In a report released on Monday, entitled Zimbabwe Business Forecast Report Quarter 3 2010, BMI attributed the forecast to controversial indigenisation laws introduced earlier this year.
Political uncertainty continues to weigh on Zimbabwes economic revival, with the latest blow being dealt by the announcement in March that the government intends to implement a set of indigenisation regulations. Uncertainty over the laws has hit investor confidence, and we have revised down our 2010 real GDP growth forecast for Zimbabwe primarily due to the fact that foreign direct investment inflows have been negatively impacted, said the report.
We now see the economy expanding by 5.4 per cent for the year compared with a previous estimate of 10.9 per cent. We believe that there will be a slight slowdown in 2011 (to 4.3 per cent), when we expect elections to take place, read the report.
According to the indigenisation legislation, which was passed in 2008 before the formation of the coalition government, all businesses with asset values greater than US$500,000 are required to cede a 51 per cent stake to black Zimbabweans.
Although Prime Minister Morgan Tsvangirai has stated that the legislation would be adjusted to reassure foreign investors, it is unclear if and how this might happen. Disagreements over the legislation have become yet another point of conflict between the two major parties in the coalition government.
BMI said one of the most pronounced risks to their view that the Zimbabwean economy would have relatively robust growth over the coming years was the failure to improve dilapidated infrastructure, mainly water and power.
Post published in: Economy