Last week, we described the 16 worst countries in the world for business activity based upon an assessment of several factors developed by the World Bank Institute. Today, we begin to look at specific countries, focusing on the factors that lead us to our conclusions.
We begin by focusing our attention on Zimbabwe, a country in the news because of the political turmoil stemming from rigged elections by its current leader, Robert Mugabe. While those unfamiliar with conditions in Zimbabwe might think that reported events in Zimbabwe are a recent phenomenon, the facts on the ground reveal that conditions in that country have been long standing and reflect institutional neglect of the basic requirements of a properly functioning government.
The chart below compares six factors developed by the WBI for assessing governance. This chart compares these factors for Zimbabwe against a regional average of other countries in sub-Saharan Africa. While the regional average for the comparison countries is poor, compared to the world as a whole, Zimbabwe rates dramatically lower for all of these factors.
In practical terms, these factors translate into a country in crisis. In its 2007 Human Rights Report, the U.S. State Department notes in its understated manner the following observations about the country and its current government:
Zimbabwe, with a population of approximately 11.6 million, is constitutionally a republic, but the government, dominated by President Robert Mugabe and his Zimbabwe African National Union-Patriotic Front (ZANU-PF) since independence, was not freely elected and was authoritarian. The last two national elections, the presidential election in 2002 and the parliamentary elections in March 2005, were not free and fair. Although the constitution allows for multiple parties, the ruling party and security forces intimidated and committed abuses against opposition parties and their supporters and obstructed their activities. Civilian authorities generally maintained control of the security forces, but often used them to control opposition to the ruling party.
The government engaged in the pervasive and systematic abuse of human rights, which increased significantly during the year. The ruling party’s dominant control and manipulation of the political process through intimidation and corruption effectively negated the right of citizens to change their government. Unlawful killings and politically motivated abductions occurred. State-sanctioned use of excessive force increased, and security forces tortured members of the opposition, student leaders, and civil society activists. Prison conditions were harsh and life threatening. Security forces, who often acted with impunity, arbitrarily arrested and detained the opposition, members of civil society, labor leaders, journalists, demonstrators, and religious leaders; lengthy pretrial detention was a problem. Executive influence and interference in the judiciary were problems. The government continued to evict citizens and to demolish informal marketplaces. The government continued to use repressive laws to suppress freedoms of speech, press, association, academic freedom, assembly, and movement. Government corruption remained widespread. High-ranking government officials made numerous public threats of violence against demonstrators. The following human rights violations also continued to occur: harassment of human rights and humanitarian nongovernmental organizations (NGOs) and interference with their attempts to provide humanitarian assistance; violence and discrimination against women; trafficking of women and children; discrimination against persons with disabilities, ethnic minorities, homosexuals, and persons living with HIV/AIDS; harassment and interference with labor organizations critical of government policies; child labor; and forced labor, including of children.
From a business perspective, doing business in Zimbabwe is extremely risky. As we have noted in previous articles on ZImbabwe, companies that continue to do business in the country face a variety of challenges. It was recently reported in the media that Tesco, a U.K. based retailer has halted the purchase of agricultural products from the country. However, as we noted last week, CAMEC, a regional mining company has entered into an agreement with the government to step up its mining operations. Fallout from the international outcry about the recent elections in Zimbabwe has included a call by several governments, most notably the U.K., for businesses to withdraw from Zimbabwe. In response, ZImbabwe’s current president, Robert Mugabe, has threatened to nationalize the country assets of any company who halts its current business activities there.
Regardless of what the proper business or human rights response should be, the fact remains that this is an extrememely risky place to do business. In assessing a public company from an investment perspective, we believe that business operations in that country pose serious risks to the overall performance of companies with operations in Zimbabwe.
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