Zimbabwe made news last Thursday with its decision to formally withdraw the Zimbabwean dollar from circulation.
The central bank will offer US$5 for every 175 quadrillion Zimbabwean dollars held in bank accounts. As the African country leaves behind its era of hyperinflation and moves towards real economic growth, it is looking increasingly eastwards to countries including the UAE.
Zimbabwe defines its relationship with the UAE well within the context of its Look East Policy (LEP), which was inaugurated in 2003 to expand bilateral and trade relations.
That relationship was underscored by president Robert Mugabe during the visit of Sheikh Saud bin Saqr, Ruler of Ras Al Khaimah, to Zimbabwe in February 2013.
Mr Mugabe had said: “It would be natural, logical and strategic for us [Zimbabwe] to forge a relationship with your emirate since we have a lot of synergies which are complementary. The relationship, if well calculated, should see mutual benefit accruing to both parties.”
During his visit, Sheikh Saud signed a memorandum of understanding regarding six areas of cooperation: mining; health care; energy; tourism; industry and commerce; agriculture.
The UAE has over the past decade become a significant trade and investment partner for Zimbabwe.
Last year, the country was Zimbabwe’s fifth largest export market and its 10th largest import market. Zimbabwe’s exports to UAE reached a record US$482 million in 2012. Its imports from UAE also rose from $70m in 2011 to $107m last year.
What is interesting to note is that the entire Southern African Development Community (SADC) recognises the UAE as being integral to its economic development.
SADC’s exports to UAE doubled from $2.1 billion in 2010 to $4.3bn last year. The regional bloc’s imports from UAE also surged from $1.5bn in 2010 to $2.6bn last year.
Zimbabwe imports products from the UAE that are important to the country’s economic transformation. For instance, Zimbabwe’s importation of fertilizer worth $14m from the UAE last year went a long way towards supporting the agriculture sector, which is the mainstay of the economy.
As for the UAE, it can benefit from buying organic agricultural products from Zimbabwe, since Zimbabwe has strict laws against the growing or processing of genetically modified crops.
Companies such as Mondore General Trading in Dubai have made headway investing in Zimbabwe’s agriculture sector, thereby creating many jobs since this sector is labour intensive. Job creation is one of the key priorities in Zimbabwe.
Zimbabwe also imports machinery, electrical and electronic equipment from the UAE, which all support Zimbabwe in enacting its current medium-term economic blueprint, the Zimbabwe Agenda for Sustainable Socioeconomic Transformation.
Bilateral relations were also set for a major uplift in 2012, with the signing of an “open skies” agreement that allowed for full route access, while fostering trade ties and enhancing the movement of people between both countries.
A significant number of Zimbabwean students is receiving quality tertiary education at universities in Dubai, with some on full scholarships.
Through these studies, Zimbabwean students are trained for their country’s sectors in critical need of manpower such as medicine, engineering, architecture, quantity surveying, computer sciences, and actuarial sciences among others. Zimbabwe is facing a serious liquidity crunch that hinders the growth of productive sectors as they cannot access loans at concessionary rates. However, UAE institutions such as Tabarak Investment Bank have obtained investment licences from the Zimbabwe Investment Authority to invest in key sectors of the economy and to provide structured finance products.
There are plenty of investment opportunities in Zimbabwe, given its high endowment of natural resources. Zimbabwe has, for instance, the largest reserve of diamonds in the world, estimated t 16.5 million tonnes. Diamonds are Zimbabwe’s top export to the UAE.
Zimbabwe has been posting impressive GDP growth in recent years. In 2011, the country grew 11.9 per cent and 10.6 per cent in 2012. Although a lower growth rate of 2.8 per cent is projected this year, the country is targeting average future growth rates of 7 per cent.
The country, which experienced hyperinflation that reached a peak of 231 million per cent in July 2008, now boasts stable macroeconomic conditions, thanks in part to the adoption of a multi-currency system in which most transactions are done in US dollars or South African rand. Inflation in Zimbabwe – at minus 2,65 per cent – is now the lowest in southern Africa.
According to the latest Global Competitiveness Report, Zimbabwe moved up seven spots. What is also pleasing to note is that Zimbabwe enjoys very stable political conditions, after holding its peaceful elections in July 2013. The country’s relations with the international community continue to improve, and the European Union removed its decade-long sanctions on the country last October.
This is the time for Zimbabwe and UAE to give their relationship a major uplift. Zimbabwe’s gates are wide open.
Clemence Machadu is an economics writer based in Harare, Zimbabwe.
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