Zimbabwe change could attract investors to region

By Phumza Macanda - Analysis

JOHANNESBURG (Reuters) - A change in Zimbabwe's political leadership could spur economic integration in southern Africa, helping the region attract vital investment.

With President Robert Mugabe's ZANU-PF party losing control of parliament for the first time and the veteran leader facing tough competition for the presidency, there are hopes Zimbabwe may start to recover from years of economic misery.

Zimbabwe -- which once boasted strong agricultural and manufacturing sectors -- has slowly descended into economic chaos in the past decade, weighing on regional development.

"This turn-around in Zimbabwe means we'll see positive economic growth this year if Mugabe does not stay on," said Chris Hart, economist at Investment Solutions in Johannesburg.

Shares in companies that have some exposure in Zimbabwe climbed this week on South Africa's stock market on news that the opposition was making inroads, increasing the possibility of new leadership and economic transformation.

South Africa's beleaguered rand currency also benefited, ending the week about 4 percent firmer, having been as much 5 percent higher at one point.

"From a sentiment point of view, we should not underestimate the impact of that crisis," said Roelof Horne, portfolio manager at Investec. "Zimbabwe has been for a long time a negative influence on the overall perception of the region."

Now that there are signs of a possible change, the fourteen-nation Southern African Development Community (SADC) formed in 1980 might be able to move forward with regional integration, which would attract investors.

"One of the key obstacles to integration has been the economics of Zimbabwe," said Kevin Lings, economist at Stanlib.

"You could not get Zimbabwe to move forward in terms of inflation, budget deficit, current account balance, while other countries have made progress."

ROADS AND RAIL LINKS

An end to Zimbabwe's crisis could open the way for SADC to implement its infrastructure agenda -- linking member countries with road and rail networks.

Other SADC key members include Angola, Malawi, Mozambique, Tanzania and Zambia.

"The more you can link the region in terms of trade opportunities the more you attract foreign investment because it would be easy to move goods between different countries," he said, adding that this could lift economic growth in countries above the average 6 percent, easing dependence on commodities.

While the economic turn-around could take years, analysts said there could be immediate social benefits if President Robert Mugabe steps down after 28 years in power.