Cape Town - The prospect of a victory for Zimbabwean President Robert Mugabe in an election rejected by his main challenger as a sham threatens to derail an economy that was emerging from a decade-long recession.
Mugabe, 89, has led the southern African nation for 33 years, the past four of them in a fractious coalition with the Movement for Democratic Change, led by Morgan Tsvangirai.
As president, he has passed laws that compel foreign-owned companies, including miners such as Impala Platinum Holdings Ltd., to cede majority stakes to black Zimbabweans or the government.
Under the coalition government, imposed on Mugabe by the 15-nation Southern African Development Community in 2009 after disputed elections, MDC-appointed ministers abolished the national currency in favour of the use of currencies including the dollar, cut the inflation rate to 1.9 percent from the 500 billion percent estimated by the International Monetary Fund and oversaw four consecutive years of economic growth.
The economy shrank 39 percent in the eight years prior to the power-sharing government after Mugabe authorised the seizing of white-owned farms for redistribution to black subsistence farmers.
“The country is back to square one,” Nhlahla Mpofu, an economist at investment group 4Cast Research, said in a phone interview yesterday from Bulawayo, Zimbabwe’s second-biggest city.
“The country is not going to have foreign direct investment.”
Voter Fraud
Mugabe’s campaign pledges included plans to enforce a program, known as indigenization, to compel foreign-owned companies to cede 51 percent stakes.
That would give Zimbabweans control of the local units of banks such as Barclays Plc and Standard Chartered Plc.
He also plans to reintroduce the local currency, which fuelled hyper-inflation after the central bank printed the currency to meet expenses.
Tsvangirai, who is prime minister in the coalition government, said yesterday his party views the July 31 election as “null and void” because of alleged widespread voter fraud and warned the results may threaten stability.
Early results released late yesterday gave Zanu-PF 52 of the 210 elected seats in parliament and the MDC 10 seats.
Thousands of Zimbabweans were turned away from voting sites because they weren’t on the electoral roll, voters were bussed to cast ballots outside their home areas and the election process was controlled by the security forces, Tsvangirai told reporters in Harare, the capital.
The Zimbabwe Election Support Network, one of the nation’s biggest domestic observer missions with 7,000 monitors, said in a statement yesterday that the credibility of the vote was “seriously compromised,” with as many as 1 million urban voters unable to cast ballots.
Volatile Markets
“The prospects of a clean and credible and legitimate election smoothing the way for a sustained economic rebound is evaporating rapidly,” Iraj Abedian, chief executive officer at Johannesburg-based Pan-African Investment and Research Services, said in a phone interview.
“Zimbabwe faces the prospect of falling into another period of volatile economic and financial markets.”
Tsvangirai and the MDC challenged Mugabe and his party in four elections between 2000 and 2008, all of which were marred by violence and irregularities, according to most observers, including the European Union and the US, which imposed travel bans and asset freezes on Mugabe and his closest allies.
Some of the sanctions were lifted in March after the nation had a peaceful referendum on a new constitution.
Zimbabwe faces power shortages, crumbling infrastructure and rampant poverty, with the IMF estimating annual per-capita income, adjusted for currency variations, in a nation of 13.1 million at $589, the lowest in sub-Saharan Africa after the Democratic Republic of Congo.
Indigenization Law
Economic growth is set to slow to 3.4 percent this year, from 5 percent in 2012 after commodity prices fell, according to Finance Minister Tendai Biti, who is also secretary-general of the MDC. Zimbabwe has the world’s second-biggest platinum and chrome reserves after South Africa as well as deposits of diamonds, iron-ore, gold and coal.
Investor sentiment may suffer a further setback if Mugabe follows through with plans to more rigorously implement his indigenization law, which has affected companies including Anglo American Platinum Ltd., Rio Tinto Plc and Aquarius Platinum Ltd.
Earlier this year he said that the government should not pay for its stakes, contradicting agreements already in place.
Impala, Aquarius and Anglo American Platinum declined to comment on the outcome of the elections.
“It’s going to be very difficult to fund further expansion” in Zimbabwe, Mark Bryson, a platinum analyst at Avior Research said by phone from Johannesburg yesterday.
“There is a very slippery slope these guys are travelling on. It doesn’t look positive.” - Bloomberg News