Its too soon to hope

For years, South African and southern African investors have sought to time their entry into Zimbabwe-exposed stocks, seeking a quick return on the assumption that the recovery will be swift, or at least that most other people think it will be. In most cases, they have been proved horribly wrong. Although prospects now look so much better, betting on a quick improvement in Zimbabwe in this case is probably largely mistaken, for a whole raft of reasons.
 
The first is that the situation is still fluid, and investors don’t fully appreciate the mentality of the Zanu (PF) hardliners, who consider themselves to be the rightful owners of the country in the full sense of the word. They don’t consider themselves administrators or, heaven forbid, public servants.

To them, elections have always been a kind of useful contrivance adopted on the basis of appearances and only on the condition that they be allowed the machine to continue to rule. Now that the election mechanism has proved flawed, it remains to be seen if they will have the courage to adopt a different route and what that route will be.

Even if they decide to retreat in this case, Zanu (PF) is still a military organisation and its power will be diminished but not extinguished. That will take some time, if it ever happens.

Three eminent academics, Jeff Herbst, Greg Mills and Terence McNamee, argue in the Sunday Times this week over a number of measures which they hope will encourage economic recovery in Zimbabwe.

These include the “systematic targeting of a small number of farmers previously engaged with large-scale farming and willing to return” given that agriculture was always the biggest part of Zimbabwe’s economy.

One differs reluctantly with such knowledgeable academics, but I can’t help feeling they are just dreaming. The return of large-scale farmers is code for whites, and I suspect this is not now politically tenable, nor is it practical. However important it would be for a new government to make a gesture of reconciliation to the old, ousted white farmers, I suspect the situation is now too far gone.

It has gone too far partly because the core of Zimbabwean agriculture was in tobacco, and buyers have by now long gone elsewhere, mainly to Brazil. In addition, large-scale farming requires a level of infrastructure that Zimbabwe no longer has.

Getting seed, diesel, reliable electricity and so on are going to be gradual processes. Parachuting in a bunch of old farmers will not help. In addition, the best farmers have by now started climbing new ladders in their new home countries; the best will remain where they are, only the worst wishing for the “good old days” will return.

I might be wrong, but if there is an economic solution for Zimbabwe, I suspect it has to happen outside agriculture.

What could come back quite quickly is mining and tourism, which have more or less coped or at the very least been put on ice. It’s here that investors should be concentrating, and where the focus of the new government action should go, partly to take advantage of the commodity boom and partly because mining is most easily salvageable. But even in mining, it’s going to need time, five years perhaps.

Zimbabwe used to have something of a light engineering industry, based on a good work ethic and good literacy. But unfortunately this industry was at least partly based on sanctions busting. Whether its salvageable depends a lot on whether mainly black Zimbabweans want to go home.

In the short term, the answer is probably not, especially when fast-food waiters in Johannesburg earn more than doctors in Zimbabwe. But if the new government can reestablish the rule of law and allows the market principles to reestablish themselves, gradually they will.

Important lessons have been learnt in the re-establishment of Mozambique and in some ways also SA, the most obvious one being that it takes longer than you think. What Zimbabwe needs is five years of stabilisation; then and only then will we start seeing growth.

If and when that point is reached, Zimbabwe will once again become an attractive investment.