Uncertainty slowing economic recovery
Since the establishment of the GNU in 2009 for once economic indicators looked positive; consumer inflation for the first time in over a decade dropped from the highest in the world to single digit levels while interest rates remain at normal levels although it seems they could still go down. The coalition government to its credit brought back some level of certainty and from this stability, something really vital for the normal running of a business. At government level there is now some semblance of normalcy with the treasury in particular fully reasserting itself as the fiscal authority while the cabinet structure brought on by the coalition government has necessitated a shift in its workings. While the scorecard of this arrangement has been abysmal from the point of view of human rights groups and trade unions it was actually a benign move by the political leaders because the coalition was able to partly end confusion and uncertainty in business circles, day to day lives of people something that has not been fully acknowledged even to this day. In theory business leaders and investors normally consider all factors like democratic systems in place, independence of the judiciary, human rights records and the UN human development index before deciding if a country is a worthy investment destination, it is the exchange rate, inflation and interest rates that normally will form the major basis for going ahead with the investment decision. Apparently we may have the lowest inflation in the region; it is currently hovering around 3% and on the other hand we may have eliminated the currency risk normally a major concern for investors willing to invest in developing countries by dollarizing the economy. These feel good facts though do not take away the fact that a lot still has to be done to move the nation towards the most ideal state, hence it is however incomprehensible that some may be working perhaps with good intentions to undo all this by advocating for events or acts that make everyone nervous and lose optimism. Towards the end of 2010 and into this year it’s now clear that the issue of elections and the drive to indigenise the economy have weighed heavily on the confidence and the enthusiasm that had been built in the early stages of the coalition government. While conflicting messages about the elections are being repeatedly fed into the media leaving everyone flummoxed, most people however have grown to dread elections because of the destruction and pain they seem to leave in their wake leading to pleas from NGOs, human rights groups and even regional leaders for the deferment of elections. The general consensus is that the economy needs time heal, to consolidate the economic gains made so far as well as to allow the government to carry out sweeping reforms while some scholars are less sanguine about the country’s ability to carry out reforms on its own. The bottom line is that elections seem to fuel uncertainty about a lot of things; what happens to this US$ regime after elections? Will companies start to move out again? These are some questions ordinary people are asking and it is the lack of clarity on these that leaves many more apprehensive towards elections. On the business front the concerns are almost the same as the talk of elections brings with it uncertainty; planning and decision making processes which thrive in more certain environments is hampered because no one knows what happens beyond elections since there is no guarantee of continuation of current policies. As a result most businesses will adopt this wait and see approach, which is a decision itself to halt any major expansion or new investment while foreign direct investment will certainly not come until after the ‘elections’ whenever they are held therefore putting brakes on the pace of the turnaround of the economy.
For businesses however elections are not the only immediate concern developing from government actions, the black empowerment drive appears to be the biggest challenge because now even major corporations that had apparently weathered the economic cries of the past decade are now considering the possibility of pulling out i.e. disinvesting from the country and that is really scary. According to the government gazette released on the 25th of March 2011, it is now official mining corporations will have to cede control of their mining operations to designated partners by either giving up or selling 51% of the shares. Readers will to note that the euphemism used here seem to indicate it will just be the transfer of shares when in fact the issue appears to be about control because 51% ownership nominally allows the holder to make decisions without fearing the veto of other shareholders and most certainly very few of the targeted mining houses will accept that. While there has been no resistance to the general idea of indigenisation by these mining corporations as they understand this could be the source of instability, the current form of the empowerment is by no means a win-win situation. It has been said to be another source of tension inside the government itself because some in government believe that in its current form the empowerment effort will actually do more harm to the country’s appeal to investors as many will see it as nothing short of nationalisation a term that puts to paid any dream of attracting foreign direct investment. While the government has indicated that it is open to proposals from industry representatives however judging from what has happened to the mining industry there is pessimism that the government actually wants to listen because the mining companies’ representatives had suggested selling 25% of the actual shares but when the gazette came out it stipulated 51%. It is still a long way before everything is actually implemented there is still some linger of hope that government will show some rapprochement however some damaged has already been made because international news outlets have already relayed this to their global audiences thus reinforcing what may be a wrong perception about the country’s attractiveness to investment. Undoubtedly the damage done 25th of March 2011 may have undone all the positives made by the coalition government since its inception in 2009 but the government can still salvage the situation by halting actions or statements that create panic in business circles. Parties in this government will have to find a common position on these issues and make joint statements or declarations thus avoid these constantly shifting positions and the sooner this is done the better.
Terence Zimwara
Is an economic consultant
Contact him on the following
temra-temra.blogspot.com
tem2ra@yahoo.com
0733406743
No comments:
Post a Comment