AFRICAN insurance group Hollard Companhia de Seguros says it has been eyeing investing in Zimbabwe for close to two decades, but tight capital controls have been forcing it to delay its entry, a top company official said.
Hollard director of agricultural insurance Israel Muchena told businessdigest on the sidelines of the Insurance Institute of Zimbabwe (IIZ) annual conference that Zimbabwe is a landing stage to penetrate the rest of Africa given its knowledge and expertise.
Muchena pointed out that the group, which specialises in general and life insurance, said lack of repatriation mechanisms has stood as a stumbling block over the years, but is still keen to invest in the near future.
Zimbabwe has a plethora of exchange and capital controls. Under these exchange controls, private individuals, traders and companies must seek permission from the government to buy, sell and hold foreign currencies.
“Hollard has been interested in Zimbabwe since 2001. The interest emanates from the fact that most of our skills in other countries such as south Africa and outside South Africa emanate from Zimbabwe. Our review of the African markets has shown that Zimbabwe is one of the key leading markets in terms of skills innovation, product development experience and knowledge thus a good landing stage for us to penetrate the whole of Africa,” Muchena said.
“The biggest challenge we have now is that any company which is willing to invest in Zimbabwe is asking if I invest, what guarantees do I have that I can repatriate my profit? Some of us who are in the business of developing these business cases, we can’t demonstrate how, say, Hollard Zimbabwe will repatriate its money. For instance, let’s assume that we have a problem in SA and we want to use that money.”
While he said he understood the need to have tight capital controls, Muchena said this was shutting out not only Hollard, but also other investors.
Muchena said the free flow of capital was paramount, saying Hollard was looking at long-term investments and the amount it invested would largely depend on the offer on the table.
“We are not trying to invest in one year and then take out the money in the next year. For example, I can tell you that Hollard hasn’t taken a single cent since 2001 as it keeps ploughing back into business. We want to invest in a market where we are sure we can repatriate our money if the need arises,” he said.
“As we all know, the reinsurance market has been very strong in Zimbabwe for many years and many of these insurers in Zimbabwe have been involved in doing business on the African continent starting from the 1980s following the Zimbabwe Reinsurance Corporation and now most are locally established.”
Foreign investors on the Zimbabwe Stock Exchange have also struggled over the years when it comes to repatriation of both principal investments, capital gains and dividends. This has seen the local bourse failing to attract new investors.
This year, the central bank issued an exchange control regulation that allows commercial banks to prioritise 15% of all foreign payments towards disinvestment by portfolio investors on the ZSE.