"You can only temper justice if peace is the dividend," Habib said at the South African Liaison Office (SALO) dialogue on "South Africa's relations with Zimbabwe" at the University of Johannesburg, where he was a keynote speaker.
He was speaking on reflections for a sustainable reconstruction in Zimbabwe.
"There's a level of pragmatism...but can only be legitimate if the trade offered is peace," Habib told a room full of academics, human rights organisation members and some ANC Youth League members.
He said the fundamental responsibility of a political leader was the "right to life of your citizens", adding that what Zimbabwe needed to do was stay away from issues of economic justice.
"How do you get an exit of Robert Mugabe?" he said, reiterating that the trade-off for justice had to be peace.
"Two decades after the dawn of independence ... the logic is 'make the deal'...then the very people who make the deal, manipulate the issue of justice and rights to stay in power.
"Domestic dominance must become the main departure of Zimbabwe's reconstruction programme."
Fair powerful lobby
Habib said the State's solutions on their own were unlikely to be feasible and that what was needed was the flowing of the market.
He said that there must be a mix between the market and the State and that "there's a fair powerful lobby particularly in South Africa that the State must be left out of the market and that that is still very dangerous."
Habib said that concerning Zimbabwe there was a belief that aid was "bad" and that what you needed to replace aid with was trade.
What the country needed for reconstruction was aid and trade together.
He cited examples in Western Europe and Asia after the last World War.
In Western Europe, the Marshall Aid Plan was used in the redevelopment of countries; and that the US had injected into Japan $500m; in Korea $13bn and in Taiwan $5.6bn between the years 1950 and 1970.
"In all those instances trade was as crucial as aid...the lesson for Zimbabwe is that a mix of aid and trade is required for the country to get out of its malaise."
Democracy was needed for economic growth and as well as collective mobilisation of citizens.
Autocrat with guns
South Africa's policy of Zimbabwe had zig-zagged and that the problem was that SADC was divided.
"It's a mess,' he said. "They seriously underestimated Mugabe...he's an autocrat but he's an autocrat with guns."
Regarding the MDC, it should not be assumed development would happen "because your man in the MDC got the job".
"Development does not happen because of good guys and bad guys."
Some organisations present at the dialogue were the Institute for Security Studies, the SA Students Congress, the Open Society Initiative for Southern Africa and the African Public Policy and Research Institute.