7 June 2019

Zimbabwe: Lack of Confidence Hampers FDI Inflows

Photo: Innocent Makawa/The Herald
President Emmerson Mnangagwa.

The country's hopes of attracting meaningful foreign direct investment (FDI) on the back of the 'Zimbabwe is open for business mantra' will remain dead in the water, unless the government addresses the confidence deficit in the country, a respected international businessman has said.

Richard Heygate, a British writer and businessman who has been in Zimbabwe for the past six weeks on a mission to scout for investment opportunities, made bold statements about the lack of trust as the major impediment hampering efforts to lure foreign capital.

"I represent the people who have to invest in Zimbabwe. I represent the largest construction company in the world.

I represent the English government. I represent people from India and I will tell you this, your Excellency, ladies and gentlemen, they will not invest a dollar unless they like you," Heygate said.

"It's a tough business--international investment -- and I always say that three things: like, trust, respect. Unless they find people like those, they will not put a dollar into Zimbabwe."

Since assuming office following a coup that toppled Zimbabwe's long-serving leader Robert Mugabe whose corrosive and hawkish policies spooked investors, President Emmerson Mnangagwa has pledged to attract capital, but with little success.

Market watchers attribute limited investment to lack of investor confidence, largely stemming from government's policy inconsistencies, among other reasons.

Speaking at the Confederation of Zimbabwe Industries' annual general meeting in Harare last week, Reserve Bank of Zimbabwe (RBZ) deputy governor Kupukile Mlambo also said lack of confidence was affecting the economy.

"So clearly people are not selling, it's an issue of confidence. As a company, you can sell, but when you want to buy you will not get the forex.

"Policymakers have probability of deflecting on their promises. I will be the first to admit, we can make mistakes in policymaking but we need to learn from those mistakes," he said.

Policy inconsistency and inability to maintain fiscal discipline, Mlambo added, were frustrating the country's drive to join the Rand Monetary Union (RMU), perceived to be part of the strategy to resolve the currency volatility crisis.

"Let's take, for example, the adoption of the rand, in general it was a good policy, but in reality we had to deal with economic fundamentals," Mlambo said

"They (South African government) were worrying about themselves. They were worried that there is no fiscal discipline in Zimbabwe and there were other issues, for instance the fact that we don't have a currency in Zimbabwe, so how do they bring us into their system?"

Meanwhile, Mlambo also revealed that fuel shortages were likely to persist while warning of the possibility of price increases.

"Fuel is the basic input in almost everything so it does drive prices. We needed also to find a way to moderate the prices, but it's not a sustainable position. Fuel companies will now procure fuel at the interbank retail rate. The issue about what that does to the price of fuel is unfortunate.

"The reason why they did not increase the prices of duel at least for now is not because they were buying fuel at the interbank but is because the fuel they are supplying right now is coming from the lines of credit that they got before but I don't know, going forward. The fuel that is currently being sold was not bought using the interbank market; I don't know how it is going to be like going forward," Mlambo said, noting that the fuel shortages were compounded by limited players in the sector.

Zimbabwe

Ruling Party Youth League Accuses Top Officials of Corruption

Zanu-PF's militant youths Monday vowed to block party secretary for administration Obert Mpofu from accessing his office… Read more »

See What Everyone is Watching

Copyright © 2019 Zimbabwe Independent. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.