Feature

Exclusive Interview with Morgan Tsvangirai

Zimbabwe's former opposition leader explains what it's like to share power with Robert Mugabe -- the man who (probably) tried to have him killed.

Imagine yourself working side by side each day with a man who -- for the last decade -- has repeatedly arrested you, charged you with treason, detained and beaten your friends, and may have plotted your assassination just a year earlier. You are prime minister and he is president, even though your party won elections to oust him from power last year. The fates of an entire country and 11 million people depend on your having a good working relationship. And now imagine that the country has multi-million-percent inflation, hundreds dying from cholera, and a pattern of political violence that has chased thousands out of the country in recent years.

Welcome to the life of Morgan Tsvangirai, prime minister of Zimbabwe and leader of the opposition Movement for Democratic Change (MDC). Since September, Tsvangirai has endured grueling negotiations to set up a power-sharing government with President Robert Mugabe and his party, ZANU-PF. Three months into its operation, the pace of progress is slow, Tsvangirai told Foreign Policy's Elizabeth Dickinson. Remaining disagreements over the appointment of ministers, the ongoing arrest of activists and journalists, and basic day to day operations have plagued the arrangement. Donors in the West have refused to send aid to the broke Zimbabwean government so long as Mugabe is still at the reins. Still, Tsvangirai is thinking big about how to get the country back on track. An economic plan will aim to get the country functioning again over the next 100 days -- tackling even the contentious issue of land redistribution. In short, Tsvangirai says, Ours is the transformative challenge: to transform old habits and introduce a new governance culture, and you know it's difficult in a coalition government.

Foreign Policy: How did it feel on day one, walking into the position of prime minister knowing all the challenges before you? What did it feel like?

Morgan Tsvangirai: It is obvious the level of economic degeneration that just hit us in the face when we went into government. There was a sense of euphoria, which was very short-lived because the decision to go in was influenced by a number of factors, one of which was that we could not be authors of chaos, and that if there was chaos in the country the outcome would be unpredictable; it would engulf us all. So, yes, there was a sense that we have made the right decision, but we didn't know what we were going into.

FP: You said yesterday that elements of ZANU-PF are holding up the progress of the unity government. Can you update us on the status of talks to resolve these remaining issues -- for example, the position of the Central Bank governor?

MT: The discussions amongst the principles are going very well; we certainly hope that tomorrow we'll be making an announcement on the outstanding issues. You must be conscious that this is a coalition government. There are sensitivities and emotions that need to be navigated and negotiated. One would be a bit overambitious to expect everything we're grappling with to be resolved within three months.

It's frustratingly slow, in our assessment, that we have gone this far without at least indicating how the outstanding issues will be resolved. But I'm glad to say that we have made progress. The issues that we have agreed upon -- and those we are still in disagreement about -- will be announced to the nation so that the nation is able to make an assessment as to if there has been progress or not.

FP: You have shown an incredible spirit of reconciliation -- saying on Friday, Robert Mugabe was part of the problem but he is also part of the solution, whether you like it or not. But are Zimbabweans ready for that kind of reconciliation?

MT: There is a sense of cautious optimism that this inclusive government will be a successful experiment because no one wants to go back to the November, December, January, situation. So therefore, when you present national union as one of the democratic challenges, people accept that there is need for national healing for progress. But of course, there has to be a process of that national healing, otherwise people will continue to [have] that frustration.

FP: President Robert Mugabe has a sinister reputation in the United States and elsewhere. But are there things that the West is failing to understand about Mugabe?

MT: I'm sure this perception is what has been built up over the years -- some of which is a reality. But one of the underlying things is that I am prepared to work with President Robert Mugabe -- not because he's right but because of the national interest: We would work with anybody who wants to push the national agenda forward. But instead of [the international community] taking a cue from us as to how to proceed, it would appear that people have made this judgment [not to help], and they have thrown out the baby with the bath water.

FP: How do you react to donors when they tell you that they can't give aid to Zimbabwe yet, until more democratic progress is made?

MT: My beef with all the international community and diplomats is that, look, those of us who are pushing the democratic reform agenda should be supported so that we can sustain this experiment.

