THE United States government says Zimbabwe has not yet adopted ‘enough’ policies that are attractive to investors.
Zimbabwe is in desperate need of new investment, which is vital to help it address its US$18 billion debt.
Of the officially recorded amount debt at the end of last year, US$12,8 billion was external, with US$5,2 billion in domestic debt.
According to the US State Department’s new 2023 Investment Climate Statement on Zimbabwe, these levels of debt make international lenders shun the country.
“Zimbabwe presents a challenging, and yet potentially rewarding, investment climate. The country’s skilled labour, high literacy rate, mineral wealth, agricultural potential, bountiful wildlife and natural landscapes present commercial opportunities for US firms,” the State Department said.
“Sectors that currently attract the most investor interest include agriculture (tobacco in particular), mining, energy and tourism. Authorities estimate the economy grew by 4% in 2022 while the International Monetary Fund (IMF) estimates Zimbabwe’s economy grew by 3,5% in 2021,” the report said.
It added that Zimbabwe’s ‘Open for Business’ policy adopted in 2018 to attract foreign direct investment (FDI) was yet to reap tangible results.
“For example, the GOZ (government of Zimbabwe) set an ambitious US$12 billion target for the mining sector by the end of 2023 and is calling for increased investment in renewable energy,” the State Department said.
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“Despite these pronouncements, the Zimbabwe government has not implemented enough investor-friendly policies to attract robust investment and corruption remains a major concern. FDI into Zimbabwe remains below regional peers. Debt also hinders Zimbabwe’s economic growth and development.”
The department said Zimbabwe’s debt now made up 66% of the country’s gross domestic product. “The country’s high external debt (public and private) limits its ability to access official development assistance at concessional,” the report said.
International financial institutions and private lenders have been hesitant to lend to the government due to perceived high-country risk. The country’s infrastructure and social needs remain greatly underfunded.
The department said lack of policy consistency was also a hindrance to implementing investor friendly policies.
“Zimbabwe’s incentives to attract FDI include tax breaks for new investment by foreign and domestic companies and making capital expenditures on new factories, machinery and improvements fully tax deductible. The government waives import taxes and surtaxes on capital equipment,” it said.
“It has made gradual progress in improving the business environment by reducing regulatory costs, but policy inconsistency and weak institutions have continued to frustrate businesses.”
Another area of concern mentioned in the statement is corruption. It said authorities were yet to make arrests concerning the four-part documentary series released by the Al Jazeera that ran from March to April, exposing illicit gold activities.
“Corruption remains rife and there is little protection of property rights, particularly with respect to agricultural land,” the department said.
The report comes after the US government named Zimbabwe, among African countries whose gold is risky for trade as it is allegedly used in illicit activities that include sanctions evasion and money laundering.
The department said historically, the government had committed to protect property rights but had also expropriated land without compensation. Targeted sanctions, mostly financially imposed by the US government, are currently on 60 individuals and 39 entities from Zimbabwe.
“The US government imposed these sanctions because of the actions and policies of certain members of the Government of Zimbabwe and other persons that undermine democratic institutions or processes in Zimbabwe, violate human rights, or facilitate corruption,” it said.
“US companies can do business with Zimbabwean individuals and companies not on the specially designated nationals (SDN) list.”
However, the Zimbabwe Investment and Development Agency (Zida) said it has made efforts to improve the overall business environment by increasing licence tenures and reducing their requirements.
“In addition, there has been a deliberate move by the Agency to create transparency in the country’s investment horizon — by sharing detailed investment statistics and data on all its digital platforms,” Zida told the Independent.
“The agency’s performance, which reflects a significant proportion of the country’s reported investment flows, have been shared publicly since March 2023, across local, regional and international platforms.
“While the values reported may not tally with other agencies — globally, the reported statistics and data are a reflection of values captured and verified through ZIDA’s monitoring and evaluation exercises and investor after care strategies.”
In 2022, ZIDA said it issued licences to investors from 22 countries, including one investor from the United States of America.
“In the first half of 2023, ZIDA managed to draw investors from 32 countries including five from the United States of America. The total projected investment value for the first half of the year of 2023 was reported at US$1,83 billion with US$ 166 million being investment from US based investors.”
