Zimbabwe’s UAE Venture: A Path to Economic Salvation Despite Western Isolation

For six years, Zimbabwean President Emmerson Mnangagwa has actively sought to strengthen ties with the United Arab Emirates, breathing new life into a nation that has faced Western isolation for the past 25 years and struggles to meet its loan obligations to China.

The affluent Gulf nation has surpassed China to become Zimbabwe’s largest export partner, investing $1.4 billion in a range of sectors, from gold trading to real estate, since 2022. These initiatives are part of a broader strategy by the UAE to enhance its influence across Africa, consistently positioning itself as a leading source of foreign direct investment on the continent.

“The UAE has rapidly transitioned from being relatively unknown in commerce to becoming Zimbabwe’s primary trading ally,” remarked Eldred Masunungure, a political science professor at the University of Zimbabwe.

In Mount Hampden, located 11 miles from Harare, Shaji Ul Mulk, a businessman from Dubai and owner of Mulk International, is spearheading the development of a flagship “cyber city” targeting affluent individuals, aiming to revitalize the dilapidated capital. Additionally, the Dubai Gold & Commodities Exchange has signed an agreement to create a gold market, while miner Bluefin Gold Group plans to establish operations in the nation.

The UAE is also consistently ranked among Zimbabwe’s top five sources for foreign direct investment, as reported by the Zimbabwe Investment and Development Agency, and it shows no signs of slowing.

A UAE official, who requested anonymity, stated that the Gulf state seeks to uphold and expand its collaboration with Zimbabwe in alignment with its broader foreign policy aims.

However, skepticism is advised due to the precarious state of Zimbabwe’s economy. The nation’s debt has surged to $21 billion since a default in 1999, and its sixth attempt at establishing a sustainable local currency in 16 years has struggled just months following its introduction. The economy is predominantly informal, afflicted by relentless high inflation, which hinders the growth of larger businesses.

Petrodollars

With China reducing its loan offerings, Europe scaling back its presence, and the US focusing more on domestic issues, Gulf states are increasingly channeling their petrodollars to enhance their influence in Africa.

The UAE has committed $110 billion across Africa in various sectors like trade, investment, renewable energy, logistics, food security, and infrastructure, as stated by its government.

According to Jim Krane, a fellow at Rice University’s Baker Institute for Public Policy in Houston, these strategic investments are pursued with the expectation of significant returns. Firms linked to the state are targeting countries where they can further the UAE’s strategic interests and are often willing to overlook certain risks that have deterred others from these emerging markets.

“While there are diplomatic incentives that extend beyond mere profitability, financial gains are still anticipated,” Krane added.

Last year, the Abu Dhabi wealth fund ADQ announced a $35 billion investment in Egypt, primarily aimed at developing prime land along the Mediterranean coast, which helped the country navigate its most severe foreign-exchange crisis in decades.

The UAE’s choice to invest in Zimbabwe came following Mnangagwa’s 2019 visit, part of a wider initiative to attract investments into an economy that was collapsing and excluded from capital markets due to sanctions, a debt default, and years of mismanagement under Robert Mugabe.

The UAE has shown particular interest in Zimbabwe’s gold sector, which has emerged as a “bright spot” in the economy, according to Lyle Begbie, an economist at Oxford Economics, with output reaching a record 36 tons last year.

Senior officials in Mnangagwa’s administration noted in 2019 that connections to the UAE offered Zimbabwe “options for survival,” a sentiment echoed by Hasnain Malik, an emerging market strategist at Tellimer in Dubai, who emphasizes that such investments are not yet sufficient to build the foreign reserves necessary to sustain a stable currency.

“Addressing sovereign debt arrears, establishing a credible fiscal path, unlocking multilateral finance and foreign direct investment, and ultimately allowing a more flexible currency float are essential for Zimbabwe’s economic solution,” Malik stated.

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