"Shunned by the West, Zimbabwe’s UAE Gamble Hands Economy a Lifeline"

" Shunned by the West, Zimbabwe's UAE Gamble Hands Economy a Lifeline \r\nZimbabwean President Emmerson Mnangagwa\u2019s six years of wooing the United Arab Emirates has given a lifeline to a nation that the West has ostracized for a quarter century and is unable to repay its loans to China.\r\n\r\n The wealthy Gulf state has overtaken China to become the resource-rich nation\u2019s biggest export partner and since 2022 has plowed $1.4 billion into everything from gold trading to real estate. The steps are part of a wider effort by the UAE to build influence across Africa that\u2019s seen it become the country that routinely pledges the most foreign direct investment into the continent.\r\n\r\n \r\n \r\n\r\n\u201cThe UAE has gone within a few years from being unknown in commerce to becoming the nation\u2019s foremost trading partner,\u201d Eldred Masunungure, a political science professor at the University of Zimbabwe, said.\r\n\r\nIn Mount Hampden, 11 miles northeast of Harare, Shaji Ul Mulk, a Dubai-based businessman who owns Mulk International, is developing a flagship \u201ccyber city\u201d for the rich to replace the capital, which is in ruin. The Dubai Gold & Commodities Exchange has a pact to establish a gold market, miner Bluefin Gold Group plans to set up in the country and Abu Dhabi-registered Terra Mining will start producing gold from a Zimbabwean mine this month, according to its chairman.\r\n\r\nThe oil-rich Gulf state is also consistently among the southern African nation\u2019s top five foreign direct investment sources, according to the Zimbabwe Investment and Development Agency. And it doesn\u2019t plan to let up.\r\n\r\nThe UAE wants to maintain and expand its relationships with Zimbabwe in line with its broader foreign policy objectives, a UAE official who asked not to be identified said. Something Zimbabwe plans to encourage.\r\n\r\n\u201cGoing forward, we\u2019d want the UAE to invest in the gold sub-sector, as an increase in production means an increase in royalties which we use to back our currency,\u201d Persistence Gwanyanya, a Reserve Bank of Zimbabwe monetary policy committee member, said.\r\n\r\nStill, caution may be warranted because of the state of Zimbabwe\u2019s economy. The southern African nation\u2019s debt pile has ballooned to $21 billion since a default in 1999. Its sixth attempt at a viable local currency in 16 years is foundering less than nine months after debut. The economy is largely informal, high inflation, the economy\u2019s Achilles\u2019 heel, persists, making it difficult for big businesses to flourish.\r\n\r\n Petrodollars \r\n\r\nGulf states are increasingly using their petrodollars to build influence in Africa, as China pares back loans to the continent, Europe scales back its presence and the US becomes more domestically focused.\r\n\r\nThe UAE has invested $110 billion in Africa spread across trade, investment, renewable energy, logistics, food security and infrastructure, according to its government.\r\n\r\nIts strategic investments are made with the prospect of earning outsized returns, said Jim Krane, a fellow at Rice University\u2019s Baker Institute for Public Policy in Houston. The investing firms, which are mostly state-linked, target countries where they can advance the strategic interests of the UAE and \u201care willing to overlook some of the risks that have otherwise prevented firms from entering these frontier markets,\u201d he added.\r\n\r\n\u201cThere are diplomatic motivations that go beyond profitability, but profits are still expected,\u201d said Krane.\r\n\r\nLast year, the Abu Dhabi wealth fund ADQ agreed to invest $35 billion in Egypt, most of it to develop prime land on the North African nation\u2019s Mediterranean coast. That rescued the economy from its worst foreign-exchange crisis in decades.\r\n\r\nThe UAE\u2019s decision to invest in Zimbabwe came after Mnangagwa visited the country in 2019 as part of a roadshow to attract investment into an economy that was in freefall and locked out of capital markets because of sanctions, the debt default and decades of misrule by Robert Mugabe.\r\n\r\nThe UAE was mainly attracted to Zimbabwe\u2019s gold, which has become a \u201cbright spot\u201d for the economy, Lyle Begbie, an economist at Oxford Economics said. Last year output rose to a record 36 tons.\r\n\r\nTies to the UAE provided Zimbabwe with \u201coptions for survival,\u201d senior officials in Mnangagwa\u2019s administration said in 2019 \u2014 and still do, said Hasnain Malik, an emerging market strategist at Tellimer in Dubai.\r\n\r\n\u201cUAE investment inflows are nowhere near large enough, on their own, to build up the foreign reserves needed to support a stable currency,\u201d he said. \u201cThe economic solution for Zimbabwe requires addressing sovereign debt arrears, committing to a credible fiscal path, unlocking multilateral finance and foreign direct investment, and, ultimately, allowing a freer float of the currency.\u201d\r\n\r\n "

"Shunned by the West, Zimbabwe’s UAE Gamble Hands Economy a Lifeline"

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