Zim records alarming decline in FDI
FOREIGN Direct Investment (FDI) to Zimbabwe declined by 64 percent to US$259 million in 2019 from US$717 million in the previous year as President Emmerson Mnangagwa’s under-fire government struggles to attract the much-needed capital to Harare.
The southern African nation, which is shut out from international development financiers because of its history of defaults, is hobbling along with an economic reforms programme which is supposed to draw private investment, but recurring accusations of human rights abuses against the government have hampered the country’s chances.
“Foreign direct investment declined from US$717,1 million in 2018 to US$259 million in 2019. Similarly, net portfolio investment inflows declined significantly from US$54,7 million in 2018 to US$3,7 million in 2019, the decline in both FDI and portfolio investment was, in large part, due to heightened perceived country risk,” Mangudya said.
The country’s industry is in desperate need of fresh lines of concessional lending to retool and restock to competitively viable levels after decades of isolation.
According to a recent survey by the Confederation of Zimbabwe Industries, the manufacturing sector is operating at just 36 percent of installed capacity and it is projected to fall further to 27 percent this year.
In its ninth edition of the ‘‘Where to Invest in Africa’’ report, the Rand Merchant Bank (RMB) downgraded Zimbabwe to be among the 20 least attractive countries for investment as an imploding economy makes it harder for companies to operate.
In line with the slump in FDI, total foreign currency receipts also declined.
“The total foreign currency for the period January to December 2019 amounted to US$6,88 billion, compared to US$7,21 billion received during the same period in 2018. This represented a 4,4 percent decrease in foreign currency supply,” added Mangudya.
While some experts have accused legacy debt and lack of political and economic reform for scuttling FDI, Mangudya said the country is currently settling some of the arrears which date back to over five years.
“Government, through the bank, is committed to orderly settlement of blocked funds – cash flows generated in Zimbabwe by foreign entities that could not be repatriated to foreign suppliers due to foreign exchange shortages — or commonly referred to as foreign exchange legacy liabilities (or debt)”.
“To date, Exchange Control has processed and validated blocked funds in an amount of US$1,2 billion from 730 applications out of 1080 requests. Of those processed, 299 transactions with a value of US$861 million were rejected for various reasons ranging from double-dipping to lack of supporting documentation”.
The balance of 350 transactions with a value of US$457 million are being processed for finalisation by 29 February 2020,” he said.
According to Treasury statistics from last year, the country owes around 800 creditors.
Some of the debts are owed to the world’s airlines in unremitted ticket sales.