Laws impeding foreign investment: EUPosted on Thursday, August 2nd, 2012 by Newzimbabwe.com in News
The European Union (EU) has warned that Zimbabwe will continue to lag behind most of its SADC neighbours in attracting foreign direct investment (FDI) unless measures are taken to address the currently prohibitive legal framework.
Having seen steady growth since the formation of the coalition government in 2009, the country’s economy has started to falter forcing the government to cut its 2012 budget as well as revise downwards growth projections for the year.
While presenting his mid-term fiscal review recently, Finance Minister Tendai Biti said Zimbabwe desperately needs to attract foreign direct investment.
“The first half of the year has been the most economically challenging in the last 40 months. This economy needs foreign direct investment to increase this little cake into a bigger cake.”
But EU representative to Zimbabwe Aldo Dell’Ariccia told the Confederation of Zimbabwe Industries (CZI) annual congress in Nyanga last week that the country must address its prohibitive legislative environment in order to be competitive.
“The EU believes in the key role that the private sector/industry and its organisations have to play in Harare economic recovery processes,” he said.
“In our views, the Confederation of Zimbabwe Industries (CZI) has a key role to play in improving business environment and predictability and clarity for economic operators.”
FDI inflows have reached US$400 million over the last few years, far less than the US$2 billion registered by other SADC countries such as Malawi and Zambia.
“The recently published UNCTAD World Investment Report 2012 makes sad reading for any Zimbabwean,” Biti said in Parliament.
“For 2011 Zimbabwe had less than US$400 million investment at a time when FDI to Southern Africa was recovering from 78% in 2010 to a more than doubling its total to US$6.8 billion.
“Nigeria, South Africa and Ghana had investment levels of more than US$3 billion. Congo, Algeria, Morocco, Mozambique and Zambia had FDI of US$2 to US$2.9 billion,” said Biti.
“Although much of Africa’s fresh investment has largely gone to hydro carbon resourced Angola and Nigeria, investments in Mozambique, Zambia, and the Democratic Republic of Congo show that investment will follow good (policies).”
Investors have largely expressed concern over the country’s economic empowerment policies which now force foreign companies to transfer control of at least 51 percent of their Zimbabwe operations to locals.
The coalition government remains divided over the policy which is being pushed by President Robert Mugabe and his Zanu PF party. The party says its aspiration is for 100 percent ownership and control of all foreign companies operating in teh country.
However, Biti said the indigenisation laws would be revised to ensure they did not apply to foreign direct investment.
“The country needs to re-strategise and redesign the current framework for luring FDI, paying particular attention to policy consistency, macro-economic stability, security of investment and building a competitive investment environment,” he said.
“The various concerns regarding some aspects of the current Indigenisation and Empowerment Regulations are receiving attention by Government.
“The objective is to rationalise and align the Zimbabwe Investment Authority Act with the Indigenisation and Empowerment Regulations, in order to address investors’ concerns and, hence, attract meaningful investment into the country without undermining the empowerment initiatives.”