The indigenisation policy, which compels foreign-owned companies to cede 51 percent of their shareholding to local blacks where their threshold is at $500,000 and above, has been condemned for threatening property rights and creating uncertainty regarding investing in Zimbabwe.
On the other hand, the country is expected to hold general elections sometime this year, and there is also uncertainty over how they will be conducted and what political dispensation they would usher in. Zimbabwe National Chamber of Commerce President, Oswell Binha, has bemoaned the lack of a proper assessment of all the fundamentals that are needed to create a favourable investment climate.
“While the macroeconomic determinants of Foreign Direct Investment have been analysed before to a considerable extent, the role of institutional factors such as the protection of property rights and the efficiency of the legal system has been underexplored.”
Fall in investments
Local media reports indicate that approved investments fell by a staggering 85 percent in one year alone from $6.6 billion dollars in 2011 to $930 million in 2012.
Economist John Robertson said indigenisation regulations were partly responsible for discouraging foreign investors.
“The main problem is the indigenisation policy. Investors end up choosing other destinations where they feel welcome rather than face being forced to cede more than half their companies,” Robertson said.
He said lack of money in the banks and talk about elections was not helping.
“A more certain environment encourages investors,” he said.
Economist, Eric Bloch, believes that the economy will be weak in the first half of 2013.
“We can not anticipate any foreign investment or any major improvement in the money market until after elections,” said Dr Bloch.
Bloch said the economic situation was going to remain stagnant, particularly in Bulawayo.
“In Bulawayo we going to see many difficulties during the first half of the year because of the negative image over the closure and downsizing of industries,” he said.
The effect of drought
The economic commentator added that the impending drought was also going to negatively affect the country’s economic growth.
“The country’s economy is going to suffer from the effects of drought.
The production is going to be lower than expected because of the armyworm that is destroying a lot of crops. Because of this, I also think the country’s GDP is going to be about three percent which will be wholly attributable to the performance of the mining sector,” he said. Bloch anticipated that the economy would pick up in the second half of the year if the country holds peaceful and credible elections.
On indigenization, the ZNCC president said it was important to note that empowerment should be an integral part of the country’s policy framework. The economic reforms envisage appropriate sequencing of policies, firstly to deal with adverse expectations and progressively to entrench stabilisation and recovery.
“In short, indigenisation has been more redistributive in its approach than perpetuating the creation of new wealth. It has created contrition in the economy and has serious potential to exacerbate the country’s national debt if it continues in its current state,” he said.
Even when investors have expressed interest in Zimbabwe they have done so cautiously with a number asking their parent governments to sign investment protection agreements with the government.
Post published in: News