Zimbabwe collected just $3 million from foreign donors in the first quarter, or 0.4 percent of its annual target, undermining the government’s efforts to rebuild the economy following a decade of recession.
The government had estimated it would receive $810 million from donors to fund its $2.2 billion budget this year, Finance Minister Tendai Biti said in an interview in Abidjan, the commercial capital of Ivory Coast, yesterday.
Zimbabwe, which has outstanding arrears of $1.2 billion to the International Monetary Fund, African Development Bank and World Bank, is struggling to attract foreign investment and aid. The coalition government, led by President Robert Mugabe and Prime Minister Morgan Tsvangirai, has been locked in disputes since its inception in February last year. Investors are also being deterred by laws requiring foreign businesses to sell stakes to locals.
“There are genuine questions that are raised when I speak to donors: the credibility and legitimacy of the government, will it last and will it deliver on the things it agreed it will do,” Biti said.
Biti said he is in “serious discussions” with South African authorities and expects to announce new lines of credit in the second half of the year. The government has also had talks with China, South Korea and its traditional donors, such as Germany and the Nordic countries, he added.
Zimbabwe is working towards meeting requirements set by the IMF and World Bank to qualify as a Heavily Indebted Poor Country, with the aim of having its debt cancelled, Biti said. To do that, the country needs “macroeconomic soundness,” he said.
“We’ve made much, much progress, in a very short period of time,” Biti said. “Almost miraculous progress. If you’re going to reduce inflation from 500 billion percent to minus 7.7 percent, it’s unprecedented. But there hasn’t been a corresponding positive reaction to the positive energy we’ve generated.”
Zimbabwe’s economic growth will probably reach almost 7 percent this year, up from a previous forecast of 4.8 percent, Biti said. The minister will publish revised budget estimates in his mid-term review next month, he said.
The southern African nation is emerging from a decade of recession after Mugabe’s failed land reform program slashed farming output, contributing to fuel, food and foreign currency shortages.
“What we are missing desperately is a catalytic investment in the country,” Biti said. “A major injection in the economy, a game-changing investment.”
Investors are skeptical as the government’s Indigenization and Empowerment Act requires foreign businesses to sell 51 percent of their shares to black Zimbabweans over the next five years.
Biti said while concerns about the legislation “should be resolved,” the law isn’t more restrictive than those in South Africa, which require companies to sell stakes to black investors to compensate for their exclusion during apartheid.#
In South Africa, mining companies are compelled by law to sell 26 percent of their assets to black investors by 2014, while most other industries have agreed to cede a quarter of their business.
“There’s been a lot of unfairness and inequality in the manner in which Zimbabwe has been treated,” Biti said. “A lot of that is based on ignorance.”