ZIMBABWE’S foreign investment policy is riddled with bureaucracy and corruption which makes it difficult for prospective investors to obtain licences unless they kn
ow some “higher-up” in government, the Business Monitor International (BMI) has said.
In its latest report titled, The Zimbabwe Business Forecast Report, Q3 2005, the London-based BMI said malfeasance was rampant in government and those connected to it.
“Also, it can be very difficult to obtain approvals without bringing well- connected locals into the ownership structure of a project,” BMI said.
The BMI said although Zimbabwe claims to be an investor-friendly country, the situation on the ground was very different, with a plethora of laws that make investment difficult.
The group blamed the political crisis for the problems that the country is facing, pointing out that the ruling party had worsened the situation.
“Clearly, the political situation is at, or near, the top of that list, not least because of the possibility that international trade sanctions might be imposed on the regime at some stage,” the BMI said.
“International studies have concluded that the outlook for the domestic market is often the most important factor multinationals consider when deciding where to invest, and clearly in that respect Zimbabwe, at least for the moment, fares very poorly,” the report noted.
This week press reports indicated the Ministry of Mines, headed by Amos Midzi, was considering inviting another local consortium to take half of the 15% empowerment stake in Zimplats.
The BMI said the trade and investment environment in the country was one of the most challenging in the world, since there are problems ranging from corruption, scarce and expensive financing, and government interference and lack of property rights.
The report painted a bleak picture of Zimbabwe’s economy, saying it seems there was no solution in sight. “We expect no overall improvement as long as political instability persists,” the BMI said.
Over the past six years, foreign direct investment has declined sharply.During the same time, the country’s economy has experienced massive de-industrialisation while the agricultural sector is in chaos.
Many skilled workers and professionals have emigrated while HIV and Aids are wreaking havoc on the country’s labour force.
Zimbabwe needs a major reconstruction programme in agriculture, industry and lately the housing sector following an ill-thought-out clean-up project that left thousands of people homeless.
However, the long drawn political impasse has made business planning virtually impossible.
The BMI said although the country had an investment centre, a body that was supposed to smooth the path of foreign investors, it has virtually ceased operations.
“And while official policy claims to welcome FDI, the operational burdens and financial costs imposed by the current foreign exchange regime act as a major disincentive, as do exchange controls on capital flows,” BMI said.
“While dividend remittances are allowed freely in theory at least, an overseas investor wishing to repatriate capital can only do so through a 20-year government bond denominated in local currency and with an annual coupon of only 4% — that does not even start amortising the capital until year 11.”
The report said taking into account inflation, currency depreciation and time value of money, the asset represented by the bond was worthless.
“It seems that it is possible to circumvent these problems, but only by engaging in practices contrary to the Organisation for Economic Co-operation and Development international code of practice for foreign investors,” it concluded.