The violent post-election demonstrations that rocked Harare and some parts of the country in August this year, may have heightened investment risk for Zimbabwe and scared away billions of dollars worth of planned foreign investments, Government has revealed.
While there is concern over the potential impact of the events of August 1, 2018, Zimbabwe’s biggest manufacturing business member group, feels the independent inquiry into what happened on the day will help foreign investors understand exactly what transpired to make informed investment decisions moving forward.
Foreign investor interest in Zimbabwe vaulted since President Mnangagwa took over in November last year, from former President Robert Mugabe who led the country since independence from British colonial rule in April 1980.
The interest grew on the back of promises by the President to expeditiously seek global reintegration, implementation of sweeping economic and political reforms and focus more on the economy than politics.
Amid the frenzied interest, foreign investors proposed investments amounting to at least $16 billion, as they stampeded to gain first mover advantage towards exploiting opportunities presented by the political change.
However, fears of heightened investment risk were expressed by the Ministry of Industry and Commerce while giving evidence on potential impact of the protests, which erupted as opposition MDC Alliance supporters clashed with police and the military while protesting the delay of results of the July 31 elections.
President Mnangagwa was declared the winner of the election after the Constitutional Court dismissed the poll outcome challenge by MDC-A candidate Nelson Chamisa, in which the President had garnered 50,6 percent of the vote.
The submissions by the Ministry of Industry are contained in the final report of the Commission of Inquiry into the August 1, post-election violent protests.
Report made public
President Mnangagwa on Tuesday released the final report of the inquiry, chaired by former South African president Kgalema Petrus Motlanthe.
The violent demonstrations by suspected MDC-A supporters broke out across the Central Business District of Harare and other selected urban centres across the country, as the results of the July 31, 2018 harmonised elections started to trickle in showing incumbent, President Mnangagwa in the lead.
The Motlanthe Commission concluded that the violent demonstrations were preplanned
and that military deployment to assist police was justified and Constitutional.
According to the submission by Industry and Commerce Ministry, through director legal affairs, Never Katiyo, to the commission, the violent post-election demonstrations, which prompted military intervention after police failed to contain the rioters, came at a time the country is on a foreign investment drive.
This also comes as Zimbabwe is trying to rebuild its economy after nearly two decades of mostly downward spiral, which economists estimate decimated about 50 percent of the economy over the decade to 2008 before posting some modest growth post 2009.
Human and business loses
The violent demonstrations, which resulted in the death of six people, vandalised a number of leading retail shop brands, including ZSE-listed Innscor owned fast food giant Chicken Inn, retail chain Choppies, top South Africa fast food retailer KFC and leading clothing chain store, Edgars among others.
It is estimated that the total cost suffered by the shops, from the initial assessment done, amounted to $1,8 million being damage inflicted to property, theft in the shops and general vandalism, not to mention revenue loss after the retailers decided to close shop to protect their businesses and employees.
Some serious investment commitment in Zimbabwe
However, this may have dented confidence among some investors keen on Zimbabwe, who had made inquiries or committed to invest billions of United States dollars.
Some of the companies that have shown serious commitment in investing Zimbabwe are; Cypriot firm Karo Resources, which is investing $4,2 billion into a platinum mining operation, $1,2 billion to be invested by Chinese R and F to resuscitate Zisco and the $1 billion investment proposed by Chinese firm Tsingshan Steel for a stainless steel plant.
Only last month, Cabinet approved for immediate implementation a total of 11 mega investment projects valued $5,3 billion cutting across various economic sectors that were processed by the country’s one-stop shop investment centre.
“The violence that took place in light of this (investment drive) seems to have alerted some political instability of the country and generally makes investors skeptical.
“It goes without saying that the nation suffered perceived investment risk and stands to miss out on the $16 billion United States dollars worth of inquired (foreign) investments in the re-engagement efforts,” the Motlanthe report says following a submission on the matter from the ministry of industry.
Industry speaks on inquiry
However, Zimbabwe’s largest manufacturing industry representative body, Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe, said while events of August 1, 2018 were unfortunate and should have been avoided, the inquiry will enable investors to have a full picture of what transpired.
“Certainly, events of the first of August 1 scuttled a lot of investments. A lot of it (talk) was really accusing the Government of being the perpetrator of that (violence), but it (inquiry) does not necessarily totally absolve the Government, but I think it brings clarity as to what was happening (on August 1).”
Jabangwe said while the events of August 1 were unfortunate, compared to the rest of Africa, events leading to, during and after the elections and the demonstrations were largely a spectacle never seen in many African elections.
He said while the loss of life and violent protests should have been avoided, there was no doubt that the July 31 harmonised elections were different from all others.
“We believe this (inquiry and its public release) will now give an opportunity for investors to actually read and understand what happened on that day because the indication of instability had really scuttled a lot of things.
“So, now people have something to look at then review what they feel about the actions of Government and what they feel about the actions of all the other parties,” he said.
With most infrastructure and industry machinery and equipment in sorry state following years of economic volatility as well as little to none domestic savings due to effects of hyperinflation, the country desperately needs foreign investment.
Cabinet approves FDI projects
Cabinet has also approved other projects including the joint venture partnership between Verify Engineering Private Limited and Magcor Consortium Group of Companies on coal to fertiliser manufacturing valued at $750 million.
A joint partnership between Mindlink Holdings and Government of Zimbabwe on establishment of a Bullion Bank valued at $2 billion was also approved by Cabinet as was a the joint venture between Hondius Capital Management, an asset management firm and Infrastructure Development Bank of Zimbabwe (IDBZ) on infrastructure development through establishing the Zimbabwe Infrastructure, Housing and Development Bank for $800 million.
Further, Cabinet endorsed a joint venture partnership between the Cold Storage Company (CSC) and United Kingdom headquartered company Boustead Beef (Pvt) Ltd for a livestock joint farming investment valued $130 million. Fears abound the post-election skirmishes may scare away these investments.
“Notable indirect losses cited was (also) the revenue lost when the retail outlets closed and the subsequent Government revenue lost that could have been collected from value added tax from the sales made by these retail outlets,” the commission report noted.
On the fateful day, hundreds of thousands of workers stayed out of work, many unwillingly due to threats and intimidation, affecting several big brand shops as well as small ones and informal business activity, the final inquiry report noted.
Zim seeks redemption
After years in the isolation and economic meltdown, Zimbabwe is pursuing an agenda for economic recovery and promoting itself as a trade and investment destination following a presidential transition in November 2017.
According to the economic think tank, Catha House, this “new economic order” includes ambitions to normalise relationships with international partners, creditors and investors.
“Delivering on promises of growth is imperative in a country where over 80 per cent of economic activity is informal, and citizens’ resilience is being severely tested by acute liquidity shortages, among other things,” Chatham House says.