FDI to Zimbabwe down 30 percent to US$295 million in 2016

Source: FDI to Zimbabwe down 30 percent to US$295 million in 2016 | The Financial Gazette January 31, 2017

INWARD direct investment to Zimbabwe fell 30 percent  in 2016 to US$294,66 million from US$421,2 million reflecting worsening investor sentiment and against a long-term target of at least US$1 billion.

One of the overall assumptions of the country’s economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) is an increase in foreign direct investment.

While government was making strides in improving the ease of doing business climate, through the Office of the President and Cabinet, foreign investors continue to be elusive mainly due to poor economic conditions which are not favourable for a country that already uses a currency that is too strong for its fundamentals and the effects of the fallout of the politics to the West. Further to that, policies are unpredictable while there is a general lax in implementation.

Figures obtained from the Reserve Bank of Zimbabwe (RBZ) show that net foreign direct investment closed the year at US$254,7 million against US$399,2 million in 2015 after accounting for US$40 million outward investments from US$22 million last year.

Quarter on quarter, FDI slipped from US$80,5 million in Q1 to US$78 million in Q2 while it picked slightly to US$81 million in Q3 before drastically falling to US$55,1 million in Q4 when the RBZ due to concerns over the country’s currency direction following the introduction of bond notes.

The figures also show that the country closed the year with negative portfolio investments of -US$26 million from a positive US$122,8 million in 2015.

Inward portfolio investment amounted to US$91 million but outflows were higher at US$117 million.

In 2015, the country recorded US$268,5 million inward portfolio investments and US$145,7 million outward portfolio investment. The poor performance was after a massive sell-off of foreigners on the Zimbabwe Stock Exchange last year.

While economic and subsequently company performance was weak, the negative sentiment on the exchange was mainly driven by the delays in settling foreign obligations.

Most investors experienced delays of up to three or four weeks in the remittance of proceeds by banks despite the fact that the settlement of dividends and investment proceeds is on Priority List 1 of the Reserve Bank of Zimbabwe’s foreign payments plan. FinX