Zim ranks lowly on investment

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Illegal money changers pose while exchanging a new Zimbabwe bond note (L) and U.S. dollar notes in the capital Harare, Zimbabwe, November 28, 2016. REUTERS/Philimon Bulawayo

ZIMBABWE attracted US$470 million in foreign direct investment (FDI) in 2018, making it one of the least attractive investment destinations in the Southern African Development Community.

By Tinashe Kairiza

This comes against the backdrop of claims by President Emmerson Mnangagwa’s administration that the country had attracted a staggering US$12 billion in FDI, mostly through various “mega-deals” signed during the year.

Announcing his maiden budget statement for 2019 last week, Finance minister Mthuli Ncube said a harsh investment climate — characterised by erratic power supplies, redundant firms requiring massive investment capital, rigid licensing requirements and a shambolic liquidity situation — was discouraging investors.

The southern African nation is ranked 155 out of 199 economies on the 2018 World Bank (WB) Ease of Doing Business index.

“In 2018, FDI is projected at only US$470 million against FDI inflows of about US$2,3 billion and US$1,1 billion received by our counterparts in the region — Mozambique and Zambia in 2017,” Ncube said.
“Identified major weaknesses are in the areas of: getting electricity, resolving insolvency and time taken and cost to import and export goods.”
However, inspite of the paltry FDI inflows Zimbabwe attracted in 2018, Mnangagwa, who won this year’s disputed poll, has announced several murky multi-billion dollar investment deals under the mantra: “Zimbabwe is open for business”.
Ahead of the July 30 elections, Mnangagwa promised to transform Zimbabwe into a friendly investment destination, as part of a departure from former president Robert Mugabe’s policies.
Mugabe’s hostile policies, particularly the violent land reform programme and the indigenisation policy, coupled with his abrasive relationship with the West turned Zimbabwe into a pariah state.
Since assuming power through a millitary coup in November last year, Mnangagwa’s administration has announced that it has secured huge investment deals although actual capital inflows remain at a minimum.
Last week, Mnangagwa announced that his government had managed to secure US$5,2 billion from China Power and General Electric to build a 2 800-megawatt (MW) hydro-power generation station at Batoka Gorge, in the Zambezi Valley.
Earlier this month, Mnangagwa also addressed a press conference announcing that Australian-listed Invictus would initially invest US$20 million to explore for oil reserves around the Muzarabani area, with the figure expected to increase to hundreds of millions of dollars depending on the availability of the resource.
In April, Mnangagwa parcelled vast platinum claims to his associate Lucas Pourolis through his Karo Resources investment vehicle to set up a refinery plant estimated at US$4,2 billion with potential to create over 100 000 jobs.
However, Bobby Morse, a senior partner at Tharisa Plc — a sister company of Karo Resources — disowned the US$4,2 billion figure in an interview with the Zimbabwe Independent, suggesting the investment amount was plucked from thin air by government.

In June, Mnangagwa’s administration also announced another controversial US$5,2 billion project with murky South African outfit Nkosikhona Holdings to transform coal into fuel in the Zambezi Basin.

This year, government also signed an agricultural deal with the Financial and Commodities Ecosystem (FinComEco) to the tune of US$1,5 billion, touted to directly create 630 000 jobs.

Economist Tinashe Kaduwo said the persisting currency volatility crisis, arising from the value disparities between the United States dollar and the local bond currency, was frustrating investors from repatriating profits to shareholders strewn around the globe.

He contended that Zimbabwe’s “political arena”, struggling to break away from Mugabe’s toxic policies, continued to jinx the southern African country’s efforts to mobilise investment capital.

“Capital always goes where it can be withdrawn without restrictions and challenges. Delta, for example, has been struggling to remit dividends to its foreign shareholders due to foreign currency payments gridlocks.
“The political arena is also to be blamed. This is to some extent the economic cost of a disputed election. Investors will wait till the climate becomes certain,” Kaduwo said.

Over the past six years, Zimbabwe has attracted foreign investment averaging below US$1 billion annually, while Mozambique’s investment inflows peaked to over US$6 billion in 2013, before declining to US$2,3 billion in 2017.

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