1. LANGKAWI INTERNATIONAL DIALOGUE 2011 19TH to 21ST JUNE 2011
EXPLORING NEW DIMENSIONS:
What has business has to offer:
‘Sell yarn or fabric not cotton my son’ Lessons from my mother
By Joseph Kanyekanye
President – Confederation of Zimbabwe Industries
&
Group Chief Executive Officer – Allied Timbers Holdings

2. Presentation Summary Introduction & Scope Africa today and tomorrow
Zimbabwe Mineral resources
Key challenges for Zimbabwe
Power as an enabler for growth
Western Skepticism or Sanctions
Forecasted GDP Growth
Forecasted Sectorial Growth
Areas of Competitive Advantage
Mining Opportunities Reloaded
Other opportunities
Conclusions
Moderation

3. Introduction Stability and political unity since 2009
Resource rich country with arable land 7 agric/industry link
Education – unquestionably Mugabe legacy
GDP growth averaging 7% in last 2 years
Constraints – I refuse
“Sell yarn or fabric not cotton” Lesson from my mother. I was born and doctored on value-addition
Come to share, learn and adapt – look east.
What to share the social economic transformation of Zimbabwe in the immediate past and co-author its future.
Malaysia palm trees – technology transfer back to Africa
Comments borne out of need to eradicate poverty while accepting inclusive business plus sustainability.
This is an objective story of my country and how SMART PARTNERS can share in future development

4. Africa today Africa tomorrow • Total population: 1 billion
• Population under 15: 41%
• Adult literacy: 62%
• GDP income per capita is 10th of world average
• Around 45% living on US$1 a day
• Mobile phone subscribers: 37%
• Population living in urban areas: 40%
• Collective GDP (2008): US$1.6t
• Combined consumer spending (2008): US$860b
Africa tomorrow
• Total population: 1.4 billion by mid 2025
• Total population: 2.1 billion by mid 2050
• 128 million households with discretionary income
by 2020
• Consumer spending will be US$1.4t by 2020
• Collective GDP will be US$2.6t by 2020
• Around 47% of Africans will be living in cities
by 2025

5. Contemporary Views on Africa
“Africa could be on the brink of an economic takeoff, much like
China was 30 years ago, and India 20 years ago.”The World Bank
Source: Africa’s Future and the World Bank’s Support to It,
The World Bank, March 2011
“Big misperceptions about Africa still exist, especially in the mainstream media where Africa is still considered as a place of civil unrest and war.” Olaf Meier, African Development Corporation
"KFC intends to double its restaurants in Africa", The Wall Street Journal Asia, 9 December 2010.
“So the point really [...] is not whether you should be doing business in Africa, but rather how.” Leslie Rance, British American Tobacco
“Africa is the untold story, and could be the big story, of the next decade, like India and China were this past decade ... The presence and the significance of our business in Africa is far greater than India and China even today. The relevance is much bigger.”Muhtar Kent, CEO, Coca-Cola 2010.

6. Zimbabwe : The real King Solomon Mines Reloaded
Gold reserves estimated at $billions but currently producing 12mt per year but capacity to do 50mt/year exists
Abundant Nickel under care but can produce tonnes
Second largest PGM in Zimbabwe worth $400billion. 4 projects on feasibility stage.
Abundant coal reserves at 2.7 million tonnes production/year
Chrome production rose 167% in 2010 to t.
Zimbabwe Kimberlitic diamonds at 4 million carats and alluvial reserves can account for at least ¼ of world production

7. Pulp & Paper
Activity > 0.5%
Zimbabwe

8. Key Challenges for Zimbabwe
ABSENCE OF LINES OF CREDIT
WESTERN SCEPTICISM: SANCTIONS & DIVIDE AND EXPLOIT CF DBSA, INHERITED DEBT, PTA AND AFREXIM ASSISTANCE
DIFFICULTIES IN ACHIEVING NATIONAL CONSENSUS ON PRIORITIES: DEBT, PRIORITIES IN GNU AFTYER FOCUS ON SANCTIONS
LACK OF NATIONAL INTEREST – TOO MUCH FOREIGN MEDDLING
RESTOPRSTION OF COMPETITITIVENESS – BUSINESS REMODELLING
DANGER OF A SUPERMARKET ECONOMY : RSA VERSUS ZIMBABWE BALANCE OF TRADE
INNOVATION: RESOURCE LEVERAGING FOR NDIAMONDS, COAL TO PLATINUM
ATTRACTING TIMID INVESTMENT ESPECIALLY INFRASTRUCTURE PARTICULARLY POWER
COMMUNICATION GAP BETWEEN GOVT/NGOs AND PRIVATE SECTOR ON ON CONCEPTS AND SPEED OF IMPLIMENTATION

9. Power as an enabler for growth
Source
Current Av. Capacity (MW)
Dependable Capacity (MW)
Remarks
Kariba
720
750
All units in Service
Hwange
300
780
Major Overhauls a Must
Fuel (Coal & Diesel) constraints
Small Thermals
150
Coal ABUNDANT BUT NO INVESTMENT
High Cost Relative to Tariffs
Total
1020
1680
>600 MW Shortfall 9

