The Sunday Mail
WITH Government now especially primed to expedite the implementation of Zim Asset in the new year, it might be opportune to share thoughts of how foreign direct investment — a key ingredient to improved investment inflows — can be attracted.
A survey done by McKinsey in 2002 suggested that investors were prepared to pay a premium to invest in a company with good corporate governance.
Important signs of good corporate governance for investors include boards that are mainly constituted by non-executive directors, significant director share ownership and share-based compensation, formal director evaluation and favourable responses to shareholder requests for information.
To this day, the issue of good corporate governance is still being debated and refined to ensure that all stakeholders are protected and they realise value from their investments.
Some of the well known reports are the King report of South Africa, first published in 1994 and updated in 2002, then 2009; the Organisation for Economic Co-operation and Development (OECD), which was developed in 1998 and revised in 2004; and the International Corporate Governance Network (ICGN), first published in 2004 and then revised in 2009.
One can either research further on these critical reports online or simply look for these reports.
I will, however, try to discuss them further.
From the above, it is very clear that a good corporate governance framework can attract investors as it gives them security and confidence to invest in your company or country.
In Zimbabwe, the issue of how we can attract foreign investors is currently a hot topic. As a nation, we definitely need to safeguard our values and principles and, at the same time, we need to work with international players to achieve some of our objectives and goals.
There is a Shona idom that goes “chara chimwe hachitswanyi inda” which shows why in-cooperating partners is important in pursuing one’s endeavours.
The biggest question now is how do we create a balance to ensure that as Zimbabweans we are not short changed by would-be investors. But, equally, we also have an obligation to ensure that investors get maximum value from their investments. They also need to feel that their investments are secure.
We definitely do not need to work with partners who intend to loot Zimbabwe at the expense of future generations.
With this said, there is need to attend to some fundamental questions if the country is to unlock value from investments in the medium to long term:
Are our current policies as a country favourable to the investors?
Is the investor protected and safe?
Will the investor realise value by working with us?
How are our statutory costs and laws? Are they favourable?
What is the downtime before any deal is executed? Does it take too much time to get a simple task completed?
How many ministries and governing boards do you have to go to before an objective is achieved?
Are those key individuals who make decisions available when you need them?
And is our environment corrupt free? Is our environment stable, (politically, economically, and socially)?
As a nation, we need to urgently deal with any bottlenecks that might impact on local investments. Its not only about foreign investors. Even local investors do not put their money on something they do not have confidence in or are uncertain of.
Business is all about taking risks, but at times some risks are not worth taking if you end up losing your money.
It is comforting to know that all the questions that have been raised above can be addressed by religiously observing good corporate governance.
All the questions I raised above can be addressed by a good corporate governance structure.
A good structure is what attracts investors, regardless of how profitable or well resourced your company is.
As I said earlier, governance issues are still being analysed and debated all over the world. By extension, my views and opinions are also subject to debate.
These are sensitive issues and time and again there are always risks to be mitigated.
To come up with excellent measures to attract foreign direct investment, continuous research and development will need to be done and several case studies will need to be looked at.
This is to see how other companies and countries that are successful in this endeavour are handling it.
From my own personal analysis and assessment, the country has learnt valuable lessons in the past two decades that will help us get even stronger as a nation in future.
Observably, foreign direct investment is beginning to trickle into the country and I am very optimistic that the future is bright.
I have no doubt in my mind that Zimbabwe will be the best business destination of choice in Africa in the not-too-distant future.
Taurai Changwa is an Articled Accounted and ACCA finalist. He is managing director of SAFIC Consultancy. He writes in his personal capacity and can be contacted at [email protected] or visit our facebook page SAFIC Consultancy or whatsapp on 0772374784.
