PLANS by Zimbabwean business to engage the European Union directly for investment have been welcomed, but political will and government’s unequivocal support are key to the overtures bearing fruit.
The EU has softened its stance on Zimbabwe and lifted sanctions on state institutions while allowing the country’s Marange diamonds to trade freely in European countries.
It also agreed to host a nine-member delegation of Zimbabwean captains of industry who have taken it upon themselves to help rescue the economy which is teetering on the brink after the July 31 elections which saw President Robert Mugabe and his Zanu PF party winning a two-thirds majority in parliament amid opposition allegations of rigging.
The delegation — comprising former Confederation of Zimbabwe Industries (CZI) president and Nestle Zimbabwe boss Kumbirai Katsande, CZI president Charles Msipa, Econet boss Douglas Mboweni, Chamber of Mines president and Zimplats CEO Alex Mhembere, Bankers’ Association of Zimbabwe president and Barclays Bank (Zimbabwe) managing director George Guvamatanga, Agribank CEO Somukosi Malaba, Mimosa executive chairperson and former Chamber of Mines president Winston Chitando, African Sun CEO Shingi Munyeza and indigenous businessman Shingi Mutasa — travels to Brussels, headquarters of the EU, from January 26 to 31.
EU ambassador to Zimbabwe Aldo Dell’Arricia is facilitating business meetings between the private sector and EU investors so they can invest in all sectors of the economy, apparently signifying a shift in position by the EU, which appears to now prefer dealing directly with business instead of government.
Independent economist John Robertson said the EU investors’ direct interaction with business would be ideal in other countries, but not for Zimbabwe given that areas of concern are to do with policy and governance.
“I think there is not much point talking to ZNCC (Zimbabwe National Chamber of Commerce) and CZI without government representation because they are not policymakers,” Robertson said.
“They can talk to people, but they can’t promise much because when people come to get their licences and approvals to do business, it remains difficult because they have to deal with government.”
Robertson said corruption was also rife in government, hence the need for a political commitment to deal with graft.
“It remains difficult to bring finality to business negotiations because some people in government will simply ask when they will get their share for signing your agreement,” Robertson said.
The business delegation must speak about indigenisation, a general lack of capital and that they are unable to get assistance from banks locally as well as the “disabled” banking system, he said, adding that the indigenisation policy and the investment environment in general, which is characterised by policy inconsistency, will deter potential investors from injecting the much-needed funding into the country’s coffers.
Government has about 300 different proposals under its new economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) that shows its intent to become more involved in every step of business, while investors prefer less interference as it speeds up negotiations, he said.
“Too much bureaucracy delays business and business does not want to keep negotiating and renegotiating,” Robertson said.
“If business engages directly with European investors, there is need for interaction with government to facilitate official agreements with the state. If you go to some countries, you can engage a chamber of commerce and sign documents which will be approved for setting up a business in a week or even a day, but it takes longer in Zimbabwe despite the fact that we already have the Zimbabwe Investment Authority’s one-stop shop.”
Zimbabwe’s ranking in the World Bank Doing Business Survey plunged two places to 170 out of 189 countries, according to the World Bank’s Doing Business 2014 Report released in November last year.
In terms of the key indicators and benchmarks, Zimbabwe’s situation in terms of paying taxes, registering property, enforcing contracts and getting credit worsened in the period under review with the country ranking 142, 93, 118 and 109 respectively.
The country slipped by two positions in terms of the ease of starting a business to 150th from 148th last year and by one place in terms of protecting investors to 128th.
In terms of registering a company, Zimbabwe has nine procedures compared to the average eight in sub-Saharan Africa and five in high-income economies despite formation of a one-stop shop to speed up processing of business deals with foreign partners.
The World Bank has said it takes an average 90 days to register a company in Zimbabwe compared to 29,7 days in sub-Saharan Africa and 11,1 in high-income economies.
Bulawayo-based economist Eric Bloch said while EU investors are looking at long-term potential and have a more positive stance towards Zimbabwe, the visiting business delegation will have indigenisation as its major obstacle to attract investment.
“They believe there will be some changes in terms of our governance in the long-term and that is a merit for the delegation,” Bloch said.
“While I don’t believe the delegation is going to generate large amounts of funds, it may well bring investment agreements and lines of credit.”
Finance minister Patrick Chinamasa is on record saying Zimbabwe required huge amounts of money in foreign direct investment to drive the economic turnaround and subsequent growth.
This followed a presentation by local senior World Bank economist Nadia Piffaretti who said Zimbabwe requires more than US$33 billion for infrastructure projects over the next 20 years to turn around its economic fortunes.