A BRITISH firm is considering investing in Zimbabwe’s troubled financial sector, which has seen several banks collapsing over the past few years, a British diplomat revealed last week. Britain’s deputy ambassador to Zimbabwe, Chris Brown, said he would this week meet the potential British investor whom he declined to name.
“I will meet a British firm considering a several hundred million dollar investment in Zimbabwe’s banks,” he told an economic symposium organised by the Zimbabwe National Chamber of Commerce.
Financial results from local banks so far indicate that there is dire need of liquidity in the sector. Brown said the country’s liquidity challenges would require new money into formal circulation. Zimbabwe ditched its own currency in 2009 and adopted a hard multi currency system.
“Others (investors) I have met are interested in recapitalizing Zimbabwe’s rolling stock, or investing in a dramatic enhancement in electricity transmission. I see much more interest (on Zimbabwe) now than before the election, where there was too much uncertainty,” said Brown.
Brown said the country was facing “massive liquidity challenges” in large part arising from the lack of domestic currency. The inability of the Reserve Bank of Zimbabwe to act as a lender of last resort, coupled with bad debts in small and some medium sized banks, creates a strong and self-enforcing disincentive to lend, holding back the recapitalization of both industry and agriculture.
“Unfortunately, restoring the Zimbabwe dollar would do more harm than good. I commend the Finance Minister (Patrick Chinamasa) for ruling this out and for the focus in his budget on measures to reactivate the banking sector,” he said.
“I hope these measures are coupled with a robust approach to problems in the bank from our new governor,” Brown said.
Speaking at the same event, Industry Minister Mike Bimha said Zimbabwe needed to change its investment environment if more foreign investors were to invest in the country. According to the World Bank Doing Business Index ranking for 2013, Zimbabwe was ranked number 172 out of 185.
Zimbabwe’ 2013 ranking was two points worse than in 2012 while regional neighbours are ranked much better, with South Africa ranked 59 while Botswana is ranked 39.
“This is reflective of the difficulties that investors and business in general encounter when they want to transact business in our country, in other words our investment climate leaves a lot to be desired,” Bimha said.
Economists say Zimbabwe needs to put in place credible policy proposals and initiatives to address issue such as strengthening fiscal management, reducing financial sector vulnerabilities in a bid to enhance our competitiveness and ensure sustained economic growth.