Improve Your Investment Climate: China Tells Zimbabwe

CHINA, which has become Zimbabwe’s most influential political and economic partner, has told Harare to improve its investment climate and address a local ownership policy seen as detrimental to attracting foreign direct investment, a senior government official told Parliament on Tuesday. 

President Robert Mugabe’s government adopted a ‘look east’ policy at the turn of the millennium after relations with its traditional western donors and trading partners soured following its chaotic seizure of white-owned farms to resettle landless blacks, as well as allegations of electoral fraud and human rights abuses.

Zimbabwe’s Indigenization Act — enacted in 2008 — requires foreign owned companies valued at over $500,000 to cede 51 percent to black locals, which analysts say is not ideal for an economy battling to recover from a decade-long recession.

Desire Sibanda, permanent secretary in the Ministry of Economic Planning and Investment Promotion, told a parliamentary portfolio committee on foreign affairs that visiting investors scouting for opportunities have highlighted concerns about the indigenisation policy as one of the major investment impediments.

“In the past seven months we have received over 40 delegations coming to scout for investment. These, including the Chinese Council for Promoting South to South Cooperation, have raised some concerns regarding the country’s investment climate and they strongly recommended that we should reform our investment climate,” Sibanda said.

“The first problem they have raised is the Indigenisation and Economic Empowerment Act. They view the 51/49 threshold as a disincentive because they are saying it denies the foreign investor a controlling stake in their investments and so forth. They would prefer to have the majority shareholding than a minority in their investment projects.”

International Monetary Fund data shows that compared to other countries in the region, Zimbabwe’s FDI inflows amounted to $1.7 billion over the period 1980 to 2013, whereas, Zambia and Mozambique received $7.7 billion and $15.8 billion, respectively.

In 2014, Zimbabwe’s foreign direct investment edged up to $545 million — less than 5 percent of the country’s GDP — from $400 million in the previous year, driven by interest in mining, infrastructure and services but still lags regional rivals.

A total of 67 projects mainly in mining and energy worth $971 million were approved in the first six months of 2015 compared to 76 projects valued at $555 during the same period last year.

Early this year government toned down its rhetoric on the policy after announcing that new FDI applications would be dealt with on a sector by sector basis, doing away a hitherto blanket approach but analysts note that this has done little to calm investors.


Financial Gazette