Zimbabwe’s economy getting better…is it?

Depending on whom you believe there were signs this week that Zimbabwe’s once proud – now battered – economy could be getting better, yet the rest of the world is slow to catch on.

I was fortunate to have worked in Zimbabwe as a journalist in the 1990s and chronicled many of the downward steps towards economic decline: unrest; land seizures; an expensive and pointless war, that it could ill afford, in the Democratic Republic of Congo.

As we wrote, the politicians used to hammer us for, in their eyes, denigrating their country. I used to respond that, while we wished Zimbabwe the best, as professionals, we were merely holding up a mirror to what was happening; it was just another story.

This is one reason why a report from investment company Coronation caught my eye this week. The investor, which manages funds worth $40 billion, says business confidence in Zimbabwe is at its highest point for years. This is thanks to currency stability and the rising performance of one of the jewels of African mining – platinum miner Zimplats, a subsidiary of Impala Platinum. The problem is, if all is so, it is likely to take time to catch the world’s attention.

“Over the past few months, we have spent a lot of time talking to businesses in Zimbabwe. These conversations highlighted the gap between perception and reality. Firstly, they emphasised how Zimbabwe has completely disappeared off the radar of international investors. Many companies mentioned that no other investors had spoken to them recently – some had not spoken to investors in almost two years,” says Coronation in a briefing document that also sprinkles a little caution.

“Secondly, there have been dramatic changes in the country over the past year. While we are not saying that the issues in Zimbabwe have been resolved, we think that people underestimate the significance of these developments and we suspect that the international investment community is completely unaware that manage­ment teams in Zimbabwe are the most upbeat they’ve been in years.”

On top of this, Coronation claims that foreign investors have found it easier to repatriate funds from Zimbabwe, than they have from Africa’s biggest economy – Nigeria.

A bedrock of these improvements has been the improving performance of the low-cost platinum producer Zimplats. The company, that has a 40-years of reserves and expansion plans, is feeding increasing demand as stringent environmental regulations insist on more platinum in cars to cut down emissions. Somehow it survived the meltdown in the economy and its share price has tripled over the last two years.

“The company has a fortress balance sheet, with a net cash balance of $226 million as at December 2020. This is more than 10% of the company’s current market capitalisation and, given where PGM prices are currently, we believe this cash balance has grown substantially in the first few months of 2021. Importantly, most of the cash is held outside Zimbabwe,” says Coronation.

Yet this is all merely one point of view. For sober, often sobering, views on the economy I often turn to my old friend the Harare-based independent economist John Robertson who has been studying the economy for more than half a century. He has often delivered verdicts that can be unpopular with the people in power.

In a recent interview in the Zimbabwe Independent, Robertson was encouraged by manufacturers to increase production and felt the government could help by relaxing import and export regulations. But he also believed investment in inflows were not enough to achieve the ambitious growth target of 7.4 %.

“We need to get rid of hurdles and barriers by removing disincentives. The government is speaking about offering incentives to attract investors and to place production targets within reach. Nobody is showing any trust in these government statements,” says Robertson.

The Zimbabwe economy – could it rise from more than 20 years of damage and turmoil to once again be the prosperous basket of Africa? Many people in the region, especially those who have fled Zimbabwe to escape poverty, would cheer the prospect.

Is it going to happen? Let’s watch Zimbabwe closely, listen to all sides of the story and make up our own minds.