I was saying to somebody this morning that it would appear that by raising the bar every time there is progress -- or every time there is an attempt [by the international community] to ignore the progress that has taken place because of one or two [outstanding] issues [unresolved in the coalitional government], you are invariably becoming a part of the [internal government] negotiations. And for the negotiating parties who are actually on the field, who are negotiating with ZANU-PF, you actually go to the extent of undermining the influence that we are trying to build among those skeptics [of international aid] inside the country.

FP: You've announced a new 100-day economic recovery plan. Can you tell us some of the things that will be happening as part of that plan?

MT: I'm sure that you know that we've just completed the first three months of this inclusive government, and the first phase was to try and consolidate the government, which I believe has now been achieved.

Now we go to the second phase in the next three months. It's a short-term program to try to intervene in various areas of our economy. And there are really five clusters: economic, social, infrastructure, rights, and security. We have done [this division] in order to build the priority programs in each ministry with the key results areas in target -- the milestones. So I would say that the next 100 days, the key priorities are to set the policy framework in various ministries; to ensure that we are able to rehabilitate some of the dilapidated infrastructure; and to ensure that the education and health delivery systems are on their feet. But above all, we need to mobilize the resources so that we can support these programs. So the 100-day plan is a test of the synergies within ministries -- across ministries -- to ensure that the whole government is working as a cohesive team.

FP: Where does land reform fit into this plan?

MT: In the 100 days, what we would expect from the Ministry of Land is first and foremost to do an assessment -- a country-wide assessment on the so-called land invasions [that occurred under Mugabe's previous government] -- if there are still any. The second part is to set up a land audit in terms of the global political agreement, a land audit that is meant to reveal whether the independent land commission is the basis to do proper land reform. We've got a plan on the land, and I think this is the only way that this issue will be finalized.

FP: In spite of your own resolve, is it difficult to motivate other members of the MDC in light of so many challenges?

MT: We have to keep focused. We know that from time to time, some of the old habits of violence will remain. But we don't lose focus on the need to create a democratic playing field so that when the new constitutional dispensation is created -- we can hold free and fair elections down the line. That's still the objective.

In other words, ours is the transformative challenge: to transform old habits and introduce a new governance culture, and you know it's difficult in a coalition government. But we know that within the transitional phase, it is important to unlock some of these mindsets that have taken us this far down. So how do I motivate our people? Our people know that we have not yet arrived as a full democratic Zimbabwe. But we are on the journey.

Feature

Seven Questions: Colin Melvin

One of the world's most influential investors says that changing behavior on Wall Street will take more than regulation.

The global financial crisis has wiped out billions in pension schemes and retirement savings. But Colin Melvin, CEO of Hermes Equity Ownership Services Ltd., is optimistic about the future of the $100 billion-plus under his advice. Melvin is part of an emerging class of investors who look to change, improve, and remold the companies they invest in -- boosting, they argue, the firms' value and competitiveness in the long run. The model has gained particular attention after the financial crisis brought to bear the short-term risk taking that had come to characterize Wall Street. Now, investors from New York to London are looking for new models, and Melvin's is one they've found. Foreign Policy's Elizabeth Dickinson sought Melvin's insight on investment strategy, his reaction to recent G-20 actions to remold the global financial architecture, and the future landscape of the financial industry.

Foreign Policy: Wall Street's management culture has been particularly demonized for its role in provoking the the global financial crisis. What's your take? What were the fundamental problems with the financial world, exemplified by Wall Street, that led to the present downturn?

Colin Melvin: I think there was a lack of accountability of quoted financial services companies -- public companies -- to their ultimate owners, the shareholders. Another factor at play is the culture within Wall Street and the city of London, which focuses on short-term matters and returns. You have a situation where the link between the company and the end owner is mediated by Wall Street. And Wall Street is incentivized to trade rather than to own the asset. [Blame for the crisis] isn't limited to the action or inaction of funds, but that's a big part of it.

FP: Your firm, Hermes, takes a longer term view of managing assets. How does that strategy differ from the typical Wall Street approach? What are the benefits?

CM: Hermes is owned by the British Telecom pension scheme, the country's largest. That gives us a much longer horizon since a pension fund's horizon tends to be 15 to 20 years or more. We also though understand that it's not possible to be a good long-term owner of a company simply to trade the shares.

