Zimbabwean President Robert Mugabe has stacked his new cabinet with Zanu-PF loyalists, signalling a return to policies that caused a 40 percent contraction in the economy.
Since his election victory in July, Mugabe has pledged to press ahead with a policy to force mining companies such as Impala Platinum and Anglo American Platinum to cede majority stakes in their local units to black citizens or the government. The nation holds the biggest platinum and chrome reserves after South Africa, as well as diamond, gold, iron ore and coal deposits.
“This cabinet doesn’t bring with it the air of significant change, and foreign investors will have to be convinced by actions of the appointees before they rush in,” Scott Gibb, a London-based partner at Cube Capital, said last week. “It is perhaps a wasted opportunity.”
The Movement for Democratic Change (MDC), led by former prime minister Morgan Tsvangirai, boycotted the opening of parliament on Tuesday, claiming the elections were rigged.
Tsvangirai said yesterday that he would not step down as head of the MDC before his current term ended in 2016.
Following news that Mugabe had won another five-year term and his Zanu-PF secured a two-thirds parliamentary majority, the Zimbabwe Stock Exchange’s benchmark index plunged 11 percent, its biggest one-day decline since 2009. The gauge has fallen by 19 percent since the announcement.
Patrick Chinamasa, who has been justice minister for 13 years, has been named finance minister, a position he filled for a month in 2009. Chinamasa is a senior member of Zanu-PF’s politburo, its highest decision-making body.
Peter Leger at Coronation Fund Managers said: “An opportunity has been missed in not appointing a more technocratic minister of finance, as this is a crucial role for investors,” who would probably adopt a “wait-and-see” approach to investing.
While MDC secretary-general Tendai Biti served as finance minister under the coalition government, the economy averaged 9.7 percent annual growth between 2009 and 2011, according to International Monetary Fund (IMF) data.
The removal of Saviour Kasukuwere, who presided over the youth, indigenisation and empowerment portfolio, and mines minister Obert Mpofu from their positions was positive, Leger said. Their replacements, Francis Nhema and Walter Chidhakwa, respectively, were “more technocratic and more moderate”.
Banks including Barclays and Standard Chartered must also show how they would comply with the indigenisation law, Kasukuwere said in March.
“Implementation of the indigenisation and economic laws is to be pursued with renewed vigour,” Mugabe told legislators on Tuesday. “Indigenisation and empowerment legislation will be strengthened during this session.”
Central bank governor Gideon Gono reassured people he had no plans to bring back the Zimbabwean dollar anytime soon. The economy emerged from almost a decade of recession in 2009 when the government permitted the use of the US dollar and other currencies.
Mugabe has blamed the nation’s economic woes on sanctions from the EU and the US, which are limited to a travel ban and an asset freeze on his most senior supporters, as well as an arms embargo.
Zimbabwe has been starved of foreign borrowing and has $10.7 billion (R105bn) in debt, the same size as its economy, according to the IMF. In June the lender said it would start its first programme with Harare since it defaulted on international loans in 1999. – Bloomberg