The ease of doing business in Zim

I was recently invited to speak on the panel of Alpha Media Holdings Conversations on “the ease of doing business”, which was live-streamed on the NewsDay website. The ease of doing business is an annual ranking produced by the World Bank and is based on technical metrics, so I spent several days researching the topic in order to keep up with other distinguished panelists.

Deborah Peters,consultant

However, on the day of the conversation, I was surprised at how the discussion kept turning to politics and I ended up abandoning my notes because that was not the conversation we were having.

The ease of doing business is based on surveys of 190 countries and it is a measure of the level of regulation in each country. The more regulated an economy is, the less likely it is to foster entrepreneurship and the higher the occurrence of an informal economy.

The lower the ranking, the better the ease of doing business, so New Zealand is number 1 and Somalia is at the bottom at 190. This year Zimbabwe is ranked at 159. In 2014, the local World Bank office in conjunction with the International Finance Corporation office in South Africa, worked to help Zimbabwe to improve its rankings. I worked on that multi-stakeholder project briefly in 2014, the year when Zimbabwe achieved its best ranking of 153, while its worst ranking was in 2011, when the country was at was 171.

In comparison, Rwanda ranks at 41 and has moved down 100 places in 10 years, so the World Bank is trying to assist other African countries to make similar improvements.
Currently, it takes 61 days to open a business in Zimbabwe, with all the requisite licences.

The goal is 50 days, but it had been reduced from 120 days in 2015. Our biggest achievement is the uptake of online payments, but this is attributed mainly to cash shortages in Zimbabwe, which encourage people to use online payments.

The ease of doing business rankings are based on the following factors:

  • Starting a business;
  • Dealing with construction permits,
  • Getting electricity,
  • Registering property,
  • Getting credit,
  • Strength of legal rights index,
  • Depth of credit information index,
  • Protecting investors,
  • Paying taxes,
  • Trading across borders,
  • Enforcing contracts; and
  • Resolving insolvency.

In 2014, government was all fired up to improve the rankings, so they formed a multi-stakeholder team which included the ministries of Finance, together with the Zimbabwe Investment Authority (Zia).

That zeal did not last long because the country slipped in the rankings again the following year. For my research, I decided to call Zia to find out where we stood on improving the rankings this year. I spoke to people at Zia who can never seem to answer questions directly. The thing that scares me is that they are people who interact with new investors coming into Zimbabwe and all they seem to be good at is e-mailing prepared reports. There has long been talk about a one-stop shop for investors coming into Zimbabwe.

Initially, it was meant to be housed under Zia, but clearly this has not worked out. When President Emmerson Mnangagwa went to Rwanda for the African Union meeting he was so impressed by their Rwanda Investment Development Board that he invited the head, Claire Akamanzi to come back for a “soaking experience” in Zimbabwe to help set up the Zimbabwe Investment Development Agency (Zida), which will take over from Zia.

There is already substantial jostling for position at the new agency. My only advice is that they need to hire new people if they hope to speed up the investment process for new investors coming into Zimbabwe because changing the name from Zia to Zida is not good enough.

All the stakeholders, from immigration to the Zimbabwe Revenue Authority (Zimra) need to sing from the same hymn sheet. According to Zia, there was a billion-dollars of new investment in the first quarter on 2018, but it is mostly memoranda of understanding because we are still waiting for the money to hit the bank.

There is a brilliant video with Zororo Makamba on his point of view show talking about the need for Zimbabwe to take care of its local investors first before we look for foreign investors. He is right, Zimbabwe is far too bureaucratic and there are too many government agencies seeking to tax local businesses.

The following story illustrates my experience. A couple of years ago I was running a gym belonging to my mother, Body Active, while she was recovering from surgery. At some point some guys kept coming to ask the staff for US$200 for a radio licence, but they always came when I was out. We had paid the ZBC licence for the year so I figured there was some sort of mistake. Eventually, they came and found me at the gym then they demanded payment for a public performances permit.

These were two guys in plain clothes with dubious identification asking for US$200 and to me it sounded like the type of licence you get when you put on public concerts, not an ordinary gym. I needed to confirm their identity and the authenticity of the request but this made them angry so much they told me I was under arrest and I should drive them to the police station to get processed.

My poor mother happened to be passing by at that point so we all got into my car. I drove the two officers, mum and one of our staff members down to the police licencing department situated along Robert Mugabe Way in town.

When we arrived the inspector, a lady, recognised my mum from the days when she used get her hair at mum’s New Look and Ebony hair salons, so I was given a warning and we left.

Business owners in Zimbabwe are used to harassment. Not a single month goes by without someone from some agency asking to see various licences and City of Harare officials are the worst of the lot. Nothing disappoints these officials more than to find everything in order. If they find anything amiss they add penalties and Zinara has a field day with vehicle licences if your licence has expired.

If Zimbabwe had roads like the autobahn, none of us would resent paying our licences. Recently, Andy Hodges had Zimra staffers on his Business Unusual programme on ZiFM on Thursdays at 7pm and he was grilling them on the issue of excessive taxation and penalties. They failed to understand that they are taxing businesses to death and there is issue of their book value for cars that they base vehicle import duties on.

When I came back to Zimbabwe in 2014 through Beitbridge border post, I could actually see the customs guys gleefully rubbing their hands together when they saw my car until they discovered I was a returning resident. But we still had to pay a clearing agent a lot of money to clear goods which are meant to be duty-free.

A family friend recently spent about five days at the border because he refused to pay anyone to clear his vehicle since he was a returning resident. Anyone who has spent a few hours at that border post knows that there are no restaurants or restroom facilities so you do not want to spend even a day there.

I advise anyone looking for investment ideas in Zimbabwe to open a 24-hour fuel station, restaurant and convenience store at the border posts in Zimbabwe and they will be printing money.

What is missing in Zimbabwe is the collective vision for reviving the economy. We can repeat mantras all we like but everybody has to understand what we are trying to achieve. Officials need to nurture local entrepreneurs with the same enthusiasm that they welcome foreign investors because local businesses are here to stay.
We also need policies that make Zimbabwe competitive for international investors. Zimbabweans in the Diaspora should also be engaged so that they channel investment towards the country.

Zimbabweans working for international finance institutions do not channel investment home at the same rate that other Africans invest in their home countries. They are too concerned about job security to care about making an impact back home.

Ask any Zimbabwean who has ever worked for agencies like IFC, AfDB, DBSA, PTA Bank and World Bank to name any projects they financed in Zimbabwe during their tenure at those institutions, you will not find very much. Moving forward, after elections I hope the new government comes in with proper planning and engages everyone into doing their part for the country. Hopefully in 2019 Zimbabwe will have made great leaps on the ease of doing business for everyone.

Peters is a business and investment consultant. She can be contacted on Twitter:@debbienpeters and email: deb.n.peters@gmail.

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