AN acute economic crisis in the country was scaring away foreign investors, a Zimbabwe Investment Centre (ZIC) executive said this week, pointing out that projects approved by the quasi-government institution and offshore enquiries for investments had signi
ficantly declined since 1999.
Speaking to a parliamentary committee responsible for investment in Zimbabwe, the ZIC acting executive director, Richard Mbaiwa, said the prevailing economic situation characterised by high inflation, foreign currency shortages, high interest rates, inconsistent fuel supplies and constant power cuts was scaring away investors.
“The current economic situation in does not give them confidence to invest in Zimbabwe,” Mbaiwa said.
He said investors felt that products produced under present economic conditions would not compete favourably on the international market.
“Not only have projects gone down, but the enquiries for opportunities for investment have also gone down. The investment status mirrors the current economic situation in Zimbabwe,” said Mbaiwa.
Economic consultant, John Robertson, told businessdigest that Zimbabwe was once a vibrant and diversified economy, bearing the hope for Africa’s future in the late 1980s and early 90s.
Today, it is a country in deep crisis and the signs of collapse are abundant.
“Political troubles and the abandonment of sensible economic policy have scared away foreign investment, closed off aid, and chased much of the talented workforce away,” Robertson said.
He said the economy had contracted in real terms over the past six years, with inflation currently at 913,6% for March.
Mbaiwa said the constant change of economic polices over the past seven years, which in most cases was a reaction to the situation, was not convincing to potential foreign investors.
“Investors are sensitive to proposals by government, for example the latest in the mining sector. They would be eager to know the way forward and how secure their investment would be,” Mbaiwa said.
“The longer such proposals take to be finalised, the more investors’ patience runs out. In the end they would opt for other countries,” Mbaiwa said.
Mines minister Amos Midzi in March announced that government intended to amend mining laws to indigenise 51% of all foreign-owned companies.
Midzi said the amendment to the mining laws would give the government 51% in mining companies, including 25% on a non-contributory basis upon promulgation.
The government would acquire the 25% shares without paying for them.
The ZIC approved a record number of projects in 1998, just before the crisis. The centre approved 460 projects valued at a record US$1,7 billion.
The year 1999 was the turning point in the number of foreign investors, with 235 projects recorded.
A total of 150 projects valued at US$50 million were approved in 2000.
In 2001, 85 projects were approved, with the same number of projects being approved the following year.
From 2003 to 2005, a total number of 76, 87 and 74 projects were approved respectively.