NEWLY-appointed Economic Planning and Investment minister Tapiwa Mashakada has hit the ground running, promising new investor-friendly policies and regulations that will unlock opportunities for this once pariah country.
Mashakada, who entered government for the first time as a cabinet minister last month, said his ministry was proposing an Investment Promotion and Protection Act that would take into account concerns raised by stakeholders.
He said a National Investment Policy would address problems that have affected the 16-month-old coalition government’s bid to woo investment.
The government desperately needs foreign money to rebuild an economy that critics say was shattered by a decade of international isolation, plunder of national resources and economic mismanagement.
“There are three imperatives,” Mashakada said. “Firstly, we have to establish a one-stop shop for investors — Zimbabwe’s gateway for investors. Secondly, we have to come up with legislative reforms around investment — an investment regulation. And thirdly, we should come up with investment road shows that showcase our investment opportunities.”
Investment analysts, however, warned this week that Mashakada’s planned blueprint could fall flat because wider political and economic conditions were likely to remain hostile to foreign investment due to coalition government partners’ diverging objectives.
Political and economic uncertainty, policy inconsistencies and an inhospitable regulatory environment are some of the obstacles Mashakada will have to overcome, the analysts say.
Fear of expropriation, heightened by the vague implementation of the indigenisation law and the country’s record in shredding property rights will make Mashakada’s bid to successfully sell an investment blueprint to a sceptical world a Herculean task, analysts told the Zimbabwe Independent this week.
While opportunities in Zimbabwe are abundant in agriculture, mining, tourism and manufacturing, investors fear sinking their money in unstable economies such as Zimbabwe, and often adopt a wait-and see attitude.
A Harare-based economic and accounting consultant, Sonny Mabheju cited poor infrastructure, corruption and weak governance structures as some of the hindrances to Zimbabwe’s investment drive.
“We need comprehensive as opposed to selective policy reforms if we are to attract investment as a country,” said Mabheju
Lance Mambondiani, an analyst with Coronation Investments, a UK-registered international financial advisory services firm, said the country needed an investment policy that guaranteed present and future investors’ interests and safety.
“In generic terms, investors are normally worried about investment promotion (bilaterally and multilaterally), and expropriation. They also get concerned about incentives and issues relating to flexibility in licensing and registration, among a host of other best practices,” said Mambondiani, whose firm focuses on investments in Zimbabwe, South Africa and Botswana.
Economic commentator John Robertson said the country’s perception as a lawless society was a major stumbling bloc, overshadowing some good policies that could have enhanced investment.
He said most investors were concerned about the Indigenisation and Economic Empowerment Act which did not guarantee safety for foreign investment. The indigenisation Act compels all firms with a net capitalisation of at least US$500 000 to dispose of a majority shareholding to locals.
“The extent of the Zimbabwe government’s obsessive preoccupation with politics totally prohibits sensible discussion on its economic needs. Of late this has become very much more obvious with the proposed Indigenisation and Economic Empowerment regulations,” said Robertson.
He said recent actions such as invasions of farms protected by bilateral trade agreements could be taken as evidence that some government officials were still intent on using political muscle to strip the assets of private players.
“Their approach seems to be that, as they have the authority to pass Acts of Parliament that formalise their claims to these powers, they have every right to use this authority to re-arrange the economic landscape to suit their needs,” said Robertson. “They obviously feel that acquiring productive assets that way is much easier than working for them, but more to the point, they feel they are properly responding to their conviction that they are in power to exercise power, not to share power with markets,” he said.
Political risk remains one of the major deterrent factors to foreign investors interested in buying stakes in local companies looking for possible suitors.
Faced with liquidity problems and low productive capacity, local companies have been looking for salvation beyond the country’s borders to improve capacity. However, several such negotiations have stalled because of uncertainty.
Three of the most high profile deals which surfaced last year but failed to conclude include the 167 million South African rand worth of stake that South Africa’s Shoprite wanted in OK, the proposed sale of Ariston by Delta and the upping of investment levels in TM Supermarkets by Pick n Pay.
Economist David Mupamhadzi said factors which have negatively affected the ability of the country to attract investment have been high country risk, largely associated with an unstable political environment, lack of property rights, and rule of law.
Economist Brains Muchemwa said the successive downgrading of the country-risk status since 2002 by credit rating agencies and the subsequent withdrawal of IMF and World-Bank funding programmes upheld Zimbabwe’s grade as a poor investment destination.
“The situation was not made easier by the free-fall of the exchange rate, rigid price and exchange controls, policy inconsistencies and hyper-inflation,” he said.
Muchemwa said Zimbabwe should not lure foreign investors “blindly just for the sake of it”, otherwise all the valuable assets would be snapped up by foreigners without material benefits accruing to the country.
“Zimbabweans will need to have reasonable say in some strategic sectors and the policy has to be specific about maximum allowable shareholding in certain industries, taxes to be levied, minimum and maximum investment thresholds,” said Muchemwa.