Hermes's Equity Ownership Services doesn't actually make decision on buying and selling shares; we represent funds as owners of companies. My team decides whether to engage or disengage with companies. The kinds of discussions that we have with companies focus on the strategy in the longer term. We assess capital structure, we look at risk management -- particularly from a long-term perspective including social, environmental and ethical risks, and we look at governance, broadly defined as the quality of the board, the nominations process for the board, the way that directors are paid, incentives. We focus on those factors we believe are linked to companies' long-term profitability.

FP: You've had success this year when most other investors have taken a hit in the market. Do you attribute this to your different approach?

CM: We're attracting a huge amount of interest. Banks have failed so spectacularly, and those banks had owners -- they were you and me. It seems like somehow that ownership link has been broken, and we were unable to fix it. Now, large public funds are coming under pressure from governments to be better owners of companies. And that's leading people to our door.

FP: The criticism of an activist approach to investing in companies is that outsiders might miss the insights that managers of companies themselves have. In essence, outsiders might make changes that appear to them as appropriate, but might in fact be the opposite. What do you make of this critique?

CM: We don't seek to micromanage the companies; our goal is hold the management and the board to account for their performance. If there's no problem, if the company's doing well, they won't hear from us. It's just when there's a problem that we'll raise it.

Of course, it would be exceedingly disappointing if I knew more about the operations of a company than the board and the directors and senior management. However, we do additional research, and we commission people to help us understand companies from a long-term approach, and that's quite unusual. Most people involved in the financial-services industry look at the short-term financials. If you were a CEO of a large company in the United States, your experience of talking to Wall Street would be pretty disappointing. You'd be challenged about next quarter's earnings; you wouldn't be asked about those things you're thinking about day to day -- the people in the business, long-term strategy. Wall Street isn't interested in that. We are [interested], and we've assembled a team of people here who are able to challenge companies on those particular issues. So it's a question of business knowledge and understanding, which again is very unusual in the financial-services industry.

FP: What do you make of the response to the financial crisis -- particularly looking at the G-20 summit last month? What did they do right, and where did they fall short?

CM: The do right bit got me there. I think it's encouraging that people got together to consider solutions. The worrying bit is that the big idea appeared to be some sort of coordinated regulation. We won't solve this problem through regulation. Experience has shown that if you seek to prescribe behavior through regulation, financial markets will find a way around it. What we're talking about is behavior. It's culture. I don't think you can solve that by regulating. What we can do at a regulatory level -- and there was an optimistic note in the G-20 on this -- is that we can regulate to produce open, fair, and transparent markets.

FP: What are some of the short-term things that could or should be done to restart the markets?

CM: There are regulations in some markets that limit the extent to which shareholders can work together. In some cases, this is sensible, but for longer-term discussions, clearly it's in everyone's interests that the shareholders are able to work together to talk to companies. Otherwise, you get multiplicities of replicating, low-level conversations. Far better if they get together and share resources. That's better for the companies they're talking to as well, because the conversations are of a higher value.

Thinking a little more creatively, we might look to the definition of fiduciary duty. In many markets, particularly common law markets, there's a duty of trust, fiduciary trust, for example on the trustees of the pension fund to work to the benefit of the beneficiaries. So if you're a beneficiary of a pension scheme, there are people to whom your wealth is entrusted, and they have a duty to look after your interests. That duty is interpreted usually as adding value to the funds in the short term. Clearly, that's a problem. So why don't we look to this definition? Why doesn't the U.S. or the UK come out with some sort of statement: This is what we mean by [fiduciary duty]? A legal opinion would assist trustees in taking a longer term view of their role.

FP: Five, 10 years from now, what will the financial industry look like?

CM: We have a very important moment to implement this [investment model]. If we have another sustained bull run, then much of this will be forgotten and [London] and Wall Street will have a great time spending the assets of their clients. Perhaps that's a little strong, but you know what I mean.

Over the last 10 to 15 years, [London and Wall Street] have been able to overtrade because they make money from transactions -- the more transactions there are, the more money they make. I hope that will change, and that the clients of the investment industry and the end owners will understand and appreciate the self-interestedness of being better owners of the assets, and being more attentive clients. If companies are more accountable, they will perform better. And if funds are invested in a more sustainable way, that's good for all our wealth.

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This article reflects two corrections: We originally stated that Colin Melvin manages a fund of $100 billion. In fact, this is the amount under his advice. Nor does Colin Melvin classify his model as activist investing. We regret the error.