HomeEditorial CommentRestore sanity to lure FDI

Restore sanity to lure FDI

Faith Zaba

MACHETE-wielding gangs, referred to as maShurugwi, have been unleashing a reign of terror, especially in gold mining areas, causing deaths and injuries. The new low is threatening the gold mining industry and further tainting the country’s already battered global reputation.

Reports of small-scale miners, gold mines and ordinary citizens across the country being attacked by gangs wielding machetes, knobkerries and guns are spooking foreign investors. Hopes of attracting meaningful foreign direct investment (FDI) are being dashed, after reports that the gangs have invaded major cities across the country, including Harare, terrorising citizens.

There have been several reports over the past few days of violent attacks by the gangs on Harare residents, particularly foreign currency dealers. Since assuming office following a coup that toppled the long-serving leader Robert Mugabe, whose corrosive and hawkish policies scared away investors, President Emmerson Mnangagwa has pledged to attract capital, but with little success.

Economists have attributed the limited investment to lack of investor confidence, largely stemming from, inter alia, government’s policy inconsistencies, as well as shaky political and economic climate.

The rebel-like menacing and marauding maShurugwi are worsening the situation by conjuring up an image of a nation where lawlessness is deified.
Zimbabwe has already been battling to attract FDI, as it is considered a hostile destination.

The European Union and China, in stories carried in this edition, insisted Zimbabwe needs to implement wide-ranging political and economic reforms to convince investors.

EU head of delegation Timmo Olkkonen said: “Of late there have been less contact to our office from the European investors. I don’t think it’s a positive sign. They want to have transparency. They want to have a level playing field and they want to have security of tenure.”

The government needs to do a lot more if it is to compete for the limited FDI and also to spruce up its battered image. Below are some of the areas needing urgent address:

l Uphold the rule of law. It is critical that this happens if the country is serious about attracting meaningful foreign investment.

No investor wants to pour money into a country where violent gangsters are a law unto themselves;

l Property rights must be respected. To show that it is committed to respecting property rights, the government needs to compensate the farmers, who lost their land during the land invasions. It also has to use globally accepted valuation methods.

To build confidence, the leasehold tenure for commercial farms should be bankable and transferable;

l It is of paramount importance that the government clears external foreign debt, now well over US$9 billion so as to unlock foreign funding and also be in good books with multilateral institutions;

l Policy consistency is critical. FDI has to do with establishing hard assets, with a medium to long term view.

Investors want the assurance that policies are stable and predictable so that they can assume proper risk appetites, protect their capital and only worry about market and systematic risks which they can control.

We cannot have ministers announcing policy positions that are reversed by their boss for political gain;

l The power supply situation needs to be stable and reliable;

l No investor wants to invest in a country with high levels of corruption.

The demand for kickbacks has been a big FDI deterrent. Nigerian billion Aliko Dangote cited corruption as the biggest issue that deterred him from setting up his cement plant in Zimbabwe.

The Chinese have also highlighted this issue in discussions with government;

l The monetary policy needs to ensure that investors can repatriate their dividends in forex.

Investors expect their assets to generate returns and if they cannot enjoy them where and when they choose, it defeats the whole purpose of investing:
l The ease of doing business must improve. Investors will go where it is more favourable in terms of ease of doing business.

The one stop investment shop, which has been on the cards from 2010 must be established; and

l Lastly the issue of political legitimacy needs to be resolved, as it speaks of political stability.
Investors prefer stable environments that focus on creating an enabling business environment.

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