Zim FDI remains depressed

FOREIGN Direct Investment (FDI) flows into Zimbabwe increased marginally by 3,25 percent to $400 million last year from $387 million in 2011, according to the United Nations Conference on Trade and Development (Unctad).

However, analysts say the FDI remains depressed as the country continues to struggle in attracting investors.

Unctad’s World Investment Report released on Wednesday said FDI contributed 17,7 percent to the country’s total gross domestic product (GDP) during the period under review.

Zimbabwe targets a 25 percent FDI contribution to GDP by 2015.

Although there has been a steady increase of investment into the southern African country — gathering pieces from a decade-long economic meltdown — from as low as $60 million in 2009, Zimbabwe continues to lag behind its neighbours in the region who received a greater share of the $50 billion FDI pumped into Africa in 2012.

South Africa, the continent’s largest economy, received $4,6 billion FDI in the period while Mozambique got $5,2 billion.

Analysts attribute Zimbabwe’s dismal performance in attracting foreign investment to its indigenisation policy coupled with escalating perceived country risk.

The country’s empowerment law compels foreign-owned firms to cede 51 percent to black locals.

The economists argue that a clear, consistent and transparent policy taking into account the fragility of the economy is critical.

Thabani Dliwayo, a director in the Economic Planning and Investment Promotion ministry, said Zimbabwe’s major constraint in attracting investment was its deteriorating infrastructure.

“It is noted that the economy is highly illiquid and as a result there is no long-term financing to investors,” he said.

Apart from the indigenisation policy, analysts say 2012 was also marred by policy uncertainty.
“This, unsurprisingly inhibited investor confidence at a time the economy was, and continues to be, in dire need of foreign capital.

“It is worth noting that policymakers could not agree on the implementation (modalities) of the policy, causing jitters in the market,” said an economist with a local bank who preferred anonymity.

But despite investor scepticism, the economy, which suffered almost 50 percent decline in GDP in the decade to 2008, has grown in the past four years.

The economy grew by 4,5 percent in 2009, 8,1 percent in 2010, 9,3 percent in 2011, 4,4 percent in 2012 while Finance minister Tendai Biti projected a 5,4 percent growth this year.

The anticipated growth is anchored on increased output in agriculture (tobacco, cotton, sugar and soyabeans) and mineral exports — mainly constituted by diamonds, gold and platinum.

However, the International Monetary Fund (IMF) sees lower growth this year and has put the economic growth rate at four percent arguing FDI remains subdued.

The IMF cited significant structural impediments, the accelerated indigenisation in mining and uncertainties about ownership in the sector.

The multilateral lender also cited political disturbances, export price declines, higher than anticipated fuel prices, reversal of capital flows and bank instabilities.

After a decade of instability, Zimbabwe possesses unlimited investment potential in various sectors including manufacturing mining, agriculture, tourism, mining, infrastructure, ICT and transport.

 

    Comments (1)

    Capital is coward! Who wants to invest in this hectic business environment where with high costs of doing business? Labour laws are inflexible, wages too high (representing as much as 60% for some companies), utilities such as water and electricity are not only expensive but erratic. You should notice the trend of toll manufacturing that is taking place as we speak. Toll manufacturing is whereby local companies arrange with other companies outside Zimbabwe to produce goods on their behalf and then import them here in Zimbabwe. This is happening, Dairibord has recently done that with a South African company, to produce low cost on their behalf. But GUESS WHAT - it is catastrophic, it kills jobs. You will also realize Dairibord has also embarked on a rationalisation exercise which partly involves retrenching employees. In other words - Dairibord has exported jobs to South Africa. This is how bad our business environment is at the moment. Also look at how exports have been overtaken by imports. The first four months of the year have seen a huge trade deficit of $1.9 billion. This can only imply that a massive de-industrialisation is taking place. The Industrialisation Development Policy which was put in place to revive the industry is not being implemented, and the road we are travelling in at the moment is getting us closer to Manufacturing Sector Armageddon

    Clemence Machadu - 1 July 2013

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