October 24, 2006

Harare signs SADC investment protocol / External debt drops / Mines law might be softened

Zimbabwe has signed a key Southern African Development Community (SADC) agreement aimed at harmonising finance, investment and macro-economic policy in the region. Botswana and Swaziland also signed the Protocol on Finance and Investment at an extraordinary summit of heads of government and state held in Midrand, outside of Johannesburg. This brings the number of countries that have signed the protocol to ten up from the seven – the Democratic Republic of the Congo, Lesotho, Madagascar, Mauritius, Mozambique, South Africa and Tanzania - who had signed in August. Nine countries out of the 14 that make up SADC were required to sign the protocol before it could be implemented by the region.

Many analysts have expressed fears that Zimbabwe’s economic problems could hamper faster integration of the region, particularly as neighbours were forced to take measures to protect themselves from the contagion effects of an economic crisis described by the World Bank as unseen in the world outside a war zone. The investment and finance protocol is seen as a key step towards a Free Trade Area planned for 2008 as the first move towards one monetary union in southern Africa, similar to the European Union. "It would appear that the region is on course for the establishment of a Free Trade Area by 2008," said Lesotho Prime Minister and SADC chairperson, Pakalitha Mosisili. The Free Trade Area would be followed by the establishment a Customs Union by 2010, a Common Market by 2015 and Economic and Monetary Union by 2018. Mosisili said the summit had also focused on "ensuring that we are all winners and that there would be no losers in integration that the small economies will be also catered for and will benefit fully."

As has been revealed before, external debt fell by 2,3% after Zimbabwe paid a total of $169-million to the International Monetary Fund (IMF) in 2005, the central bank has announced. "Zimbabwe's total debt disbursed and outstanding [including arrears] is estimated to have declined from $4 071-million in 2004 to $3 978-million in December 2005, representing a decrease of 2,3%," the Reserve Bank of Zimbabwe (RBZ) said in its annual report. "This mainly reflects resource payments on public sector medium- to long-term debt, particularly to the multilateral financial institutions." The government paid back a total of $176,3-million in 2005, of which 95,6% ($169-million) reduced the external payments arrears to the IMF to $144-million as at December 2005, the central bank stated. The remaining $7-million were paid to other external creditors, but the bank did not specify their identities.

In the meantime it was also made public that foreign mining firms in Zimbabwe may be allowed to retain their majority shareholding as a reward for their contribution to the development of local communities under amendments to proposed new legislation. The government announced plans for a law to compel foreign firms to hand over 51 percent of their equity to local investors, sparking warnings from the mining sector that this would frighten away investment. According to proposals, the government now plans to amend the draft law to give companies credits for "any investment into social investments such as schools, scholarships, training and on-going running costs of clinics". Companies that score high on an empowerment scorecard will be required to shed a smaller stake to local investors, which the government says have been historically disadvantaged by laws that favoured huge conglomerates.

The Chamber of Mines of Zimbabwe, which has been leading the campaign against the initial proposals, said it was heartened by the latest developments. Chamber president Jack Murehwa said: "Both the ministry and we are keen to resolve the issue of empowerment as soon as we can. However, we are not yet at a point where we can release a common position," he said. In June President Robert Mugabe sought to reassure foreign mining firms, saying the proposed law would not lead to property grabs. "We are not there to frighten away investors… We are there purely to become partners in Zimbabwe." About 200 foreign firms operate mines in Zimbabwe, which has significant reserves of platinum and diamonds as well as gold. (Zimbabwe Online, South Africa / The Mail & Guardian/ South Africa / AFP)

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