Source: New mindset key to ZIDA success | The Herald December 10, 2019
Lovemore Chikova Assistant Editor
The passing of the much-awaited Zimbabwe Investment Development Agency Bill (ZIDA) by Parliament last week has raised stakes on the prospects of attracting foreign direct investment (FDI).
The Bill now awaits Presidential assent before it becomes law, and effectively establishes an institution called Zimbabwe Investment Development Agency (ZIDA) to handle all issues related to local and foreign investors.
That the President will sign the Bill is obvious, and it is widely expected that in the next coming days, the ZIDA law will be operational.
While this law will create conditions necessary for grabbing the attention of foreign investors, it is imperative that Zimbabwe strives to offer a complete package to attract more such capital.
It is good to celebrate the passing of ZIDA, especially after the Bill seemed to have been stalled in Parliament for some time, but the new law alone will not produce the magic wand.
This discussion will look at what ZIDA offers the potential investor, and why that needs to be complimented by other issues usually considered crucial in the investor’s decision-making process.
ZIDA will effectively create a one-stop investment services centre, where officials from all Government agencies and ministries involved with investment will be housed. The beauty of this arrangement is that it will cut the process of having potential investors move from one office to another in search of the right papers to start their business.
This cumbersome process entailed that the investor would end up spending more time waiting to access the right papers, instead of planning and implementing their projects.
ZIDA has repealed the Zimbabwe Investment Authority Act, the Special Economic Zones Act and the Joint Ventures Act, all of which were dealing with investors separately.
The Zimbabwe Investment Authority was responsible for issuing licences to foreign and domestic investors and ensuring they were able to start operations. The Special Economic Zones Act was overseeing the establishment of special economic zones where investors enjoyed certain privileges, such as exemption from ordinary customs tariffs.
The Joint Venture Act was concerned with the exploitation by foreign and domestic investors of State-owned resources such as land and contracts for Government utilities in the power, transport and water resource field.
But these institutions often carried out their work at variance with each other, pronouncing contradictory policies, rules and regulations that ended up annoying some investors.
It is envisaged under ZIDA that within a day, the investor will be able to register a company, obtain a tax certificate number, an environmental impact assessment certificate, a National Social Security Authority (NSSA) number and many other necessary documents.
More importantly, ZIDA will craft a raft of incentives for investors which will be favourable enough to ensure there is a return on their capital, while the country also benefits.
ZIDA will provide for the promotion, entry, protection and facilitation of all investments by both local and foreign investors. The new institution will work with Government and interested stakeholders in using modern communications methods to promote Zimbabwe as an attractive investment destination.
Investors will be allowed to invest in, and reinvest their profits into any and/or all sectors of the economy.
The law binds the new investment body to institute a fair and equitable treatment of investors, while every investor will be protected against denial of justice in criminal, civil or administrative proceedings.
ZIDA provides important statutory guarantees against discrimination between foreign and domestic investors, and pledges fair treatment to all investors.
Holders of investment licences will be accorded certain privileges such as priority in the consideration of any secondary licences or permits required to secure their investments.
While what ZIDA offers is attractive to any investor from anywhere in the world, it is important that more is done outside the institution to make its work more effective.
One of the issues that scares away potential investors is corruption, which is perceived to have been rampant, especially under the previous dispensation.
It is important that the New Dispensation under President Mnangagwa has made the fight against corruption one of its top priorities.
Intensifying the fight against corruption will help change the mindset of those who want to bring their capital to Zimbabwe.
Already, the ground has been laid for this exercise, which has resulted in some high profile people being brought before the courts facing a raft of corruption charges. Foreign investors are always jittery when it comes to committing their funds to a destination thought to be characterised by corruption for fear of losing out on their investments.
There has been too much bureaucracy in the handling of investors, which in some cases has resulted in the potential investors abandoning their pursuits out of frustration.
For instance, reports in the past indicated that there were too many third parties that took advantage of the investors to induce them to pay bribes for short-cuts to obtain the necessary documents.
In fact, some were reported to demand money from investors so that they link them up with high profile figures to facilitate their approval.
Even Government officials were sometimes accused of sitting on the investors’ papers or making demands that were difficult to fulfil in a bid to frustrate them if they did not “play ball”.
President Mnangagwa recently warned such officials to desist from their acts, for the law will soon catch up with them. For ZIDA to succeed, it needs a new mindset which does not encourage interference in its operations, otherwise there is a risk of reverting to the previous set-up where everything was centred on the minister’s approval. Policy consistency will be one of the issues that should be addressed if ZIDA is going to be effective in the attraction of foreign investors.
There should not be a contradiction between what the Ministry of Finance and Economic Development pronounces with regards to how far the investors can go, and what is offered by ZIDA. Incentives, rules and regulations offered by the ministry for exports, for example, should align with those under the statutory instruments governing such issues.
In the past, investors have complained about lack of clarity on such issues, but this can be solved by letting ZIDA becoming a true one-stop services centre for investors.
ZIDA should be given the leeway to make all the pronouncements with regards to issues that are related to investors if it is to become effective.
The economic reforms being undertaken by Government have to be speeded up to ensure that the stability that is beginning to emerge is consolidated.
The economic stability is important for the attraction of foreign investors who are always keen to avoid making losses on their investments.
Although theories of investment have proved that capital tends to flow from regions where it is concentrated to those with lesser such funds, it is also true that it flies to destinations where it feels safe.
This is why Government should be complimented for its efforts in creating an environment that is becoming a good haven for both domestic and foreign investment.
Although Zimbabwe has been attracting some foreign direct investment in the past, the flow has not been satisfactory.
A cocktail of frequent droughts, weakened trade terms, reliance on primary commodity exports, high external and domestic debt fuelled a decline in the attraction of foreign direct investment starting a few years after Independence.
According to the World Investment Report, foreign direct investment in Zimbabwe was stagnant at US$400 million between 2010 and 2013.
But in 2018, the country recorded foreign direct investment inflows of US$745 million, up from US$349 million in 2017.
In its National Investment Policy published this year, Government believes that attracting foreign direct investment and its expert management is important for successfully attaining Vision 2030 of achieving an upper middle-income economy.
With a fully-fledged ZIDA, this can be achievable, as it will make the country leverage on its strong areas in the attraction of foreign direct investment.
These areas include abundant mineral resources (platinum, gold, diamond, nickel); huge potential in agriculture (maize, wheat, tobacco, cotton), highly skilled and hard-working labour force as well as potential for tourism development.