When Emmerson Mnangagwa takes over from Robert Mugabe as Zimbabwe’s president on Friday, he’ll inherit an economic wasteland that will take years and a complete reversal of some of the government’s signature policies to set right.
Among Mnangagwa’s key challenges will be to revive an agricultural industry that collapsed following the Mugabe-sanctioned seizure of mostly white-owned commercial farms starting in 2000, unlock investment in the mining industry by clarifying so-called indigenization laws that force companies to sell or transfer 51 percent stakes to black Zimbabweans and reestablish international credit lines.
“The quicker policy credibility is established, the more foreign capital starts flowing,” said Hasnain Malik, head of equity research at Exotix Capital in Dubai. “Many of the ingredients of a great frontier market are in place in Zimbabwe. While there is much to be done on the government wage bill, recapitalization of the economy and the banking system, the starting point for investor expectations is very low.”
Mnangagwa’s ascension to the presidency follows the 93-year-old Mugabe’s decision to quit Tuesday under threat of impeachment from his own party. While the former intelligence chief has been part of Mugabe’s inner circle ever since he took power when white-minority rule ended in 1980, he and his faction within the ruling Zimbabwe African National Union-Patriotic Front have signaled that they plan to run the country’s finances differently.
Change is desperately needed. The economy is half the size it was in 2000, and has slipped from being one of the 10 biggest in sub-Saharan Africa to number 20. Formal jobs outside the government are virtually non-existent, there are chronic cash shortages and roads and other public infrastructure have crumbled. Many of the best-educated Zimbabweans have moved to neighboring South Africa and the U.K., leaving the country with limited expertise to rebuild.