Zimbabwe poised for take off

via Zimbabwe poised for take off | The Herald. September 10, 2015 by Dr Gift Mugano

Zimbabweans from all walks of life are pondering over the direction the economy is taking. This anxiety has been so intense and in recent weeks have been renewed by the Supreme Court ruling which has seen over 20 000 people sacked. Without doubt, the incessant companies’ closures, emergence of the informal sector, soaring trade deficit and liquidity crunch are inter — alia combined factors which created a gloomy picture for the laymen. On the contrary, Zimbabwe is poised for take off! This week’s unpacks the expected exciting moments awaiting us.

My argument of hope is built on continued inflow of foreign direct investment (FDIs) into the country as a solution to economic challenges. Zimbabwe’s major source of liquidity under the dollarised environment is FDIs, exports, remittances and aid. For Zimbabwe, FDIs, exports and remittances are the major sources of liquidity as aid is constrained by debt problem.

Although the question as to which one can catalyse economic transformation between FDIs and exports is an egg and hen debate, it seems for Zimbabwe FDIs are the major driver. As a result, this week’s discussion will show how the recent FDIs are anticipated to propel the economy. In recent years and subsequently recent months, Government and private sector invested a lot of energy in attracting FDIs but the results are not immediately visible. According to the World Bank’s popular quote: “At its best, finance works quietly in the background; but when things go wrong, financial sector failures are painfully visible.”

For the last 12 months Zimbabwe has received significant FDIs from Brazil, South Korea, China, India, Russia, Belarus, South Africa and recently Nigeria.

Last year, through the charismatic efforts of President Robert Mugabe, we saw the $4 billion platinum extraction and refinery investment deal inked with Russia which is anticipated to employ over 8 000 people on completion.

This is a game changer as it will bring in competition and obviously give the people of Zimbabwe more bargaining power with their resources. What is so refreshing is that this investment in Darwendale came at a time when Government is accelerating the implementation of the Zimbabwe Agenda for Social Economic Transformation (Zim-Asset).

The issue of value addition particularly in the mining sector has been a thorn issue as miners argued that they don’t have critical mass to go for it. The coming in of the Russians presented Government with options and solutions to escape the bully behaviour of the oligopolistic structure of the mining sector in Zimbabwe.

In August 2014, President Mugabe and his Chinese counterpart His Excellency Xi Jinping signed various deals worth billions of dollars, mostly focusing on infrastructure.

According to Zimbabwe Investment Authority (ZIA) statistics published in the China Daily, the Asian giant remained Zimbabwe’s largest investor during the first five months of 2015, accounting for 74 percent of the $134 million of the foreign direct investments pouring into the country. In 2014, ZIA approved $929 million of Foreign Direct Investment (FDI) projects, among which 72 percent was from China.

To date, this year alone, according to the Zimbabwe Investment Authority, FDIs have reached $1,6 billion. This excludes the Dangote imminent deal. In July 2015, Zimbabwe and Belarus signed a $150 million Memorandum of Agreement in four areas namely road and dam construction, mining, agriculture, municipal and other equipment.

This agreement will see the Belarus’ Minsk Tractor, which is one of the world’s biggest tractor manufacturing companies which has been in existence for the past 70 years with dealership in 150 countries investing in Zimbabwe through the establishment of a service centre and a tractor plant. Just recently, we witnessed the launch of a staggering $250 million which was sourced from South Korea, India and Brazil for irrigation rehabilitation which will of course positively affect agricultural productivity in the face of climate change.

In line with this, it is also heartening to note that Chinese firm (China CAMC Engineering) partnered the Agricultural Rural Development Authority (ARDA) to revive ARDA Mushumbi Pools Estate by investing $200 million for the next five years in Mashonaland Central.

If completed, this will see 1 000 hectares of land being put under irrigation. As if not enough, the China CAMC will build a dam, a cotton ginnery and a fruit canning plant at Mushumbi Pools.

The company intend to generate about 15 megawatts of electricity from the dam to power the ginnery and canning plant. What is even exciting is that once this project is completed it is expected to employ about 3300 people from the supply of cotton alone. Interestingly, Masvingo City Council recently clinched a windfall following a mega signing with China’s CAMC Engineering amounting to US$60 million which will enable them to apply for funding towards critical infrastructural development projects.

