HARARE – Lack of investor confidence in doing business in Zimbabwe remains a major stumbling block in efforts to revive the country’s broken economy, the Zimbabwe National Chamber of Commerce (ZNCC) has said.
The country is battling to resuscitate its economy — still suffering a hangover from a decade-long recession — dogged by depressed foreign direct investment, an acute liquidity crisis and massive power and trade deficits among other challenges.
Market analysts contend that investors’ confidence levels sunk to the lowest following the re-election of President Robert Mugabe in the July 31 election, with the stock market plunging to unprecedented lows.
Brains Muchemwa, ZNCC’s macroeconomics committee chairperson, yesterday told an Industry and Commerce Parliamentary Committee that “interactions with local and foreign business people with interests in the country had attested to the fact that confidence has been and remains the major factor constraining significant capital inflows into the country.”
“Notwithstanding the challenges our economy faces regarding inadequacies relating to our tangible economic enablers such as energy shortages, constraints in the supply of clean water as well as generally failing critical infrastructure, investor confidence, though intangible, remains a key economic enabler which, if left unattended to, may render futility to all our efforts towards restoring our economy to its former glory,” the economist said.
He added that the major factor dampening investor confidence is lack of policy clarity and transparency regarding key economic issues such as implementation of the indigenisation and empowerment laws, particularly in the sensitive banking sector.
“The absence of government decisiveness on the resolution of both the country’s domestic and international debt as well as the continued less than satisfactory record, at least in the eyes of the international community regarding Zimbabwe’s adherence to the widely held virtues of upholding property rights and transparently enforcing commercial contracts is detrimental to our efforts,” said Muchemwa.
This comes as Zimbabwe’s global rankings on the ease of doing business dropped this year to 170 out of 185 countries, according to World Bank’s Doing Business 2013 report.
On the ease of starting a business, the country ranked 143, getting electricity 157, protecting investors 128 , trading across the borders 134, resolving insolvency 169 and enforcing contracts 111.
Zimbabwe’s economy — once the second-largest on the continent after South Africa — is currently characterised by decelerating gross domestic product growth, burgeoning fiscal and current account deficits and policy discord.
Recently, former Finance minister Tendai Biti revised downwards economic growth target from five percent to 3,4 percent on the back of a slowdown in activity in the mining agricultural sectors.
The economy grew by an average seven percent between 2009 and 2011 following the establishment of a coalition government between Mugabe and long-time rival Morgan Tsvangirai, but began slackening last year due to political uncertainty and constant bickering.
To unleash new momentum, Muchemwa said there is urgent need for fresh capital injection in the economy.
“Zimbabwe requires substantial capital flows to underpin economy wide recapitalisation, overhaul the antiquated machinery which are teeming in our factories, replace technologies of decades ago with new technologies and revamp our infrastructure,” he said.
“The economy is stuck in an untenable low equilibrium position characterised by low capacity utilisation, low wages, low levels of employment and low investment rates, and this is not sustainable.”