HomeLocal NewsZim ranks lowly on Fitch political, economic risk

Zim ranks lowly on Fitch political, economic risk

BY KUDZAI KUWAZA

PROMINENT   American market research firm, Fitch Solutions, has ranked Zimbabwe as a country that poses the highest political and economic risk in Southern Africa, a major indicator that points to dim investment prospects.

Zimbabwe is locked in the throes of a deepening economic crisis characterised by currency volatility, policy inconsistency, plummeting foreign direct investment (FDI) and rising inflation.

The report comes at a time when political violence is on an increase with the recent killing of a political supporter at the Citizens Coalition for Change (CCC) rally held in Kwekwe last weekend.

In its February 2022 Southern Africa Outlook, Zimbabwe scored the lowest on both the economic and political stability indexes in the region, both in the long and short-terms.

The country risk index by the think-tank scores countries on a scale of 0-100 in which a higher score equals to lower risk.

Zimbabwe scored the lowest with 39,4 on the short-term political risk index, which is well below the regional average of 59,9. Mauritius scored the highest with a score of 72,3.

Zimbabwe also anchored the short-term economic risk index with just 32,7, trailing the regional average of 44,5.

Botswana had the highest score in this category at 61,5.

On the long-term political index, Zimbabwe is at the bottom of the pile with 42,8, which is below the regional average of 58,2.

Mauritius scored the highest in this category with 79,1. Zimbabwe also lags behind its regional counterparts on the long-term economic index scoring a measly 24,8, which is well below the regional average of 42,4.

Zimbabwe is considered the most risky country in the region on the operational and country risk indexes.

The country scored 30,1 on the operational risk index, which is a far cry from the regional average of 42,4.

Zimbabwe scored 33,3 on the country risk index, which is below the regional average of 48,3.

Last year, the United Nations Conference on Trade and Development (UNCTAD) ranked Zimbabwe bottom on the Trade Openness Index.

Seasoned political scientist Eldred Masunungure said the findings by Fitch Solutions are in stark contrast to the rosy picture painted by President Emmerson Mnangagwa’s government of an economy that is on a recovery path.

“The discrepancy between what the government is saying about being open for business and successful re-engagement and the findings of Fitch Solutions shows that there is something wrong,” he said.

“What the think-tank has said is a confirmation of a trend that has been prevalent for more than two decades.

“It has to be taken seriously because this is coming from one of the countries in which we are looking for investment,” Masunungure added.

He said the findings on the country’s risk profile are a major cause of concern, which should give the government sleepless nights.

“Investors are keen to put their money where there is stability and where the risk profile is reasonably low,” Masunungure said.

“Zimbabwe has the highest risk profile in the region and this is very scary.”

FDI have been on a downward spiral since Mnangagwa came into power in 2017. FDI has plummeted from US$717,1 million in 2018 to about US$150 million last year amid widespread concerns of a hostile operating environment, which has repelled investment.

The Covid-19 pandemic also had a huge impact on investment inflows, not only in Zimbabwe but worldwide.

A survey carried out by the ZimbabwAe National Chamber of Commerce (ZNCC) last year shows  that more than three quarters of businesses across the economy noted that the ease of doing business in Zimbabwe is unfavourable as a result of policy inconsistencies and limited financing.

Respondents were asked to indicate the challenges weighing on the ease of doing business in the country.

According to survey results, the major challenges related to limited availability of credit (91%), an unpredictable policy landscape (82%), multiple licence requirements (73%) and red tape in public offices (67%), among others.

It also noted that despite the establishment of the Zimbabwe Investment and Development Agency (Zida), red tape and multiple licences remain major inhibitors to doing business in Zimbabwe.

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