Eric Bloch: There Won’t be FDI Until…

OVER the past half year there has been a progressive growth in interest being demonstrated by the international business community in the immense investment prospects existing in Zimbabwe.  Prospects of Foreign Direct Investment (FDI) have been evidenced to an increasing degree ever since the “inclusive government” came into being. 


Notwithstanding the global economic recession, significant expressions of investment interest have been demonstrated by many investment houses, financiers and business houses in South Africa, Canada, USA and Australia, divers countries in the European Union, in the Middle East (and particularly Saudi Arabia and Dubai), and in the Far East (including China, India and Malaysia).  However, despite the magnitude of interest displayed, the extent of actual investment is, as yet, relatively minimal, and falls far short of the FDI which Zimbabwe desperately needs as the principal catalyst of a comprehensive, and very greatly needed, economic recovery.
The Zimbabwean potential for FDI is extraordinarily great.  There is a vast wealth of unexploited valuable minerals beneath Zimbabwean soil, ranging from gold to platinum, nickel to chrome, diamonds, coal and methane gas to tantalite, and much else.  The country has a near unique array of tourism attractions and resources, including wildlife to an extent exceptional in Africa (notwithstanding that of Kenya and some other highly wildlife-endowed countries). Zimbabwe’s resources include the elephant, rhino, lion, leopard, cheetah, giraffe, hippopotami, crocodile, innumerable different antelope, buffalo, diverse bird life, and much, much else).  Tourism attractions and resources include the incomparable splendour of Victoria Falls and the Zambezi Valley, the enthralling grandeur of Matopos Hills, the spectacular sights, pleasures and sunsets of Lake Kariba, the mystic of Great Zimbabwe, Khami Ruins and other astounding historical sites, the escapism to the beauty of Nyanga and Chimanimani, and many more.
Innumerable other investment opportunities exist.  The manufacturing sector has an immeasurably great growth potential.  Not only is Zimbabwe geographically placed to be a key supplier to a regional populace of over 420 million, but it already has a substantial established industrial base, ranging from engineering to furniture manufacture, textiles and clothing, pharmaceuticals and foodstuffs, agricultural inputs and extensive other industrial operations.  It also has a very large, sadly mainly unemployed labour force capable of quality service, and it has many established markets, albeit contracted by the global economic recession and by constrained domestic consumer demand.  However, the industrial sector is grievously under-capitalised, and has suffered a considerable “brain drain” of technological skills.  These two constraints create a moment of opportunity for FDI.
Other economic sectors also have much opportunity to offer to the international investor, and particularly so in the spheres of information technology, professional services, commerce and finance.  The investment opportunities range from equity participation in existing enterprises to the initiation of new ventures, be it in collaboration with domestic investors, or as FDI-based operations.  There are also indications of investment opportunities in Public Private-sector Partnerships, as government increasingly recognises the need for total or partial privatisation of parastatals, if their viability and service-provision is to be restored.
Government has outspokenly voiced its desire for FDI, be it in numerous public statements by Prime Minister Morgan Tsvangirai and Deputy Prime Minister Arthur Mutambara, by the Minister of Economic Planning and Development Elton Mangoma, by the Minister of Mines Obert Mpofu, the Governor of the Reserve Bank, Gideon Gono and others in high office.  Foremost amongst those recognising that FDI is a prerequisite of a substantial economic recovery is Minister of Finance, Tendai Biti.  He made this clear in his 2009 Budget review, and again in his 2009 mid-year Budget review in July, and has also done so on many other occasions speaking in Zimbabwe and abroad.
However, very forthrightly, and with commendable frankness and honesty (both unusual characteristics in a politician) he has openly acknowledged that there are still some economic environmental limitations of great magnitude which are hindering the conversion of the evident investor interest into actual investment.  Addressing a gathering of about 100 business executives in Bulawayo (members of CZI, ZNCC and ABUZ) he unreservedly acknowledged not only the need for substantial FDI if a complete economic recovery is to be achieved, but also that despite extensive FDI expressions of interest there is a grievous lack of conversion of that interest into reality.  With equally great candour, he voiced the indisputable contention that this is due to the absence of genuine law and order maintenance in Zimbabwe.  The existence of law and order is an absolute prerequisite for investor confidence, and despite protestations of some in the political hierarchy (and the presidium in particular), and of the supposed guardians of law and order, that it exists, that is blatantly contrary to the facts.
The harsh reality is that farm invasions are continuing unimpeded, and without any attempts to contain them.  In all too many instances the criminality of those invasions is intensified by recourse to pronounced violence, expropriation of private property and contemptuous disregard for property and human rights.  
Concurrently, many are subjected to prolonged incarceration in prisons without being brought to trial, being regarded as guilty before proven innocent, in contrast to the constitutional prescription that individuals are innocent until proven guilty.  (This is highlighted, to cite but one of very many examples, by the fact that more than six months after the coming into being of the inclusive government, Roy Bennett has still not been sworn in as Deputy Minister of Agriculture).  
Moreover, there is a spate of prosecution of parliamentarians, without exception being members of the two MDC factions, whilst all in the previously ruling party appear to be immune to such prosecutions.  Until government vigorously brings to a total halt the farm invasions, and achieves a general restoration of genuine law and order, an investment-conducive environment will not exist.  And, until it does exist, a comprehensive economic recovery cannot be achieved, despite the commendable progress in recent months.  And, until it is achieved, continuing intensive poverty and suffering will remain the lot of the majority of Zimbabweans.
Minister Biti also stated that an essential element of attaining meaningful FDI is the very belated execution of the long-proposed Bilateral Investment Promotion and Protection Agreement (Bippa) with South Africa.  In that too he was correct, but nevertheless its execution will be a shallow façade unless Zimbabwe demonstrates an unequivocal intent to adhere to such agreement.  
To provide such assurance convincingly, Zimbabwe has to demonstrate genuine intent to honour the many Bippas to which it has already been party. It has to acknowledge, without reservation, its considerable liabilities for farm expropriations (without speciously seeking to impose liability upon Britain), for vandalisation and theft of farm equipment and inputs, and for loss of income of displaced farmers. It has to commit, convincingly, to the ongoing security of all FDI, and particularly that allegedly protected by Bippas.  Unless it does so, the execution of further Bippas will be but a meaningless sham, and FDI will still not happen.

 

BY ERIC BLOCH