Zimbabwe hindered by unattractive policies

via Zimbabwe hindered by unattractive policies March 7, 2014 by Taurai Mangudhla

ZIMBABWE is hindered by unattractive investment laws and lack of policy consistency, trade experts say.

The country needs transparent and attractive policies to avoid rent seeking behaviour in industry, World Bank African region trade practice leader Paul Brenton said.

“The country should focus on putting right incentives in terms of taxes and generally reduce trade costs,” Brenton said at a World Bank Zimbabwe seminar on trade and competitiveness on Wednesday.

International growth centre country director Richard Newfarmer said while Zimbabwe’s trade policy objectives were centred on transforming the country from a primary products exporter into an exporter of processed products, policies on the ground are at tangent with the objective.

“The problem is policies are not aligned to these objectives,” Newfarmer said.

He said the country has abundant natural and human resources to unleash new sources of growth, but the policy environment in the near term will determine whether or not these outcomes can be realised.

Newfarmer said Zimbabwe has unhealthy export trends as a result of its flawed policy environment.

He said the country currently remains dependent on a few commodity exports and is labour intensive, exposing the economy to trade shocks and slow job creation.

He said being over reliant on mining means the economy will suffer in case of a plunge in international metal prices.

“Zimbabwe is now firing on only one cylinder of the export engine. Mining is the principal driver of the economy, but there is potential for the other three that is agriculture, services and manufacturing,” said Newfarmer.

He said Zimbabwe’s exports were less diverse compared to other regional countries.

“Better policies can reverse these export trends and transform the economy,” he said.

A World Bank survey indicated it was 80% more profitable to trade domestically than to export from Zimbabwe.

Newfarmer also said Zimbabwe has been unable to grow tourist arrivals and earnings due to a poor policy in the service industry.

He said policies in the services sector were highly restrictive to new players.

“Zimbabwe’s tourism assets are ranked number 22 in the world but it is not doing well. The service industry has real potential in landlocked countries but the question is how to unlock this potential,” he said.

The cost of internet also remains high, at US$1000 per month for 3mbs compared to US$200 per month for 180mbs Newfarmer said.

To grow trade, the county should review ownership restrictions and individual policies that discourage investment. He said government should also take action to reduce institutional rigidities that drive up the costs of trade.

National statistics show that Zimbabwe’s trade deficit continues to widen as industry suffers from a lack of capital after a decade of economic stagnation and introduction of a multiple currency regime in 2009.

Exports fell 10% to US$3,51 billion in 2013 from US$3,88 billion in 2012, while imports increased by 3% to US$7,7 billion from US$7,48 billion. Zimbabwe
imported goods worth US$3,66 billion from South Africa, 47% of total imports last year. Exports to South Africa totalled US$2,6 billion.

Imports from China amounted to US$438,8 million, while exports to that country stood at US$30,9 million.