The way we answer that question determines the amount of investment we receive at the end of the day. The way we understand that question is reflected in the way we craft our policies and laws.
Zimbabwe urgently requires significant amounts of foreign direct investment to create employment, enhance technological progress, improve productivity, add value and beneficiate our raw materials. More than 80 percent of our exports are raw materials.
At the moment, we can process less than 30 percent of the cotton we grow, and virtually zero percent of our diamonds. This makes exporting most of our raw materials inevitable – and we have no control over commodity prices. What is worrying is an observation from the African Development Bank that the African primary sector has been the largest recipient of accumulated foreign direct investment (FDI). This shows that most foreign investors are largely interested in securing raw materials to satisfy the growing appetites of their manufacturing plants.
In Uganda, the recent oil discoveries in Lake Albert have contributed significantly to the observed levels of FDI inflows, increasing by 93 percent in 2012. This also applied to the DRC with investment inflows increasing by 96 percent, mainly into the Tenke Fungurume copper-cobalt mines.
One wonders how advantageous these deals were to the countries concerned. One thing is for sure, such deals are not benefitting Zimbabwe as a nation. For example, Essar bought ZISCO and all the iron ore deposits for a paltry $700 million. We have vast iron ore deposits which are worth tens of billions of dollars. To make matters worse, that same investor is treated as a sacred cow which can go above the indigenisation law, by parting with 60 percent shareholding, when we insist on 49 percent for all others. One just wonders how many bottles of whisky would our government negotiators have taken before putting ink to paper, or rather what’s in it for them?
It is high time we seriously consider looking for real investment that significantly reinforces our secondary production. This starts by putting a reasonable sunset on exporters of raw materials to acquire capital to process the commodities and move into secondary production. It also lies in communicating the right message abroad. Serious investors can only come when we have an optimal investment system in place.
When we start to realize that we are competing for foreign investment with other countries, we will surely begin to seriously consider issues like our indigenisation laws, labor market arrangements, the rule of law and respect for property and other rights, consistency of our policies, our tax regime, the general doing business environment, just to mention a few. We have already seen that domestic-led economic recovery is impossible, due to our biting liquidity crunch. Let’s therefore start acting like people whose reliability on foreign investment is inevitable. Swallowing our pride is probably the first stage to kick start that process.
The high levels of unemployment, budget deficits, trade deficits, weak terms of trade, low levels of industrial capacity utilisation, serious liquidity crisis, high interest rates are signs of a country that needs to seriously remodel its investment laws and policies. If we insist on the status quo, we are guaranteed to destroy the country with our bare hands.Post published in: Business