Africa, Development & Aid, Economy & Trade, Food and Agriculture, Headlines, Trade & Investment, Trade and poverty: Facts beyond theory

ECONOMY-ZIMBABWE: Government in Two Minds About the Rule of Law

Stanley Kwenda

HARARE, Jul 13 2009 (IPS) - The Zimbabwean government’s international investment conference at the end of last week did little to assuage fears that the country remains far away from re-establishing the rule of law and stopping land invasions.

Many among the 400 investors who attended the conference had expected the new coalition government of ZANU-PF and the MDC to make a bold statement on property rights and a firm commitment to upholding the rule of law. But nothing close to that was on exhibition at the two-day event on Jul 9-10 in Harare.

Instead, President Robert Mugabe chose to tell the delegates that his government will not compensate white farmers who lost land during what his government has dubbed the "land reform programme".

The international investment conference was part of the coalition government’s effort to showcase the nation’s investment opportunities and revive the country’s comatose economy.

Investors have insisted that they want to see a return to the rule of law before they can put any money into Zimbabwe. The farm invasions constitute a major problem, with productivity at an all time low due to continuing disturbances. Invasions are continuing throughout the country.

Former legislator and social activist, Trudy Stevenson, told IPS the government did not say what the investors wanted to hear. "The investors are interested in the safety of their money and investment. They did not get the answers," Stevenson told IPS. "There is still a struggle over the rule of law, although the politicians would not want to say so."

Tony Hawkins, professor at the University of Zimbabwe Graduate School of Management, told IPS that the "government did little to change perceptions. The conference underlined the rift in the government as the leaders are not singing from the same hymn sheet.

"As long as there is uncertainty, things will remain as they are. There is need for the enactment of legislation which is investor-friendly and respects property rights."

Investors are also concerned about so-called empowerment laws which limit foreign ownership of companies. Minister of Mines Obert Mpofu sought to allay these fears by telling delegates that the new government is having a re-think on mining laws.

Under "indigenisation" laws, foreign companies cannot hold more than 49 percent of a business and must sell any stake above that to Zimbabweans. The government is also able to seize 25 percent of shares in some mines without paying.

"Government is in the process of reviewing some sections in the Mines and Minerals Act with the aim of coming up with a user-friendly operating environment," Mpofu told the conference. He added that careful consideration will be taken to ensure that the process of "indigenisation" is not at the expense of much-needed direct foreign investment.

"We are back to the drawing board – at stakeholder consultation stage – where submissions of all the views of interested parties are now being sought again in order to address all the concerns," he said.

Mining has become Zimbabwe's leading source of foreign exchange, with gold accounting for a third of exports, but political turmoil, unavailability of energy and unfavourable regulations have forced some mines to close. The government has launched a review of all mining contracts, saying it would introduce a "use it or lose it" policy.

"In doing so we want to ensure that all those that are performing will not be prejudiced," he claimed. "We are doing it in a manner that will not frighten people away."

But Mugabe in his opening remarks said the country’s "indigenisation" laws are an attempt to "democratise" the economic sector. "Such policies as the Indigenisation and Economic Empowerment Act should not be viewed as obstacles to investment promotion.

"They should be welcomed as promoting greater participation of our people in the economy and, indeed, as the democratisation of our economic activity that builds up to good business returns for the investor," said Mugabe.

Tafadzwa Muropa, a Harare-based economic and social commentator, concurred with her leader. She told IPS that there can be no better investment other than that which involves local people. "My expectation is that local people must benefit from whatever investment coming into the country. There is no real investment without the involvement of locals.

"What’s in it for me, what’s in it for the informal businesses. We don’t want investment which comes in the form of aid," Muropa told IPS. However, she emphasised the need for order. "There is no investor who would want to invest in a country where there is political instability," she acknowledged.

A German investor, Willy Paps, who runs wildlife conversation businesses in the country, told the conference that, "if issues of property rights and rule of law are not addressed, then we are having a big party (at the conference) and nothing will come of it and I will take my money elsewhere."

Zimbabwe’s economy has plummeted to an all-time low over the past decade. According to the government’s Investor Prospectus, the country’s manufacturing sector is operating at 10 percent capacity. At its peak in 1990 it was the biggest contributor to the country’s gross domestic product (GDP).

The mining sector accounts for 3,8 percent of GDP and 4,5 percent employment and a third of total foreign exchange earnings as of 2007. Tourism accounted for 16, 1 percent of the GDP in 2007 but has suffered successive years of decline due to negative perceptions of the country.