10. SANCTIONS MUST GO
‘ Until the President makes the certification described in sub-section(d), and except as may be required to meet basic human needs or for good governance, the Secretary of the Treasury shall instruct the United States Executive director to each international financial institution to oppose and vote against: (1) any extension by the respective institutions of any loan, credit, or guarantee to the Government of Zimbabwe: or (2) any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any international financial institution’
SANCTIONS? TARGETEED? IMPACT ON BUSINESS REAL – COMPANIES,ECONOMIC DEVELOPMENT, WORLD BANK, IFC ABSENCE

11. FACTS? TRUTH?POLITICS? FAILURE TO ENGAGE?
USA/EU Skepticism and Sanctions - 1
FACTS? TRUTH?POLITICS? FAILURE TO ENGAGE?
Conversations with EU,USA, Ambassadors, ADB, World Bank, IMF, PTA .
Zimbabwe Democracy & Economic recovery Act (2001) versus Bill (S.3722.IS) Zimbabwe sanctions Repeal Act 2010 ( acknowledges the burden of sanctions in Zimbabwe GNU)
EU Council resolution (EC) – 314/2004 CFSP – financial restrictions on Zimbabwe and travel ban on select government leaders
Sanctions UNILATERAL – no WTO rules
Can sanctions be justified post in a unity government You decide.
Is it fair when compared to other regions since 2009? ‘

12. Western Skepticism or EU US Sanctions - 2
FACTS? TRUTH?POLITICS? FAILURE TO ENGAGE?
ZIDERA prevents debt rescheduling cf post independence odious debt of US$1.5 billion
US/EU can influence Zimbabwe getting lines of credit
The West has not forgiven or forgotten land reform – heart of the issue
Targeted entities:
State constitute at least 40% of businesses
State utilities and enablers of growth largely depend on foreign loans for capex – power, railways
Zimbabwe needs to deal with ZIDERA /land reform. ‘

13. Opportunities in Mining Reloaded
Chrome ore export ban cries for investment to cause beneficiation of at least mt
Scope for new investors in platinum, coal and gold mining
Thermal and Hydro Power generation options
Nickel operation under care and maintained due to funding constraints .
Kind Solomon is open for business and CZI will help
New one stop shop allows speedy investments

14. ZIMBABWE FORECASTS % p.a. 2011 2012 9,3 7 6 13 10 GDP Growth
Inflation – end year 6
Interest Rates (USD) 13 10
Source: Hawkins 2010

15. ZIMBABWE SECTORAL GROWTH
% p.a.
2011
2012
Agriculture
25.0
15.0
Mining
45.0
55.0
Manufacturing
9.5
12.0
Distribution
8.0
10.0
Tourism
6.0
Source: CZI2011

16. Some Key areas of competitiveness in Zimbabwe
Clothing and textile industry
Agro-Processing
Chemicals & Tourism
Manufacturing - Food
Pharmaceuticals
Metals and Minerals
Technology
Wood and furniture

17. Opportunities
Zimbabwe to focus on priority industries to focus on. – incubation strategy, modernization, capital injection, technology transfer
The products must come from sectors where the country has competitive advantage and can therefore be pushed into the region – focus on quick fix e.g. in Argentina and Hungary [SADC&COMESA]
Consideration must also be given to tourism
Resource leveraging on minerals: coal, gold, platinum, diamonds
Value addition especially on cotton and tobacco which have recovered – Land reform cannot be seen as a disaster even by the most pessimistic critic

18. Opportunities continued
Government should come up with a comprehensive National Industrial Strategy
Use of the EPA benefits as this may yield increase and progress in market liberisation
Industry must innovate or die
Allowing more players and ensuring that market rules apply
Seek incubation period via derogation non WTO obligations

19. Opportunities Continued.
Foreign enterprises and other players that seek to partner local industries urgently needed
Endeavour to export value added products
Line of credit of US$2 billion or same value revolving fund urgently needed at rates of 10% per annum an a tenor of at least 1 year
Industries need to modernise
Need to dump high mark-up low productivity business models
Use Total Quality Measurement Strategies (TQM) and ISO standards to improve the quality of goods and services and sustainable environmental practices thereby increasing customer satisfaction.

20. Opportunities - continued
Institutional and structural reforms – stop fighting private sector, commercialise or privatise state enterprises immediately
Make the nation attractive to investment – Political stability
Policies that spawn new firms so as to keep ourselves at the top – e.g. micro-finance for value adding like in fruit drying
Boost Research and development through tax credits , lower corporate tax, Capital equipment credits and NO VAT FOR CAPEX.
Pace of work ….governments slow and on three speeds eg leveraging of minerals & resolution of sanctions

21. Opportunities continued
Assistance in form of incentives, tax holidays
Supporting of low interest rate loans which businesses can borrow
Providing affordable industrial finance which enables industry to recapitalize, retool and increase capacity utilisation
Going back to the social contract & a investor - friendly Labour Relations Act
Continuing to groom entrepreneurs – Government must privatise now airlines, phone, power, commercial investment to experience the Chinese “miracle”

22. CONCLUSION
Building blocks for policies must be market based principles:
Focus on incentives rather than punitive measures
Look East and Learn – Kenya case: Sino-Indian Persian triumvirate has upstaged UK 3 billion pound investment, Oversubscribed Bond Programme, Growth
Governments have the mandate to rule but they must ideally lead by consensus.

23. 'Behind me is infinite power; before me is endless possibility; around me is boundless opportunity. What I need is Smart Partners" - Adapted fromStellaStuart
THANK YOU 23