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Addressing the ease of doing business

The recent visit to Zimbabwe by Africa’s richest man Aliko Dangote is a wake-up call for government to urgently embark on economic reforms and ease of doing business. Zimbabwe has repeatedly ranked poorly in each and every Doing Business Survey by the World Bank and the World Economic Forum. Doing business simply refers to the ease with which investors can get investment licences and permits, including a relaxed visa regime and security of investment. Doing business also encompasses the general investment climate of a country.

Tapiwa Mashakada

In my tenure of office as minister of economic planning and investment promotion, during the inclusive government, my job was cut out for me. Basically, I was in charge of promoting domestic and foreign investment and above all portraying Zimbabwe as an investment brand. As soon as I was appointed, I did not waste time. My first priority was to set up a One-Stop Shop (OSS) Investment Centre at the Zimbabwe Investment Authority (Zia). The idea was to bring together under one roof all government departments and agencies that were pivotal to the issuance of permits or licences. This was meant to avoid a situation whereby investors would run from one office to another looking for information.

As the minister, I commissioned study visits to Mauritius, Rwanda and Uganda. Ministry officials came back with concrete recommendations regarding best practices on investment facilitation. In Mauritius, investors can register a company within one day and this is done online. In Rwanda and Uganda, all relevant departments are housed under one roof. To cut the story short, I accepted the recommendation to implement the Rwandese OSS model.

t-Mashakada

I prepared a memorandum to cabinet on the proposed OSS and cabinet unanimously agreed that I should proceed to establish an OSS Investment Centre at Zia. Within two months of the cabinet approval, we established an OSS Investment Centre at Zia. Its features were as follows:

  • Offices were designed at Zia to house the following departments under one roof: the Department of Immigration; Environmental Management Agency; Registrar of Companies; Ministry of Indigenisation; Ministry of Mines; Zimbabwe Revenue Authority; Ministry of Local Government; First-Port-of-Call Investment Facilitation desk; Aftercare Services Desk; and the Reserve Bank of Zimbabwe desk.
  •  A directive was made that senior officials should be deployed so that they can make final decisions.
  • A five day turnaround time frame was set within which investors would register a company and get all licences and permits to operate in Zimbabwe.
  •  A raft of incentives were packaged for potential investors.
  •  Zero tolerance on bureaucracy and red tape
  •  The OSS was officially launched by President Robert Mugabe, who unveiled a plaque to that effect. After the launch, it was now time to operationalise the OSS. All hell broke loose. Some ministries deployed junior officers to the OSS while some simply refused to co-operate. They simply would not deploy their officials to the OSS. In order to curb this, I proposed, inter alia, the following amendments to the Zia Act in order to create the necessary legal framework for the OSS:

    1. That the Indigenisation Act be repealed as it was the biggest stumbling block to foreign direct investment (FDI).

    2. That the deployment of senior officers to Zia be made mandatory and those who failed to do so be punished.

    3. Investors to get licences or permits within five working days.

    4. No foreign investor to operate in Zimbabwe without a Zia licence.

    5. All investors (especially Chinese) who were operating in Zimbabwe without Zia licences be given a period within which to regularise their operations by getting licences from Zia.

    6. If an investor does not get an investment licence within five working days, then the investment licence is deemed issued and the investor should proceed to set up shop.

    7. That investment disputes be settled at the International Centre for the Settlement of Investment Disputes in the event that the domestic legal route is not satisfactory.

    My proposed amendments were shot down by the cabinet committee on legislation primarily on account of my proposal to have the Indigenisation Act repealed. Coupled with “turfism” by other government departments, the OSS at Zia was undermined. What was a good initiative suffered a still birth.

    I thought I should give this background so that this time around, similar pitfalls would be avoided. Zimbabwe needs FDI in order to spur economic growth.

    The World Investment Report (2014) reveals that Zimbabwe received the least FDI in the region, trailing behind Mozambique, South Africa, Zambia, Angola and Namibia. Zimbabwe’s FDI was US$450 million compared to billions worth of investment that went to these other countries. But why has Zimbabwe not received sufficient FDI since 2000? The perceptions and realities which discouraged investors ought to be addressed head-on. There are so many elephants in the living room.

