Page last updated at 23:34 GMT, Tuesday, 14 April 2009 00:34 UK

Zimbabwe economy 'starting from zero'

Victoria Falls from Zambia side

By James Melik
Business reporter, BBC World Service

Now that Zimbabwe's coalition government has decreed that it wants normal relations with other nations, and the country has adopted the US dollar and the South African Rand as currency, some people think it is time to pursue a different approach to the country.

But while Robert Mugabe remains president, despite his Zanu-PF party failing to win the country's elections, many countries believe that economic sanctions should remain in place.

Zimbabwe is stalked by cholera, starvation, hyperinflation and 80% unemployment, and there are now strong voices calling for the lifting of sanctions.

"We need to marshal the appropriate resources - financial, human and technical - to make a heavy investment in Zimbabwe," says Jay Naidhu, chairman of the Development Bank for Southern Africa.

"The water, electrification, telecommunications and sanitation sectors have not been maintained in Zimbabwe for decades," he says.

If we get the return on our investment and the outcome we want, we will go into Zimbabwe tomorrow
Jay Naidhu, Development Bank for Southern Africa

Critics argue that a democracy like South Africa should not invest any money in Zimbabwe while Mr Mugabe remains in power.

"This is an interim leadership and until elections determine who the real the leadership is," Mr Naidhu says, "we have to deal with what is there."

Criteria for aid

He believes there is a vested interest in rebuilding Zimbabwe, because of its potential to be the food basket of the region.

South Africa, which owns the Development Bank for Southern Africa, has not put any money into Zimbabwe in the last 10 years because of the "political risk".

Mr Naidhu says the argument is now academic.

"Rather than focus on Mr Mugabe, we should focus on programmes which have a practical benefit for ordinary Zimbabweans, who today are living in absolute deprivation."

That does not silence opponents, who maintain that any money paid into Zimbabwe helps only the president and his cronies.

"Everyone in the world has to recognise that the parties internal to that country have reached an agreement," Mr Naidhu insists.

"If Zimbabwe makes an application for assistance from South Africa, we need to come to the party," he says.

War veterans in Zimbabwe
Food production was curtailed as farms were taken over by war veterans

"When we supply money to local government in South Africa, we project manage down to the last factor," he says.

"If we are financing a sanitation project, we check how many toilets are being installed."

Mr Naidhu says there is nothing to prevent the Development Bank investing in Zimbabwe.

"If we can get the return on our investment and get the development outcome that we want, we will go into Zimbabwe tomorrow," he says.

He says that the Bank's main criteria of performance measurement is the outcome of the development being funded.

"Will our investment help rebuild the water infrastructure and will that lessen the probability of a further cholera outbreak?"

'Starting from zero'

There has been a huge amount of change, including the adoption of the South African Rand and the US dollar as the local currency.

There is no capital, so it is literally like starting from zero again
Alexander, haulage company owner

The price of goods tends to reflect their origin, plus the transport to Zimbabwe and duties, so people are actually witnessing price deflation.

"What it does is give people an opportunity to transact in currencies they trust," says Alexander, the owner of a haulage company in Zimbabwe.

He says he would like to see South Africa pump money into the economy.

"They are good at talking about how the rest of the world should pour in money," he says, "but essentially South Africa were the ones who forced this political deal and therefore they should back it up with their own money."

He believes that South Africa might not be too comfortable with the status quo because, at the end of 2008, they put 300 million rand ($32m) into Zimbabwe and most of it is reputed to have disappeared.

"Things are definitely better economically," Alexander says.

"We are not living in a world of trillions of per cent inflation, so from that perspective, there is some stability," he adds.

Companies producing any form of food and beverages are actually experiencing a boom.

children collecting water in Zimbabwe
A supply of clean water is crucial for improving the population's health

"You have to remember that these companies are 90% off where they were originally," he reminds himself, "so we are talking very low levels of economic activity."

But for companies who are beginning to plan ahead, there is an element of economic activity beginning to take place.

"The only problem is there is no capital, so it is literally like starting from zero again," he says.

He believes, however, that there are great domestic opportunities.

"Companies need coal and components, but they do not have the physical cash to pay for those things," he laments.

"And no companies are willing to extend credit either," he adds.

"It is a bit of a stand-off at the moment and that makes life very challenging."



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