Zim losing FDI allure: US think tank

via Zim losing FDI allure: US think tank – DailyNews Live 17 July 2014

HARARE – Zimbabwe has become an insignificant destination in terms of Foreign Direct Investment (FDI) in sub-Saharan Africa due to the quality of its governance, an American think tank said.

According to its report, Brookings Institute (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.

This comes as 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.