Kudzanai Sharara Taking Stock
Zimbabwean President Emmerson Mnangagwa has used most of his time as the President of the republic to tout his “Zimbabwe is Open for Business” mantra.
When he first announced that “Zimbabwe is Open for Business” ahead of his maiden trip to the World Economic Forum in Davos, it seemed like mere rhetoric to many. After all, politicians are known to be in the business of selling promises. But since then, President Mnangagwa has not looked back, instead, he has accelerated efforts to bring more investment into the country.
His message throughout, has been that of pushing the country’s economic agenda and most of his engagements have been on reviving the economy, through energy and physical infrastructure projects as well as trade and investment agreements.
President Mnangagwa, who personifies this new swagger and drive, has charted a more ambitious course for Zimbabwe on the global stage. Just by looking at what is happening on the ground, the President’s energy has been directed at accessing global capital, foreign direct investment and the spoils of global commerce.
The re-engagement drive is a catalyst of this trend, with the goal of broadening and deepening Zimbabwe’s s ties in the world and positioning it as an open investment destination in the country for the first time in years, a period that probably dates back before the new millennium.
A move away from the past
The new economic drive, diverges from the old one in three critical and meaningful ways.
First, its geographic focus is now more expansive. While the previous administration had narrowed its economic relations through the “Look East Policy” which focused on improving relations with China, relations have since been broadened to include any nation that is interested in doing business with Zimbabwe.
“We will take definite steps to re-engage those Nations who have had issues with us in the past,” said President Mnangagwa at his inauguration speech, and we have seen this re-engagement drive in full force.
Second, while the previous administration seemed to have leaned towards going it alone, and pushing “radical policies” such as indigenisation, the new thrust have seen a softening of such policies amid crafting new ones that are meant to accommodate both foreign and local interests.
Finally, via the Foreign Affairs Ministry, Zimbabwe has been forward-leaning in mending relations with Britain, than it had been willing to do in the past.
This can be seen through efforts to re-joining the Commonwealth, a grouping where Britain has significant influence.
With regard to the United States, President Mnangagwa has shown greater willingness to engage. After meeting visiting US senators, the President emerged from the meeting saying “it is important to accept constructive criticism so that where you feel you were doing things in a manner that you felt was correct; if there is constructive criticism you can always benefit from such.”
“Where there is dialogue you can always find a way of resolving challenges and this is one opportunity that has come around for us to look at issues which are challenging so that together we can find a way to resolve these challenges and move forward and that is the spirit I would want our people to accept,” he said then.
Though getting Zimbabwe open to business remains a work in progress several months into Mnangagwa’s administration, the drive has bone real fruit.
On the objective of attracting FDI, the Zimbabwe Investment Authority (ZIA) approved $950 million worth of investment project proposals in the first three months of the year and by the time of writing might have eclipsed the $1,2 billion approvals achieved for the entire part of 2017.
In the first quarter of 2017 only $150 million worth of projects had been approved.
While Zimbabwe has always had ties with China, it is only now that the policy seems to be bearing fruit with the Asian country now agreeing to unlock funding to national projects.
This can be seen through the $1 billion that Zimbabwe has been given through the Export-Import Bank of China (Exim Bank) to expand power generation and help alleviate the country’s perennial electricity shortages. Just this week another Chinese firm Tsingshan signed a $1 billion dollar deal for establishing a steel plant that can produce up to 2 million tonnes of steel per annum.
More still need to be done
While the Mnangagwa administration has managed to attract “more than $15 billion in investment commitments”, there is still a lot that still need to be done for the country to be able to take full advantage of these multiple opportunities in front of it. For a start, is it attracting the right investment.
According to investment banker George Manyere, it is critical to understand FDI from various perspectives. Manyere told a CEO Conversations breakfast meeting hosted by Business Weekly last week that the right FDI must result in an increase in productivity, job creation, human capital formation, higher wages, transfer of skills and make a meaningful contribution to GDP.
While the President is working tirelessly, there is need for corresponding efforts from technocrats in government to craft deals that bring all those benefits to the country. There must be no room for half-baked contracts that might result in minimal benefit to the country of which what happened in the diamond sector is a quick reminder.
If Government bureaucrats do not have capacity and capability to structure beneficial deals, then like Manyere said Government must engage investment bankers to help structure our offering to the global and international capital markets.
Dan Keeler, a frontier markets editor with the Wall Street Journal, said while Government has been saying all the right things, there is now need for it to do the right things, urging business to continue to put pressure on Government to not just say the right thing but to start doing the right things. He said investors actually want to see results instead of just seeing.
Paul Hinks (chairman invest Africa, US) who came along with a delegation of foreign investors said one area of concern to most investors is the issue of foreign currency and the ability of businesses to repatriate funds or pay foreign lenders. He said some investors use lenders to start businesses and the lenders would want to understand how this all works. Hinks also touched on the issue of registering and starting a business which he said is cumbersome.
Though Zimbabwe has rhetorically positioned itself as being more open for business, it has remained a difficult place to do business. Its ranking in terms of the ease of doing business is the weakest link. At the last count by the World Bank the country was sitting at number 159 overall.
Dealing with construction permits, for example, where the country is ranked 175 with just 44,73 points out of 100 is a point of bother, given most of the infrastructure projects will involve construction of some sort. The time, costs and procedures are also onerous.
The costs can set you back more than $10 000 before one can even start construction.
According to the World Bank, procedural and approval costs are either 1 percent or 1,75 percent of the construction cost, but this varies from one authority to another. The time required for the entire procedure depends on the local authority; in Harare, it is usually not less than 6 months and can be up to a year. The procedures of getting electricity, though improving (at number 161), is also not at levels that helps Zimbabwe compete.
Speaking at the CEO Conversations breakfast meeting hosted by Business Weekly, former Harare Mayor and lawyer Muchadeyi Masunda said Zimbabweans and Government must have a shared vision so that when foreign investors come in, they will buy in a position that has been taken by locals.
Masunda said business gets done in cities and towns and what needs to be done is to connect the dots and ensure that there is no disconnect between Government aspirations and those of the cities. If there is a disconnect, he said, it will result in investors encountering utilities that are not functional and roads and other infrastructure that are in a deplorable state. He said the infrastructure that is in place is not conducive for doing business.
Breakfast meeting facilitator and constructor Canada Malunga, however, said there is now a positive vibe in terms of Government working on improving infrastructure. And as Manyere said, we should not be judged prematurely as we still need time to prepare adequately for international capital.