Zimbabwe’s President Emmerson Mnangagwa’s six-year outreach to the UAE has positioned the Gulf state as Zimbabwe’s leading trading partner, investing $1.4 billion since 2022 in sectors like gold and real estate. Despite these investments providing a lifeline, Zimbabwe continues to grapple with substantial debt and currency instability, indicating a need for significant economic reforms for lasting stability.
Zimbabwean President Emmerson Mnangagwa has cultivated a significant relationship with the United Arab Emirates (UAE) over the past six years, providing crucial support to Zimbabwe, which has faced Western sanctions for 25 years and struggles to repay its debts to China. The UAE has become Zimbabwe’s largest trading partner, investing $1.4 billion in sectors like gold trading and real estate, enhancing its influence in Africa. Political science expert Eldred Masunungure highlighted the UAE’s swift rise as a key commercial player in Zimbabwe, solidifying a vital economic partnership.
The UAE’s investments in Zimbabwe are embodied by projects like the cyber city in Mount Hampden, developed by Dubai businessman Shaji Ul Mulk, and collaborative efforts like establishing a gold market through the Dubai Gold & Commodities Exchange. As a leading foreign direct investment source, the UAE is poised to expand its involvement aligned with its strategic foreign policy objectives, as stated by an anonymous UAE official, despite existing economic challenges in Zimbabwe.
Zimbabwe’s economic situation remains precarious, marked by a $21 billion debt and persistent inflation issues. The country’s most recent attempt at stabilizing its currency has failed, highlighting a broader trend of informal economic activity that undermines flourishing businesses. The reluctance from Gulf states reflects a shift in international investment patterns, with the UAE increasingly inclined to leverage petrodollars for influence as other nations recede.
With $110 billion investments across Africa, the UAE strategically pursues profitable opportunities, often overlooking conventional risks prevalent in frontier markets. While diplomatic goals play a role, profitability remains crucial, as seen in previous investments in countries like Egypt, which received $35 billion from the Abu Dhabi wealth fund ADQ to avert a foreign-exchange crisis.
The UAE’s engagement with Zimbabwe was spurred by Mnangagwa’s 2019 visit to attract investment in an economically deteriorating atmosphere. The country’s gold sector emerged as a focal point for UAE interest, with output hitting a record 36 tons last year. Official sources have emphasized the significance of UAE partnerships for Zimbabwe’s survival, although expert analysis indicates that investment inflows are still insufficient to ensure economic stability without comprehensive reforms addressing sovereign debt and fiscal credibility.
Zimbabwe has faced economic isolation from Western nations for nearly a quarter century, primarily due to political mismanagement and sanctions. This isolation intensified following historical leadership challenges under Robert Mugabe, resulting in a significant debt crisis. Conversely, the UAE has been actively extending its influence in Africa and seeking lucrative investment opportunities, particularly in resource-rich countries like Zimbabwe that are grappling with economic instability. The dynamic between Zimbabwe and the UAE reflects a broader trend of Gulf states leveraging investments to develop strategic partnerships in Africa in the wake of diminished Western interest.
The partnership between Zimbabwe and the UAE represents a crucial development for Zimbabwe’s economy, despite ongoing challenges. The UAE has established itself as Zimbabwe’s principal trading partner, significantly investing in local industries. However, the long-term viability of Zimbabwe’s economy is contingent on comprehensive reforms addressing severe debt issues and fostering a stable fiscal environment to attract even more investments and sustain economic growth.
Original Source: financialpost.com