Zim needs deeper structural reforms

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ZIMBABWE has climbed 16 places to position 155 out of 189 countries ranked under the latest World Bank Doing Business report released on Tuesday.

Zimbabwe Independent Comment

The 2016 World Bank report shows that Zimbabwe, which has committed to far-reaching reforms to unlock foreign direct investment inflows, recorded two positive reforms: getting credit and protecting minority investors as measured by the Doing Business during the course of its latest report’s data collection cycle (June 1, 2014–June 1, 2015).

While this marginal improvement should be acknowledged, it is still a far cry from being an ideal situation and points to the need for deep structural reforms and institutional shake-up to make Zimbabwe more investor-friendly. The country must rigorously address key indicators on the Doing Business index if it is to join countries such as Singapore, New Zealand, Denmark, United Kingdom (UK), and the United States (US) ranked in the top 10.

Critical indicators Zimbabwe must deal with include starting a business, electricity supply, protecting minority investors, construction permits, enforcing contracts and registering property.

The urgent need to address these vital indicators is reflected in the United Nations Conference on Trade and Development World Investment Report which indicates the country only managed a paltry US$545 million in foreign direct investment (FDI) inflows last year which paled in comparison to neighbouring countries in the Sadc region such as Mozambique, which received US$4,9 billion, almost nine times more, South Africa (US$5,7 billion) and Zambia (US$2,4 billion).

Hostile policies such as the Indigenisation law must be repealed. Concerns over indigenisation have been echoed by business delegations from various countries, including the US, UK, France and other EU states and Scandinavian nations, as well as Zimbabwe’s close allies like China and Russia. African countries have expressed anxiety over the policy. Despite pronouncements by senior governmental officials such as Finance minister Patrick Chinamasa and Policy Coordination minister in the Office of the President and Cabinet Simon Khaya Moyo that the toxic law is being sorted out, newly-appointed Indigenisation minister Patrick Zhuwao is singing a different tune, claiming the policy “cannot be diluted like Mazowe (orange drink)”.

It is this kind of confusion and discord that has made the country the economic backwater it is today. Starting a business in Zimbabwe, a key indicator on the Doing Business Index, remains a nightmare with stifling bureaucratic red tape and it remains to be seen whether the plans announced to reduce bureaucracy will see the light of the day or like so many other pronouncements remain on paper.

The failure to respect property rights manifested through endless farm invasions, trampling on the rule of law, the dilapidated state of key infrastructure such as roads and railways, erratic supplies and high cost of key utilities like water and electricity, rigid legal frameworks, bureaucratic inefficiencies and rampant corruption must also be addressed effectively if the country is to address the World Bank indicators of protecting minority investors and enforcing contracts.

Failure to do this will result in the marginal gains being wiped out, while the country plunges deeper into the economic doldrums.

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