Political risk high in Zimbabwe as elections loom, but opportunity awaits

Security has been tightened in the wake of a recent attack on Zimbabwe’s President Emmerson Mnangagwa at a political rally in the run-up to 30 July elections. Risk managers say the mood is tense in the run-up to the elections but they remain hopeful the elections will pave the way for change in the southern African state, which used to be in the top three African economies. Grace Muradzikwa, CEO of Zimbabwean insurer Nicoz Diamond, said the country is already enjoying a surge in interest from investors. However, she added: “The international community wants to see an election to legitimise the change in president.” Ms Muradzikwa said one of the strongest signals of the potential boom is that hotel occupancies have surged, as businesses send over scouts. “Zimbabwe used to be the third- or fourth-largest market in Africa and we have the potential to become that once again,” she said. “It is not a market that you can just ignore. It was so vibrant when we gained independence. Now there is equally a lot of goodwill and investment coming into the country.” Ms Muradzikwa accompanied the President on a recent trip to China. “The Chinese are not waiting for elections,” she said, “they are investing now. The focus is on energy, mostly renewables, but also on road maintenance and international railway links.” Another boost for international development is that the previous restriction that stated all businesses had to be 51% Zimbabwe-owned has been lifted. This should really encourage foreign investment, believes Ms Muradzikwa. She said businesses are still looking for local partners as a quick way into the market, but she said due diligence is critical, as well as making sure the pricing is right for the investment. However, the country first has to get through the election cycle. Best Mugida, group risk manager at CAG Holdings, admitted: “The mood is a bit tense because people are expecting change, because we have been stagnant as a country for too long.” He said the new government has already introduced change but, like Ms Muradzikwa, he believes it is important the government goes through an election to legitimatise its rule. Overall, there is optimism that the elections will result in a clear government and deliver strong leadership to bring Zimbabwe back into the international fold. A risk manager from the mining sector added: “I think generally the countdown to the elections has been very peaceful by Zimbabwean standards and that’s been a relief for companies operating here. “However, given the recent coup d’état and the attempt on the President’s life, [that] really pushed everyone to adopt a strictly wait-and-see attitude regarding new investments. So yes, it’s tense, although refreshingly calm, and the verdict on the conduct of the elections will either make or break a very anticipatory market.” Ms Muradzikwa added: “A peaceful election is crucial for Zimbabwe. Everyone now understands this and looks committed to this. There is a lot of disappointment with what happened in Bulawayo.” Another risk manager, from the energy sector, warned: “The political risk for Zimbabwe remains fairly high, with great anticipation for improvement after the elections. The President has done a lot to engage the international world and open up the economy for business, but still there is a wait-and-see attitude among international investors, [who are] waiting to see the reality.” He added: “The resignation of the former president has brought hope for the majority of the world, but they still want to see if the current President will walk his talk and if he is really going to be officially voted into power.” It has been a case of so far, so good, he said, explaining: “The President has done a lot in terms of economic revival. The situation on the ground is very promising for a violence-free and fair election. Some investors have started moving into the country and establishing themselves, as a result of change in government policy. Whoever wins the election, the political risk of Zimbabwe is headed for an improvement. “However, corruption remains a cancer that the country still needs to tackle.”

Political risk high in Zimbabwe as elections loom, but opportunity awaits

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