United States companies are keen to invest in Zimbabwe but they are wary of a violatile foreign currency exchange environment, American ambassador Brian Nichols has said.
Nichols spoke to Standardbusiness on the sidelines of an event to mark the Women’s History Month in Harare last week that interest in Zimbabwe remained high, but the currency problems caused uncertainty.
The Reserve Bank of Zimbabwe (RBZ) last month liberalised the foreign currency exchange market and introduced a local currency in the form of the real time gross system (RTGS) dollars.
Initially the exchange rate between the RTGS dollars and US dollar was fixed at 2:5 but it has since skyrocketed to 2.7.
Companies say the introduction of the interbank trading platform for foreign currency has not addressed crippling US dollar shortages on the market.
Nichols said the key was for the government to continue the process of liberalising the foreign currency market.
“I think there is a lot of interest (from US companies),” he said.
“I was in South Africa a couple of weeks ago and met with a number of US companies that were interested in doing business in Zimbabwe.
“One of the key challenges for them has been the issue of forex and the exchange rate.
“I encouraged the government to continue the process of liberalising the exchange rate and allow the allocation forex based on market principles entirely.”
The envoy said a liberalised foreign currency market would enhance the ease of doing business in Zimbabwe.
“I think that will deepen the ability of companies to do business here, both the companies that are here and those that would like to return here because a number of the companies I talked to were companies that had been previously operating here and the things that they say are foreign exchange issues, rule of law and the confidence of their investments,” Nichols added.
According to the Bureau of Economic Analysis of the United States Department of Commerce, US direct investment in Africa was pegged at US$50,2 billion in 2017, a dip of 2,7% from the comparative year’s US$51,7 billion.
Zimbabwe received US investment worth US$37 million or a paltry 0,07% of the total investment in Africa.
Nichols said increasing transparency in the judicial system will make Zimbabwe even more attractive to US companies
“That if there is any dispute or concern it will be solved fairly, transparently and quickly those are the things the private sector is looking for,” he said.
“As many people know, I have brought Abbott Laboratories (an American health care company), hosted an event at my home for their investment.
“We have had the presence of the General Electric Africa (part of the American multinational conglomerate, General Electric) which has been very interested in cooperating on power generation as well as healthcare in Zimbabwe.
“There has been discussion of other significant companies coming here and as we go forward they will be looking for those improvements in the rule of law (and) economic transparency.”
Investment trends indicate that US investors seek areas where they can get high returns with clear exit opportunities.
While targeted sanctions have increased the risk of doing business in Zimbabwe, corruption, bureaucratic red tape, policy inconsistencies, lack of national engagement and the property rights deficit are largely responsible for deterring investment.
Foreign investment in Zimbabwe declined by 10% to US$22, 8 million last year from a 2017 comparative of US$25,4 million.