Limited access to long term finance and policy inconsistency have led Zimbabwe to slip one position down to 125 out of 140 in the Global Competitiveness Index, a World Economic Forum report has shown as government pushes for reforms to unlock investment.
Experts say Zimbabwe, which has been lagging regional peers in attracting foreign direct investment, requires a raft of reforms to compete on a global scale. High interest rates have seen local firms struggling to retool and remain competitive at a time imports are flooding the market.
The latest United Nations investment report shows that Zimbabwe’s foreign direct investment (FDI) leapt to US$545 million in 2014 — less than 5% of the country’s GDP — from US$400 million in the previous year, driven by interest in mining, infrastructure and services but still lags regional rivals.
Official data shows that Zimbabwe received US$1,8 billion in FDIs between 1980 and 2013, compared to neighbours Zambia which attracted US$8 billion and Mozambique at US$16 billion over the same period.
“Access to finance remains far and away the main problem, followed by policy instability and restrictive labour regulations,” reads the World Economic Forum report.
This survey was undertaken before the July 17 Supreme Court ruling on labour retrenchments described by the IMF as labour market liberalisation.
The report shows that since 2005 the Zimbabwe score has increased 6% from 3,25 to 3,45, which is 4% below the Sub-Saharan average of 3,58.
The highest score in the 2015 report is for Switzerland, ranked top with 5,76, while the lowest is Guinea ranked 140, with 2,84. The highest for Sub-Saharan Africa is Mauritius in 46th place (down 7 places over the year at 4,43) while South Africa is up 7 places to 49th (4,39).
“Over the seven years since 2008/9, the striking improvements have been achieved by Rwanda, Zambia, Ethiopia, Mauritius and Lesotho, while Zimbabwe’s gain is more a rebound after slumping to second from bottom, than an improvement,” the report said.
“Significantly, countries that are often hyped as good performers – Nigeria, Botswana, Tanzania and Kenya – have poor competitiveness records.”
The report comes at a time government has made a statement of intent on the ease of doing business in a move to attract fresh capital.