Should we stay or should we go?

“Any company doing business in Zimbabwe is keeping the regime alive.” So said the Movement for Democratic Change in condemning Anglo American for planning to press ahead with a $400m investment in the country. In this abridged article, writer Markus Reichardt asks whether companies should be continuing to operate in the country and ponders the future of business in Zimbabwe.  

According to MDC Treasurer Roy Bennett no foreign company can survive in Zimbabwe without giving “patronage” to the Mugabe government.

News that Anglo American, through its subsidiary Anglo Platinum, was putting

a further $400m into the Unki platinum mine in Zimbabwe turned the spotlight on other companies investing in the blood-soaked country.

In June, Supermarket Tesco became the first UK company to announce that it would withdraw from Zimbabwe – just a week after saying it would be “irresponsible” to leave the country. The retailer said it would stop sourcing £1m worth of produce from Zimbabwe “as long as the political crisis persists”.

The German government then persuaded Munich-based company Gieseke & Devrient, which had supplied banknote paper to the Reserve Bank of Zimbabwe for 45 years, to stop selling to the country.

Yet, foreign companies retain a major presence in Zimbabwe. UK banks Standard

Chartered and Barclays, British American Tobacco and oil firm BP have all stayed in the country. US-based Chevron and Coca-Cola are there, as is Canadian shoe company Bata.

But the truly big players in Zimbabwe’s economy are South African. Nearly 20 of the top 40 shares on the Johannesburg Stock Exchange have Zimbabwean subsidiaries.

China is also a player. Mining insiders in Zimbabwe fear that Mugabe is gradually transferring a range of mineral rights to Chinese companies – or to front companies run by political cronies in his Zanu (PF) party, some of which have close ties to

Chinese state-owned enterprises.

Few individual Chinese companies maintain a significant profile in Zimbabwe

but their presence is felt and hated.  

Zimbabweans habitually refer to the cheap Chinese manufactured goods that Mugabe has allowed to flood uncontrolled into the country, and which have driven many Zimbabwean manufacturers out of business, as zhing-zhong’. This loosely translates as substandard’.

Deals with China

Beijing has offered help to keep Mugabe in power. In 2005, China sold Mugabe’s regime riot control equipment and air force trainer jets for $200m.

Beyond exempting Chinese imports from customs duties, Mugabe has given Chinese companies contracts to supply all public buses and provide the generators for Zimbabwe’s power company, which his brother-in-law, the appropriately named Reward Marufu, runs.

For all this, Zimbabwe pays China mostly in kind – tobacco, mineral rights and mineral concentrates.

Rumours abound of special deals granted by Mugabe to Chinese businesses allowing them to ship mineral concentrates and agricultural products out of the country in return for continued Chinese supplies of essential items to the regime: riot gear, small arms and ammunitions.

Residents of Mutare, on the Mozambique border, claim that large numbers of trucks go across the border unchecked – with the full knowledge of police and customs officials. The trucks are thought to carry minerals, such as chromite, the source of a key ingredient of stainless steel.

So what can foreign companies not wanting to succour the regime or abandon its people, and their operations, do? By being there, companies theoretically continue to support the regime through their tax payments, but with inflation running at millions of per cent, these are irrelevant, as they are paid in Zimbabwean currency.

Commercial sense

Provided they can steer clear of being forced to provide direct support for Mugabe, companies must ask themselves two questions: Can they continue to survive until a post-Mugabe political dispensation offers better opportunities? And does it make commercial sense to do so?

Moral qualms aside, some economists are beginning to suggest that the level of devastation wreaked upon Zimbabwe’s agricultural sector through farm seizures, the violence against individuals and the recent compulsory acquisition of the majority stakes in all important businesses by Mugabe’s regime may have put paid to a commercial reason to remain.

If a deal is eventually struck between Mugabe and the opposition, the moral imperative for companies to leave the country could fall away. But at a more practical level, the reason for leaving could be the state of the economy, which has morphed into an informal system dominated by barter and shady deals. A thriving, officially illegal, cross border trade in remittances worth an estimated $1bn a year, from 3m Zimbabweans working outside their country, has drip-fed a shadow economy and kept everyday life barely going. Half of all households, including many in the top income bracket, depend in some way on these remittances.

University of Zimbabwe economist Tony Hawkins warns that an initial rally in Zimbabwe-related assets such as property and shares could create unrealistic expectations over the pace of the recovery.

For example, for Zimbabwe’s economy to recover to pre-2000 levels over the next five years, per capita income would have to grow at 15 per cent a year. Hawkins argues that this is impossible given “the level of devastation” in the economy.

While some in the international community may well make emergency funds available to Zimbabwe in the wake of a political settlement, the continuation of even a small number of Mugabe’s allies in positions of power, coupled with the inexperience of the MDC in governing, will make Zimbabweans, especially skilled workers with good jobs elsewhere, wary of returning.

By regional standards, Zimbabweans tend to be exceptionally well educated, and many have found a new life in neighbouring countries. Those returning would be the ones who did not.

Any company wanting a reason to give up on Zimbabwe, morally and commercially, need have looked no further than the behaviour of the political negotiators from MDC and Zanu (PF) who, after agreeing to meet in a South African hotel for talks to resolve their country’s political crisis, suspended them to move to another, “more appropriate” venue. The reason? The venue where the talks began had no minibars in the rooms.