Macro Analysis /

ZIMBABWE: Constitutional Court rules in favour of incumbent Mnangagwa

    Christopher Dielmann CFA
    Christopher Dielmann CFA

    Director, Macroeconomic & Sovereign Research

    Tellimer Research
    24 August 2018
    Published byTellimer Research

    Our new research partners in Zimbabwe, IH securities, assess the political landscape in light of the country’s highest court clearing Emerson Mnangagwa’s path to the presidency. 

    The MDC Alliance’s official court challenge to the Presidential election result that installed Mnangagwa (of the ZANU-PF) as Zimbabwe’s second President since independence in 1980 came to an end this afternoon, with the Constitutional Court ruling that the election result stands.

    The Constitutional Court is the final court of appeals for all matters relating to the Constitution of Zimbabwe and its decision is binding on all other courts in Zimbabwe, which means there are no avenues of appeal.

    Chief Justice Malaba, who heads the panel of judges, dismissed the application with costs, citing that the applicant failed to submit clear and substantiated evidence that demonstrated that irregularities raised by the applicant materially affected the electoral outcome.

    Inauguration day could be as early as this Sunday (26 August), bringing to an end a polarising three-week wait for resolution in the country.

    What does the new President immediately face?  

    Although ZANU-PF won the General Assembly with a +68% majority, Mnangagwa recorded a narrower win in the presidential contest, taking only 50.7% of the vote, suggesting mixed support for him among ZANU-PF supporters and residual factional tensions. He will need to swiftly consolidate control and persuade key opposing elements to coalesce around his leadership, while avoiding a hawkish inclination to seek immediate retribution.

    Given the potential for a negative MDC response to the ruling (which would manifest itself in urban areas – the MDC support base), Mnangagwa will need to decide whether to use a ‘firm hand’ to deal with any violent responses, focusing on the fact that the highest court has legitimised his victory or to make ‘moderate’ overtures to MDC leader Nelson Chamisa to secure a softer landing

    Foreign sentiment has gone from positive to mixed and, in some quarters, negative. Given that Zimbabwe is of limited strategic value (no oil, no refugees, etc.) to key voices in multilateral institutions (the US, UK and EU), the government will have to take the initiative to immediately implement key and visible reforms while actively lobbying to restore diplomatic bridges. We do not believe that these doors are closed.

    Key for these reforms will be the composition of the new cabinet, which is due to be announced shortly; it is imperative that Mnangagwa balances the need to reward party stalwarts with a healthy injection of new and younger technocrats in high-profile positions. One post to watch will be the minister of finance –previous occupant Chinamasa lost his parliamentary seat and is likely to be replaced.

    On the economic front, the country is facing a worsening liquidity position. Without any immediate support likely to come from the multilaterals in the short term, we expect FX liquidity to remain tight and parallel market premiums to remain high. Investors are likely to hide in dollar hedge assets.

    We suspect the government will turn to all-weather ally China for support, but it is hard to tell what form that support will take. The downside risk here is the temptation to ‘print’ RTGS balances to fund ‘gaps’ – we hope that the new Minister of Finance will be a strong proponent for fiscal discipline. 

    It is our view that, despite a turbulent past couple of weeks, the platform for this administration to restore much-needed good will still exists. The Constitutional Court ruling does legitimise the Mnangagwa government and it is still important to highlight that the 2018 electoral process was easily the most peaceful and organised since 2002. It will, however, be critical to get the endorsement, even if mild and with some reservations, of the EU Observer Mission (the full report is yet to come).

    Mnangagwa will have to quickly revert to the economic blueprint he has been implementing since November 2017, which has generally been well received. However, in our opinion, Zimbabwe’s economy needs decisiveness in key areas, especially fiscal discipline and corruption, now that he has secured a five-year term.

    It is also important to remember that, for the first time in a long while, there is genuine output growth in the country at the moment, with primary exports gold and tobacco this year surpassing the 1999 volume peaks.