New FDI figures a warning signal

THE latest United Nations Conference on Trade and Development World Investment Report 2015 released this week shows Zimbabwe remains hostile to foreign direct investment (FDI) as it persists with damaging policies and unworkable programmes which are fuelling an unfriendly business climate.

Compared to its neighbours, Zimbabwe got a paltry US$545 million in FDI last year while Mozambique received US$4,9 billion, nearly nine times more, pacesetter South Africa US$5,7 billion and Zambia US$2,4 billion. Southern Africa received US$10,8 billion of FDI in 2014, down 2,4% from 2013. While South Africa remained the country that receives the most foreign investment in the region as well as on the continent that got US$54 billion, Mozambique — the recipient of the third largest amount of FDI in Africa — got more than Zimbabwe’s current budget. Business delegations from various countries such as the United States, United Kingdom, France and other EU states, China and Russia that have come to Zimbabwe of late have all complained about the country’s toxic policies and obstacles to doing business.

Zimbabwe ranks 171 out of 189 countries on the latest Ease of Doing Business index, an indicator as to why the country is not attracting meaningful investment. Top of the list in repelling investors is the thoughtless indigenisation policy which needs to be repealed if the country is to attract capital and recover.

Investors have fiercely resisted the policy which demands that foreign-owned companies surrender 51% shareholding to locals and remain with at most 49%. The policy has been mired in confusion with contradicting statements from various government officials and policymakers scaring away wary investors.

Despite promises by President Robert Mugabe and officials like Finance minister Patrick Chinamasa at various forums to overhaul the policy, only inconsequential changes have been made.

Chinamasa only managed to fuel anxiety during his presentation of the 2015 budget last year when he announced government was giving line ministers power to approve indigenisation plans for sectors under their purview, with the Indigenisation ministry only issuing compliance certificates. Investors feared the piecemeal review opened the door to rent-seeking venality by ministers.

Other factors that have resulted in Zimbabwe getting less than a tenth of what South Africa has received in FDI terms include the failure to respect property rights manifested through endless farm invasions, trampling on the rule of law, dilapidated state of key infrastructure such as roads and railway, the erratic supplies and high cost of key utilities like water and electricity, rigid legal frameworks, bureaucratic inefficiencies and rampant corruption.

Launching the report on Wednesday, Economic Planning minister Simon Khaya Moyo spoke of creating “a world class one-stop shop investment centre” to facilitate the ease of doing business. The reality however is government just talks but doesn’t walk the talk. If anything it does the opposite. Even the creation of the economic zones will not boost FDI inflows unless there are meaningful policy reforms. Political problems, policies inconsistencies and uncertainty are some of the biggest stumbling blocks to investment in Zimbabwe.