Lonrho planning to invest in Zimbabwe despite threat to companies

By Tererai Karimakwenda
June 07, 2007

The mining and land giant company Lonrho is reported to be planning to re-invest heavily in Zimbabwe, despite pending legislation aimed at taking over all foreign owned companies, and despite the ongoing human rights abuses by the Mugabe regime. Earlier this week the company announced they would raise about £50 million, but according to the UK Telegraph newspaper, they are now looking to gamble £100m for a planned Zimbabwe investment fund. David Lenigas, an Australian deal-maker engineering a renaissance at Lonrho, is reported to have said: "My vision is that Lonrho puts hundreds of thousands of Zimbabweans back to work with reasonable pay and a future for their families.” But there was no mention of the plans by the government to take over 51% of all the shares of foreign owned companies. And critics say no company should support a brutal regime.
Thea Fourie, an economic analyst for sub-Saharan Africa at Global Insight, believes the Zimbabwean government will probably make exceptions for their friends when plans to nationalise foreign companies are implemented. She said the business takeovers will “basically have a very negative impact on any future investment spending decisions by both foreigners and locals” in Zimbabwe. But she added: “I also have to say that the government will probably have some provisions for some of its friends, basically companies owned by South Africans as well as Chinese.”
Lonrho is clearly quite aware of the risks of doing business in Robert Mugabe’s Zimbabwe. Inflation is officially at 3700% and there are serious shortages of fuel and spare parts. The Telegraph said the company is setting up a separate business called LonZim in which it will probably have a stake of only about 20%, plus a management contract.
For the Mugabe regime the issue is foreign currency. Fourie at Global Insight said: “The Zimbabwe government is going through a severe foreign currency crunch. I would imagine that they would try to in some way to accommodate companies who are willing to invest in their country to keep the foreign exchange flowing from those mining sectors.”
Because of the extreme shortage of foreign currency to purchase fuel, food and many other basic necessities government could be forced to negotiate a resolution of the political and economic crisis that has destroyed the country. Critics say that investment from foreign companies like Lonrho does nothing more than help the regime stay in power.