HARARE - Insurance giant Old Mutual says Zimbabwe must put the economy at the top of the agenda and correct its deficiencies in the corruption index and ease of doing business rankings’ criteria for the country to achieve growth.
“The Zimbabwean economy remains a hub of potential growth as the right policies are not being applied to critical sectors of the economy. The policy inefficiencies, inconsistency and corruption in critical arms of government continue to labour the economy in achieving reasonable economic strides,” Old Mutual said on its research note on Zimbabwe.
According to Transparency International in its 2015 corruption index, Zimbabwe ranked 150 out of 167 countries. This compares unfavourably with regional peers Botswana (28), South Africa (61), Zambia (76), Mozambique (112) and Malawi (112).
When compared to other countries in terms of ease of doing business, Zimbabwe ranked 157 out of 189. Over the past few years the country has struggled to implement measures aimed at reducing the number of days to register a company from the current 90 days costing up to over $1 500.
Market experts, however, warned that with traditional powerhouses such as the United States, Britain and Europe shying away from emerging markets, Zimbabwe will have to make significant strides in implementing good policies in order to lure investment.
Old Mutual said it was imperative for Zimbabwe to significantly improve its corruption and ease of doing business indexes for the country to gather foreign direct investment — necessary for economic recovery.
“This is because Zimbabwe cannot, in the short to medium term, fund its economic recovery from internal resources because of its limited fiscal space,” the insurance giant warned.
Old Mutual noted that the alternative option is to approach multi-lateral institutions for credit but this was premised on the ability of the country to service debt arrears worth $1, 8 billion by April 2016.
But developments on the ground suggest that this may not be as viable a solution as initially thought due to depressed aggregate demand and the impending drought.
“The Finance minister Patrick Chinamasa suggested funding the payment of these arrears through refinancing from regional banks. However, the inability of the government to pay sections of the civil service on time and threats of civil servant strikes may not auger well for granting of these loans.
“The commitment by the government to pay bonuses to civil servants despite fiscal strain casts doubt over the government’s sincerity in prioritising resource allocation as well,” Old Mutual added.
Several developed countries such as Australia, Britain, Germany and France among others have also expressed concern over Zimbabwe’s indigenisation policy, saying the legislation was fraught with inconsistences.
“Policy consistency on the implementation of the Act is fundamental to the ability of Zimbabwe to attract much needed investment. While such efforts are commended, we remain concerned that some elements of the guidelines need further elaboration. We, therefore, welcome the Zimbabwean government’s plans to consult further with the business community,” the British embassy said last month after fresh amendments to the indigenisation regulations.
Zimbabwe introduced a black empowerment law in 2008 that compels foreign businesses to cede 51 percent of their shareholdings to locals, but investors are wary of these regulations and have so far given the southern African nation a wide berth.
This comes as bickering among factions in the post-congress Zanu PF that are jostling to succeed President Robert Mugabe has thrown spanners into the government’s programmes, thereby dealing a hammer blow to on-going efforts meant to rescue the country’s economy from the abyss.
Previously seen as the continent’s most promising economy, Zimbabwe has been thrust into the throes of a crisis of major proportions.
At the epicentre of it is a deepening liquidity crunch, caused in part by collapsing industries and the absence of meaningful external support, especially by way of balance of payments support from multilateral lenders.
Nothing brings home the gravity of the situation than Treasury’s failure to pay civil servants on time.
Economic experts, however, see the factional fights in the ruling party as distracting its leadership from focusing on bread and butter issues.
To all intents and purposes, Mugabe has been left all alone to deal with the crisis, as members of his inner circle expend their energies on fortifying their political bases behind his back.
The succession conundrum that resulted in the dismissal of his former number two, Joice Mujuru, and her allies from both government and Zanu PF for allegedly attempting to stage a palace coup on the incumbent, or plotting to assassinate him, has overshadowed efforts to mend the country’s economy.