A troubled nation
DEMOCRACY ATTRACTS INVESTORS
After the 15 November coup, it seemed the future of Zimbabwe would be much more different from the past. One year later, the future has come, and it has turned out to be very different, indeed. The economic crisis is deepening. Food, medicine, and fuel shortages bite. The introduction of 2% tax on electronic transactions did not help. The country cannot pay its estimated debt of $18 billion. And to add salt to injury, opposition parties are becoming even more insignificant. Even those disillusioned with politics have now grown restless, angry and disdainful. Whilst they are fed up with Zanu Pf lies, they are also fed up with Zimbabwean politics. Now it is very clear that running around the world with a scarf around the neck, saying “Zimbabwe is open for business”, is not enough to attract investment. Is it still former President Robert Mugabe to blame, or the system that he left behind?
By Kingstone Jambawo
In April 2018, the US Senate Foreign Relations Committee called on Zanu Pf to hold free and fair elections as a pre-condition for the lifting of sanctions. They laid out key benchmarks for Zimbabwe to attain democracy, which they hoped would stabilise the political system. One was political reform, a prize that self-preserving Zanu PF did not want to pay. The prize would have been both precious and perennial for our country. The undemocratic and unreformed Zanu PF still blames individual sanctions for Zimbabwe’s economic woes.
One may argue that undemocratic Rwanda has had a boom, with economic growth exceeding those of young democracies in Africa, with Kagame creating an admirable industrial tradition – and that this could happen to Zimbabwe. Well, Rwanda’s economy is half that of Zimbabwe and is based on rural subsistence farming. It is a small economy that is dependent on aid and has not been able to attract Foreign Direct Investment (FDI).
Clearly, what has battered the Zimbabwean economy has not been resolved; we still have an autocratic regime that steals elections. Mnangagwa has been sending messages consistent with a democratic transition – somehow changing from autocracy to democracy. However, what Zanu PF is doing is different from what it is saying. Although Rwanda makes the impact of democracy on FDI contradictory, there is evidence that countries that are more democratic or guarantee more political and civil rights attract larger FDI inflows. For African countries – the so called ‘young democracies’ – political risk on FDI depends on the level of democracy. Zimbabwe cannot be described as democratic or even a ‘young democracy’ simply because all it does is agree with what Zanu PF calls free and fair elections. Democracy implies citizen participation and high levels of legal protection in respect of both citizens and foreign investors. This is certainly not the case in Mnangagwa’s second republic.
Privatisation in Zimbabwe, far from creating a market, has led to the concentration of tremendous power in the hands of a few individuals – such as Wicknel Chivayo, Kudakwashe Tagwirei (Queen Bee), Philip Chiyangwa and others – whose links with those wielding political power is unquestionable. This stands in the way of economic rationalisation and has encouraged total misappropriation of the much needed foreign currency.
Paradoxically, the relationship between democracy and economic development seems to be undergoing it’s baptism of fire in crises situations. The recent crisis in Zimbabwe has shown that the so called economic tigers – Mthuli and others – are in reality nothing other than castrated cats.
They are yet to learn that in periods of economic and financial difficulties – it is essential to have the confidence of creditors, investors, and multinational firms or other international economic institutions. However, this confidence is usually shown – first and foremost towards democratic countries – whose governments are assumed to have the support of the people and which are considered more transparent, in terms, for example, of the reliability of their economic and financial statistics. The people of Zimbabwe are refusing to accept this government, saying elections were rigged. They came out in numbers – in Zimbabwe as well as the UK diaspora on 29 November 2018 – voicing their concerns.
In sum, there is no democratic consensus which is required for draconian economic reform policies which Mthuli is trying to put in place. In undemocratic country as ours, such policies are being met with popular hostility. This is because the top down approach to policy formulation does not have the support of stakeholders. Long term policy documentation is rare. More often, policy is just announced by government ministers, the president or even by high level government officials. As a result, it is difficult to implement.
In countries such as Botswana, where public opinion counts – economic development is be sustainable – that is to say – compatible with environmental protection – whereas in Zimbabwe this is much more difficult, if not impossible. Nepotism and corruption are not the marginal phenomenon. Rather they are structural, with monopolies in various sectors of the economy, the result of the Queen Bees’ symbiotic relationship with those wielding political power, which means they do not have to abide by the rules of market efficiency and which therefore impedes on reform. Under these conditions, economic development in Zimbabwe is inevitably unequal, making the rich richer and marginalising the poor.
2003 LOOK EAST POLICY
The state-led business model practised by China in Zimbabwe and other parts of Africa could be problematic because most of these state linked firms have rather poor standards of corporate governance. This could prove disastrous for a weak state such as ours, where the rule of law does not exist. It could thus be an invitation for more greedy politicians. China has been criticised for aiding corrupt regimes that violet human rights. The Chinese responded to these criticisms by saying that human rights, from their perspective, are relative, and hence each country should be allowed their own definition of human rights and the timetable to reach them. They add that non-interference in domestic affairs or internal affairs of African countries is a central part of their foreign policy. They maintain that human rights are a Western creation and are inappropriate for China. Furthermore, the Chinese claim that civil and political rights should not be given primacy over economic, social and cultural rights. Now at what cost are we accepting Chinese loans? – Debt trap is one – unless we would like to believe that there is such a thing as free money.
MULTINATIONAL FIRMS ACT AS AN ENGINE FOR DEVELOPMENT AND PROMOTER OF HUMAN RIGHTS A more optimistic and realistic view is that multinational companies are attracted by regions where democracy and human rights are respected. Autocratic regimes are associated with a high risk of policy reversal and lack of credibility, and FDI is attracted by more stable, democratic governments. In addition, the increased awareness of human rights abuses has made multinational firms vulnerable to reputational costs, as they are increasingly held responsible for their actions. To avoid these reputational risks, multinational firms would be more likely to locate in regions where human rights are respected and thereby support democracies rather than autocratic regimes. Moreover, the multinational firms would directly promote economic and social rights through the creation of better employment and labour conditions and indirectly support civil and political rights through their potential for enhancing economic development.
Easy access to and diffusion of information allows NGOs to direct media attentions to malpractices by multinational firms in developing countries – the spotlight phenomenon. Therefore, there is an increased tendency for multinational firms to direct their investments towards countries with a broader protection of human and political rights. As such, it appears that FDI is generally directed towards regions where human rights are respected and through its accountability in the home country. The belief is that FDI might enhance the spread of human rights and social and environmental standards to developing regions. Attracting FDI is thus not a simple solution for enhancing economic growth and human development. But, when policy makers succeed in setting the right conditions, FDI can provide an important contribution to our economic and human development.
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