Govt policies spook investors

THAT there is a huge interest from local and foreign investors in putting in capital in Zimbabwe — a structurally weak, vulnerable and small economy — despite the current political instability, a sea of economic troubles and social volatility is not in doubt.

Editor’s Memo,Dumisani Muleya

Investors are always hovering over the country, but are kept at bay and even spooked by government policies and other problems. Hence, Zimbabwe’s investment outflows were up 50% to US$33 million as Foreign Direct Investment (FDI) declined 24% in 2016

The country’s investment inflows declined last year to US$319 million compared to US$421 million the year before, according to the World Investment Report by the United Nations Commission for Trade and Development.

In Southern Africa, FDI inflows contracted by 18% to US$21,2 billion. With the exception of Malawi and South Africa, FDI fell in all the economies of the sub-region. FDI flows to Angola declined by 11% to US$14,4 billion mainly due to a decline in reinvested earnings, reflecting the impact of low prices on profit margins.

Inflows to Mozambique declined by 20%, although they remained sizeable at US$3 billion. Despite a serious financial crunch, investors remained upbeat about long-term value in Mozambique’s commodity sector, with Eni (Italy) approving US$8 billion in offshore gas exploration at the end of 2016, and ExxonMobil (United States) buying a multibillion-dollar stake in Eni (Italy). Flows to Zambia fell sharply, dropping 70% to US$469 million, amid low commodity prices.

South Africa, the economic powerhouse of the continent, continues to underperform, with FDI at a paltry US$2,3 billion in 2016; that was up 31% from a record low in 2015, but still well off its past average. Nonetheless, China’s state-owned Beijing Automotive International Corporation agreed to build a US$759 million automotive plant — the biggest investment in a vehicle-production facility in the country in four decades.

By comparison, Zimbabwe is worse off. While investors have a huge appetite to come in, they remain on the fence or are even frightened away by a hostile investment climate.

Toxic government policies, incompetent officials, greed, corruption and petty squabbles are blocking investors from coming into the country.

Examples of this include the US$750 million Ziscosteel-Essar deal, the US$60 million Barclays Zimbabwe-First Merchant Bank (FMB) Malawi transaction and now the US$400 million Diaspora Infrastructure Development Group-Transnet-National Railways of Zimbabwe (NRZ) project. There are many others besides these.

The irony is while government ministers thwart such deals, they approve corrupt projects like the Dema diesel plant, the US$945 million Todal platinum deal and several Zesa projects awarded to convicted criminal Wicknell Chivayo

Chivayo is not even the owner of Intratrek Zimbabwe — the controversial company he has successfully fronted to win several multi-million dollar tenders in electricity generation projects over the past two years under murky circumstances. He is often portrayed as a savvy young businessman and owner of Intratrek, but is in reality merely the Zimbabwean face of the shady company whose owner is the equally controversial South African-based Zambian national Ibrahim Yusuf.

Yet ministers have no energy to question and fight such corruption. They have all the zeal and drive to sink the Zisco-Essar deal, Barclays-FMB transaction and NRZ project, among others, simply because they are not involved. Corrupt Chinese companies are involved in the Beitbridge-Harare highway project, but ministers are quiet about it; in fact, very happy to partake in that. This shows their opposition to other projects is not legitimate, but driven by self-interest and greed. If they are genuine, let them query and block all the dodgy projects, particularly those undertaken by notoriously corrupt companies.

Otherwise, it becomes rather difficult to believe them and take them seriously. So government must urgently address these issues. Apart from greed and corruption, authorities must tackle the ease of doing business, property rights, rule of law, retrogressive policies like indigenisation and political risk factors.

Without that, Zimbabwe is going nowhere.