This comes as the much touted “mega deals” signed between the Zanu PF-led government, China and Russia remain hanging in the sky, despite much hype which appeared to suggest the economy was poised for a jump start.
Instead, said analysts, problems are mounting for President Robert Mugabe’s government which is grappling one of the worst problems since the introduction of the multiple currency system in 2009.
On Tuesday, the international Monetary Fund (IMF) said the country’s economy is expected to shrink further this year from the projected 2,8 percent growth due to fiscal challenges and lack of policy implementation.
“The infrastructure deals were negotiated by the Chinese government, but unfortunately Chinese companies no longer take decisions from their government and make their own independent resolutions based on likely returns on an investment,” leading economist John Robertson told the Daily News On Sunday.
Robertson noted that Zimbabwe has — on many occasions — failed to pay Chinese suppliers hence it would be difficult for the country to convince Chinese investors to inject fresh capital into projects in the country.
“We have disqualified ourselves from being taken seriously by an investor and there is need for stern policy shift if the country it to attract foreign direct investment to drive this economy forward,” he added.
According to Treasury data, Zimbabwe already owes China about $700 million.
In an effort to pacify the increasingly restless Zimbabwean population, Mugabe — who won the 2013 harmonised elections under controversial circumstances — signed nine “mega deals” with China last year aimed at stimulating growth in the country’s moribund economy.
A $3 billion platinum mining deal was also signed in September last year between Zimbabwe and Russia.
However, some Zimbabweans are critical of the deals saying they have not seen much benefit.But the government says its Look East policy has kept it afloat and helped it counter sanctions imposed by the West since 2002.
Bulawayo-based economist Cecelia Nyoni said recent pronouncement of semi-nationalising diamond companies and the indigenisation precedent could be one of the reasons why the $3 billion Russian platinum agreement is stalling.
“Russians will not rush to pour in money when they are not fully assured that their investment is protected.“Zimbabwe’s economic environment is currently poisoned by the failure of the Essar deal to take off,” she said.
“Most investors are adopting a wait-and-see approach because of the uncertainties in the country. “After what happened to Amari Platinum Holdings, it would be hard for the country to convince any investor to pour in money quickly into the economy,” added Nyoni.
South Africa-based Amari Platinum Holdings sunk $35 million into platinum exploration in the country in a joint venture with the Zimbabwe Mining Development Corporation before its licence was cancelled in unclear circumstances in 2010.
Econometer Global Capital head of research Christopher Mugaga noted government made the mistake of misleading people that they signed “mega deals” when they only signed Memorandum of Understandings (MoUs).
“Since independence, more than 5 000 agreements have been signed by government and very few have come to fruition,” he said.
“As long as Zimbabwe keeps on signing MoUs with developing countries outside the European Union and North America, who still have hunger for growth and economic improvement of their gross domestic product per capita for their people, the mega deals will remain a mission statement,” said Mugaga.