ZIMBABWE’S veteran ruler, President Robert Mugabe is turning to Nigerian billionaire and Africa’s richest man, Mr Aliko Dangote for elusive foreign direct investment, portraying him as the saviour for his country’s unforgiving economic woes.
The wealthy Mr Dangote was in the Southern African country late August to scout for opportunities and invest “like we have been doing in all the other African countries”. “As soon as we get things right, we will move. We are not here looking to invest. We have already made up our minds to invest so we are here and we will invest,” he told reporters after engaging with Mugabe.
Mr Dangote, whose net worth was US$17,5 billion according to Forbes magazine, is moving in to invest at a time most investors are sitting on the fence, jittery due to Zimbabwe’s hostile business environment. Mr Dangote is worth more than Zimbabwe’s annual Gross Domestic Product which stands at about US$13,66 billion and about five times the country’s paltry US$4 billion annual budget.
He managed to arm-twist the investment-desperate regime to secure exemption from its controversial indigenisation laws so that he secures full ownership of his investments. The waiver of the indigenisation policy comes at a time several government officials have called for substantive amendments to the toxic law blamed for capital flight.
Zimbabwe’s administration fronted by 91-year-old Mr Mugabe and several government officials have in the past few 12 months been to different countries with the hope of raising funds to resuscitate the economy.
The China and Russian mega-deals made international headlines and had a combined quantum of $8billion, which equates to Zimbabwe’s two-year budget, but little or nothing has come out of them. Speculation had been rife that Beijing would quickly pour billions of dollars into the country’s empty coffers. However, months down the line not a single project has kicked off.
Politicians and economists have cast doubt on the implementation of Mr Dangote projects who pledged to inject close to $400 million into the ailing economy through investments in various sectors such as energy, construction and water. The common argument is if the China/ Russian mega-deals which have the backing of those governments failed to materialize, why then the fuss to pin hopes on a single individual. Political commentators said Zimbabwe has become as desperate as to put all our hopes of economic recovery on one businessman. “It is alarming that the entire country is now pinning its hopes on one Nigerian tycoon, who has promised to invest in power generation, cement and coal mining, among other deals, we are told. “For me this is but just one of the numerous Zanu PF propaganda machinations meant to divert attention from real issues affecting the people of Zimbabwe. It has become a regular ritual that whenever all hope seems lost as the economy continues to implode, we are told about multi-billion-dollar deals to resuscitate our economy,” Mr Blessing Vava said.
Former Premier, Morgan Tsvangirai is also skeptical of Dangote investments lifting the economy from its pit. He says Dangote’s expected $400 million investment will not rescue Zimbabwe economy from the doldrums as the country needs close to $15 billion to actually implement a serious economic recovery programme. “This country does not need $400 million but $15 billion to implement an actual economic turnaround programme. “If Dangote wants to bring his little monies to invest let him come but the truth of the matter is that the country’s economy cannot be rescued as long as Mugabe maintains his grip on power,” Tsvangirai told NewsDay.
South African-based Zimbabwean businessman Mutumwa Mawere, who at one time had vast interests covering mining, finance, insurance, agriculture, telecoms, real estate and media, warned Dangote that he must tread carefully on Zimbabwe’s explosive economic landscape which he said was a minefield for investors. According to Mawere, Zimbabwe has a hostile investment terrain because of personalisation of the state, break down of the rule of law and violation of property rights, among other things. “It must worry you when your due diligence team has first to meet with the Deputy Chief Cabinet Secretary to consider an investment in a democratic state,” Mawere wrote in an opinion piece.
Zimbabwe has for long been accused of trampling on the rule of law, especially after embarking on a chaotic and often violent land grab in 2000, and violating property rights — factors among those blamed for the trickles of foreign direct investment. Mawere’s business empire was seized by government a decade ago, claiming his companies owed state entities.
Economist Godfrey Kanyenze said Zimbabwe should not be excited about one investor but should create a business environment conducive for investment. “We must improve the whole business environment starting with local investors. We need to create an enabling environment. The problem is the doing business environment. Utilities must be efficient, the cost of capital should be conducive,” he said.
Analyst Takura Zhangazha added: “The bilateral trade and investment agreements that the government has been signing with its Russian and Chinese counterparts while late in kicking off will probably do so, mainly because it is the Chinese and Russians who appear keen on these deals in order to acquire either raw materials or exploit to the maximum the Zimbabwean market for their own profit.”
Although China and Russia have signed multi-billion dollar investment deals with Zimbabwe, they have been treading cautiously as they fear their investments could sink in this unstable environment.
In 2009, at the height of the country’s economic woes, Zimbabwe signed an $8 billion deal with China where Sino-Angolan company, Sonangol was supposed to invest in gold and platinum refining, oil and gas exploration, fuel procurement and distribution, and housing development, but it is not clear what transpired of the deal.
However, if the Dangote proposed investments come through, there would be a major boost for the country that is seeking FDI to help rebuild its economy. Zimbabwe has been trailing regional neighbours such as Zambia and Mozambique in FDI inflows, as potential investors cite policy inconsistencies and threats caused by the empowerment legislation. Last year, Zimbabwe recorded FDI inflows of $545 million, the highest since 2009. Yet the inflows were insignificant compared to South Africa ($5,7 billion), Mozambique ($4,9 billion) and Zambia ($2,4 billion).