Zimbabwe’s Potential Economic Resurgence Poses Important Questions

Zimbabwe’s Potential Economic Resurgence Poses Important Questions

The news coming out of Zimbabwe is exciting, with a new president, an upcoming election, and hopefully an economic resurgence on the cards.

On the streets, the Zimbabweans are talking about the potential for the government to re-engage an aggrieved population and bring money and energy back into the system.

Yet the enthusiasm cannot overshadow the pressing economic questions that new president Emmerson Mnangagwa must answer.

The currency (and debt?) question

Zimbabwe remains a multi-currency regime as the Zimbabwean dollar lingers in the wilderness as a suspended currency. Inflation—nearing 500 billion percent—crushed the local currency in 2008 to 2009 and led to the introduction of the current monetary regime.

Most gains from the adoption of a 2009 budget and economy backed by the American dollar dissipated quickly thereafter for a few specific reasons.

First, the currency cannot be restricted within Zimbabwean borders with non-dollarized nations on each border (quite willing to accept dollars from visiting Zimbabweans).

Secondly, the Zimbabwean government also lacks any ability in driving monetary policy around the dollar as that policy disseminates from the United States.

It comes as no surprise that President Mnangagwa recently announced that the country will focus on rebuilding reserves of gold and diamonds to back the potential (or eventual?) return of the Zimbabwean currency.

The reintroduction of a local currency could put more control back in the hands of the central government and strengthen President Mnangagwa’s ability to steer the economic train through the woods.

Retaking such control could also provide the new leadership a pathway to issuing sovereign debt. But this type of debt market re-entry will be heavily dependent on the leadership’s efforts to boost cash, control the printing of money and inflation, and create consumer confidence on the ground.

It is a tall order for any president, particularly a president following the controversial (yet iconic) Mugabe.

Targeting the right sectors for economic resurgence


The country is endowed with minerals. Diamonds and gold are the storylines. But the country also has the second largest reserves of platinum and a significant amount of coal. The new administration relaxed indigenization laws to ease investor concerns around the sector.

The jury remains out on whether investors are willing to quickly re-engage the sector at this stage. Capital requirements and a new political reality will require a warming up process for most investors.

President Mnangagwa may not have time on his side as a boost in this sector could be a key first step to getting the economic headwinds going in his favor before the election this year.


A retail rebirth will also be part of the story. Local and international brands have flooded other countries in southern Africa (and beyond), but have remained sceptical on Zimbabwe for obvious economic reasons.

Any sense of recovery with Zimbabwe will excite retailers who already see Zimbabweans cross the border with cash to buy foreign goods and return back to their home country.

Zimbabweans also account for a significant portion of the Africans who have moved cross border to South Africa and Zambia among other countries in the region.

Their spending power, if shifted in any way back to their home country, potentially through remittances or travel back home, could be a welcomed ancillary economic boost to the Zimbabwean economy. E-commerce will also become a major component of this retail rebirth.

The reality remains that Zimbabwe had one of the fastest growing retail markets back in the 1990s…there is no reason good economic policies cannot recreate those boom days.


Zimbabwe requires more power investment. The power outages in the country continue to undermine the mining sector as much as daily life for Zimbabweans.

A reliance on petrol and diesel power generation burdens manufacturing and light industrial sectors. The country has long opened its borders to foreign investment to promote IPPs. The opening of the sector, however, has not necessarily boosted investment therein.

With President Mnangagwa declaring the country back open for business, big energy companies, such as General Electric (GE), are searching the country for big energy investment opportunities, including the Batoka hydro electricity project.

More investors may follow the words of GE or, at least, find their own courage in examining investments within this new political market in Zimbabwe.

Targeting the Right Investors…

Little thought has been put into the question of who are the ideal investors to target in the early stages of this new administration.

The retail sector could benefit from the entry of large international brands, but it may be the smaller small and medium enterprise-focused investors and their private equity counterparts that could provide the capital necessary to create a first mover effect in most sectors of the economy.

Being open for business, as the new leadership portrays it, is not sufficient unless capital moves towards the country and its wealth of investment opportunities.

Finding those investors with an interest in Zimbabwe and with capital will be challenge. But, for now, there is a large group of curious observers anxious to get involved in the country.

Kurt Davis Jr. is an investment banker, with private equity experience, focusing on Africa and Middle East. He earned a M.B.A. in finance, entrepreneurship and operations from the University of Chicago and J.D. in tax and commercial law at the University of Virginia’s School of Law. He can be reached at kurt.davis.jr@gmail.com.