ZIMBABWE’s investment climate has deteriorated drastically along with the economy over the past decade. The World Bank Doing Business Report has repeatedly ranked Zimbabwe 158th out of 183 countries. The World Economic Forum’s global competitiveness index has rated Zimbabwe poorly at number 133 out of 134 countries over the past five years.
The poor perception of the country has affected investment inflows over the past decade. United Nations Conference on Trade and Development statistics on inflows into the subregion show Zimbabwe has received the least foreign direct investment (FDI) over the past five years.
Zimbabwe is in the throes of a devastating economic crisis authored by the stolen election of July 31 last year. Ever since, the economy has been in free fall, with the government having no clue how to intervene to stop the bleeding.
Rigging an election is not synonymous with rigging an economy. The so-called ZimAsset economic blueprint is more of a political statement. The greatest mischief arresting the economy is deflation, triggered by the liquidity crunch and a broke government.
Industry has not been spared. Since the elections we have witnessed more and more companies closing down due to absent credit lines and competition from imports. It goes without saying that central to the crisis is the lack of capital. Zimbabwe needs FDI to stimulate growth but the indigenisation and economic empowerment policy, particularly the 51% local ownership threshold, has been a brake on FDI.
Investors have been concerned by the lack of clarity and inconsistencies regarding the interpretation and implementation of the indigenisation policy. For the past five years, they have adopted a wait-and-see attitude. Even new projects approved by the Zimbabwe Investment Authority in the mining, agriculture, manufacturing, tourism and infrastructure sectors have failed to be consummated because of the indigenisation policy.
The other problem is that indigenisation has been rolled out as a one-size-fits-all policy prescription with serious overtones of nationalisation. We in the Movement for Democratic Change (MDC) have long warned that by pursuing a rigid indigenisation drive, the government is scaring away investors and putting a foreclosure on prospects for new capital inflows.
Recently, the government has started to backtrack on its indigenisation policy. This has vindicated the MDC, which has all along called for a review. Any government that takes its people seriously should never craft policies that not only scare away investors but encourage the closure of industries.
Now, the government has clarified its intention to review its empowerment policies by adopting the so-called production-sharing model and joint empowerment investment model, borrowed from the Middle East.
The MDC categorically rejects the purported policy shift as a case of too little too late. We see this move as mere posturing by the corrupt Zanu (PF) government. The MDC does not believe Zanu (PF) is able, or politically willing, to improve the investment climate.
The question that remains is whether the 51% threshold is still in force. The government cannot provide a clear answer.
The other vexing question is: what is production sharing? Our interpretation is that it implies a 100% indigenisation threshold, even worse than the current 51%. So instead of easing the indigenisation and economic empowerment policies, the government is actually tightening the screws.
If the 51% threshold is a foot brake on investment, the new model is an anchor. It is the last nail in the FDI coffin as it does not inspire any confidence whatsoever.
What Zimbabwe needs are investor-friendly policies making it easy for investors to set up shop and contribute to the development of the country. Investors want to control their businesses, and the proposed models do not allow that.
Investors do not base their decisions on explanatory notes; all they want to see is a clear policy and legal framework. Therefore, the proposed model is a damp squib. The MDC alternative cabinet calls for a holistic policy and legal review of all laws that inhibit investment, making sure that they are aligned to the new constitution.
The government still has to address such issues as corruption, which has become a cancer that drives away investors. Serious anticorruption measures need to be put in place and implemented to avoid leakages of investment as experienced over the past years.
The people of Zimbabwe are eagerly waiting for jobs and economic development, which can only happen once there is a truly legitimate government with the mandate of the people. The jury is still out as to when the government will introduce serious political and economic reforms that will put the economy back on the rails, promote FDI and create jobs.
ZimAsset is dead in the water because it cannot attract FDI. To boost economic recovery and Zimbabwe’s long-term growth potential, Zimbabwe needs to attract a significant amount of FDI, rebuild its image and establish itself as a viable and attractive destination.
Key to achieving this goal is ensuring that the country overhauls its institutional and legal frameworks. Efforts by the Zanu (PF) government to hoodwink investors will come to naught until it seriously addresses the perceptions and realities around sovereign risk and security.
• Mashakada is Zimbabwe’s shadow minister for industry and commerce.