Zimbabwe Business Forecast Report Q2 2008

Publication Date	March 2008
Publisher	Business Monitor
Product Type	Report
Pages	46
ISBN Number	1746-5818
Product Code	BMI00763

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Summary

Make Or Break: March 2008 Election Crucial

For over a year President Robert Mugabe has struggled to retain control over his ruling Zimbabwe African National Union - Patriotic Front (ZANU-PF) party. In December 2007, the party refused to endorse an extension of his mandate until 2010, forcing him into a general election scheduled for March 29, 2008. Mugabe is expected to coast to victory, in what will likely be a highly tainted ballot, devoid of credible international monitoring. In BMI's view, however, Mugabe's days in office are numbered and we expect him to be out of office by the end of 2008 at the latest. South African President Thabo Mbeki's efforts to mediate a political solution have so far been unsuccessful.
A formidable challenge has arisen from within ZANU-PF: former finance minister Simba Makoni will fight the election as an independent, but will be backed by powerful anti-Mugabe forces within ZANU-PF, most notably ex-army chief Solomon Mujuru. It looks highly probable as well that a part of the mainstream opposition Movement for Democratic Change will also back Makoni. We see risk of an elevated level of political violence before, during and after the March election.

Makoni and his backers will likely re-engage with the international community, but only because their personal interests have been damaged by Mugabe's ostracism. A prerequisite for economic revival is a restoration of trust in the reserve Bank of zimbabwe, which at the moment is totally discredited as it presides over the world's highest inflation rate, probably 150,000 %, and a worthless currency. There is significant foreign direct investment interest in the country's natural resources, but a major effort will first be needed to re-establish Zimbabwe's payment record.

The business environment is extremely poor, corruption levels are thought to be extreme and the personal safety of foreigners cannot be taken for granted. Electricity, potable water and medical facilities are difficult to secure and crime is a serious issue.

Content

Executive Summary
- Make Or Break: March 08 Election Crucial
Chapter 1: Political Outlook
- SWOT Analysis
- BMI Political Risk Ratings
- Domestic Politics
- mugabe Under Threat?
- National elections will be held at the end of March. Zimbabwe is completely unprepared and there is little
- chance of a clean ballot, but Mugabe is no longer assured of the landslide victory he wants.
- Foreign Policy
- Fend For Yourself
- The region, Africa generally, and the west have lost interest in Zimbabwe's crisis. A newly democratic dispensation
- will be strongly backed, but the country must first put its own house in order.
Chapter 2: Economic Outlook
- SWOT Analysis
- BMI Economic Risk Ratings
- Economics Introduction
- The Roots Of Today's Trouble
- Economic Activity
- Further economic Contraction ahead
- Economic production is still falling, even from an already depleted level. The country remains highly food insecure,
- investment is non-existent, and household consumption is only being sustained by family remittances from abroad.
- Fiscal Policy
- Financing Debt with more Debt
- The government continues to tap the Reserve Bank of Zimbabwe for huge sums of deficit financing, adding to
- the existing mountain of public domestic debt and the hyperinflationary surge.
- Monetary Policy
- Banks On The Brink
- Central bank monetary policies are causing the banking system extreme problems. So far, the major players have
- chosen to continue to battle to keep their franchises afloat, but their patience is not infinite.
Chapter 3: Special Report
- Looking beyond 2008
- US: The Rebalancing act
- Unwinding The imbalances
- We believe that a substantial, multi-year shift in the US external accounts is under way. A weak US dollar and
- subdued domestic consumption should lead to a narrowing in the US's structural current account deficit.
- China: What if We're All Wrong?
- Our Core Scenario For China
- We are retaining our positive headline growth projections for China across the forecast period to 2012, with
- our expectations of the continued success of the urbanisation process and export-driven growth model
- underpinning our assumptions.
- Japan: Immigration Key To Long-Term Growth
- Demographic Woes Portend Long-Term Decline
- Immigration remains the only realistic way that Japan can overcome its long-term economic challenges.
Chapter 4: Business Environment
- SWOT Analysis
- BMI Business Environment Risk Ratings
- Business Environment Outlook
- Institutions
- Infrastructure
- Market Orientation
- Operational Risk
List of Tables
- Table: Economic Activity
- Table: Fiscal Policy
- Table: Monetary Policy
- Table: BMI business and Operational Risk Ratings
- Table: BMI Legal Framework Ratings
- Table: Zimbabwe FDI
- Table: BMI Trade Ratings
- Table: Top Export Destinations (US$mn)