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Is Zim really open for business?

That Zimbabwe’s Foreign Direct Investment inflows (FDIs) rose to US$745 million in 2018 from US$349 million in prior year came in as sweet music for authorities who are frantically making efforts to attract inward investments into the country. Zimbabwe’s economy is currently facing serious headwinds which include rising inflation, high cost of living, fuel price hikes, high levels of unemployment and a depreciating local currency. In November 2017, following the resignation of long-time leader Robert Mugabe, President Emmerson Mnangagwa undertook to overhaul the investment climate in Zimbabwe. His ‘Zimbabwe is open for business mantra’ signaled
government’s commitment to break with the past. The Indigenisation and Empowerment Law compelling foreign investors to cede 51 percent stakes to locals was often cited as a piece of legislation that spooked investors. But Mnangagwa said that the law would only apply to investors in diamond and platinum mining sub-sectors. Many saw this as a marked shift from the old regime. However old challenges continue to confront the new administration. The United Nations Conference on Trade and Development in its latest investment report said Zimbabwe’s FDI’s for 2018 was up 86 percent compared to prior year. On face value, this figure appears like a huge leap but comparatively it emains a fraction when compared to regional peers like Mozambique, Zambia and South Africa. During the period under review, the global total value of announced greenfield projects in the primary sector doubled to $41 billion, mostly due to projects in metals mining, which trebled in value to $20 billion in 2018, the highest level since 2011. Karo Resources (Cyprus) announced a project worth $4.3 billion in a platinum mine in the country. This mega project was supported by theAfrica Finance Corporation.

Zimbabwe’s FDIs flows figures were above those recorded in Botswana, Namibia, Angola, and Madagascar in which were all below the US$500m mark.

According to UNCTAD FDI flows to Southern Africa recovered to nearly US$4.2 billion in 2018, from -US$925 million in 2017. Inflows to regional powerhouse, South Africa more than doubled to US$5.3 billion in 2018, contributing to progress in the Government’s campaign to attract $100 billion of FDI by 2023. This significant growth in inflows was largely due to intracompany loans, but equity inflows also recorded a sizeable increase. For instance during the same period under review, China-based automaker Beijing Automotive Industry Holding opened a US$750 million plant in the Coega Industrial Development Zone, while automakers BMW (Germany) and Nissan (Japan) expanded their existing facilities in the country. Apart from the aforementioned projects, Mainstream Renewable Energy of Ireland started building a 110 MW wind farm, with a planned investment of circa US$186 million. Mozambique received FDI flows amounting to
$2.7 billion in 2018, up from $2.3 billion in 2017. Elsewhere, FDI flows to Angola in 2018 continued to be negative (-$5.7 billion). Angola has traditionally been an attractive FDI destination because of its oil and gas sector; however, FDI inflows to the country have been negative for the last two years due to both profit repatriations by foreign parent companies and the decline in the country’s oil production, which weighed on new investments. The current negative FDI flows contrast with almost $7 billion a year invested on average in the country between 2014 and 2015. Recently the Government, in an attempt to encourage FDI,
introduced an investment law that removes the mandatory national ownership share of 35 per cent in greenfield investments and the minimum investment requirements. The UNCTAD also notes that multinational enterprises from developing economies were increasingly active in Africa but investors from developed countries remained the major players. France maintained its interests in Francophone countries while the Netherlands holds the second largest foreign investment stock in Africa.

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