AS we report in our lead story today, the Chinese have expressed outrage at the Zimbabwean government following a siege laid on one of its investors in the country amid complaints around the rule of law, property rights, political bullying, criminality and corruption.
Already Zimbabwe ranks very low in the investor protection index, according to the Ease of Business database. The ease of doing business index was created by Simeon Djankov at the World Bank Group. Higher rankings (a low numerical value) indicate better, usually simpler, regulations for businesses and stronger protections of property rights, while the opposite similarly applies.
Because foreign investment has higher risk than domestic investment, modern investment laws play a very important role in protecting investors and in host countries. This particularly applies when investors are setting up their business in countries which may have poor political or economic system, ineffective administration, bureaucratic malfunctions and corruption. Apart from political risk and expropriation problems, investors also face other difficulties. Foreign investors have over years been facing numerous risks in Zimbabwe.
Even under the so-called new dispensation, the situation has not changed as the rule of law and property rights continue to be violated with impunity. The clash between the Chinese embassy officials and Zimbabwe authorities this week over investment protection further demonstrates what happens when a country allows lawlessness to spin out of control.
The situation which arose tensed up the two countries’ diplomatic relations, while testing their strength. Harare considers Beijing its all-weather friend and strategic partner, but the Chinese this week openly questioned that posture after one of its investors was put under siege by local politicians and their supporters without protection. Due to lack of protection from political interference, corruption and bullying, Chinese company Sunny Yi Feng Tiles Zimbabwe, which has invested US$50 million into its Norton-based tile production factory, has decided to abandon its expansion plans.
The Chinese embassy in Harare engaged government over the issue and demanded protection of its investors, more so considering the two countries’ cordial relations. China, which financially keeps Harare afloat, has various companies in Zimbabwe involved in mining, energy, construction, infrastructural development and manufacturing, among other economic sectors. A Zimbabwe ministerial delegation consisting of Information minister Monica Mutsvangwa, Industry and Commerce minister Nqobizitha Mangaliso Ndlovu and Justice minister Ziyambi Ziyambi, as well as Information permanent secretary Nick Mangwana toured the company on Wednesday under pressure from Beijing to protect its investors.
Sunny Yi Feng — which employees 1 193 local workers — started manufacturing tiles in May. The company produces between 30 000 and 35 000 square metres of tiles per day, exporting 70% of the tiles to Sadc countries, including South Africa, Malawi, Zambia, Botswana, DRC and Mozambique. This situation shows government needs to act and do the right thing: protect all investors.