BULAWAYO — The recent engagement with the European Union (EU) by captains of Zimbabwe’s industry has stimulated investor appetite from the economic bloc, but several handicaps remained, which could lead to continued isolation and scuttle potential foreign direct investment (FDI) inflows, an industry executive has said.
Once the single largest source of FDI to Zimbabwe, the EU has applied brakes on trade and investment with the country, which has been hit by a flight of global capital due to political uncertainty. Controversial agrarian reforms, expropriation of private assets, economic mismanagement, corruption and hostile policies are among factors that have triggered a standoff between Zimbabwe and the EU.
Confederation of Zimbabwe Industries (CZI) president, Charles Msipa, who was part of a delegation to the EU a few months ago, said it is likely to take time for EU investors to consider Zimbabwe as a safe investment destination. Government, he said, needed to review its harsh policies and give clarity on a number of policy issues, particularly indigenisation. The EU, together with the United States, slapped Zimbabwe with sanctions a decade ago.
Since the establishment of the EU-Zimbabwe Dialogue by the inclusive government in 2009, which saw the CZI taking an active role in mending relations there has been notable progress achieved through the dialogue. In January, captains of industry visited Brussels, the headquarters of the EU, as industry took it upon itself to impress upon foreign firms to return to Zimbabwe, whose economy has stabilised since dollarisation in 2009.
Msipa told the Financial Gazette’s Companies & Markets (C&M) last week that it was still early to expect a flood of investment following the trip to the Belgian capital. “I don’t think we expected that there would be a flood of the investment flowing, but what we did was to restart that engagement process, get them to consider Zimbabwe,” said Msipa, who spoke exclusively to C&M on the sidelines of the Zimbabwe International Trade Fair (ZITF) .
“The first thing is that it was important to start this engagement after 14 years of zero engagement, after 14 years of virtual isolation for Zimbabwe in terms of international business investment circles.”
The EU has responded positively after the CZI’s trip, he said, with several investors kicking off assessment missions into Zimbabwe. However, the controversial indigenisation and economic empowerment policy remained the stumbling block.
“They have also cited the fact that the indigenisation law and policy for them is a barrier. It is a roadblock; they perceive it as a roadblock to investment in Zimbabwe relative to the kind of investment climate they are offered in other countries in the region,” Msipa said.
“They have also indicated that our country in the recent past has not had a great history of policy clarity, consistency and stability. In many cases investments are long-term initiatives unlike trading and so they have said that they are looking to some or greater level of policy clarity, consistency and stability.”
The sad thing is that in a global village, the rate at which investors share information has improved, and the sentiments coming out of the EU will be shared by the rest of the world, placing Zimbabwe in a precarious situation as it fights to rebuild an economy destroyed over many years.
He said the CZI would continue engaging and giving government feedback about how the country could strengthen and improve its policies in order to attract capital inflows. “One thing we got from our visit in January to Europe, they said ‘please, we need to see you again, we would like to come to Zimbabwe, let’s stay in touch’,” said Msipa.
“It’s not a once-off thing that we go and say we had a visit so we are going to get the investment, it is continuing. We started the process of engagement and dialogue; we need to carry it on.”
CZI, Msipa said, was considering organising an international investment conference this year and bring on board the EU. He said while trying to complement government’s efforts in turning around the fortunes of the country’s troubled economy, they also had their constraints.
“We don’t have the capacity to do everything; we took a step in one direction; in one particular geography; (Europe), because of strong existing commercial and trade links. The Zimbabwe Investment Authority and others can pursue other source markets for investment,” added Msipa.
Meanwhile, the Senior Minister of State in the Office of the President, Simon Khaya-Moyo has said Zimbabwe was considering engaging Brazil, Russia, India, China and South Africa for financing of the government’s economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, which requires US$27 billion.
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