‘Create conducive investment climate to stop company closures’

via ‘Create conducive investment climate to stop company closures’ 7 July 2014 by Kudzai Chimhangwa

THE government must create a conducive investment climate as a step towards averting continued company closures, an official with the Zimbabwe National Chamber of Commerce (ZNCC) has said.

In an exclusive interview with NewsDay last week, ZNCC vice-president David Norupiri underscored the importance of government revising and formulating policies that would be imperative to attract foreign direct investment (FDI).

“It is possible for government to assist in resuscitating industry, but it shouldn’t only be government playing ball. The private sector has a very important role to play in setting up businesses,” he said.

A substantial number of companies continue to operate at estimated 40% capacity utilisation levels while the National Social Security Authority recently revealed that an average number of 10 companies were closing every month since January this year.

The Zimbabwe Revenue Authority (Zimra) has stepped up revenue collection efforts not only from an ailing industrial sector, but virtually every economic activity as the government is becoming increasingly constrained by cash problems.

Norupiri said when the government comes up with policies favourable to attracting investment, then the much-needed FDI would begin pouring in.

“Government has to create a level playing field, corruption must be addressed and labour policies also need to be dealt with appropriately,” he said.

Growth in manufacturing has continually performed below expectations, stifled by credit constraints and diminishing competitiveness.

The government’s economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset) attributes this to structural and infrastructural bottlenecks such as unreliable power supply, outdated machinery and dilapidated infrastructure.

Compounding the challenges facing industry are working capital constraints vital to fund stock in trade as well as operational, marketing, distribution and administrative costs.

Economist John Robertson said government hostility towards business has not been helpful either.

“Government simply needs to move out of the way, and then industry or the private sector can resuscitate itself. The government has so many restrictions,” he said.

He added that the process of restoring investor confidence is the difficult one as there is still a milestone towards improving the investment climate and easing or doing away with stringent regulations.

“The question that needs to be addressed is why is the private sector finding it difficult to set up business in the country? Zimra [Zimbabwe Revenue Authority]’s continued pouncing on businesses and garnishing accounts has virtually brought a number of businesses to an end,” Robertson said.

“The taxman has even taken away any remaining company reserves and refused to listen to any arguments on why payments could not be effected.”

In a recent paper, the World Trade Organisation recommended a variety of measures for least developed countries that would go a long way towards reviving and increasing their local industry competitiveness.

These include the diversification of economic structure, namely of production and exports, the enhancement of export competitiveness, technological upgrading, as well as the improvement of the productivity of all resources, including labour.

The institution advocates the creation of a business friendly environment, for both domestic and foreign investors, bureaucratic capacity in decision making and in designing, implementing and revising policies and the coherence of policies with other trade and development policies.