Financial Gazette (Harare)
Munyaradzi Mugowo
18 June 2009
Harare — SOUTH Africa and Zimbabwe will this month seal a new bilateral investment promotion and protection agreement (BIPPA) outlining new measures that could help the country secure fresh capital from Africa's largest economy following a call by the Business Unit South Africa (BUSA) for more secure guarantees in April.
South African business mogul and BUSA president Patrice Motsepe led a 22-strong member delegation early April in meetings with President Robert Mugabe, Finance Minister Tendai Biti, and local business leaders and their industry associations in Harare.
At the end of the one-day mission, Motsepe described BUSA's discussions with government officials as "frank" and "very good" in terms of the inclusive government's commitment to creating an investment environment that "builds trust."
BUSA is South Africa's premier business association.
The negotiations that followed focused mainly on investment guarantees and instruments of property rights protection, resulting in the drafting of the accord.
Mutize Sibanda, the permanent secretary in the Ministry of Economic Planning and Investment Promotion said the investment protection agreement, which was initially scheduled to be signed on April 14, would be concluded by the end of this month once the Cabinet legal committee clears it.
"Minister (of Finance) Tendai Biti met his South African counterpart, Rob Davies, on the sidelines of the World Economic Forum in Cape Town last week and agreed to conclude the agreement as soon as possible," Sibanda said.
"The agreement is very important because we urgently need foreign direct investment (FDI) and lines of credit from South Africa."
The pact - an elaboration of the investment protection instrument introduced by the Reserve Bank of Zimbabwe (RBZ) in 2004 to encourage FDI - also lays out conditions for the disbursement and repayment of the lines of credit availed to Zimbabwe on behalf of the private sector.
Concerns over Zimbabwe's property rights regime arose when the country violated BIPPAs during the 2000-2003 fast-track land reform.
In 2008, the Property Rights Alliance (PRA), a United States-based international property rights watchdog, condemned Zimbabwe's property rights protection regime when the organisation rated the country and three others number 109 out of 115 economies, trailed only by Angola and Afghanistan.
In the bilateral framework agreement, Zimbabwe undertakes to accord South African companies national treatment; relax foreign equity restrictions, uphold free movement of capital, both dividends and disinvestment proceeds and provide political risk cover for the cross-border investments.
A number of companies from the agriculture, mining, construction, financial and pharmaceutical sectors of Africa's largest economy, notably First National Bank, Nedbank, Aspen Pharmacare, Netcare Ltd, African Rainbow Minerals and FirstRand Ltd, have said they are ready to set up shop in southern Africa's second largest economy by industrial size.
The country estimates that the economy will this year recover by more than 4 percent largely to a projected increase in FDI, particularly from South Africa.
Since the beginning of the year, Zimbabwe has taken several measures to strengthen the local investment climate, including the removal of sector restrictions on foreign ownership, relaxation of exchange control regulations, the establishment of a one-stop shop for FDI to cut investor turnaround times and a commitment to protect private investments, including BIPPAs.
FDI to Zimbabwe fell from US$444 million in 2002 to under US$10 million in 2007, according to the RBZ.
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