Why There is Low FDI In Zimbabwe: Commentary

Why There is Low FDI In Zimbabwe: Commentary
Image Credit: Lonely Planet

During the beginning of this year, Bhizimusi published an article stating that the war-torn Democratic Republic of Congo is better than Zimbabwe on business. The article is based on Forbes’s rankings on Best countries for Business in 2018. Zimbabwe is ranked at number 145 on the best countries for business. Investors have been shunning away Zimbabwe resulting in a low Foreign Direct Investment (FDI). This is a commentary on why there has been low FDI in Zimbabwe.

The question why Zimbabwe is DRC is better than Zimbabwe on business was answered during the Zimbabwe Mining Investment Forum that took place in Harare recently. An investor who was in attendance stated that that the risks that are in DRC when it comes to business are better known than in Zimbabwe. The investor went on to say that it is well known that there is war in DRC but no one knows the risks of investing in Zimbabwe and investors are not comfortable in investing in a country that they do not know its risks.

Investor confidence is still low in Zimbabwe. After the indigenisation policy that was passed in the past and issues to do with property ownership, investors have been left with a low to no confidence in doing business with Zimbabwe. “It’s going to take a lot more confidence building before you get majors investing big monies,” a London-based analyst at Liberum Capital Ltd,  Ben Davis is quoted in Mining Zimbabwe. “They need a bit more certainty, and that can’t just happen with words.”  There is always need to continuously engage and show the world that “Zimbabwe is open for business”.

Policy clarity is still a problem that investors are complaining about. There is still need for clarity on land and property ownership and rights. An investor once complained about clarity on whether the land to be used for investment is to be bought or to be leased. Investors also confuse the indigenisation policy to imply the sharing of profit after starting any form of business in Zimbabwe. The 51/49 policy is only limited to two minerals in the mining sector platinum and diamond. With no information and clarity on policies, Zimbabwe is ranked low on business and investment.

Investors are creating a wait and see approach on Zimbabwe. Due to the political developments in the country, no one seems to predict the future and this is making investors wait to see what happens next and then invest. Politics in Zimbabwe has been developing at a fast pace since August last year leading to a new President in office. Despite the assurance of credible, free and fair elections by Zimbabwe’s leader, investors are now just watching waiting for the election period to pass and then move to invest in Zimbabwe.

In conclusion, Zimbabwe having economic woes and is looking for investors to create employment, inject money to solve the liquidity crunch as well as develop the industrial sector. In order to get FDI, there is need to boost investor confidence and clarify policies. The risks associated with investing in Zimbabwe should be reduced and there is also need to deal with the wait and see the approach that investors have taken on the country.

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