Zimbabwe’s FDI inflows drop 23 percent in 2015: UNCTAD

Source: Zimbabwe’s FDI inflows drop 23 percent in 2015: UNCTAD | The Financial Gazette July 13, 2016

ANGOLA was the largest recipient of foreign direct investment in Africa at US$8,7 billion but Zimbabwe continues to under-perform with the country recording an almost 23 percent decline in flows received in 2015.
While Government is making strides in improving the ease of doing business climate, 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.

According to the United Nations Conference on Trade and Development’s 2016 World Investment Report FDI flows to Zimbabwe in 2015 were at US$421 million from US$545 million in 2014. In 2010 the country attracted US$166 million in FDI.

After several years of negative flows, Angola attracted a record US$8,7 billion of FDI largely due to loans provided by multi-nationals to their local affiliates who had been affected by declining oil prices. FDI to South Africa declined 69 percent to US$1,8 billion – the lowest level in 10 years – owing to factors such as lacklustre economic performance, lower commodity prices and higher electricity costs.

Mozambique also recorded declines but still attracted a strong US$3,7 billion, which – though 24 percent lower than 2014 inflows – still made it as the third largest FDI recipient in Africa. FDI flows to Zambia declined 48 percent to US$1,7 billion as electricity shortages and uncertainties related to the mining tax regime continued to constrain FDI into the mining sector.

FDI flows to Africa fell to US$54 billion in 2015, a decrease of seven percent over the previous year. An upturn in investment into North Africa was more than offset by decreasing flows into sub-Saharan Africa, especially to West and Central Africa. In particular, this was because low commodity prices depressed FDI inflows in economies based on natural resource.

Dynamic flows into Egypt boosted FDI to North Africa. FDI flows to Kenya reached a record level of US$1,4 billion in 2015, resulting from renewed investor confidence in the country’s business climate and booming domestic consumer market.

In 2016, FDI inflows to Africa are expected to return to a growth path as a result of liberalization measures and planned privatizations of State-owned enterprises. This increase is already becoming apparent in announced greenfield projects in the first quarter of 2016.

Meanwhile Diaspora remittances closed 2015 at US$915 million but the Government says it expects to earn more this year following the approval of the diaspora remittances policy that aims at increasing such funds.

Finance Minister Patrick Chinamasa said although the policy is not coming in a structured way, the Government was fully supportive of the initiative and wanted to emulate Ethiopia and see to what extent can the country leverage resources and skills in the Diaspora. FinX