The Sunday Mail
Richard Wilde
The Zimbabwe Investment Authority’s vision is to increase Foreign Direct Investment. That is probably the most important way in which we can address the country’s economic performance.
And tied to that is increasing revenue and employment creation. We have inflows of about US$500 million. If you look at our GDP – which is around US$16 billion – we are talking about an investment to GDP ratio of 3,5 percent.
So, certainly one of our key objectives is to increase that ratio. Zambia is doing the best regionally with a ratio of 7,6 percent. Their GDP is slightly larger than ours at around US$20 billion, and they are certainly getting significantly more investment than us.
Countries like China, for example, have much higher ratios because they have attracted massive amounts of foreign investment. South Africa’s ratio is about 4 percent, but, obviously, in US dollar terms, it is quite huge because their GDP is much bigger than any other country in the region.
Our initial target is 10 percent. We have the resources and that is achievable. The question is: What do we need to make it achievable?
Clearly, the environment is a problem. Companies are having difficulties sourcing foreign imports (for raw materials) because of foreign currency problems related to importing far more than we export.
One of the focuses of investment is trying to link foreign investment and exports. A sister organisation – the Special Economic Zones Authority – has just been set up, and will be focusing particularly on exports.
If you get any form of foreign investment that also creates additional exports, then you will be increasing your balance of payments significantly. There are delays in import payments as the Reserve Bank of Zimbabwe has a priorities system.
So, the problem will be dealt with, in part, if balance of payment improves resulting from foreign investment. SEZs are important in attracting FDI as you will be competing with everybody else in the world.
Investment spiral
We have attracted more investment in 2017. Of course, when projects and licences are approved, that doesn’t guarantee that investment will actually be implemented.
The value of projects approved this year is higher than that of last year. So, this shows progress, though there is a long way to go.
Investors’ perception is more positive. One of the main things required to attract foreign investment is ensuring the ground rules are clear.
These ground rules should also not change often; I think there has been quite a bit of progress there in clarifying the ground rules.
This may be partly responsible. I wouldn’t say one should expect a sudden increase in foreign investment immediately. It will depend on how the general economic environment improves.
If it’s seen to be progressively improving, then, yes, you will see a response. But to expect a sudden increase at this stage would be unrealistic.
Investors cite a number of challenges, among them, liquidity and the regulatory landscape. Investors have to go through too many fees and requirements.
It is basically an issue of bureaucracy, and improvements are required on that side. A lot of effort has been put into ease-of-doing-business reforms to improve the regulatory environment.
The average time it takes for one to get his/her licence processed from the moment he/she walks through the door is now about five days maximum, which is a massive improvement from, say, three years ago.
Resource constraints
Inadequate resources are some of the challenges in promoting investment. Government’s budget is under a lot of stress due to competing demands, and funding is relatively small.
We are considering ways of increasing our reach.
We would like to open offices at different centres and in a number of countries where investment is coming from. That requires major resources.
Therefore, we are collaborating with local authorities for them to play an active role in promoting investment and to complement the Zimbabwe Investment Authority in their respective jurisdictions.
So, we have entered into agreements with them to capacitate them, train their officers, help them develop promotional material and establish investment offices in their jurisdictions.
Countries like South Africa have provincial investment authorities. On the international front, we want to use our embassies (to promote investment). We have spoken to the Foreign Affairs Ministry regarding training their officers in investment promotion.
We are beginning to attract investment from new markets, and there has been quite some significant movement this year.
Investment from markets like Bulgaria, Israel and Singapore which had not traditionally invested in Zimbabwe before.
Aside from all the investment from the West, we also have investment coming from China and South Africa.
If you are an investor, the first thing you will do is talk to other foreign companies that may have invested here and get feedback on the environment.
So, it’s good now that we are getting a bigger spread of investment source markets, especially from non-traditional markets.
This is not to say we are not getting investment from traditional markets. It’s just that we hadn’t seen investment coming from these other countries.
Indigenisation
I don’t think indigenisation is a problem as long as we are clear on exactly how it is going to work. There has been a lot of effort to clarify that; going back to the statement the President made last year. There is no problem as long as the investor knows what the rules are.
Indigenisation is not a uniquely Zimbabwean policy. Many countries like Malaysia have been extremely successful in attracting foreign investment with such a policy in place.
It’s just a matter of: What are the ground rules?
Yes, we have to have policy consistency and clear rules regarding how investment will be treated. Investors can work with policies as long as they are clear.
These are the key areas. Before President Mugabe’s statement, it was unclear which sectors would be affected by what.
Some legislation still needs to be enacted in response to that statement. Any law that needed to be changed to fit in with what he said should be done.
Investors wanted that statement, but also wanted to see the legal framework changed in line with that statement.
So, Government needs to move quickly to make sure those changes are implemented.
- Mr Richard Wilde is the Board Chairperson of the Zimbabwe Investment Authority. He was speaking to The Sunday Mail’s Senior Reporter Lincoln Towindo
