March 14 (Bloomberg) -- Zimbabwe’s economic progress has become “stuck” because of a lack of clarity on policy, while Ivory Coast is threatened with collapse amid a political crisis, said African Development Bank President Donald Kaberuka.
Kaberuka visited Zimbabwe last week as part of a three-nation tour of Southern Africa, urging authorities to clear up confusion about the Indigenization and Empowerment Act, which compels foreign companies to sell stakes to black Zimbabweans. He also called for political parties to stick to a power-sharing agreement, or risk investors fleeing the country again.
“Zimbabwe has done the basics, but now they’re stuck,” Kaberuka said in an interview yesterday in Pretoria, the capital of neighboring South Africa. “They’ve stabilized the macroeconomic environment, but they can’t move” to the next phase of development “until there’s policy clarity on property rights, less uncertainties and more predictability.”
While the indigenization laws have been passed by lawmakers, there have been conflicting messages from policy makers about their implementation. The legislation requires foreign and white-owned companies to cede 51 percent to black Zimbabweans.
“The signals coming out of Zimbabwe can be quite confusing” and they discourage investors, Kaberuka told reporters in Pretoria today. “I’ve urged the Zimbabweans to give signals which are less confusing, to have greater policy clarity especially on matters of property rights and to give some long term predictability to their policies.”
Risk of Collapse
The Movement for Democratic Change, led by Prime Minister Morgan Tsvangirai, formed a power-sharing government with President Robert Mugabe’s Zimbabwe African National Union-Patriotic Front in 2008 after disputed elections. While the coalition helped end a decade of recession, it has often come close to breaking down.
The risks that a collapse in the coalition government would pose to the economy “are considerable,” Kaberuka said yesterday. “In the short-term, confidence will be lost, and re-engagement with international partners will be seriously compromised. For the long-term investment outlook, it’s a no brainer.”
The power-sharing agreement “is what gave confidence for the return of macro stability,” Kaberuka said. “So you understand our concern. When the global political agreement seems to be shaky, investors get worried, external partners get worried, and I suppose, Zimbabweans should be worried as well.”
The African Development Bank, based in Tunisia’s capital, Tunis, is helping Zimbabwe improve its debt management as it seeks to have $7 billion in debt owed to the AfDB, World Bank and International Monetary Fund canceled.
The AfDB has set aside $500 million to help Zimbabwe clear its arrears, a first step toward a debt write-off, Kaberuka said. A pre-condition to making the funds available would be for Zimbabwean authorities to agree on an IMF-monitored plan that aims to sustain economic growth.
Kaberuka said the political crisis in Ivory Coast following a disputed Nov. 28 election had continued for “too long,” to the detriment of the economy and its people.
The West African nation’s economy “has become dysfunctional,” Kaberuka said. “Credit to the economy has dried up. They’re having challenges paying the civil service; they’re having challenges exporting cocoa and coffee. I can’t use the term breakdown of the economy, but it’s become dysfunctional. And the entire region is becoming affected.”
The African Union said on March 11 it backs Alassane Ouattara as the legal president of Ivory Coast, the world’s largest cocoa producer. Incumbent President Laurent Gbagbo has refused to relinquish power following the vote. The World Bank and AfDB have suspended funds to the country, while cocoa exports have been disrupted.
“I hope the appeal by the African Union is adhered to because it’s a unanimous position,” Kaberuka said. “I’d like to see civil war in Ivory Coast avoided at all costs. Certainly, the crisis in Ivory Coast has gone on for far too long. The damage to the wellbeing of the people, increased poverty levels and increased dysfunctionality of the economy, is not in the interest of anyone.”
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