an international survey shows. The survey, “Into Africa: Institutional Investor Intentions to 2016″, ranks Zimbabwe behind only Nigeria and Kenya as preferred investor destinations on the continent. In terms of the results of the survey, Nigeria is the most popular market over the next three years. Fifty-one percent of international investors place the country in their top five markets, followed by Kenya (48 percent) and Zimbabwe (35 percent).
Egypt (34 percent) and Ghana (34 percent) complete the top five.
“Investors are naming highly diverse countries as offering the best prospects for investment returns in the coming three years,” says the report.
“In terms of popularity with investors, Nigeria and Kenya top the list, followed by Zimbabwe and Egypt.”
The Zimbabwean Government has been working on a number of initiatives to improve the investment climate, including setting up the one-stop-shop investment centre, the promulgation of a new investment promotion and protection law and conclusion of negotiated Bilateral Investment Promotion and Protection Agreements, among others.
But these are yet to translate into significant new foreign direct investment on the ground.
Economists believe there is also need for the Government to address other issues at the macroeconomic level, which might put off investors, notably labour market rigidities.
Inefficient labour market fundamentals tend to be inextricably tied to poor performance of an economy.
Meanwhile, the study, which was carried out by the Economist Intelligence Unit and commissioned by the Abu Dhabi government-owned Invest AD Asset Management, confirmed that foreign direct investment into Zimbabwe and the continent generally is set to rise exponentially in the next few years.
It also revealed that more than half of institutional investors surveyed saw Africa as the most attractive region to invest in the next decade, with a third expecting to commit at least 5 percent of their portfolios to the continent by 2016.
The study surveyed 158 global institutions including pension funds, hedge funds and private banks.
Nearly half of the respondents said that they expected the best returns to come from sectors such as energy, natural resources, agriculture and agribusiness, construction, real estate and financial services.
According to the study, energy and natural resources are the most attractive sectors over the next five years, with 46 percent of respondents putting this sector in their top three, followed by agriculture and agribusiness (35 percent) and construction/real estate and finance (both 35 percent).
Private equity and infrastructure were expected to outpace commodities as the best-asset classes for investment in Africa in the next three years.
The EIU report also showed that an emerging middle class is the main attraction for the majority of institutional, investors with 39 percent of respondents citing Africa’s emerging middle class in the top three reasons to invest. (High economic growth is the second most popular reason (35 percent), followed by high commodity prices (34 percent).
Zimbabwe has, since dollarisation, shown high economic growth rates. But its middle class was negatively affected by the prolonged hyperinflationary period and now requires rebuilding.
The Government can, for instance, set tax adjustments that lead to more disposable income for the lower and middle class, which can boost aggregate demand, capacity utilisation, output and ultimately employment. – The HeraldPost published in: Business