The World Bank says Zimbabwe’s ownership and investment policies continue to hurt its trade prospects. In the latest Zimbabwe’s Trade and Competitiveness Report, the World Bank says the export performance, though it has improved since 2009, is in the long run insufficient to power growth at desirable levels.
It urged Zimbabwe to promote greater and more diverse exports to drive economic growth and job creation. Once the regional economic powerhouse and an exporter of food, manufactured goods, and agricultural products; Zimbabwe now exports just a few minerals – tobacco and very little else.
Country Director at International Growth Centre, Richard Newfarmer says Zimbabwe still experiences difficulties in its competitiveness. “In mining, Zimbabwe has done well recently. However, there are still some problems that put Zimbabwe in the bottom quintile in certain measures of competitiveness – whether it’s effective governance or whether it’s how you manage your tourism industry.”
The 2014, World Banks’ Trade and Competitiveness report on Zimbabwe says ownership and investment policies, high tariffs in communication and transport services have caused missed trade growth opportunities.
Furthermore, the country’s export performance failed to keep pace with the region. In the mid 1990’s, its exports were almost three times higher than Zambia. They are now only half of its neighbours. Transport costs are also significantly higher in comparison to Zambia despite it being further inland.
“Lowering high country risk should be the top priority.”
Businesses say the discretionary application of the black empowerment law has damaged the reputation of the government among foreign investors. A Zimbabwe businessman says: “We never know whether they are telling the truth or not or whether they will change their minds.”
The businessman’s new investors have chosen to expand the business, but outside Zimbabwe. The World Bank says that this is a challenge that needs prioritising as uncertainty over ownership laws has pushed the country risk profile higher.
Acting World Bank Country Director, Nadia Piffaretti says: “Lowering high country risk should be the top priority. There is already a high country risk. You can’t really afford to increase it further because you are sterilising investments mostly in the manufacturing, agriculture and low grade mining sector that would be profitable in another situation.”
The World Bank report says following the slump in global mineral prices, the lack of diversification as well as a dependence on a few commodities has exposed the country to trade shocks. The World Bank says the minerals are not delivering opportunities for people coming onto the job market.
It has urged authorities to encourage new firm entries, to review tariffs and industrial policies as well as to address lingering issues of the investment climate if the country is to move towards sustainable economic growth.