By Pearson Mbendera
The state of the Zimbabwean economy is a shame. We can safely say that Patrick Chinamasa the incumbent Minister of Finance and Industry is clueless on which direction the economy should be headed toward. And the ruling party ZANU PF hasn’t delivered on the promises of their campaign that should have seen Zimbabwe moving towards rebuilding our economy and creating jobs, something our educated yet unemployed youths desperately need.
Given all the economic problems the nation is facing, some local economists advocated for the need of Foreign Direct Investment (FDI), which given the state of our politics and policies, hasn’t been flowing in for a long time now. My question however is can Zimbabweans invests in Zimbabwe?
With a serious absence of FDI, all hope lies with the locals to rebuild this country. But the poverty of the locals of Zimbabwe makes it difficult for them to start meaningful business that will help the economy at large and not necessarily small scale informal businesses that are meant to enrich the owner and a spawned as a measure to counter unemployment.
There are many factors that attract investments such as availability of raw materials, labour, tax system, market forces, interest rates and other factors. While we have a rather cheaper labour force, some good raw materials we still haven’t been able to attract investment even from locals.
In February 2013, Econet Wireless split its shares so that one share would sell for 60c in a move to entice more Zimbabweans to take part in investing in the company given that they couldn’t afford to buy the stocks and the Zimbabwe Stock Exchange (ZSE) was dominated by foreign buyers.
There are many problems that we are facing in our economy. Liquidity is one of them and it has a strong hold on the success of companies. Without free flowing cash, businesses maybe be carried out and profits made but people will have no real cash in hand inhibiting their ability to continue operating. I worked for one company that had over $150000 in debtors but had no working capital. The fact that we do not have our own currency means that money has to come from outsiders, thus we have little control over the future of our economy as it is.
Due to serious unemployment numbers in Zimbabwe, many Zimbabweans are engaging in small time entrepreneurial activities, more in the informal sector juts to earn a good living. But given excessive funding, I question their willingness to invest in Zimbabwe, the economy of which is in serious shambles that has seen companies close down due to many problems that range from liquidity crises
Truth is that our economy is in a worse situation that we cannot even invest in it should we have the necessary amount needed to make a worthy investment. Right now no one is optimistic about the future of our economy. To everyone the glass is half empty. Now when we cannot believe in our own future, then who will?
While our policies don’t really attract FDI, do they also promote local investment?
There are however a few points to note from the government policies especially the indigenization policy.
1) Indigenization doesn’t necessarily promote local investment but it hijacks foreign investors by just taking 51% of their investment. While this is a good move to ensure that we can control our resources and that investments made in Zimbabwe will go a long way to making the livelihoods of Zimbabweans better. However considering the fact that we are starved of liquidity, sometimes there is need to compromise a little on the indigenization policy so that we can benefit in the short run while working out a plan for the long run. The situation we have today is that, in 10 years’ time, we will still be holding on to our indigenization policy and have no real FDI.
2) Investments are driven by investor confidence. Generally an anticipation of a good foreseeable future brings out more confidence from investors. The lack of FDI in Zimbabwe discourages not only foreign investors, but potential local investors too. While the indigenization policy may threaten the influx of FDI, generally an economy that fails to generate FDI in some ways scares even potential local investors. Many local companies are failing today and subsequently closing up because the environment they are operating in isn’t conducive enough for them to prosper. Given that nothing has been done to endure that tomorrow is better than today, the future of Zimbabwe looks bleak and no one can be attracted to invest in such an economy, Local or otherwise.
3) Business brings about business. Looking at countries that are doing well economically, one can tell that their levels of entrepreneurship are also high. This is because the moment one business opens up; it offers opportunity for another business to prosper. Say for example, a paper manufacturing company opens up in a community; their employees will need food, clothes and other basic needs thus attracting supermarkets and clothing lines. These businesses will require banking services, thus attracting a financial institution. Health requirements will require a hospital or clinic thus bringing in just one business will spawn out other businesses. FDI will help bring in more FDI, or even local investment, but that’s not happening.
Given a large sum of money, can a Zimbabwean risk his/her money by investing locally in a meaningful business? The moment we can all answer yes to this question is the moment our economy will start shaping up. The poor state of our economy doesn’t necessarily lie in our inability to attract FDI; we cannot even attract Local investment as it is. Something needs to be done to change all this.
Comments
About Author
