Zimbabwe has this year maintained its tail end position on the Global Competitiveness Index (GCI) after slipping one position to 125 out 140 due to limited access to long -term finance and policy inconsistency, the latest World Economic Forum report says.
This comes at a time President Robert Mugabe’s government is pushing for reforms to unlock investment.
Experts say Zimbabwe, which has been lagging behind regional peers in attracting foreign direct investment(FDI), needs to institute 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, as exports decline.
The latest United Nations investment report shows that Zimbabwe’s foreign direct investment 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 FDI between 1980 and 2013, compared to neighbours Zambia which attracted US$8 billion and Mozambique at US$16 billion over the same period.
Investors blame the Indigenisation and Economic Empowerment Act compelling foreign investors to cede at least 51% equity to locals for the low FDI inflows.
“Access to finance remains far and away the main problem, followed by policy instability and restrictive labour regulations,” reads the Global Competitiveness Report for 2015-16 compiled by the World Economic Forum.
This survey was undertaken before the July 17 Supreme Court ruling on labour retrenchments described by the IMF as labour market liberalisation.
The Global Competitiveness Report 2015-2016, which has been published since 1979, presents the rankings of the GCI.
The GCI is based on 12 pillars that provide a comprehensive picture of the competitiveness landscape in countries around the world at different stages of economic development.
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 Africa 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 seven places over the year at 4,43), while South Africa is up seven 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 reports says.
Significantly, countries that are often hyped as good performers — Nigeria, Botswana, Tanzania and Kenya — have poor competitiveness records.
“This is not surprising because a narrow focus on growth alone is not necessarily a reflection of improved competitiveness.
Commodity exporters such as Nigeria, Angola (not ranked in 2015) Mozambique and Ghana are illustrations of fast — growth economies that have either remained uncompetitive (Angola, Mozambique) or lost competitiveness.”
The report comes at a time when government has committed to improving the ease of doing business in a move to attract fresh capital.
Zimbabwe has in recent times sent several delegations to countries such as Singapore, Malaysia, New Zealand, Georgia and Azerbaijan, among others, to study development models of those countries.