JOHANNESBURG, South Africa — Mention Zimbabwe and immediately images of violence, chaos and collapse are conjured up.
Under the thumb of President Robert Mugabe, 86, the country is shattered by years of farm invasions, hyperinflation, political violence, corruption and food shortages.
But now, 18 months into a power-sharing agreement with Mugabe’s ZANU-PF, Prime Minister Morgan Tsvangirai and his party are trying to lure foreign investors back to Zimbabwe and rebrand the country as open for business.
“We are making progress. Zimbabwe is moving forward, from the darkness of madness and self-destruction to the dawn,” said Tsvangirai, addressing a conference on the future of Zimbabwe in Johannesburg on Thursday.
He cited the “tangible” progress of medicines available in hospitals, food for sale at supermarkets and water in the taps. Tsvangirai also pointed to the country’s single-digit inflation and expected growth rate of 7 percent this year.
“Does this mean that the madness of previous years has been eradicated? No,” he said. “The failed policies of the past continue to haunt us. Disdain for the rule of law and property rights continues to undermine our reputation as a safe investment destination.”
Tsvangirai highlighted Zimbabwe's potential in tobacco production, and the country’s “vast, untapped mineral resources, from natural gas to diamonds and platinum,” as well as coal and gold.
“Despite the challenges we face, we need committed investment partners to join us in unlocking Zimbabwe’s potential,” he said.
The conference in Johannesburg, hosted by The Economist and attended by investors, diplomats and analysts, struck an optimistic tone on Zimbabwe’s future, with Tsvangirai’s team making a largely upbeat pitch for the country as an investment destination.
“I think this conference demonstrates that Zimbabwe is back,” said Tapiwa Mashakada, minister of economic planning and investment promotion. “We are back.”
He said Zimbabwe is taking its cues from Mauritius, ranked by the World Bank as the easiest country in Africa in which to do business. “We want an investor to be able to come to Zimbabwe and get all required papers and permits in two days,” he said enthusiastically.
But Zimbabwe has a long way to go to become investor-friendly. It is ranked 159th of 183 countries on the World Bank’s index. Mauritius is 17th.
Tsvangirai and his team were forced to spend much of their time defending the country’s controversial new indigenization law that requires companies valued at more than $500,000 to sell black Zimbabweans a 51 percent stake within five years.
The law, on the books since 2004, has drawn comparison to the land reform under Mugabe that saw thousands of white farms violently invaded and seized. Tsvangirai’s Movement for Democratic Change party is working to modify the law to make it more palatable to investors.
Tsvangirai, seeking to reassure nervous investors, emphasized that 51 percent is a long-term goal, and in the short term, companies would only be required to meet minimum thresholds that would vary by industry sector and are currently being negotiated — for example, in mining, local ownership could start at 10 percent.
Tsvangirai noted that other countries such as Botswana require foreign companies to have local investment. “It is about citizens’ empowerment, not expropriation,” he said.
Stefan Hayden, president and CEO of Caledonia, a Canada-based company that operates the Blanket gold mine south of Bulawayo, told investors in a recent conference call that despite revisions to the indigenization law, “we still believe that the existing requirements are un-commercial and impractical and in their present form are continuing to deter foreign investors.”
“If the Zimbabwean government expects its mining industry to grow, it should rapidly resolve all the issues around indigenization in a manner which does not discourage international investors,” Hayden said.
Another major concern for investors is the potential instability during the next two years, with a general election coming up. Before the next election can be held, a new constitution must be completed and put to citizens in a referendum. Dates have not been set, but the referendum is expected to take place in May or June of 2011.
Other deterrents to investment in Zimbabwe include crumbling infrastructure, crippling electricity shortages and the “brain drain,” caused by millions of well-educated Zimbabweans leaving the country to seek work abroad.
The World Economic Forum, in its latest Global Competitiveness Rankings, rated Zimbabwe 136 of 139 countries, due to major concerns about property rights, as well as the quality of health care and low educational enrolment rates.
It would be a “mistake” for companies to think they can come into Zimbabwe and make money in the next year or two, said John Legat, chief executive of Imara Asset Management, in a panel discussion. “Our horizon in Zimbabwe is 10 years.”
Chinese investors, notably absent from the conference, are already heavily invested in Zimbabwe, especially in the agricultural areas of tobacco and cotton, as well as chrome, platinum and diamonds.
“Whether Europeans like it or not, China is going to be the biggest consumer for our commodities,” said Andrew Cranswick, a Zimbabwean and the CEO of African Consolidated Resources.
“If you’re not invested yet, you may be too late,” Cranswick said. “There are seven flights a day from Johannesburg to Harare, all of them full.”