eBusiness Weekly
The country needs to do much more to lure investors
My Two Cents
It’s no wonder warm climate and weather were right at the top of reasons why people needed to move from Europe to settle in Rhodesia in the early 1900s.
Europe can be cold particularly around this time when winter is at its peak. But the weather didn’t deter those who control the world’s billions and those who run its powerful economies to assemble in Davos, Switzerland, a town with a population of just 11 000.
According to the organisers, the World Economic Forum in Davos, which ran from January 23-26 attracted just close to a third of the town’s population. The snow was the thickest it has ever been since 1999. And for those coming from the southern hemisphere, extra caution had to be exercised to navigate around the snow’s slipperiness.
Snow aside, Davos was exciting for Zimbabwe. It was the first time a sitting head of state for the country had been invited to the forum. Because of that it presented the country with a platform to market itself, make contact and network with the international community.
This was the first international trip by the President since his inauguration. The message that was carried by President Mnangagwa and his team was that ZIMBABWE IS OPEN FOR BUSINESS. The country has shown that they are now working tirelessly on the ease of doing business which is the port of call for real investors.
The team had prepared for the meeting, making a necessary effort to launch Investment guidelines but on the other hand an unnecessary effort to dress up in the colourful scarfs. All the same, opinions aside, they were prepared.
Davos presented President Mnangagwa with a timely chance to explain the circumstances surrounding his ascendance to power through an operation that confused the world on whether it was a coup or not. Instead of letting speculation carry the day, with the world guessing what kind of a leader had taken over in Zimbabwe, the President managed to tell his story in person. The timing was also right as Zimbabwe was still subject of discussion across the globe. The feedback is that he acquainted himself very well.
The President’s diary was full with bilateral engagements and interviews with international media coupled with his panel appearance during the main WEF conference. This all makes up what Davos is really about. And the President experienced it.
The forum provided Zimbabwe with a chance to meet financial leaders from the World Bank, IMF among others. While Zimbabwe has always dealt and interacted with these monetary institutions it has never been at the highest level, but Davos presented the country’s President with a chance to meet the IMF head Christine Lagarde.
This is something that does not happen every day and if there is any clarification on policy or assurance that the multilateral institutions want from Zimbabwe, then the president is best placed to give that.
Davos is a giant networking event for business and political leaders which provide those who attend with a chance to cram so many high-level meetings into so little time. Davos allows senior executive from the world’s largest companies to take advantage of their physical proximity to meet in person with partners and clients and would-be clients — meetings that can end up being vastly more valuable.
The President’s busy schedule in Davos allowed him to push his thrust that Zimbabwe is in need of FDI and if there are any investors that have been eyeing Zimbabwe, they would have taken the opportunity to meet him there before coming down to Zimbabwe.
But herein lies the problem
Zimbabwe has got a lot of deficiencies and inefficiencies that have gone wrong in the past twenty years, and these have to be fixed before we go out with the open business mantra. It’s nice and dandy to say we are a new Zimbabwe, but we can’t be a new Zimbabwe without fixing what’s broken. Investors want to make profit in a conducive environment and not to fix broken economies. They are not patriots, but just in it for the money.
Of paramount importance is having a clear message here at home of where we stand and where we are going, in very simple terms understood by the ordinary folk who constitute the majority of Zimbabwe 14 million strong population. It is after all these people who carry this nation forward and their buy in is required.
They need to be psyched up to the Government’s plan. FDI follows the private sector, not Governments. And if this private sector continues to face challenges in accessing foreign currency, cheap capital and keep facing high costs of production, then sentiment both local and foreign will remain on the fence … a kind of let’s wait and see stance.
What exactly do investors look at?
Because of space we will quickly look at what investors really consider when investing into a country. And hope that President Mnangagwa articulated these questions well in his many engagements.
Direct investors tend to look at a number of factors relating to how they will be able to operate in a foreign country:
The rules and regulations pertaining to the entry and operations of foreign investors
Standards of treatment of foreign affiliates, compared to “nationals” of the host country
The functioning and efficiency of local markets
Trade policy and privatization policy
Business facilitation measures, such as investment promotion, incentives, improvements in amenities and other measures to reduce the cost of doing business.
Restrictions, if any, on bringing home (“repatriating”) earnings or profits in the form of dividends, royalties, interest or other payments.
The determinants of foreign portfolio investments are somewhat more complex, however, they can be more sensitive to factors such as:
High national economic growth rates
Exchange rate stability
General macroeconomic stability
Levels of foreign exchange reserves held by the central bank
General health of the foreign banking system
Liquidity of the stock and bond market
Interest rates
In addition to these general economic indicators, portfolio investors also look at the economic policy environment as well, and especially at factors such as:
The ease of repatriating dividends and capital
Taxes on capital gains
Regulation of the stock and bond markets
The quality of domestic accounting and disclosure systems
The speed and reliability of dispute settlement systems
The degree of protection of investor’s rights
