Despite an increase in European business delegations visiting Zimbabwe seeking opportunities, most investors ultimately go elsewhere in the region because the local investment climate is still hostile, Danish embassy Chargé d’Affaires Erik Brøgger Rasmussen has said.
In an interview this week, Rasmussen said although government has been trying to mend relations with Europe while also making steps to attract investors and funding, it still needs to do much more to improve the business environment so that the visits and inquiries turn into concrete business.
Rasmussen said the delegations which have been visiting Zimbabwe also visit other countries in the region before deciding where to invest.
“Yes there has been an increase in business delegations visiting, but this is not just because of Zimbabwe,” he said.
“Over the last 25 to 30 years a lot of European business people were looking for new markets in Asia, but over the last five to seven years, Africa has been a destination of choice.
“Despite these visits, foreign investment inflows are not very significant in Zimbabwe. Investment inflows in Mozambique are about 40 times of what comes to Zimbabwe.
“I have seen many Danish business people visiting Zimbabwe, for example, but when they come they also look at the entire region. They look at the opportunities in Zambia, Angola, Malawi and other countries before making up their mind. Unfortunately most end up investing elsewhere.”
Rasmussen noted that Zimbabwe is ranked a lowly 171 out of 198 in the World Bank’s doing business index, highlighting that it was still not good for business.
World economies are ranked on their ease of doing business, from 1–189, with a high ease of doing business ranking meaning the regulatory environment is more conducive to the starting and operation of a business.
The rankings are determined by sorting the aggregate distance to frontier scores on 10 topics, each consisting of several indicators, giving equal weight to each topic.
The World Bank measures how easy or difficult it is to start a business, register a property, get credit, get electricity, trade across borders, protect minority investors, enforce contracts, resolve insolvency, pay taxes and deal with construction permits.
“Naturally, when one is looking for investment opportunities they are likely to go where the rankings are better,” said Rasmussen.
“It matters where, for example, if I want to start a business in Harare I have to spend time with the Harare municipality, Zimbabwe Investment Authority, government ministries and so on. Corruption is also an issue; do you have to pay ministers and civil servants to be able to do business? Is there rule of law, will you be able to get protection from the courts and is the infrastructure in place, be it roads, water and power supply? All those things matter.”
Rasmussen, whose country has been asked by the Zimbabwean government to assist in its quest to get funding from multilateral lending institutions such as the International Monetary Fund, however, commended government for abiding by the commitment it made under the IMF’s staff monitored programme.
Under the IMF staff monitored programme, government has also pledged to consolidate its fiscal position, accumulate international reserves and mobilise international support for resolving the country’s external debt situation while also restoring confidence in the financial sector and improving public debt and financial management.
In addition, government has promised reforms to enhance the business climate, boost productivity and competitiveness as well as build confidence.
The IMF this week said Zimbabwe was on track with its pledges although the country still has a lot of work to do.
Rasmussen said Zimbabwe should also do more to further improve the human rights situation in the country.