Tuesday, August 12, 2008

Why pulling out of AFrica is business suicide

from the African executive

"...One of the many reports about sanctions pointed out that Brown did not directly order British firms to withdraw operations from Zimbabwe. ... Asking British firms to stop doing business with or pull out of Zimbabwe will have negative consequences for those companies as well as effects on Zimbabwe’s economy. It is sometimes portrayed as if the continuation of those companies’ business in Zimbabwe is out of the kindness of their hearts, a sort of favor to poor helpless Zimbabwe, and that they would actually be relieved to leave such a poorly performing economy.

The truth is even if their operations are barely ticking along now, many of these companies have substantial long-term investments that they risk being expropriated by the Mugabe government should they pull out. Mugabe has on several occasions mentioned his willingness to do just that if ‘provoked’ enough. It is true that there is no reason to believe the government would run those mines and other investments any better or profitably than the companies themselves, especially without access to the kind of international money required for capital-intensive things like mining. But at that stage the considerations would mostly be hot-headed political ones, as we saw with farm take-overs, not necessarily cool-headed economic ones...."

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