    Firstly, topping the list is political risk. Investors have been worried about Zimbabwe’s chequered political history that was characterised by political violence and the breakdown in the rule of law. Of concern to investors was the violation of Bilateral Investment Promotion and Protection Agreements (Bippas). Some of the Bippas that were violated, through expropriation without compensation, include that between Zimbabwe and Germany; Zimbabwe and the Netherlands; Zimbabwe and South Africa; Zimbabwe and Malaysia. The issue was about compensation. The Dutch investors took their case to the New York-based International Centre for the Settlement of Investment Disputes which ruled in their favour. However, the government of Zimbabwe is yet to pay the amount running into millions of dollars to Dutch farmers.

    Secondly, the Indigenisation Act, which talks of a 51-49% shareholding structure, has been a handbrake to investment. Investors have complained that 51% strips them of a controlling interest in their business. After all, the invested funds are borrowed funds from capital markets. To put it dramatically, one investor at a Zimbabwe investment conference did not have kind words for me as his response was chicky. He said: “ Zimbabwe, indigenisation, no.”

    Thirdly, investors complained about policy ambiguity and lack of policy consistency on indigenisation. Ministers were making different pronouncements on the subject. Investors did not like a situation whereby laws were changed on them.

    Fourthly, potential mining investors complained about lack of geological information on mineralisation. There were no readily available geophysical exploration data or aeromagnetic data that indicates the quantities and values of the underground resources.

    Fifthly, investors raised concerns about the security of their investments.

    Sixthly, investors complained about our cumbersome visa regime. Without compromising our national security, it is still possible to do due security diligence and issue visas at the port of entry.

    These are some of the concerns that were raised by almost all investors. However, every dark cloud has a silver lining. Investors commended the use of multiple currencies, the high level of education and skills; plenty of opportunities; a good climate; liberalisation of repatriation of after tax profits; tax incentives, fairly developed infrastructure, peace and tranquillity; geographical location, among other advantages that Zimbabwe boasts of.

    Going forward, Zimbabwe should not only improve the ease of doing business, but address the political risk. Investors want certainty and security of investment. The Indigenisation Act must be amended in a manner that exorcises it of connotations of expropriation. All laws that impede investment must be amended or repealed. These include but are not limited to: the Mines and Minerals Act, Companies Act, Immigration Act, Income Tax Act, Environmental Management Act.

    In addition, Zimbabwe must craft an Investment Charter that every investor must sign. The Investment Charter will address investor commitments to skills transfer, employment of locals, corporate social responsibility, local banking, participation by Zimbabweans in the supply chain, community share ownership, environmental preservation, among a host of other things.

    Zimbabwe must work on its investment brand so that we become the most preferred investment destination. Our embassies must now shift their priorities from diplomatic to business, economic and trade ties. We must therefore deploy business oriented trade and investment attachees to source markets such as Hong Kong, Shanghai, Mumbai, Moscow, London, New York, Frankfurt, Johannesburg, Lagos, Cairo, Tel Aviv and Mauritius.

    We also need to rope in the private sector when negotiating investment deals because some of our private sector players have vast experience on negotiating private equity deals. The procurement process must be revamped and there must be zero tolerance on corruption. Zia must be transformed into a proper investment facilitation entity rather than a regulating authority. Gone are the days of regulating this and that.

    When it comes to the mapping of investors, it is clear that, at present, the Brics (Brazil, Russia, India, China and South Africa) countries are the ones leading on investments in agriculture, infrastructure, mining, oil and gas. Countries like China, Russia and Brazil are now all over Africa, investing in commodities. In the case of Zimbabwe, we must insist on value addition and beneficiation in order to create jobs. Investors from Western Europe tend to spread their investments across all sectors of the economy, but they dominate private equity and portfolio investments.

    Finally, we need more Dangotes to come and invest in Zimbabwe and they are many. But we also need to take care of our own domestic investors and give them the same reception and attention that Dangote was given. Some of our own citizens, who are successful business people in their own right, cannot come back to Zimbabwe. Government must show its sincerity on promoting domestic and foreign investment by implementing the following confidence building measures:

  • Giving back Mashava and Shabanie asbestos mines to Mutumwa Mawere, the erstwhile owner.
  • Grant amnesty to all Zimbabwean businesspeople who allegedly fled persecution. These include Strive Masiyiwa, Roy Bennett, James Makamba, among others.
  • Renegotiate and consummate the Essar investment deal
  • Provide domestic businesspeople with an enabling business environment.Let us now give investment a chance.

    Dr Mashakada is MP for Hatfield and former Economic Planning and Investment Promotion minister and executive director for Africa Centre for Trade and Investment Facilitation. These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society. E-mail kadenge.zes@gmail.com and cell: +263 772 382 852

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