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Harare - Africa's richest man, Aliko Dangote, could not have timed his decision to invest in Zimbabwe better.
READ: Africa's richest man bets on Zim opportunities
While Zimbabwe has been ravaged by one crisis after another for the past 15 years, I believe there is no time like the present for someone who is seriously considering investing in the country. Given the current state of the nation, there is no doubt Zimbabwe will be negotiating from a point of weakness and will be desperate for any deal.
Two of the savviest negotiators around, Deepak Malhotra and Max Bazerman, in their book Negotiation Genius will tell you that when going into negotiations, you should never reveal that you are weak. Unfortunately for Zimbabwe, its shortcomings are well documented.
The country has a difficult operating environment characterised by deflationary pressures, a negative balance of payment, low foreign direct investment, declining aggregate demand, increased company closures and higher unemployment levels - to name but a few of its problems.
This means whatever talks the Zimbabwean government is having with Dangote’s people are not really negotiations, but more like asking for sympathy or favour.
Dangote can call the shots
The billionaire businessman’s five-member team led by Dangote Group chief strategist Abdu Mukhtar will have it easy when they get to the negotiating table. I think the negotiators will take any deal - even if it's a bad one - rather than walk away when they hit an obstacle. I am sure no one in government would want to be labelled as the reason Dangote ends up not investing in the country.
In contrast, Dangote is coming into these negotiations with nothing to lose. As much as he needs coal to power his cement plant in Zambia, I don’t think he is in a desperate situation as yet. The plant in Zambia is already in operation, meaning he has a source of power or coal for at least another couple of years.
We, however, cannot say the same about Zimbabwe. Given the state of the economy, can we wait another couple of years and risk losing investments to other countries? I don’t think we have that luxury, and that puts us in a much weaker position.
I think it will be very difficult for the Zimbabwean government to say “terms and conditions apply” to Dangote. From its current position of weakness, Zimbabwe simply does not have that leverage.
In her book The Brazen Careerist - The New Rules for Success, Penelope Trunk says if you can't outmuscle the other side in a negotiation, you may want to stop flexing your muscles and, instead, simply ask them to help you. If Zim’s negotiators try to be aggressive and rigid, it could be disastrous considering that they are the weaker party.
Does Zim have a power mindset?
The key thing the Zimbabwean government must bear in mind when going into the negotiations is a power mindset. But does Zimbabwe have the mindset to say no, even if Dangote makes unreasonable demands?
As much as Dangote is looking at investing in the resources sector which calls for a 51/49 ratio in favour of locals, I don’t think we have the leverage to push hard for our course without losing the deal. On paper, Dangote seem to have the greater bargaining power as I believe he is able to walk away from any deal if things do not go his way. But we can’t say the same for Zimbabwe.
One other problem is that the Zimbabwean government did not have time for systematic preparation and careful strategy formulation. While Dangote was working on his strategy and how he would approach the Zimbabwean government, authorities didn’t even have a clue that he was coming.
Speaking about his intentions, Dangote said the decision to invest has already been made, meaning the necessary groundwork has already been done. But one cannot say the same about the Zimbabwean government. Our investment laws and the processes involved have already been condemned and are in the process of being reviewed.
The question then becomes: which laws and processes are we going to use? In other words, Dangote will be investing on his own terms. But we all know what happens with such deals.
The Ziscosteel deal is one good example of a deal negotiated from a point of desperation. Despite being signed and sealed five years ago, the new company is yet to take off after government realised that many factors were not taken into consideration when the agreement was signed.
One of the Ziscosteel dealbreakers is a dispute between the ministry of mines and the ministry of industry (which negotiated the deal) over the ownership of iron ore reserves. I believe the protracted dispute over Ziscosteel has been a major deterrent to potential foreign investors.
As much as Dangote might have his way now, the question is: can he trust the Zimbabwean government to stick to whatever they are going to agree on?
Only time will tell.
* Malcom Sharara is Fin24’s correspondent in Zimbabwe. Views expressed are his own.
