Open Economy: Selling Zimbabwe needs tact

17 Aug, 2014 - 06:08 0 Views

The Sunday Mail

The US-Africa Summit gave us a lot to talk about. At the core of it all was the matter of investment. So I thought it would be an opportune time to assess where we stand in terms of our investment appeal.Many of our analysts seem very optimistic, and have argued that our market is enticing to potential investors.

Unfortunately, I disagree. Our investment allure is grossly overstated. We oversell Zimbabwe as an investment attraction.

In a rather dark twist, it seems that we are the only ones buying into our own oversell. Evidently outsiders are not. Perhaps I can offer a few suggestions as to why Zimbabwe is failing to appeal to investor interest at the moment.

Here are five points to ponder.

First, we are not clear what type of investors we are looking for. There are different types of investors; private, institutional, FDI, venture capitalists, angel investors and micro-financiers. Each type of investor has unique interests and objectives.

Hence each type should be approached with a customised strategy. A blanket investment seeking strategy does not work.

Have we been flexible in our investment seeking?

Second, we lack informational assurance. Our data and statistics are not the most trustworthy and accurate. What is the unemployment rate in Zimbabwe? What is the average household income in Zimbabwe?

It seems impossible to present an appealing investment case when our own economic analysis involves disputable data and statistics. If we cannot compile credible market data and growth estimates how do we expect to lure investors to commit long-term?

Third, we do not respect technocrats. Our policymakers consistently disregard technical expertise. Political veneration is preferred to technical proficiency. Hence board governance in key sectors is appointed on political consideration.

This may be fine with us, but skill — not political reverence — wins investor confidence.

Our policies have failed to attend to the contraction of the formal workforce. Our entrepreneurial push has somewhat overshadowed our policymakers’ responsibility to create a formal professional market. In terms of FDI, our shrinking base of technical experts is a turn-off.

Why should multinationals invest branches and plants here if our skilled workforce is leaving? A market with a wide technocratic base is an investment attraction. Microsoft and Dell actually compete to invest in India because of its base of IT experts. Kenya is well placed for FDI because not only does it have the workforce but it took responsibility to invest in ready-to-use infrastructure for FDI.

We tend to think that skilled labour will come back when FDI is in Zimbabwe. Things don’t work that way; FDI follows skill, not the other way round.

Fourth, we lack policy urgency and tenacity. How badly do we want to achieve our economic agenda?

For instance, Malaysia’s economy attracts considerable investment. A major appeal for investors is the government’s unwavering diligence in getting results.

If growth targets are at 6 percent, then 5,9 percent is failure!

Infrastructure projects must meet deadlines without fail. Competence and timeliness create confidence for capital budgeting. Investors not only inject money into your projects, but at lower cost of capital.

What are our standards for diligence? The US government locked itself in its chambers on December 31 to work out a fiscal policy budget to be in effect on January 1. The EU Commission called immediate all-night meetings at the peak of its economic crisis.

This is the standard of economic diligence that potential Western investors are used to.

One year into Zim-Asset we have been draggy, dispassionate and uninspired to get things done.

How are capital markets supposed to take us seriously when we seem to be sleeping on our own agenda?

Fifth, investors are not attracted by the public sector. The public sector is susceptible to systemic compromise and lack of discipline. We should learn from the past.

In 2011 and 2013, Government failed to even find Diaspora takers for its bonds but CBZ was able to raise US$40 million and US$70 million.

The message is clear, the private sector is more appealing. It should be concerning that our public sector reputable for lacking accountability and performance is leading our investor search.

I would prefer some kind of mechanism where investors are directed to private sector firms which in turn can be mandated to play a role in Zim-Asset.

By diverging capital from Government to the private sector we would be avoiding public debt but maintaining discretion of how invested funds are expected to be used with the macro-economy in mind. I assume this would involve a process with the Zimbabwe Investment Authority and the private sector.

Not every project in Zim-Asset has to be undertaken by Government. I would like to see greater correspondence with the private sector.

I believe that you will find a fair share of these points to be valid. I understand that it is easy to be cynical and lose impartial perspectives on our economic issues. However, I do think we oversell Zimbabwe as an investment attraction at the moment.

We still have work to do.

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