PRESIDENT Emmerson Mnangagwa’s recent jaunt to Japan in search of elusive investment has once again brought to the fore the futility of his numerous trips outside the country without introducing political and economic reforms at home first.
Mnangagwa travelled to Japan for the Tokyo International Conference on African Development (Ticad) last week in an effort to scout for investment for the country. However, his 15-minute meeting with Japanese Prime Minister Shinzo Abe gave him a quick and sharp reality check.
“At the outset, Prime Minister Abe mentioned the importance of institutional reforms for promoting business, as discussed at the Ticad7, and stated that, ‘We hope that reform will be promoted and democratisation will be advanced in Zimbabwe under the leadership of President Mnangagwa’,” the Japanese Foreign ministry said in a statement after the meeting.
Abe also told Mnangagwa to improve the business environment for the promotion of trade and investment between Japan and Zimbabwe.
Within a quarter of an hour, Abe had aptly summed up to Mnangagwa the reasons why Zimbabwe continues to be a pariah state when it comes to luring investors and trade.
Mnangagwa travelled to Japan shortly after a brutal crackdown by police on protests organised by the main opposition MDC. The protests were against the deteriorating standards of living characterised by skyrocketing prices of goods and services at a time wages have been severely eroded by inflation and prolonged power cuts.
The beatings and arrests by police are in stark contrast to Mnangagwa’s electoral promise to ensure the upholding of democratic tenets.
Condemnation of the crackdown on protests and the violation of citizens’ constitutional rights has come from, among others, Australia, United States and the European Union — the very countries Zimbabwe is scouting investment from to revive the economy which is mired in the doldrums.
Zimbabwe’s economic crisis has been characterised by a debilitating liquidity crunch, runaway inflation, foreign currency shortage, low capacity utilisation, daily power cuts lasting up to 18 hours and company closures.
Investors are complaining about the adverse business environment prevailing in the country characterised by policy inconsistency and high operating costs. Among those who have expressed frustration are investors from China and they mirror the major obstacles investors in general face when operating in Zimbabwe.
Tian Ze Tobacco Company general manager Ye Hai, who is also chairperson of the Chamber of Chinese Enterprises in Zimbabwe — which represents 80 Chinese companies operating in the country — and tabled the challenges they are facing in Zimbabwe’s hostile business environment in an interview with this paper last month.
“The other problems we are facing are hinged around two areas, namely the tax policy and policy inconsistency. Sometimes government makes a policy and tomorrow the policy is changed. This makes it difficult to do business as it increases the cost of doing business,” Ye said.
“The other issue relates to the exchange control regulations. We are an exporting company; we hope government can come up with stable policies around exchange regulations so that it becomes easier for us to plan. To put this in context, Zimra introduced new tax brackets which came into effect on August 1 under Pay As You Earn (PAYE).
“We noticed that using that tax regime, our staff is going to lose 25% of their salary compared to last month. For the company to keep the staff, we need to pay more to our workers but this increases the cost of doing business in Zimbabwe. This applies to most companies doing business in the country.”
Ye said the other problems Chinese businesses in Zimbabwe are experiencing include the decision by the government to ban the multi-currency regime and make the Zimbabwe dollar the sole legal tender through Statutory Instrument 142 of 2019.
“The re-introduction of the Zimbabwean dollar really affected our operations. For us (Tian Ze) as an exporting company we bring foreign currency into the country. When money comes in, it is changed into the Zimbabwean dollar. If you do not use that money in time, it loses its value by the day and this impacts on planning,” he said.
“The situation is worse for our members who are not exporting. With the exchange rate going up, most companies suffer from workers who are now demanding to be paid more. As a business, it is now difficult to survive here in Zimbabwe.”
The investment deficit in the country cannot be addressed by Mnangagwa travelling across the globe, but by meaningful reforms, according to business consultant Simon Kayereka.
“The President can fly to any conference and meet up with investors. This is not new. What counts is how many of these meetings have brought about anything meaningful?” Kayereka asked.
“(Former president Robert) Mugabe did the same and we have nothing to show for it. What the country needs is substantive reforms including getting Zesa working again, stabilising the fuel supply and getting the currency reforms right by attending to fundamentals rather than floating bond notes.
“We also need major political reforms and policy consistency. Investors do not want uncertainty, unpredictability and policies that do not offer protection for their investments.”
The revelation by officials from the Ministry of Finance this week that a national US$5,2 billion coal project — spearheaded by Verify Engineering and announced by Mnangagwa last year — has failed to take off, speaks volumes of the country’s unattractive investment profile. It has failed to take off due to the failure by government to meet the conditions of the prospective investors.
Ministry officials told parliament on Monday that the project which could reduce the current power deficit has been hampered by government’s failure to fund a feasibility study as well as the failure to guarantee that investors will repatriate the money they would have invested.
Economist Prosper Chitambara believes that once government gets the various economic enablers on track, investors will come flocking in.
“The best way to attract investment is to implement reforms at home,” Chitambara pointed out. “If they sort out the enablers, the investors will come and they will not need to go looking for investment.”