HARARE, January 29 (The Source) – In Davos, President Emmerson Mnangagwa broke the ice, in more ways than one.
After decades of being frozen out, Zimbabwe is finally getting the ear of foreign investors, or, as Mnangagwa and his senior advisor Chris Mutsvangwa like to put it, “global capital”.
Just a three months ago, it would have been inconceivable that the President of Zimbabwe would be having cheerful photo ops with the heads of the IMF and the World Bank or dining with the likes of Nestlé.
For former President Robert Mugabe, the IMF and the World Bank were “evil twins”. As for Nestlé, the company was once threatened after refusing to buy milk from Alpha Omega, Mugabe’s private dairy.
While the rest of Africa were falling over each other opening themselves up to foreign capital, Mugabe positioned Zimbabwe as the last bulwark against Western imperialism, a term he used loosely to describe anything from a white Zimbabwean farmer to foreign banks.
Now, suddenly, Zimbabwe is trying to break into a system that it was out of for so long.
Images from wintery Davos, venue of the World Economic Forum, showed Mnangagwa hosting the likes of the IMF’s Christine Lagarde and the World Bank’s Kristalina Georgieva.
He also met Mohammed Al-Shaibani of the Investment Corporation of Dubai, the investment arm of the government Dubai, with assets worth over $200 billion. It has interests in Emirates Airlines and, more significantly for Mnangagwa, has just announced a billion dollar fund to invest in infrastructure in Africa.
These are spaces in which Mugabe never wanted to be seen. He was more at home at rallies, and in the warm seats of obscure conferences, from which he would occasionally wake up to bash podiums and rant at imperialists.
But, in his rush to set himself apart from Mugabe’s faux pan-Africanism, Mnangagwa needs to be cautious in his plea for foreign capital. While “Zimbabwe is open for business”, as he keeps telling every audience, it must not be open to abuse.
We know what we don’t want to be – remaining Mugabe’s Zimbabwe – but do we know yet what we want to be? What sort of economy does Mnangagwa want to build? How does he want to build it, with whom? What is he ready to sacrifice?
Mnangagwa will be asked to make promises that he can’t keep. They will ask him to relax labour laws, to make it even easier than it already is for big corporations to fire workers. He needs to decide where to put the marker to balance all this out.
Already, in his meeting with IMF’s Lagarde, he was told to take tough austerity measures such as cutting public sector wages. How deeply can he make such cuts?
They even want him to reduce farm subsidies, which would mean cutting back on Command Agriculture. But that’s his centrepiece policy, the one that makes him excitedly sit up in every interview and passionately reel off figures and statistics.
The IMF even wants him to compensate dispossessed white farmers. It is an impractical demand, showing once again how detached the IMF can get from the local realities of the economies in which it gets involved.
Investors will demand concessions that Mnangagwa cannot afford to give.
And this is where he will need to be smart. And doing that begins right there in his office. He has many good civil servants around him, but many others are rusty relics from the Mugabe era.
Those civil servants have been traditionally poor at negotiating with foreign investors. It may be worse now that they have to deal with a section of prospective investors that they never had to deal with before. Even more concerning, they will be negotiating under pressure to produce immediate results, given this inane obsession with the 100-day targets.
Desperate people negotiate bad deals. Worse so, when they already are bad negotiators.
Anderson Chiraya, an official in the Office of the President and Cabinet, revealed last year why government always fails when negotiating big deals: “During negotiating for such deals, some partners came with a barrage of lawyers, while on our part, there may be a minister and the permanent secretary only and if they do not understand, we get a raw deal. Yet the other parties come with lawyers and people that are well versed.”
In May 2014, Zimbabwe sent some of its officials to a World Bank seminar on how to negotiate deals with investors. It is time to put those lessons to some use.
In the 2013 “Africa Progress Report,” former UN Secretary-General Kofi Annan said poor negotiation of contracts was one of the reasons Africa was not benefitting enough from its resources. A comparison of the selling price of five Congolese mining assets with an independent assessment of their value uncovered a difference of over $1 billion.
One wonders what the result would be in Zimbabwe, where desperation has seen Zimbabwe willing to hand over large swathes of mineral concessions to the first would-be investor that came bearing lofty promises.
Mugabe’s indigenisation law was foolhardy, a route for cronies to collect fees. Mnangagwa has done the right thing and virtually done away with it. However, he has not replaced it with a fresh law that would both guarantee security of investment while allowing local communities to benefit more.
Zimbabwe should not auction off its family jewels, out of desperation to be seen as investor friendly. The investor handbook carried by the Zimbabwe delegation to Davos offers too little detail. What we need is a comprehensive, new investment policy that show what we want from investors and how we want to deal with them.
The Davos delegation itself was heavy on politicians and hangers-on, reportedly resulting in disharmony in the team. This needs to end.
In Davos, US commerce Secretary Wilbur Ross was asked if he would be ready to “show leadership” and go easy on America’s tough “America First” trade policy. He replied: “We don’t intend to abrogate leadership, but leading is different from being a sucker.”
Investors are after profit, not charity. To tell the difference between exploitation and mutual benefit, Mnangagwa needs competent teams and a strong policy to engage them.
He cannot achieve much using these blunt tools that he inherited, which is why he was roundly criticised for sticking to old horses in his Cabinet. It is time Mnangagwa shook up his own office, modernised the top civil service and made it more alert to the new “open for business” thrust that he is trying to push.
Mnangagwa famously kept one eye open while his political opponents circled around him. He needs to welcome these prospective new friends, but with that same side-eye.