Rising from adversity

RECORD RATES: Hyperinflation has proved an obstacle to Zimbabwe’s economic progress.

Tamara Walid reports on the Gulf investors eyeing opportunities in Zimbabwe, despite the country's economic and social woes.

Battling with the highest inflation rate in the world at over 100,000%, rising unemployment, shortages in food, electricity and energy, and the pressure of Western sanctions, Zimbabwe continues to attract investors despite economic and political unrest. High investment returns in the areas of mining, agriculture and manufacturing remain the big attraction for international investors.

"While Africa has many investment opportunities, there are also formidable challenges," says Harry Broadman, Acting Chief Economist at World Bank, Africa Region. "But it also presents high payoffs. Poorly maintained or underdeveloped infrastructure facilities, such as the unreliable electricity service, are a major constraint on business development, but this also means it is an obvious sector in which clever investors ought to seize an opportunity."

Qatar seems to have realised the potential in Zimbabwe despite the challenges, announcing plans last year to invest US$1.5bn in an oil refinery and a hotel. Venessia Petroleum, a company run by a member of the Qatari ruling family, will build a 120,000 barrels-per-day refinery in Harare while a sister company plans to build a five-star hotel in the capital.

Other investors have also contributed to job creation among the country's 13 million people. China is one - last year, it signed a million-dollar deal to supply the African nation with farming equipment in exchange for tobacco.

The importance of such investments to the economies of Africa cannot be underestimated, believes Broadman. "The flow of resources to Africa in the form of direct investment can engender benefits to the continent not only through the transfer of capital and the creation of jobs, but also through the indirect or intangible benefits of transfers of technology and know-how," he says.

LonZim is another company playing a role in the revival of the Zimbabwean economy. The AIM-listed firm was set up to build an investment portfolio primarily in Zimbabwe, as well as a part of Mozambique. Among the sectors of interest for LonZim are tourism, infrastructure, transport, commercial and residential property. The company says it avoids risk through investing in different sectors rather than pouring its capital in one basket.

So far this year, the company has acquired a 79% stake in two hotels in the Beira area of Zimbabwe at a cost of US$4.25m. The company plans to demolish the existing hotel properties and develop a luxury hotel on the site, to be operated and managed by a company owned by Zimbabwe's Lonrho Plc.

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