Zimbabwe has shown growing ambitions to charm foreign investors, with the coalition government increasingly calling on the world to embrace the country as a worthwhile and safe destination. Prime Minister Morgan Tsvangirai recently said investors should refrain from a "wait-and-see" attitude towards Zimbabwe but snatch the plentiful opportunities the country offered.
But the foreign capital that Zimbabwe craves, as it seeks to reconstruct its economy, comes at a high price: the repulsive effect of the political rhetoric around the country’s economic empowerment laws which compel foreign firms to cede 51 percent to local black investors.
Zimbabwe realised about $125 million worth of investment last year according to the local investment agency figures, representing a tiny portion of the foreign direct investment inflows into Africa which accounting consultancy Ernst & Young reported recently.
Analysts this week told Africa News that while Zimbabwe’s indigenization policy was not entirely bad, it could render the country uncompetitive in the face of potential international investors if poorly handled.
“Zimbabwe’s policy choices are seriously discouraging to foreign investors because it is showing no respect for their civil rights or their property rights,” the country’s top economist John Robertson said.
“Shares in their companies are their property and Zimbabwe’s declaration that they will be required, by law, to give up 51 percent of them is seen as an attempt to legalise the theft of assets. Those not here already won’t come and those who are here feel they are being robbed and have stopped almost all development.”
Tsvangirai has reiterated that he shared the same ideals with his coalition partner President Robert Mugabe about economically empowering Zimbabweans, but differed with him over how to implement the law.
In a country reeling from widespread poverty, rising social inequality, and unemployment rates of around 90 percent, some critics say Mugabe's Zanu-PF party has hijacked the policy as a way of scaring foreign firms into bankrolling its often violent election campaigns.
“Zimbabwe is attractive to foreign investors. However, this interest has not been translated into actual investments on the ground,” said Alpha Pesanai, an investment analyst, in an exclusive interview.
He added: “There is a talk of indigenisation in the mining sector which some people see as a deterrent to FDI in that sector, to me real investors will not be scared by such a move. Investors are not concerned about the level of equity they possess in an entity but the level of return they are going to generate from their investment.”
However, Pesanai concurred the indigenisation thresholds in their current form which does not allow for negotiation even in some priority areas, were a deterrent to some extent.
“My advice would be directed to the government to clearly explain the policy to remove misconceptions,” he said.
Asked if Zimbabwe’s strategy of turning to some Asian countries for investment and trade, including the so-called BRICS countries was going to turn around the country’s investment fortunes, Robertson was sceptical.
“Trade with BRICS or anyone does not make up for reduced investment. As it is investment in additional and new capacity that is needed, the country has to become competitive to those who have funds to invest.
Pesanai said the strategy on its own will not bring back the country’s economic glory days. A balance, he said, needed to be struck by engaging the West to mend the broken relations and win technical support as the countries had well developed industries and well experienced industry leaders.
“Re-engagements with the Bretton Woods institutions are vital to enable the country to get long term funding for critical projects and technical support,” he stressed.
Justice Zhou, AfricaNews reporter in Harare, Zimbabwe
