While it isn't a party just yet, the lights are definitely coming back on and Zimbabwe is open for business.
In November 2017, Robert Mugabe's 38-year long rule came to an end via an internal ruling-party fight that culminated in a silent “non-coup” and transfer of power from Robert Mugabe to his trusted right hand man, Emmerson Mnangagwa.
The ushering in of a new dispensation in the form of a new president brought with it hope for Zimbabweans. There were international re-engagement efforts and the global community appeared eager to support Zimbabwe. President Mnangagwa subsequently made short work of attaining legitimacy courtesy of his win at the 2018 presidential polls.
"We Are Zimbabwe" video courtesy of CMEDIA Africa
During the run up to the July 31st election, Emmerson Mnangagwa was the public face of what was pitched as a new era for the ruling party. Opposition parties campaigned freely, government expenditure was noticeably curbed and many promises were made regarding economic revival. However, when the election actually took place, delays in the collation and announcement of voting results led to public demonstrations that led to the infamous violence of August 1st 2018. This tragedy rained on the fragile fire that Zimbabwe was rekindling, both internally and abroad, as activists bemoaned what appeared to be ZANU-PF returning to its default settings. For many, the hopes of a New Zimbabwe had been halted by the deadly live rounds fired on that fateful August afternoon.
Today, Zimbabwe’s economy is at a crossroads. The country faces a myriad of challenges relating to fiscal consolidation and financial sector stabilisation. The government desperately wants to to see meaningful regional and international investment flows and industrial productivity in order to improve its revenue collection and foreign exchange generation prospects. Meanwhile, social gains must be made alongside improvements in governance, and that demands a commitment to actuating legislative and institutional reforms.
Zimbabwe's recently-published monetary policy statement seeks to address some of these challenges. A standout policy update has to be the Reserve Bank of Zimbabwe's decision to float the local currency; allowing market forces to determine the rate of exchange. While everyday Zimbabweans are understandably confounded by this development, in industry circles, it has widely been lauded as a pragmatic first step in the right direction in terms of stemming current liquidity challenges, attracting foreign direct investment and improving the balance of trade. No doubt, many more sound, pragmatic steps are needed.
The central bank's latest pronouncements are designed to support the Transitional Stabilization Programme 2018-2020— which has so far made impressive gains but has also caused parallel market exchange rates to skyrocket and contributed to inflationary pressures. Back in November 2017, Zimbabwe set its sights on becoming a middle-income economy by 2030, and in a likely demonstration of seriousness to would-be financiers, Zimbabwe's “Austerity for Prosperity” themed fiscal budget featured austere reforms, and the Zimbabwe is Open For Business campaign which accompanied it embodied the country's aspiration to transition from a government-driven economy to a private sector-led economy in line with Vision 2030.
It has been hiccups aplenty for the New Zimbabwe. And while there really is no point in glossing over the obvious economic challenges the country is facing, it is certainly not ridiculous to assert that economic stability is on the horizon, and to ask the questions, Are the lights coming back on? and Could this be an opportune time to invest in Zimbabwe's economic future? We believe so.
The African Development Bank's 2019/20 Zimbabwe Economic Outlook states the following:
The economy performed better than expected in 2018, expanding by an estimated 3.5%, driven by agriculture, supported by relatively peaceful elections.
Also mentioned in that report is the fact that Zimbabwe's fiscal deficit has been significantly reduced and that the government would do well to address the currency uncertainties to unlock the country's potential. Zimbabwe's recently-announced monetary policy, which essentially liberalises foreign currency trading, directly addresses the latter point.
Here is a laundry list of utterly fixable challenges which present massive opportunities for the discerning investor willing to play the long bet in Zimbabwe: policy-related macroeconomic instability, lack of project finance, land tenure uncertainties, fluid investment regulations, inflated input costs, outdated machinery; inefficient government bureaucracy and inadequate public infrastructure.
The Zimbabwean government currently has its arms wide open to would-be investors keen on getting stuck into everything from energy and transport to health and agriculture. And they well should! Zimbabwe boasts a youthful population with a high literacy rate, and much of the country's basic infrastructure, while worn, is still in place. Major road rehabilitations and power generation projects have started to come online and the tourism industry is doing incredibly well given the circumstances with Zimbabwe placing 3rd in LonelyPlanet's Best in Travel 2019 list!
While most sectors seem poised to deliver handsome ROI to savvy investors, government has earmarked four key sectors as being crucial for economic growth: Agriculture, Manufacturing, Tourism and Mining. Doubtless, key support sectors like IT and financial services are also positioned to benefit as the economy expands. So, in short, it isn't a party just yet, but the lights are definitely coming back on and Zimbabwe is open for business.
Follow Simanga on Twitter @SmangaMad.
Image credit: Henry Hakulandaba