Barriers to investment on the increase – economist

December 7, 2012 in Opinion

For too many years Zimbabwe has raised one barrier to foreign direct investment (FDI) after another.

Column by Eric Bloch

There is an abysmal and contemptuous disregard for the irrefutable fact that the country desperately needs such investment in order to attain substantive growth of its economy. That growth is critical if a comprehensive reduction of the overwhelming unemployment that has plagued Zimbabwe for too long is to materialise.

A virile economy is essential to alleviate the immense poverty and suffering that has not only afflicted an overwhelming majority of Zimbabweans, but has also significantly contributed to the decline in the key infrastructure required by the populace and the economy.

Facilities that have deteriorated include most parastatals, national health and education, and many other utilities.

Our economy needs a solvent, stable and effective fiscus.

Zimbabwe has sizeable resources which are a magnetic attraction to FDI, including a vast array of minerals much sought after internationally, ranging from gold and platinum, to tantalite, lithium, chrome, diamonds, methane gas, and much else.
Its soils and climate enable it to produce various agricultural commodities in national and international demand.

Zimbabwe has diverse tourism attractions. Its geographic location puts it at an advantage to be a supplier of primary and secondary industrial products to an extensive portion of southern and central Africa, which has a potential customer base of more than 420 million people.

This is over and above an ability to export to further afield.

Complementing these, and many other potential economic resources, Zimbabwe has a population which, with a few exceptions, is very able and work-motivated (notwithstanding the considerable extent of Zimbabwe’s “brain drain” to the diaspora in recent years).

With all these and many other economic assets, Zimbabwe could have been one of the foremost economies in Africa, had it been a recipient of the considerable FDI essential for the development and exploitation of the economic opportunities.

It would also have accessed internationally-developed, state-of-the-art technologies.

However, with ever-increasing determination, Zimbabwe has not only refrained from accommodating the reasonable expectations of foreign investors, but has increasingly created one barrier after another, or deterrents to investment.

Any investor, be they foreign or domestic, save for a few exceptionally high-risk takers, requires that investment be into an environment that has, at the very least, a stable economy, and preferably one which is attaining real growth.

In addition, he or she expects assured investment security, political stability, absolute respect for property rights, and an environment which has an assured, high level of law and order.

Over and above these essential characteristics, investors inevitably have an expectation that the operations of the enterprise into which investment is made would not be endangered, or their returns unduly minimised by peremptory, overly-authoritarian bureaucracy and state interference, or by unduly excessive taxation or other imposts.

Tragically, not only does Zimbabwe consistently disregard these investor needs, and has steadfastly failed to ensure fulfilment of essential requirements for a conducive investment environment, but it recurrently pursues new and additional policies which worsen that environment, resulting in an endlessly ongoing decline in new investments very desperately required to restore well-being of the Zimbabwean populace.

As if the unilateral expropriation of lands, (effected without compensation), the recurrent incidents of violence in order to displace farmers from accessing their lands (without any State interventions to contain that violence), did not suffice to alienate investor interest, government has continuously enabled or condoned many other occurrences which negate investor interest in Zimbabwe.

This includes the contemptuous disregard for the many Bilateral Investment Promotion and Protection Agreements (BIPPAS), and the introduction of oppressive, ill-considered, counter-productive laws for the indigenisation of business.

The country has failed to administer its resources constructively, in consequence of which it has allowed the majority of its parastatals to decline to such a great extent that virtually none of the utilities and services essential for a vibrant economy are available.

These include a grievous inadequacy of electricity supplies, a near-derelict national airline, grossly insufficient rail services, as well as innumerable other economically-essential needs.

It blatantly and has brazenly allowed and enabled endless, fiscally and economically disabling corruption to prevail in both the public and private sectors. It belittles and threatens the banking sector in general and foreign-owned banks in particular, thereby continuously diminishing public confidence in the banking sector, with inevitably consequential adverse effects upon the economy.

It also unceasingly alienates international goodwill and strives to deflect recognition of its economic misconduct by attributing all negatives to allegedly “illegal international sanctions” which, in reality, are only restrictions and constraints upon the government and its underlying entities, and upon many of those who constitute the government.

As if all these and many other acts of commission and omission do not suffice to be very major deterrents to the extensive investment needed to resuscitate and develop the economy, endless pursuits that discourage investments are pursued.

Most recent is the declared intent that the Zimbabwean security forces are to become actively involved in monitoring and enforcing government’s oppressive, non-constructive, indigenisation programme, to ensure that indigenous Zimbabweans have the mandatory 51% equity in companies.

Recent reports record that an entity of senior military, police and intelligence service officers is to be mandated to monitor private sector compliance with the indigenisation policies, legislation and regulations.

The functions of the security forces are to ensure the defence of Zimbabwe and its people against any enemy actions; and to assure nationwide compliance with the human rights-centred constitution and the like, but not to engage in, or interfere with, economic and business policies.

Zimbabwe cannot benefit from security forces interfering in the day-to-day conduct of commerce and industry, and doing so yet further dissuades investors from pursuing investment opportunities in the country.

Eric Bloch is an independent economist in Zimbabwe