Thursday, 16 July 2009

Kicking the tyres - slow but steady trickle of investment into Zimbabwe

I am really getting sick and tired of these endless investment conferences, seminars, delegations.
All these gatherings have yielded nothing except talks, official addresses and some politically correct statements from the foreign delegates of what a promising country Zimbabwe is, and that’s it. When these people leave, you will never hear of them again,”
ranted a Mr Chinenhamo in a Zimbabwean weekly newspaper.

My initial reaction was to chuckle at Mr Chinenhamo’s comments but after exercising my mind more on his contribution, his frustration seemed justified and encapsulates the frustrations of capital starved Zimbabwean companies - the unity government has come into being, the economy has stabilised, the country is no longer top of the inflation charts, successful Zimbabwean business has little debt, the country’s infrastructure is relatively intact, the workforce is highly skilled ....... the list of positives goes on. So what more could an investor need? The real money should be flowing by now! On the other hand, Mr Chinenhamo’s sentiments reveal the expectations of some local businesses and some in the general population that investment into Zimbabwe should happen immediately because on the private sector side, they have ticked all the boxes they feel they need to have ticked– the reality is often very different - it is a process and not an event to attract the calibre of investment Zimbabwe needs.

Investors have been well aware of the country’s potential but because of the previous 10 year economic crisis in Zimbabwe, that potential could not be converted to reality. Zimbabwe was one of those countries which geologists would speak about the vast mineral resources, and the financially astute would fawn over their returns from the local stock market. Bar the odd mining multinational and a few tyre kickers looking to build a relationship ‘for when things turn,’ the level of new FDI into the country was extremely low. In 2007, inward FDI flows into the country were about 14% less than that of Swaziland. Now things have changed. For those multinationals that kept their operations functioning, they are seeking to recapitalise their Zimbabwean assets, for those that left, they are now looking at re-entering the country. Slowly investment is beginning to trickle into the country. There is widespread acknowledgment that the political changes are permanent and the economy has responded positively.

One of our clients, African Sun has interests in the Zimbabwean hospitality sector and their Chief Executive, Shingi Munyeza, commented that their city hotels in Harare were almost at 70% occupancy in the first half of the year driven by international business-people. He also gave an interesting anecdote about the number of Gulfstreams at Harare International Airport – which got me thinking about creating a GulfStream Index as a proxy for international investment activity...........that discussion will be reserved for another blog though!

It would be very naive not to consider the history, political environment and perceptions surrounding any sort of large scale capital investment in the country – these topics have been covered in detail in many other forums, but three stick out; i) concerns over policy consistency ii) property rights and iii)indigenisation (Zimbabwe’s version of BEE). The government does have a clear position on these matters and a call to the Ministry of Industry and Commerce could provide one with the clarity they need. The ministry has set up the Zimbabwe Investment Authority, a one-stop shop providing investment advice on the country. The challenge now is to communicate that vision clearly.

Then again, perhaps I’m being unfair to Mr Chinenhamo, and his statement was merely a call for action. Any takers?

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