Wednesday, 29 November 2017

Zimbabwe:Mugabe’s downfall gives Zimbabwe a golden opportunity

Robert Mugabe has been given the boot, but is this just an opportunity to reboot the rule of Zanu-PF in Zimbabwe? Emmerson Mnangagwa’s proposals to root out corruption and reform the economy have been well received, but as one lawyer puts it: “He can talk the talk, but can he walk the walk?” You might even query how convincingly he talks the talk; apparently Mnangagwa closed his first speech after Mugabe’s resignation by saying in Shona: “The dogs may keep on barking, but Zanu-PF will keep on ruling.”
For many years Zimbabwe’s courtrooms felt the full effect of Zanu-PF rule, with little separation of powers between the government and the judiciary. The perception has been that the independence of the judiciary has, in some instances, been undermined by the appointment to the bench of persons regarded as being pro-government. The result was that the court’s decisions over business disputes reflected what suited the regime. Either that, or, as Kwadwo Sarkodie of Mayer Brown points out: “Zanu-PF did not feel itself bound by the decisions of the courts.” And, put simply, that was one of many reasons why international investment in Zimbabwe dried up.
If the Zimbabwean economy is to enjoy a renaissance, the integrity of the courts must be established and the rule of law resurrected. The problem is, says Wildu du Plessis of Baker McKenzie, that with little international commercial activity in the country there is a risk that there is not a sufficient pool of experienced commercial judges.
One outstanding issue is whether the expelled white farmers will get any compensation for their confiscations and be given the chance to restore their former properties. Mnangagwa has made clear that they will not regain the land, but it remains to be seen how far the process of indigenisation continues. “During President Mugabe’s reign, policies that were adopted had the effect of driving investors away from Zimbabwe,” says Lavery Modise, the chairman of Hogan Lovells in South Africa. “One such policy was the indigenisation law, which required that 51 per cent ownership of multinational companies should be owned by Zimbabweans. If the new president’s inaugural speech is anything to go by, it appears that he intends to adopt investor-friendly economic policies with a view to attracting foreign investors.”
Some say that indigenisation in itself is not a barrier to investment, provided that there is clarity over the law and that people know where they stand. “It is lack of certainty in the application of the law which is the problem,” says George Sibanda of Pinsent Masons.
Were there to be substantial change, however, significant economic improvements could be realised fairly quickly, says Johannes Gouws of DLA Piper. “They are starting from a low base and all they need is to do just a couple of the right things to get it going.” There would probably be no shortage of willing investors. As Sarkodie observes, the country’s resources in terms of chrome and platinum and other minerals are enormous. Joz Coetzer of White & Case says that they have already had inquiries from clients interested in energy (including renewables) and mining. “South Africa has always had good relations with Zimbabwe and a lot of South African corporations would be interested in investing further in the country,” he says. Du Plessis too reports a flurry of inquiries over the past fortnight about investing. Some reassuring action is in the pipeline. “Zimbabwe is introducing new business rescue legislation, demonstrating that country’s economic resilience and optimism and making it more attractive to investors,” says Alex Eliott of Hogan Lovells, who will speak at a conference on the legislation in Harare next month.
Those investors could come from the other side of the globe. “With increasing globalisation, we don’t see Chinese investment as a bad thing,” says Melissa Butler of White & Case. “The Brics — notably Brazil and China — are increasingly active in south-to-south investment across the whole of the southern Africa region.”
If justice is restored, investors will find a workable infrastructure of business law surviving in the country. Although the corporate code needs updating, it is serviceable. Sarkodie points out that Zimbabwe has an effective Arbitration Act and is signed up to the New York Convention, so it is able to honour international arbitration agreements. It also has in place a number of bilateral investment treaties. “It has a legislative framework which compares well with other countries in the region,” says Sarkodie. Moreover, lawyers there are regarded as highly competent and creative. Added to this, says Gouws, are the many young qualified Zimbabwean lawyers who moved abroad in recent years and may, given the chance, want to return home. It remains to be seen if Mnangagwa will deliver on that opportunity.