Zimbabwe’s government said it has approved $971 million in foreign investments in the first half of the year versus $555 million a year ago, but a law handing majority control of businesses to locals was putting off investors.
The government requires foreign companies to sell at least a 51 percent stake to local shareholders in a bid to redress colonial imbalances in a process known as indigenisation.
Desire Sibanda, the permanent secretary in the Economic Planning Ministry, told a committee of parliament on Tuesday that foreign investors, including those from China, had recommended that Zimbabwe should relax its empowerment policy.
China has emerged as the largest investor in Zimbabwe in the last 10 years but government officials privately complain that Beijing has not poured in the billions they hoped as in other southern Africa states such as Zambia, Angola and Nigeria.
“The first problem they have raised is the Indigenisation and Economic Empowerment Act, the 51/49 (percent). They would prefer to have a majority shareholding than a minority in their investment,” Sibanda said.
The majority of the investments were from Chinese, Mauritian and South African investors in manufacturing and mining sectors.
Sibanda said shortages of electricity and water, dilapidated roads and rail, high costs of labour, delays in the issuing investment permits and frequent government changes in policy also discouraged foreign investment.
Critics point to a planned $650 million investment by a unit of India’s Essar Group to mine iron ore and produce steel, which was signed in 2010 but stalled over mineral rights as a sign of government’s sudden changes in policy.
Last year Zimbabwe, whose economy slumped by 45 percent between 1998-2008, said it required $27 billion-about twice the size of its economy-to fund a five-year ZimAsset economic plan to improve basic services and rebuild the country.
“The investment levels are not sufficient to sustain the aspirations of the ZimAsset, we need to do more,” Sibanda said.