South Africa

Mugabe launches charm offensive as Zimbabwe’s economic woes mount

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Robert Mugabe may not have been too perturbed by the jeers that greeted his short state of the nation address on Tuesday; after all, they came from opposition lawmakers. But Zimbabwe’s veteran leader has other concerns: the economy has stalled, popular discontent is rising and more than a million people are likely to go hungry this year because of a poor maize harvest.

Analysts say Mugabe needs foreign investment and debt relief to jump-start growth, but the west remains wary of the often bellicose 91-year-old, while China – another important investor – is struggling with its own financial woes.

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“I was there two days ago, and everyone is very much dreading a return to 2008, which was the era of meltdown and hyperinflation,” said Stephen Chan, professor of international relations at the University of London’s School of Oriental and African Studies.

“That won’t happen now,” explained Chan, “because they are using the US dollar … However, it is very, very clear that there is not enough stability, not enough inward investment and certainly not enough reserves – and far too much debt and far too little productivity – for the economy to take off again.”

Zimbabwe started using foreign currencies, including the US dollar and South African rand, in 2009, after the Zimbabwean dollar was ruined by hyperinflation, which hit 500bn% in 2008.

Chan said Mugabe was between a rock and hard place and described his speech as an effort to make himself more “user-friendly” to the west.

“It’s not a softening of his position but an attempt to put life into a position that has become moribund … everyone also understands that the west has a fatal … hesitation in going beyond a certain point of re-engagement, and that has to do with the personality of Mugabe himself,” he said.

Bishow Parajuli, the UN’s resident coordinator in Zimbabwe, said the government was very keen to expand investment and engage with the international community.

“Zimbabwe has around $10bn [£6.47bn] dollars of debt and they are trying to find a way to look at rescheduling this or handling it well so Zimbabwe can get more new loans, which is really critical,” he said.

In a 25-minute speech, Mugabe, who has been in power since 1980, said he welcomed western re-engagement and urged a strengthening of ties with multilateral bodies like the International Monetary Fund (IMF) and the World Bank. He also cited China’s involvement in infrastructure, agriculture and energy projects.

“The cash-strapped government is under pressure from the IMF, World Bank, China, and the west, to implement an economic reform agenda … if Zimbabwe is to receive funding or debt forgiveness,” said Knox Chitiyo, associate fellow of the Chatham House Africa Programme.

“Mugabe’s address, which outlined some reform templates, was also designed to give some basis for discussion with an IMF team which is soon due to visit Zimbabwe,” he added. The team is due to visit next week.

Mugabe also promised to repeal all laws that hamper business. Foreign investors are particularly concerned about “indigenisation” laws that require foreign-owned businesses to sell at least 51% of their shares to locals.

“Over the last few months, there has been some softening of the indigenisation laws so that there is now officially ’greater flexibility’ in how they are applied,” said Chan. “However it is very unlikely that major investors … will feel wholly convinced.”

Zimbabwe’s government has reduced its growth forecast for 2015 from 3.2% to 1.5% because of drought and weak commodity prices. The lack of rainfall also means a difficult year-end for poor families.

The World Food Programme said this week that 1.5 million people – 16% of the population – will not have enough food to eat during the lean season after crops are harvested because of a dramatic fall in maize production.

But potentially more worrying are deep-rooted problems caused by years of underdevelopment. Nearly 28% of children under five are stunted because of chronic malnutrition, and more than half of all children aged between five and six have anaemia.

After 2009, Zimbabwe’s economy rebounded with average growth rates of about 8/9%. Inflation stabilised, revenues improved, and life expectancy rose to 53.3 in 2012, from a low of 43.1 in 2003. However, growth has slowed since 2012.

The UN said in a 2012 report that Zimbabwe was only likely to reach four out of the 21 targets set by the millennium development goals (MDGs), which expire this year. Targets on poverty and hunger and maternal mortality were among those unlikely to be met.

An estimated 3,000 women die every year in Zimbabwe during child birth, and at least 1.23% of GDP is lost annually due to maternal complications, according to a UN paper that said maternal mortality worsened by 28% in the period between 1990 and 2010.

“The government has acknowledged that … in the area of poverty and maternal mortality they need to do some work. They are looking at policy reform, investment attraction, microcredit programmes, agriculture improvment and productivity,” said Parajuli. He noted that there had been good progress on the MDGs on primary education, HIV/Aids, and gender equality.

Parajuli said one major UN focus now was to introduce resilience programmes, community-based irrigation systems and encourage crop diversification.

Addressing agriculture vulnerabilities is key. Chan warned that food shortages are likely to increase popular discontent.

“It does add to a very great deal of pressure on (Mugabe) to do something, and he wishes to do something – you have to give him his due – but there is actually nothing he can do.”

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