Government must take forex repatriation issues seriously

WHEN shareholders establish businesses, they want to make profits and earn dividends. This is also the reason why investors inject capital in existing businesses. Dividends, where they are declared, are a big deal.

They are the endgame of a long process of investing, running a business and making a profit.

Dividends are the funds that investors pocket after this long process; they determine their way of living.

But in a globalised world where capital is flowing across countries, recipient economies must put their act together.

There are very clear rules of the game that determine whether a country receives investment or not.

The first and most pertinent is a country’s ability to demonstrate that when foreign direct investment flows, it is safe.

As has been seen through recent investments in mining, when fund managers make a decision to inject capital it is usually in the billions of United States dollars.

This leads to the second reason — should things go wrong —investors must be able to repatriate their money home without hitches.

Then of course in good times they want to remit dividends to their shareholders.

Together with several other factors, tax laws and the cost of doing business form the basis on which investors decide if capital would be directed to Mauritius, Zimbabwe or Somalia, in Africa’s case.

They have so many options except in a few cases where an investment destination is offering a unique and special resource.

While there has been some improvement in the foreign currency situation, a very important foreign investor has said repatriating dividends has been a nightmare in the past 14 months.

Caledonia Mining Corporation, one of the most consistent investors into Zimbabwe, has declared about US$1,5 million in dividends. But executives are worried that it may take ages for foreign shareholders to get their money.

That would be unfair for owners of a firm that has kept faith in Zimbabwe over many years and controls Blanket Gold Mine, which employs many Zimbabweans.

There should be many firms in the same predicament.

The trouble is, when big firms start making their point known, the investment community listens to their stories.

Consequently, investments previously planned for Zimbabwe will be sent to other destinations where the climate is hospitable. Zimbabwe is not the only country with gold for instance, or rich wildlife. Investors have options.

The Reserve Bank of Zimbabwe, the Ministry of Finance and the President’s Office should, therefore, take Caledonia’s point seriously.

This is the only way Zimbabwe can guarantee sustained investment inflows in the future.