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Zimbabwean succession crisis worsens economic prospects

2015-06-24 Protection Group International Ltd Zimbabwean succession crisis worsens economic prospects

Economic conditions in Zimbabwe are deteriorating amid infighting within the ruling ZANU-PF party over who will succeed 90-year-old President Robert Mugabe. The uncertainty surrounding the succession has led many companies to withhold investment, while the IMF has cut Zimbabwe’s growth forecast for 2014. Although ZANU-PF’s annual conference from 2-7 December may provide some clues as to who is leading the race, this is unlikely to sufficiently restore investor confidence or improve the country’s medium-term economic prospects.

Political infighting over the succession has intensified in recent months, principally between allies of Vice President Joice Mujuru and Justice Minister Emmerson Mnangagwa. The situation was further complicated in August, when the president’s wife, Grace Mugabe, entered the fray as a nominee for the head of the ZANU-PF women’s league apparently supporting Mnangagwa. Grace has since led a vitriolic campaign against Mujuru, attending rallies across the country in which she has accused the vice president of a range of violations, including corruption, incompetence and, most recently, an assassination plot against the president.

Although Mugabe has previously avoided intervening in the succession battles, there are now clear signs he is taking a stand against Mujuru. In late November, the president changed the party’s constitution to allow him to unilaterally appoint his deputies, a move many suspect will allow him to promote his wife to key positions at the upcoming ZANU-PF National Congress. Meanwhile, Mujuru has been increasingly sidelined, unable to persuade her own provincial branch of ZANU-PF to nominate her for a position on the party’s central committee. Many suspect Mujuru will be stripped of all her leadership roles at the National Congress.

The purge of Mujuru does not, however, necessarily equate to a victory for Mnangagwa. As Mujuru’s position has been weakened, other candidates have emerged in her place and Grace Mugabe has herself hinted that there is no reason why she should not become president. It remains to be seen whether the National Congress will identify a clear successor, with Mugabe determined to remain in power and having previously refused to support an individual candidate. With Grace Mugabe now expected to secure a position in the ZANU-PF politburo through her women’s league role, she will be in a formidable position to challenge Mnangagwa and any other contenders that emerge during the conference, prolonging the current uncertainty.

The emerging succession crisis has significant implications for the political and business environment in Zimbabwe. Whoever eventually inherits the presidency will enjoy wide-ranging powers, benefiting from the recent centralisation of power within the ZANU-PF, and the disarray of the opposition Movement for Democratic Change since its 2013 electoral defeat. Significantly, the new president will have considerable influence over the enforcement of the controversial indigenisation act, which has been inconsistently applied since it was first introduced in 2008. The act requires foreign-owned companies with assets greater than USD 500,000 to transfer majority ownership to indigenous Zimbabweans. Although central bank governor John Mangudya has called for caution in how the policy is implemented, Mnangagwa’s faction has vehemently opposed any rolling-back of the law irrespective of the damage done to investor sentiment.

There are already clear signs of the impact that the succession battle is having on the Zimbabwean economy. Mining companies are withholding investment as uncertainty persists over the indigenisation laws, while the IMF projects that growth will slow to 3.1 percent in 2014, down from 4.5 percent in 2013. Zimbabwe is the world’s largest platinum producer and weak prices for the metal are damaging public finances in Zimbabwe. The government is now struggling to pay public sector wages, which account for around 80 percent of the national budget.

There is little to suggest that the upcoming National Congress will deliver a clear plan for how to overcome these obstacles. None of the factions have outlined specific policies to revive Zimbabwe’s economic fortunes, though many have demonstrated a tendency to promote nationalist policies during times of hardship that could create fresh challenges for businesses. Simultaneously, businesses are being pressured to make campaign contributions to the various factions, including from a fundraising committee set up by Grace Mugabe, to target white-owned farmers and businesses. Mnangagwa and Mujuru have undertaken similar initiatives, raising the prospect of reprisals for those companies that support a losing faction, including unfavourable terms when it comes to negotiating indigenisation agreements with the government.

Although many suspect Grace Mugabe will emerge from the National Congress in a position that will leave her well-placed to inherit the presidency, this is unlikely to amount to a genuine succession plan. Mugabe has dismissed any possibility of retiring before the next elections in 2018, meaning the various factions will continue to jostle for influence in anticipation of the aging president’s eventual departure from power. This will further damage the investment climate, while the constant infighting will undermine the government’s ability to make critical decisions on the budget, foreign debt and indigenisation law that are necessary to stabilise the country’s economic prospects.

 

Protection Group International Ltd

Zimbabwean succession crisis worsens economic prospects - Protection Group International Ltd
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