Omega Ukama 
WHILE the government has made significant progress with regards the ease of doing business in Zimbabwe, economic experts say policy risk remains a major hindrance for foreign direct investment (FDI).
This comes as the United Nations, in its recently published investment report, has said FDI into the southern African nation amounted to US$166 million in 2021, down from US$194 million in 2020 and US$745 million in 2018.
Speaking to The Financial Gazette this week, the experts said inconsistent policies did not only weaken the economy, but also had the effect of dampening investor confidence.
Investment analyst at a local securities firm, IH Securities, Lloyd Mlotshwa said the country had established a reputation as an “unpredictable policy environment”.
“In our foreign investment roadshows, one of the first questions always asked regardless of sector is around policy risk … it is difficult to commit large tickets of capital without the assurance that the rules governing your investment will remain the same for any prolonged period of time,” Mlotshwa said.
He said the country still had structural issues in its foreign currency policy that “must be urgently attended to”.
“In the current environment it is hard to safeguard a foreign investment unless it is made into a 100 percent export sector, which effectively means you have invested US$ to earn the same and do not have to engage deeply into the domestic foreign exchange market and navigate various effective rates and repatriation queues which may decimate your real earnings.
“There must be a clear understanding that Zimbabwe is a competing investment destination, we compete for capital with other African countries which have stable policy environments and functioning capital markets for foreign exchange and debt. Until we mirror their value proposition by creating a stable and functioning domestic environment ourselves, it will always be difficult to attract meaningful FDI. This must become a political and administrative objective, policy alignment across all aspects of government,” he said.
On his part, research partner at local investment bank Morgan & Co, Batanai Matsika, said the exit of major multinational banks like Stanchart and Barclays correlates with the decline in FDI flows into Zimbabwe.
“The exit of such institutions is negative from a foreign transactions/international settlements point of view. Further, it demonstrates waning confidence in Zimbabwe as an investment destination.”
He said authorities should expose corruption to public scrutiny: “Zimbabwe needs to do all the things every emerging nation has to do to attract foreign and regional partners to not just grow but survive in the new global economy”.
He added that the country should focus on its competitive advantages.
“There is no Silicon Valley in Zimbabwe, but agriculture can grow the economy and mining can generate the cash. The advantage is that Zimbabwe has arable land and vast mineral resources – most of which are unexplored.
“Publicly traded companies in Zimbabwe should improve on investor relations. ZSE and VFEX listed companies can increase their visibility through aggressive investor relations strategies and campaigns that are aimed at communicating the investment case in the business and more broadly in the general economy.”
Finance minister Mthuli Ncube said the government was in the process of establishing an international financial services centre in Victoria Falls to develop the financial services sector, through provision of opportunities for global investment.
“This is expected to attract foreign direct investment, domestic investment, and export development in the country,” the minister said in his 2022 budget statement.
The government has also set up a project preparation development fund, which Ncube said was a critical avenue to facilitate project preparation activities for implementing agencies.
“A pipeline of developed projects ready for the market or government funding aids in quickening decision making on investment prioritisation and funding.
“The Zimbabwe Investment Development Agency will also complement government efforts on this programme,” the minister said.
In previous years, progress was made in improving the investment environment, resulting in the country being ranked 140 in 2020 from 155 in 2019 under the World Bank ease of doing business ranking. However, the process lost momentum since the advent of Covid-19.
Starting this year, Ncube said the government will revive the multi-sectoral engagement with a view of eliminating obstacles to the business environment in the country.
“This includes reviewing and aligning investment regulations and policy frameworks in line with regional and international best practice.
“Furthermore, the government seeks to advance the use of public-private-partnerships (PPPs) as one of the major sources of finance for infrastructure especially for projects with high economic and social impact.”
To date, projects worth US$2 billion in the sectors of mining, tourism, transport and energy have been processed under the PPP arrangements and are at various stages of implementation, according to the minister..
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