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Zimbabwe – Economic policy may be emerging from the quagmire, but…

Zimbabwe’s decision to review its controversial indigenisation policy could stimulate the economy and change the fortunes of the country. So far, all we have is words, but we also have some real sense that perhaps this time there is real hope that Zimbabwe can shake off its long economic nightmare. Local media, importantly the ZANU-PF mouthpiece The Herald, said this week that the revision of the indigenisation law opened avenues for realistic policy options that appeal to the common sense of sustainable business development. That hardly sounds like ZANU-PF talk, and if it can translate into concrete actions then our optimism that Zimbabwe will eventually ascend in the investor-attracting African environment once again would be justified. But so far all we have is words and, contrary to the claim of a once-popular melody, words actually do come easy.

Earlier this year, we saw Zimbabwe’s finance and economic development minister, Patrick Chinamasa, suggest in public (without being shot down in flames as would have been the usual response) that the country was ready for a major shift in economic policy to arrest an economic decline that appeared terminal. Zimbabwe wanted to “follow the good examples set by Mauritius, India and China.” A little later, Mr Chinamasa was urging foreign investors to consider doing business with Zimbabwe, assuring them that “no one would take 51% of their money.” Shortly afterwards, Minister of Industry and Commerce Mike Bimha told the Chinese news agency Xinhua that the authorities were looking at all possibilities, including reviewing the indigenisation law. Adding political weight and tacit Politburo support to the overall plans, media reports of government policy on May 26 stated that investors would be able to recoup their investments before being asked to implement empowerment programmes.

We suggested previously that the wind of change may be blowing through Zimbabwe’s economic and political landscape, but that actions were required. While that remains the case, there is clear evidence that the words themselves are taking on a new intensity and new weight. This suggests that change may well be on the way with Zimbabwe looking to models from the Middle East, specifically the Joint Empowerment Investment Model (JEIM) and the Production Sharing Model (PSM). Clearly extraction is the common feature (Zimbabwe has minerals and the Middle East has oil) and the models seem appropriate and have generally been welcomed and encouraged by economists.

WHY DO WE CARE? Critics blame the indigenisation law, which was enacted in 2010, for frightening away foreign investors. The government has maintained that the law, as a cornerstone of the ruling party’s policy, would not be scrapped, but that it would draft different implementation approaches from sector to sector. We have commented previously that the fundamental problem in rebuilding Zimbabwe’s economy is overtly political and resides exclusively in ZANU-PF and President Robert Mugabe. The level of economic activity, ZANU-PF interference in the economy, and the ruling party’s failed social engineering are so intertwined that a complete and fundamental reshaping of policy – involving the total removal of the state from the economic process – is now essential. The real issue is how far ZANU-PF and Mr Mugabe are prepared to go to rescue the economy. While the words and undertakings are very promising, we urgently need to see some action.

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