Taper FDI expectations, for real reforms are not merely political…Structural reforms must be offer real yields for investors

24 Nov, 2017 - 04:11 0 Views
Taper FDI expectations, for real reforms are not merely political…Structural reforms must be offer real yields for investors

eBusiness Weekly

Chris Chenga
Politics tends to be a discipline of scape-goating and passing along culpability to one’s opponents. As a contest of appeasing public perception, politicians behave to draw themselves from accountability of the public’s general contempt; indeed anything otherwise would be daft strategy to accumulate confidence and votes. So such is the nature of the discipline that one is not a “bonafide politician” if they cannot identify opportunity and exploit it to find a scapegoat for undesirable occurrences that grow public contempt.
A prolonged occurrence is Zimbabwe’s lack of foreign investment and capital inflows. The country has been attracting less than 5 percent of inflows into the SADC region over the last decade. The past week’s events in the country were pretexted by the admittance, or foresight, of social and political discontent.

Underlying the narrative of political transition was a well-articulated cause for global re-engagement, which would then be leveraged for foreign investment and capital inflows.
Already, as to be expected in politics, there is movement and gestures to hint blame for the hindered foreign investment and capital inflows. We cannot fault politicians for their propensity to pass blame. That is part of the discipline. But, we can call-out an extensive optimism that is born from this practice of blame game.

Whatever we are to be told was cause for low investment and inflows can be tolerated as inherent in political jostling. But what we should not easily fall for is the imagination that investment and inflows shall now come in abundance. Inertia in structural reforms has long been quoted as main impediment to FDI.

Whether caused by outright stubbornness to reform or bureaucratic lethargy, stagnancy in structural reforms slowed down the necessary gateways for both investor confidence and yield potential.

From an investor point of view, slow reforms are typically an entire administration’s fault, from the Presidency to the Cabinet.

Perhaps another view point is to suggest an autocratic means of economic management that places culpability solely on a Presidency.

In the latter, under autocratic governance, line Ministers in Industry and Commerce, Economic Planning and Investment Promotion, as well as other ministries such as Infrastructure and Agriculture can be distanced from the low investor confidence and yield potential. In this case, investors then would be agreeable to see the continuation of respective incumbents in these ministries, or reshuffled.

This seems to be the outward political posture, as many ministers of the last administration remain visible within the “Restoration of Legacy” exercise.

If this is to carry through into President Mnangagwa’s Cabinet, perceptive investors will politely oblige to such continuity, merely accepting it as part of the political jostling practice that scapegoats and passes along culpability. We cannot fault politicians for passing blame.
However, the retention of members of the last Cabinet will not easily sway investor confidence and favourability.

In fact such appointments would be challenged by the “old wine in new bottles” convention. Accordingly, FDI promises and expectations must be tapered.

Structural reforms extend outside of the political arena and should be presented, seen, and tested as pragmatic, practical and offering tangible yields for investors.

Investors want real tangibles such as monetary stability, ease of doing business, and efficient pubic institutions. All these must have substantial evidence that is felt as real yields.

What we tend to discount in Zimbabwe is that while general public may seem to be sold on political posturing, the investing public is not so easily sold onto it.

Erudite investors, who make up the large share of investors to do thorough diligence and benchmark yields in frontier markets such as Zimbabwe, are not so impressionable to political posturing.

Thus, switching political chairs is not going to guarantee foreign investment and capital inflows; only real structural reforms will motive such outcome.

Another consideration as we experience our significant political inflection is that foreign investors are not rediscovering Zimbabwe new.

A new political class carries with it legacy concerns that have existed over decades. Investors will not carry out due diligence on blank canvas.

There are many legacy issues of structural reforms on governance, policy sectorial reforms amongst many others to convince investment commitment.

Foreign countries have remained in Zimbabwe throughout through embassies, aid agencies and institutional affiliates.

So more precisely, Zimbabwe is really trying to shift donor and aid money into commerce money.

According to the UNDP, healthcare costs in the country are 80 percent attributed to donor funds. In other words, there are already existent sector databases of investment opportunities in health care.

In agriculture, aid finance has sustained drought relief and food sufficiency. There are already existent sector databases in agriculture.

At a bi-lateral level, nations such as Canada have sent inflows of $300 million into Zimbabwe, and they have retained database and information outposts readily available to Canadian businesses over the years.

The fact is, foreign presence has always been in Zimbabwe, and mere political jostling will never outweigh the hard evidence and material knowledge that foreigners already have of our economy.

Operation Restore Legacy can be commended for the political reformation that it has enabled, but we must taper FDI expectations for real reforms are not merely political. The wise investors will be agreeable to the scape- goating and passing blame inherent in politics, but they will not be moved by overly optimistic promises of FDI and capital inflows.

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