Zim FDI plummets 53pc

via Zim FDI plummets 53pc – DailyNews Live 5 DECEMBER 2014 by KUDZAI CHAWAFAMBIRA

HARARE – Zimbabwe’s foreign direct investment (FDI) inflows plummeted by 53 percent to $146, 6 million in the 10 months to October 2014 compared to $311, 3 million recorded in the same period last year.

Finance minister Patrick Chinamasa in his 2015 National Budget said the foreign capital inflows remained subdued due to the perceived country risk.

However, he projected FDI to increase by 69 percent in 2015 on the back of continued implementation of reforms and the re-engagement process.

In August, Industry minister Mike Bimha established a Doing Business Committee tasked to probe factors dampening the country’s ‘ease of doing business’ and come up with recommendations.

The move was part of the reforms targeted at luring foreign investors.

This comes as Zimbabwe’s FDI was stagnant in 2013 with the country receiving $400 million, unchanged from 2012, according to a recent United Nations Conference on Trade and Development (Unctad) report.

The $400 million represented just three percent of total FDI into southern Africa.

This exposes investment-starved Zimbabwe’s incapacity to attract meaningful FDI it desperately needs to jump-start its faltering economy.

Recently, an American think tank, Brookings Institute (Brookings) noted that Zimbabwe had become an insignificant destination in terms of FDI in sub-Saharan Africa due to the quality of its governance.

Brookings — a private non-profit organisation involved in independent research and innovative policy solutions — says the investment-starved Zimbabwe’s governance policies repel FDI.

“Zimbabwe and the Democratic Republic of the Congo (DRC) are at the bottom with a respective score of -1.35 and -1.74, thereby making them unattractive investment destinations,” the report said.

In the survey, Brookings used world governance indicators which cover six dimensions of governance, accountability, rule of law, government effectiveness, political stability, regulatory quality, and control of corruption.

The governance index ranges from -2.5 (weak) to 2.5 (strong governance performance).

“Investing in countries with relatively higher governance performance reflects concerns with the investors’ level of risk aversion, the pursuit of democratic principles or non-ideological relationship based on non-interference,” Brookings said.

“It also shows the level of pressure from global consumers, who are increasingly scrutinising their choices along the global value chains according to the respect of governance indicators, such as respect for human right,” it added.

Zimbabwe’s indigenisation policy — compelling foreigners to cede 51 perecent shareholding to black locals — has been blamed for driving away investors from the country.

The Brookings report also indicated that FDI to Sub-Saharan Africa increased substantially from over $33,5 billion in 2000 to $246,4 billion in 2012, with the European Union (EU), China, Japan and the United States of America (USA) accounting for approximately 54 percent of the investments.

However, the FDI in-flows into sub-Saharan Africa are highly concentrated in a few countries, with South Africa and Nigeria being the top recipients of FDI from China, the EU and the USA.