As Mugabe leaves office and Mnangagwa takes the role of interim president many questions arise to whether or not this could signal a turning point in the country’s economic future.
A country which has a plethora of natural resources was once one of the most developed countries in Africa, held up by a strong infrastructure and educational system. This all changed when in 2000 Mugabe called for a seizure of white-owned farms which caused a shortage of food production and widespread famine. This combined with other factors forced the economy into a nosedive which resulted in high inflation, unemployment, and poverty.
The story of an African country in economic shambles who turns things around is not one that is unheard. Uganda, once under the control of the brutal Idi Amin, was able to return to some level of stability and economic growth after his presidency. Rwanda, once known as the face of brutal genocide, is now one of the more stable and business-friendly countries in the region under Paul Kagame. These two examples of how political and/or social turmoil does not mean a county is doomed to suffer from an unrecoverable economic death sentence.
While Zimbabwe could follow in the path of its fellow African nations, many steps need to be taken before it becomes attractive to foreign investors. Currently, the crippled economy sees a 200 percent inflation rate and an unemployment rate of 90 percent. As it stands Zimbabwe’s economy is one of the most fragile in the world, and it can only start to repair itself if human rights, property rights, and private enterprise are allowed to take a stronghold. The new government in power will need to enact strong measures that would ensure the rule of law and the sanctity of contracts before it becomes attractive to foreign investors again.
Not all hope is lost in Zimbabwe. The country is still home to the world’s third-largest reserves of platinum, which is essential in the production of many electronics. It is the fifth largest producer of lithium, an essential element in rechargeable batteries. With the ever-increasing global demand for smartphones and rechargeable batteries, Zimbabwe could catch the eye of international mining companies. Along with the country’s abundance of mining and agricultural resources, it is also home to a large, skilled labour force, notwithstanding the number of Zimbabweans who have fled to neighbouring countries in search of work.
Foreign investors, political instability and uncertainty do not mix well, hence the downturn of direct foreign investment in Zimbabwe in the past couple of years. As it has been evident in the events in Zimbabwe that have unfolded, serious political change can occur in a week. However real economic change though could take years. If those years are filled with foreign investment, not just by the Chinese, Zimbabwe could be headed down the path away from economic turmoil. But one thing is clear. Mnangagwa, or whoever succeeds him, need to stabilise the economy to harness the full benefits of foreign investment. With new leadership, Zimbabwe could see a re-engagement with the international community resulting in more foreign direct investment.
This was first published by the Centre for Policy Studies