HomeAnalysisZim stuck in mediocrity

Zim stuck in mediocrity

Ernst & Young’s 2016 Africa Attractiveness Report, released this week, shows that Zimbabwe is lagging behind other countries in luring foreign direct investment (FDI), a major weakness which is symptomatic of the government’s failure to take decisive action in stemming the economic implosion.

Zimbabwe Independent Comment

The report provides further confirmation that, despite President Robert Mugabe’s spirited denial that this country is not a “fragile state”, the economy is actually in a more precarious situation as shown by the dismal record in attracting foreign investors, itself a telling measure of economic competitiveness. Zimbabwe is not in the top 10. Morocco tops the rankings, followed by Kenya, South Africa, Ghana, Tanzania, Uganda, Cote d’Ivore, Mauritius, Senegal and Botswana.

At independence in 1980, the only country among these top performers which had a better economy than Zimbabwe is South Africa. This simple fact tells a tragic story of epic proportions.

The world is marching ahead while the likes of Zimbabwe remain stuck in mediocrity. Egypt, Kenya, Morocco, Nigeria and South Africa collectively attracted 58% of the continent’s total FDI in 2016.

These nations are competing robustly to entice investors by providing an environment conducive for the growth and development of businesses.

Ernst & Young’s comprehensive report provides an analysis of FDI investment into Africa over the past 10 years. The 2016 data shows Africa attracted 676 FDI projects, a 12,3% decline from the previous year, and FDI job creation numbers declined 13.1%. However, capital investment rose 31,9%. To gain a better understanding of the full picture, it is useful to look into the economic sectors which attracted the highest levels of investment.

The report shows that the surge in capital investment was primarily driven by capital intensive projects in two sectors, namely real estate, hospitality and construction (RHC), and transport and logistics. The continent’s share of global FDI capital flows increased to 11,4% from 9,4% in 2015.
This made Africa the second-fastest growing FDI destination by capital.

Zimbabwe’s failure to attract meaningful investment and derive significant benefit during the recent commodity boom means that the country will find it increasingly tough to ride out the ongoing wave of global geo-political uncertainty. The commodity boom was a squandered opportunity.

Foreign investors are always on the lookout for the “next wave” of opportunities. For the top performers, transport and logistics, which became the fifth largest field in 2016 and also ranked second by FDI investment, is one of the business sectors worth venturing into. For Zimbabwe, the growth of transport and logistics will be hampered by terribly dilapidated roads and policy inconsistency.

Zimbabwe’s greatest weaknesses are policy instability, poor access to financing, corruption and inefficient government bureaucracy. If these are addressed, the fragile state can be salvaged.

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