Globalization and the rise of a mostly friendly and sympathetic-to-Africa Asia have assured that travel and business bans imposed by the West on Mugabe and his close aides have been nothing more than a minor nuisance.
It is interesting that as newly determined to act against Mugabe as Gordon Brown’s government is, it has not called for the outright pull-out of the many British companies operating in
In late June, Brown warned the British: “‘Where businesses are helping the Zimbabwe regime, they should consider their position now,” before making any investments in
One of the many reports about sanctions pointed out that Brown did not directly order British firms to withdraw operations from
But perhaps there is more to this seemingly contradictory caution than concern about not worsening ordinary peoples’ hardships. Investments are not a one way street. Asking British firms to stop doing business with or pull out of Zimbabwe will have negative consequences for those companies as well as effects on
The truth is even if their operations are barely ticking along now, many of these companies have substantial long-term investments that they risk being expropriated by the Mugabe government should they pull out. Mugabe has on several occasions mentioned his willingness to do just that if ‘provoked’ enough. It is true that there is no reason to believe the government would run those mines and other investments any better or profitably than the companies themselves, especially without access to the kind of international money required for capital-intensive things like mining. But at that stage the considerations would mostly be hot-headed political ones, as we saw with farm take-overs, not necessarily cool-headed economic ones.
Such takeovers would in the short-term be largely non-performing assets for the government, in the same way they are poorly performing assets for their current private owners. So any losses due to expropriation, fire-sale shedding of the assets or forced (by sanctions) pull-outs would not necessarily bite the investors hard in the short term since their assets are performing minimally now. But for the capital and long-term opportunity, losses would be major.
Many companies in
It is not just sitting investors who see opportunity in
Zimbabwe itself has also seen something of an investment boom this year, with an estimated $150-250 million coming into the country from investors keen to buy cheap assets and position themselves for an eventual recovery.
Enthusiasm has since altered but those who have gone in say they are staying put and probably the largest investment fund, London listed LonZim says it still intends to raise another up to $100 million to fund new purchase.
“I’ve had no nervous phone calls from investors,” said LonZim executive chairman David Lenigas. “Quite the contrary. There is a loss of enthusiasm for what LonZim is doing in
It must not be forgotten that the “collapse” of
Therefore no company with long term investments in
Brown & Co. would have taken all this into consideration, and it must be one reason why they have not called for a total withdrawal of British companies: there is an awful lot for those companies to lose.
Bloomberg had a very good article about some of the big companies with a stake in the Zimbabwean economy on March 27, two days before the ‘harmonised’ election in which Tsvangirai outpolled Mugabe. The article was essentially about how the mining industry remained confident that recovery of the sector would be quick with positive political reform.
“The (mining) industry and investors are betting that better times lie ahead. The key: the political future of President Robert Mugabe,” wrote Anthony Sguazzin.
“There are investment funds waiting in the wings” should Zimbabwe’s leadership change and the economic outlook improve, said Mark Wellesley-Wood, chief executive officer of Johannesburg-based Metallon Corp., Zimbabwe’s biggest gold producer. “We are hunkered down. It’s been survival and preparation.”
“Metallon and Impala Platinum Holdings Ltd. already are prepared to expand. Zimbabwe has some of Africa’s best roads and best-educated workforce, and the remnants of a manufacturing industry that once lagged behind only
“Economic progress might come rapidly should Mugabe lose, or win and be pushed out. “I am certain that if there is political change, the turnaround will be quick,” said Greg Hunter, chief executive officer of Central African Gold Plc, which bought two Zimbabwean gold mines last year and is considering expansion.
“Relatively little investment is needed to rehabilitate the industry, Hunter said. Power production could be ramped up at
For now, Impala Platinum is delaying portions of an expansion plan in
In December 2006, Zimbabwe’s government sent police to seize a diamond concession from African Consolidated Resources Ltd., and last week Mugabe said the government may “act against” British companies to retaliate for U.K.-imposed sanctions, said the state-controlled Sunday Mail newspaper. London-based Rio Tinto Group owns a diamond mine in
“They have the mineral resources; it’s only the presence of Mugabe that makes the West uncomfortable,” said Sebastian Spio-Garbrah, an analyst at Eurasia Group, a New York political- risk firm. “Once he has gone, there will be a sense of relief.”
You get the drift.
The current loud talk of a type of sanctions which will not make much additional difference to the ‘targeted sanctions’ that are already in place is mainly just that, talk, for show. “Real” sanctions will not be imposed because some of those calling for them most loudly would have as much to lose as