Eager foreigners still wary of investing in Mugabe's Zimbabwe

Foreign investors eager to pursue tempting opportunities in Zimbabwe still seem to think business under the regime of President Robert Mugabe is a bit too risky.

After Swiss food conglomerate Nestle canceled a contract with a company owned by Mr. Mugabe's wife last week, the government temporarily froze its bank account. This week, South African supermarket giant Shoprite cancelled a plan to invest in Zimbabwe.

Zimbabwe is only now pulling itself out of a 10-year economic decline that saw 80 percent unemployment and 231 million percent inflation. Mugabe has only reluctantly allowed the winner of last year's national election, Morgan Tsvangirai, to serve as his prime minister and as recently as last December he threatened a broad program of nationalizing banks, mines, and factories, similar to the decade-old campaign to force white commercial farmers from their land.

"The lack of investors, as seen by Shoprite, comes for a reason. They see that the government is going to continue its interference with business,'" says John Robertson, an independent economic analyst based in Harare. "Businesses are not saying no to Zimbabwe, they are saying, 'not yet.'"

Any delay in investment could have a powerful effect on the economy, and on the country's shaky power-sharing government as well, Mr. Robertson adds. Not only does the lack of investment mean that mine owners can't secure loans to buy new equipment and take advantage of rising prices for minerals. It also means businesses have less money to hire workers, banks have less money to lend, and consumers have less money to spend.

Economic impact on the power-sharing government

In the end, all of this may spell doom for the power-sharing government. "Unfortunately, it plays to [the ruling ZANU-PF party's] hands more than anyone else. It feed's ZANU-PF's sense that the power-sharing agreement with the [Mr. Tsvangirai's Movement for Democratic Change] hasn't worked, and it's MDC who is to blame," says Robertson.

Zimbabwe is desperately seeking foreign investment. In mid-September, Mugabe told foreign investors at a mining-industry meeting in Harare that his country respected property rights and the rule of law. Finance Minister Tendai Biti, a member of Tsvangirai's MDC party, has also talked up the economy, promising as much as 15 percent growth for Zimbabwe if it sells off state-owned telecommunications companies, banks, and the National Oil Company of Zimbabwe.

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