How to discourage investment
By Eric Bloch
A FEW weeks ago, the Minister for State Security and Land Reform, Didymus Mutasa, met with a large group of dispossessed farmers in Chiredzi.
meeting took place fairly soon after Zimbabwe had, very belatedly, acknowledged liability to various foreign nationals, in terms of Bilateral Investment Protection and Promotion Agreements (BIPPAs), for compensation in respect of farms expropriated by the State.
The farmers were seeking clarification as to government’s compensatory intents, and as to the extent, if at all, that any of them would have an opportunity to resume farming.
The many reports that emanated from those who attended the meeting were in accord that the minister was extremely belligerent.
Apparently he stated acrimoniously that “if it was up to me I would never have signed a single bilateral agreement because foreign investors just come and take Zimbabwe’s assets, and give Zimbabwe nothing in return”. He continued by advising the evicted farmers that, to all intents and purposes, they should “get your money and leave Zimbabwe”. (This conflicts with recent governmental statements that white farmers were welcome “as long as they regarded black farmers as equals”, stated only a month ago by President Mugabe when speaking in Matabeleland South, and that such farmers should apply for 99-year leases).
The minister’s statements of negative perceptions of foreign investment also conflict diametrically with the much governmentally lauded National Economic Development Priority Programme (NEDPP), and with the president’s greatly heralded “Look East” policy. A most pronounced element of NEDPP is the promotion, motivation and solicitation of foreign investment. Investment missions were despatched to China, South Korea, Russia, the Middle East, and elsewhere. Statements of joy in the state-controlled media have trumpeted forth of the growing interest in investing in Zimbabwe being displayed by leading Canadian mining houses, South African investors, and many others. Is the honourable Minister trying to undermine the NEDPP–driven investment drive? Surely not!
And his contention that foreign investors merely take Zimbabwe’s assets and give nothing in return, is devoid of even a “smithereen” of substance. Of course, any investor, foreign or domestic, wants to benefit from his investment. Why should he place his capital at risk, politically, economically, or otherwise, if he is not to realise something for doing so? To expect that of an investor would be naivety in the extreme. But to suggest that there is no quid pro quo between investor and Zimbabwe is even more naïve.
The foreign investors inject greatly needed foreign exchange and technology transfer to Zimbabwe, and very often expand Zimbabwe’s international markets. Their investment generates employment for Zimbabweans. That employment is of critical importance, for more than 80% of Zimbabwe’s employable population is without formal sector employment.
And the investment invariably stimulates much downstream benefit to the Zimbabwean economy. Many inputs of goods and services are sourced from within the economy. In numerous instances the new investment is strongly export-related, yielding vital inflows of foreign exchange. In other instances the new investment is import–substitutory, thereby reducing foreign exchange needs. The earnings of the employees of the investment venture are expended within the economy.
Those earnings, and the investment profits, attract taxation for the near-empty coffers of the fiscus. The extent of benefits to Zimbabwe of constructive foreign investment is vast, but the minister denies their existence, and does not welcome foreign investors. How can he justify a stance which is so at variance with the official policy of a government of which he is a senior member?
Of course, the minister is not alone is discouraging foreign investment. A major field for investment is the mining sector, but investor uncertainty as to investment security in that sector is immense. For several years government, in general, and the president and the Minister of Mines in particular, have made statements that government will enforce black economic empowerment within the mining industry. Few, if any, foreign investors are opposed to the principle of substantive indigenous ownership in mining. In fact, most welcome it. But they do want to know the basis thereof. Will the indigenous Zimbabwean participation be governmental, or private sector? Very few are enamoured by any prospect of the former, for they are conscious of the wide-ranging parastatal mismanagement that has long prevailed in Zimbabwe.
Similarly, will the co-investment by Zimbabweans be equitably funded by them, or is the foreign investor expected to provide all the capital, and then forfeit much of it?
Having witnessed the vehement opposition of government to payment of compensation for farm lands, and the tardiness and inadequacies of compensation for farm improvements and moveables, there is an inevitable fear that like inequities and injustices will apply to acquisition of equity in mining ventures under an indigenisation policy. And the investor wants to know whether the policy will be motivational and facilitational, or authoritarian and mandatory, over what period of time will compensation be forthcoming, and what security will be accorded the investor on that investment which he is permitted to retain.
In like manner, the investor also needs to know the extent that the operations of the investment entity will be subject to economic regulation, and the extent to which Zimbabwe’s presently grossly over-regulated economy will be deregulated. If an investor places his capital, his skills and his energies at risk, he wants to be the master of his investment’s destiny, instead of that destiny being subject to the whims and fancies of a government which has, for 26 years, demonstrated great volatility. Zimbabwe is dragging its feet in formalising its mining sector indigenisation policies, and needs urgently to enunciate an authoritative, constructive, investment-conducive, policy.
If Zimbabwe wants to discourage investment, and assure the continuing decline of its economy, it must continue to alienate the foreign investors, be castigating of those investors’ motives, be reluctant and delinquent in honouring BIPPAs, minimise investment security, and make statements such as that attributed to the minster at the Chiredzi farmers’ meeting.
If, on the other hand, it genuinely wants investment, instead of non-forthcoming Far Eastern largesse, it must do exactly the reverse of such measures, and convincingly demonstrate that foreign investment is welcome.