And, in a week or so ago we received Africa’s richest man, Mr Dangote and his team. He is a man of few words but action packed. In his own words, he said we didn’t come to scout for investments but we came to invest billions of dollars in cement, power and coal mining! He went on to say the ball is in the Government court. His statement was pregnant with a lot of meaning.

My interpretation is the Mr Dangote confirms to school of thought which says that Zimbabwe is a country which is abundantly blessed with resources. Rightly so, he was spot on! The other meaning from Mr Dangote’s statement relates to the ease of doing business.

We actually have a litmus test on the number of days we are going to take to process this investment deal! I am confident that for the first time in history if the assurances we hear from the relevant authorities are anything to go by we will have this investment deal being processed in less than five days.

The challenge going forward is to maintain this new record even for small investors. What it requires is that we need to make the framework of one stop shop a reality and not to see everything coming to a halt as authorities step over one’s toes to make way for Mr Dangote.

The million question is what is the meaning of Mr Dangote’s investment to an ordinary citizen in Zimbabwe? There are a number of important positive effects which include employment creation, export generation, competition and restoration of investor confidence. With respect to employment creation, these are mega projects which run into billions of dollars. There is no doubt this will create employment not only in the three areas identified by Mr Dangote, that is, cement, power and coal mining but also the downstream industries.

Export generation, the fact that Dangote cement in Zambia uses Zimbabwe coal; it is therefore obvious that there is ready market for coal exports.

Moreso, the fact that Mr Dangote want to build an integrated plant here in Zimbabwe which is bigger than the other plants in other countries coupled by the fact that we already have other cement producers here it is therefore evident that Zimbabwe will have enough capacity to export to region thereby utilising the regional trade protocols in the Common Market for Eastern and Southern Africa (COMESA), Southern Africa Development Community (SADC) and even the Eastern African Community (EAC) — under the tripartite free trade agreement.

Competition, for a long time Zimbabwe suffered in the hands of few players in the cement manufacturing (oligopolistic structure). Some players in the cement manufacturing for the last 15 years invested their money in spare parts there technically holding the country at ransom. With the coming in of Dangote, it is game over!

Restoration of investor confidence, one can look at this from two fronts. First, the coming in of Mr Dangote together with other investors from South Korea, China, Russia, Belarus, India, Brazil etc gives clear message to the whole world that Zimbabwe investment climate is good!

Second, the indigenisation law is demystified. Since the new pronouncement by the Minister of Finance in his 2015 Budget Statement that the indigenisation law is not one size fit all there was no clear platform to test it.

Recent investments approvals not only the Dangote ones but also new acquisition such as the Lessafre Group which acquired 60 percent stake in Anchor Yeast, Japanese firm Kansai Plascom which acquired 63,25 percent in Astra and 100 percent acquisition into Blue Ribbon Industries by the Tanzanian Conglomerate (Bakhresa Group) are clear testimonies of Government flexibilities on indigenisation and policy consistency.

What is refreshing is that most of these investments are coming into agriculture and infrastructure which are problematic areas for Zimbabwe. These recent developments have no doubt placed the country on a right path to take off. What we need is to build the momentum.

Hence, going forward, in order to consolidate investments inflows and follow up on bilateral investment deals, there is need to set up a ministerial task force on FDIs mobilisation, coordination and evaluation whose terms of reference inter — alia must include making follow ups on bilateral investment deals, contacting investment road shows, coordinating investment climate perception survey, assessing the easy of doing business, etc.

Iwe neni tine basa!

Mina lawe silomsebenzi!

Dr Mugano is an Economic Advisor, Author and Expert in Trade and Competitiveness. He is a Research Associate of Nelson Mandela Metropolitan University. Feedback: +263 772 541 209 or [email protected]

COMMENTS

WORDPRESS: 6
  • comment-avatar
    R Judd 7 years ago

    Is the author nuts or am I?

  • comment-avatar
    ntaba 7 years ago

    To R Judd – I think we need to smoke some of this guy’s stuff – it must Binga’s Best mBanji.

  • comment-avatar
    Mupurisa 7 years ago

    Another article of Hallucination in the Herald. You just have to wonder when these are going to wake up and smell the coffee!

  • comment-avatar
    mandevu 7 years ago

    Quite sad really that it has come to this

  • comment-avatar

    on same page as news of fresh farm invasions.

  • comment-avatar
    makanyara 7 years ago

    PhD in dreaming…..