpopular requirement will remain for diamonds and platinum two of the big earning minerals. It says the ministry will be charged with drawing up a new bill and regulations to govern diamonds and platinum. How long that takes is not written in the document, but the longer it takes to create certainty the more likely investors are likely to look elsewhere.

Mnangagwa maybe needs to be a little bolder and clearer if he is to win back foreign investors. His predecessor and former mentor Mugabe will be remembered for ushering a once robust economy into steep economic decline. Maybe Mnangagwa needs to work fast to stand a chance of being celebrated for doing the opposite by showing the world that when it comes to business the crocodile has teeth.