It’s the final quarter of 2015 and it appears every stakeholder in all sectors of the economy is seized with the push to finalise the one-stop-shop investment centre.
The best practices, as evidenced by how Rwanda managed to turn around its economic fortunes, have made a compelling case study not only for the East African states but also the Zimbabwean government. It is only a week since a workshop was held with the focus on establishing a one-stop-shop and as industrialists we look up to the intention with unprecedented excitement.
Indeed, the trend of foreign direct investment (FDI) into Zimbabwe is quite worrisome as the figures have trended from US$52 million in 2008, US$105 million in 2009,US$400 million in 2012 and 2013 and US$545 million in 2014. The trend is not that ugly, but what makes the figures strange is the comparison with neighbouring states with Mozambique alone netting almost US$5 billion in FDI.
The trend for portfolio investment equally points to an unimpressive regime worse still if regional trends are to be factored in. Since dollarisation, we reached a peak in terms of portfolio investment in 2014 when the inflows topped US$305 million from a US$283 million mark the prior year.
There is no doubt that one wants to find out what had been threatening the flow of capital into the country. As much as we blame an unfriendly bureaucratic structure in registering new companies, it is pertinent also to be alive to other factors which seem to have been hindering investors appetite to the country. As industrialists, we are alive to the fact that less than 10% of flights which used to ply the Zimbabwe route have withdrawn, the number of tourists who peaked to all-time highs in 1999 have dwindled and that our domestic currency has vanished.
All these factors can inform us that a threat to investment goes beyond the issue of a one-stop-shop. As much as there is need to expedite the ease of doing business, the proof of the pudding is in addressing the “hard factors” which is the business environment itself.
We do not want to run the risk of spending a lot in restructuring the Zimbabwe Investment Authority as if it is the genesis of investor appetite.
There is empirical evidence that shortening the time and cost of establishing a company can affect investment flows, but the extent of influence is so much limited. In New Zealand, for example, it is a matter of hours which is about 0.5 days to start a business, in terms of trading across borders, Ireland and France are quite efficient while in terms of resolving insolvency, Japan and Norway sets the frontier in regulatory practice.
As business representatives, we are alive to the fact that it will take more than a one-stop-shop concept to have a suitable environment for doing business. Having a seemingly too big number of ministries can be an impediment itself since a number of labourers from such diverse ministries will be seconded to track the progress of investor participation in the country.
Imagine if the ministries of environment and mining were falling under the same portfolio, this means a potential miner will not wait to hear what the environmental boss would set as standards for one to be a bona fide player.
For starters, it is also significant just to shed light on what we mean when we talk about ease of doing business. The ease of doing busiess index ranks economies from 1 to 189. For each economy, the ranking is calculated as the simple average of the percentile rankings on each of the 10 topics included in the index. These include starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.
If an economy has no laws or regulations covering a specific area — for example, insolvency — it receives a “no practice” mark. Similarly, an economy receives a “no practice” or “not possible” mark if regulation exists, but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator.
However, as the gospel of addressing the ease of doing business gathers momentum, it is equally pertinent for Zimbabwe to appreciate that the index is not a paragon of probity in its standing. The index is limited in scope. It does not account for an economy’s proximity to large markets, the quality of its infrastructure services, the strength of its financial system, the security of property from theft and looting, macroeconomic conditions or the strength of underlying institutions.
As we debate on the modalities surrounding the establishment of a one-stop-shop, it is vital to also be alive to the fact that such a shop can only but be a hygienic factor in attracting investment. It is time we weigh how other variables such as electricity generation, sovereign risk, political risk, dollarisation and the dominance of informal economy are impacting on the investment levels.
With the near decimation of the rail network, it will not be surprising that construction of a ports authority will not make much difference as our road network will remain congested. The absence of an additional reliable network to transport goods has made it difficult to address the border challenges. It is certainly irrational to resist the idea of having a one-stop-shop, but also irrationally expectant to look forward to the fruits of a one-stop-shop when other crucial factors are not addressed.
Mugaga is the chief executive of the Zimbabwe National Chamber of Commerce (ZNCC). These are his personal views not those of ZNCC. He can be contacted on firstname.lastname@example.org or +263 772 340 353. These New Perspectives articles are co-ordinated by Lovemore Kadenge, president of the Zimbabwe Economics Society.
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