Foreign direct investment dries up

FOREIGN investment inflows to Zimbabwe last year fell by 23.7% to US$40.06 million compared to the same period in the previous year, with analysts attributing the decline to the outbreak of Covid-19 pandemic.


According to a Monetary Policy Statement released by Reserve Bank of Zimbabwe (RBZ) governor John Mangudya last week, foreign investment declined from US$53.47 million to US$40.06 million in 2020 while international and diaspora remittances increased by 57.6% to US$1.002 billion.

Loan proceeds registered 42.5% growth to US$845.21 million whereas income receipts and non-governmental organisations contributed US$56.85 million and US$647.75 million, respectively.

In total, foreign currency receipts for 2020 increased by 14.9% to US$6.288 billion.

Economic analysts attributed the decline in foreign investment to the outbreak of the Covid-19 pandemic which heightened the risks.

“The decline in foreign investment is because of the risks associated with the Covid-19. No one was actually going to be investing. But already the crisis before was associated with declining foreign direct investment (FDI),” economic analyst Godfrey Kanyenze said.

Zimbabwe has been struggling to attract significant foreign investment due to toxic policies and unstable political environment, among other factors.

According to the United Nations Conference on Trade and Development (UNCTAD) 2020 World Investment Report, FDI inflows decreased significantly to US$280 million in 2019, compared to US$745 million recorded in 2018.

Zimbabwe ranked 140th out of 190 countries listed in the World Bank’s 2020 Doing Business Report, gaining 15 places from the previous year’s report.

Policy inconsistency, administrative delays and costs, and corruption are some of the challenges hindering business facilitation in the country.

Zimbabwe does not have a fully online business registration process, though one can begin the process and conduct a name search online via the ZimConnect web portal.

In February 2020, the government passed legislation creating the Zimbabwe Investment Development Agency (Zida) to act as a one-stop investment centre, replacing the Zimbabwe Investment Authority.

Zida houses several agencies that play a role in the licensing, establishment and implementation of investment projects including the Zimbabwe Revenue Authority, Environmental Management Agency, RBZ, National Social Security Authority, Zimbabwe Energy Regulatory Authority, Zimbabwe Tourism Authority, the State Enterprises Restructuring Agency, and specialised investment units within relevant line ministries.

In order to attract greater FDI and improve the country’s competitiveness, the government has encouraged public-private partnerships and emphasised the need to improve the investment climate by lowering the cost of doing business and restoring the rule of law and sanctity of contracts.

Implementation, however, has been inadequate.

Source: News Hawks

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