Zim scores low on investment openness

Published: 07 February 2018

Zimbabwe has been ranked as one of the worst performing southern African states in terms of its openness to foreign investment after the country scored a lowly 18,7 points out of 100.

International think-tank BMI Research said other regional countries such as South Africa, Zambia, Mozambique and Namibia scored relatively higher at 60, 54,5, 50,7 and 41,3 points respectively.

This comes as years of relative economic isolation and political uncertainty under former President Robert Mugabe have significantly limited the overall amount of foreign direct investment (FDI) which the country has received, despite the fact that Zimbabwe's economy enjoyed modest growth in FDI levels between 2011 and 2015 due to negotiated deals with China and planned economic reforms.

Data from the United Nations Conference on Trade and Development (UNctad) show that the country received an average of $400 million FDI in the past nine years when other regional countries got an average of $1,1 billion.

BMI said excessive government levies and hostile business policies have deterred much-needed investment, affecting the mining and agricultural sectors in particular.

"Such policies have included the regular expropriation of land without compensation, and the Indigenisation and Empowerment Act. Although applied irregularly, this sets minimum ownership levels by black Zimbabweans at 51 percent of enterprises valued at more than $500 000 in most economic sectors," the Fitch Group company said, adding that labour regulations also continue to restrict the employment of foreign nationals.

"The removal of Robert Mugabe as president in November 2017 does, however, create potential upsides for renewed foreign investor interest in the country and economic reforms," the think-tank said.

The latest report comes after Zimbabwe was ranked 124th out of 137 on the World Economic Forum's 2017-2018 Global Competitive Index (GCI).

Roberto Crotti of the Geneva-based WEF Competitiveness Research said Zimbabwe's business environment has proved challenging to operate in for local as well as foreign businesses, due to the country's monetary and fiscal standing which have affected overall macro-economic performance.

"For example, the budget deficit is now at 10 percent and the government debt is 75 percent, which are affecting substantially the conditions for businesses to operate in Zimbabwe right now," he said.

The GCI ranking is determined by the performance of 12 pillars or drivers of competitiveness that collectively define a country's rating.

The 12 pillars are: institutions, infrastructure, macroeconomic environment, health and primary education, higher education and training, goods market efficiency, labour market efficiency, financial market development, technological readiness, market size, business sophistication, and innovation.

- The Financial Gazette

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