‘Investment policy needs real action’

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GOVERNMENT’S recent launch of the national investment policy statement, though noble, needs to be complemented by concrete action on the ground for the new thrust to achieve its intended objective of injecting the much-needed foreign direct investment (FDI) into the country.

By Kudzai Kuwaza

President Emmerson Mnangagwa launched the guidelines titled Investment Guidelines and Opportunities in Zimbabwe, this month before his trip to the World Economic Forum in Davos, Switzerland. Mnangagwa succeeded former president Robert Mugabe who resigned in the face of impeachment proceedings prompted by a military intervention.

The investment policy statement spells out an adoption plan for the next six months.

This includes the modernisation of the legal framework for investments, and strengthening of investment promotion and retention framework. The policy also details plans for investment incentives.

“The government of Zimbabwe will adopt a new investment promotion retention and expansion strategy that clearly articulates the roles of domestic and foreign investment towards achieving Zimbabwe’s development goals,” the policy document states.
The launch comes at a time when Mnangagwa has gone on an aggressive drive to woo investors as part of efforts to halt the economic crisis characterised by a debilitating liquidity crunch, a severe cash shortage, company closures and substantial job losses.

Investment inflows have plummeted from US$545 million in 2014 to US$319 million in 2016, according to statistics by the United Nations Conference on Trade and Development.

Finance minister Patrick Chinamasa made bold pronouncements in his 2018 budget presentation which include whittling down indigenisation requirements to cover just the diamond and platinum sectors in efforts to promote investment into the country, a move that was widely applauded. Government has also initiated a programme to improve the ease of doing business in the country.

However, there is a lot of scepticism as to whether the Mnangagwa administration can walk the talk.

This is not the first time that positive pronouncements have ended in just talk. The Mugabe government, of which Mnangagwa was part of, made the right noises before dismally failing to deliver as they could not match rhetoric with action.

The one-stop shop concept was launched under the auspices of the Zimbabwe Investment Authority during the era of the inclusive government. The move was supposed to remove red tape for investors looking to set up in the country. However, the concept has been blighted due to various challenges, including the lack of an enabling legislation.

Probably the best example of the mismatch between action and rhetoric by the Mugabe administration was the botched US$750 million deal with Indian firm Essar Africa Holdings (Essar) in which the foreign investor agreed to takeover and resume operations at defunct state-owned Ziscosteel. Though officially opened by Mugabe amid much pomp and fanfare, the investor pulled out amid political squabbles, shattering the hopes of thousands who had pinned their hopes on the revival of the steel giant.
Despite the positive noises coming out of Munhumutapa Building, questions remain on the government’s ability to address key challenges such as the liquidity crunch. To illustrate the magnitude of the liquidity crisis, local banks have since last year been rejecting access to credit facilities from European banks for on-lending to productive sectors, citing the possibility of failure to repay the loans because of uncertainty caused by bond notes. The failure to access cash from the banks remains a major impediment to government’s ambitious drive to bring investment.

Economist and Buy Zimbabwe executive Oswell Binha, though commending the launch of the investment policy statement, says more work needs to be done by the Mnangagwa administration to increase FDI inflows.

“The launch of the policy is, yes, a noble move but we need to have a body language that indicates that we are ready to do business,” Binha said. “What investors want to know is whether they will be able to collect their profit from the bank. It is now an economy of Treasury Bills.”

He cited the example of the Environmental Management Agency which takes 5% from every investment project as one of the hindrances to investment, adding that despite undertakings to amend this, it remains on the statute books. He also pointed to the delays in amending critical laws such as the mines and mining law crafted in 1961 as obstacles to bringing in investment. The amendment of the mining law has been on the cards for more than a decade.

“Efficiency models are going to have to be an integral part of our national planning dashboard,” Binha said.
The pending elections set for later this year will be a major litmus test for Mnangagwa’s government and their ability to inject investment to revive the floundering economy.

The European Union’s statement last week leaves no doubt how crucial it is for the country to hold a free and fair election to attract investment into the country.

“The EU welcomes the commitment of the authorities to hold elections in line with the Constitution, and underlines the importance that the conditions are in place to allow those elections to be peaceful, inclusive, credible and transparent,” the continental body said its statement.

Outgoing Australian ambassador Suzanne McCourt, in an interview with this paper last week, also pointed out that credible polls are vital to FDI inflows.

“Australia and other nations have identified the 2018 elections as an important point in terms of seeing if the rubber has hit the road, to use an Australian term. To see if talk of the new government has turned into action now that the President has said there will be free and fair elections. That is very good to hear. But we need to see that in practice,” she said.

With complaints from civil society and opposition parties over the uneven playing field and the need for electoral reforms growing louder, Mnangagwa has his work cut out. However, despite the challenges, economist Vince Musewe is optimistic that the launch of the investment policy is a step in the right direction.

“An investor handbook is one of the critical tools to attract investors. It states the rules which must be consistent. So it helps. Accurate information leads to informed decisions,” Musewe said. “Second we must see the government deal with ease of doing business, capital protection to ensure investors are confident that they can indeed reap their profits.”

Musewe added that the “momentum will pick up”.

“All we need are first movers then we see a scramble for Zimbabwe sooner rather than later,” he said. “Critical will be peace, stability and dealing with corruption.”

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