‘More FDIs key to Zim Asset success’

via ‘More FDIs key to Zim Asset success’ – NewsDay Zimbabwe November 18, 2013

ZIMBABWE’S Foreign Direct Investment (FDI) inflows should double within the next five years in order to achieve the 7, 3% annual economic growth rates projected in the new economic blue print, University of Zimbabwe Graduate School of Business professor Tony Hawkins has said.

Speaking at the Institute of Chartered Accountants of Zimbabwe (ICAZ) one-day chief finance officers (CFO) forum in Harare last week, Hawkins said since 2009, FDI-Gross Domestic Product (GDP) ratio has averaged 15%, less than half of the amount required.

This means that Zimbabwe — a lowly ranked investment destination, according to the World Bank — faces a herculean task of attracting more foreign capital.

He said the country faces several hurdles in attracting FDI, which include policy inconsistency. Critics blame the country’s indigenisation and empowerment policy compelling foreign-owned companies to sell controlling stakes to locals for spooking away investors.

“For the economy to grow at 7,3% annually according to the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset) target, Zimbabwe will need to invest 33% or so of GDP each year,” Hawkins said.

“Of course, there is much more to growth than investment. Going forward growth will be limited by a number of binding constraints that will make it extremely difficult to reach the Zim Asset target.

“If growth depends heavily on investment and investment depends significantly on savings, then consumption growth must slow substantially,” Hawkins said.

The blueprint was extracted from Zanu-PF’s election manifesto and previous national development programmes, identifies four, but all-encompassing clusters, namely food security and nutrition, social services and poverty reduction, infrastructure and utilities and value addition and beneficiation.

But experts contend its success is hinged on funding and political will.

Hawkins said apart from subdued FDIs, binding constraints to the blueprint include a huge debt overhang, unfavourable investment climate and an overvalued exchange rate among many others.

The African Development Bank estimates that Zimbabwe needs $14 billion to fix multilateral lenders, which stopped lending to Harare in 1999 because of arrears. Zimbabwe has an estimated debt of $10,7 billion, which represents 110% of GDP.

According to the United Nations Conference on Trade and Development (Unctad) FDI flows into Zimbabwe increased slightly by 3,25% to $400 million last year from $387 million in 2011.

FDI contributed 17,7 % to the country’s total GDP during the period under review.