LAST week’s launch of the investors’ handbook 101 by Treasury boss Mthuli Ncube as well as the launch of the Zimbabwe Investment Development Authority (Zida) by President Emmerson Mnangagwa, though commendable, would be exercises in futility if government does not entrench property rights, among other much-needed sweeping reforms crucial towards attracting capital.
With Zimbabwe gripped by an intractable economic maelstrom, the southern African country has struggled to attract meaningful foreign direct investment (FDI) largely due to its hostile policies which have spooked investors.
In the face of dwindling investment figures, Mnangagwa’s administration launched the investors’ handbook and Zida last week in a bid to lure capital into the country.
However, market watchers contend that investors, who are spoilt for choice, continue to shun Zimbabwe as a hostile destination due to its toxic investment policies, a weak property rights framework, deteriorating human rights situation and an unstable political environment, among other drawbacks.
Rampant corruption, which has become commonplace in Zimbabwe, also repels capital.
Coupled with that, experts who track the movement of capital across the globe also point out other key indicators crucial towards attracting investment namely inflation levels and the exchange rate. In simple terms, the ease and cost of doing business in any country is either a pull or push factor.
In July, Zimbabwe’s inflation soared to more than 800% the highest rate of inflation since 2009. As a result, Treasury and the central bank, through a variety of fiscal and monetary tools moved to rein in the volatile currency crisis by introducing the weekly foreign currency auction system. At the inception of the weekly foreign currency auction, the exchange rate relatively stabilised at US$1:ZW$51 from the prior rate of US$1:ZW25 when the government enforced a fixed exchange rate.
At the core of Zimbabwe’s dilemma to attract capital, critics have debatably singled out an unstable macroeconomic environment, compounded by the protracted political crisis.
Economist Tawanda Purazeni contends that beyond the rhetoric of launching impressive policy documents, the government should cultivate a culture of policy consistency, which is a key ingredient towards luring investment.
This year, in an unpopular policy move that wiped close to US$300 million on the Zimbabwe Stock Exchange (ZSE) government, for an indefinite period, suspended trading on the local bourse while annulling the fungibility of key counters such as Old Mutual, Seed Co and PPC.
At the time the decision was made, the government said it was meant to curtail the rampant manipulation of the free falling Zimbabwe dollar, investors expressed alarm at the move which they said was an onslaught on investment.
Purazeni postulated that an environmental mix of political stability and policy consistency, would mend Zimbabwe’s battered investment image.
“The fundamentals should be fine-tuned and aligned to create an environment conducive for investment. The major determinants are the economic and political environment. As a nation we should not flip-flop with our economic policies. Sound economic doctrines might be there on draft or policies, but they should be actioned consistently and persistently,” Purazeni said.
“What we have seen over the years is at variance with what is on paper and on the ground. A stable political environment is also key. Disputed elections since the turn of the millennium are doing us a disservice on the investment front. The nation is always on crisis mode hence, a deterrent on long-term investment in the country.”
Mnangagwa’s tenure at the helm has been a carry-over of former president Robert Mugabe’s disregard for property rights which culminated in the violent land seizures in 2000.
Though Mnangagwa has committed to mobilise US$3,5 as compensation for mostly white farmers who lost their land during the chaotic land reform exercise of 2000, the continued seizure of farms largely to settle political scores has done little to change investor sentiment on Zimbabwe. Pointedly, officials within Zanu PF have crossed swords as they tussle to grab privately-owned Gaika gold mine in the Midlands province.
Within the investment community, lingering fears over government’s disregard for property rights and policy flip flopping still loom large.
Analyst Dumisani Nkomo advances the argument that Zimbabwe’s investment trends will continue to plummet, if the government does not adhere to policy consistency amid a flagrant abuse of human rights.
“We need policy consistency, respect for human rights and a stable political environment and a clear national vision,” Nkomo prescribed.
Ironically, Mnangagwa, espousing his national vision on a number of occasions has struck the right chords, emphasising that “Zimbabwe Is Open for Business.” However, his administration has lacked the political will and clout to translate rhetoric into tangible results, evidenced by failure to roll out sweeping political and economic reforms perceived key towards sprucing up Zimbabwe’s battered investment climate.
The Mnangagwa administration has displayed a propensity of shooting itself in the foot, particularly when dealing with dissent. The abduction of opposition activists by suspected state security agents and the narrowing of the democratic space are factors that unnerve investors.
There are other inherent structural issues namely revamping the country’s infrastructure such as energy and Information Communication Technology(ICT) facilities that would also be crucial towards attracting capital.
Considered as key economic enablers, the Mnangagwa administration should ensure that Zimbabwe is energy self-sufficient and has adequate and affordable water reserves critical towards sustaining industrial operations.
Once the right reforms are put in place, Zimbabwe, endowed with a lucrative natural resource treasure trove and a skilled human resources base can easily follow the path of the Asian Tigers and Rwanda, in terms of attracting investment.