Online Reporter
ZIMBABWE is seen as an ever more desirable destination for investment, both direct, where the investor opens a new mine or factory and via the Zimbabwe Stock Exchange, where one buys shares in existing businesses that have been floated on the stock exchange.
Both are important, with the two types of investment in recent times showing increasing interest in backing the Zimbabwean manufacturing sector and construction companies.
While 26,53 percent of the total shareholding by value on the Zimbabwean Stock Exchange is now held by foreign investors, up from just 15,39 percent in the first quarter of the year, this sort of interest and involvement should make it a lot easier to raise more capital for expansion by several companies.
It should also make floating on the exchange more attractive to others.
The Zimbabwe Stock Exchange uses the ZiG, and this growth of interest is also a vote of confidence in the local unit by outsiders, following the fixing of the fundamentals, the creation of ever growing reserves at the Reserve Bank of Zimbabwe, and the resulting stability in both exchange rates and prices.
While direct investment fell from US$9,7 billion in 2023 to US$8,6 billion last year, it is still a very large figure. The fall was entirely due to decisions to delay some of the investment in new mining, following the general fall in metal prices except for gold. Delays do not mean cancellations.
But these mining delays were almost entirely offset by the strong growth in manufacturing and construction industry investment, plus of course the indirect investment in the Zimbabwe Stock Exchange. This means that there has been a lot wider spread of incoming investment, and that is beneficial and important.
The spread of investment, and the Zimbabwe Investment and Development Agency sees a growth in the service and technology sectors as well, is important not just because Zimbabwe needs a broadly-based economy, but also because diversification means rising stability in the totals being invested, so there are not major swings from one year to the next and falls in one sector can be balanced by rises in another.
Mining is critical for Zimbabwean economic growth and especially for maintaining adequate exports and foreign currency earnings to balance the import needs. But we do not need to have too many eggs in just one basket, and it is important that agricultural exports grow beyond the traditional tobacco.
But with the best will in the world there are limits to how much mining and farming can drive exports and we should not be reliant on exporting raw materials in any case. This is one reason for the pressure by the Second Republic for value addition of mining and farming exports, so that we earn more from these exports.
Value addition in Zimbabwe also helps to smooth out the sometimes dramatic fluctuations you can see in prices of raw materials.
Processing costs, regardless of whether the processing is in Zimbabwe or somewhere else, tend to be fixed charges, so large percentage swings in prices of raw materials tend to produce far smaller percentage swings in prices of processed products.
Like most African countries, Zimbabwe is short on industrial investment, and there is need to move beyond the value addition to minerals and crops and to manufacture more from the processed minerals and partly processed crops.
Our industry still has a high component of using imported raw materials for import substitution, which while useful, is not going to be the major driver of future industrialisation in a competitive African Continental Free Trade Area, where we must use our competitive advantage of having most required raw materials in our rocks or on our farms.
This will need substantial investment, and this will probably see even more foreign investment, both direct as new companies and factories are established and indirect through the stock markets where capital becomes available, usually from the smaller investors than those with the cash for a new mine or a new factory.
The pro-investment policies of the Second Republic, coupled with the looking after of the main economic fundamentals and making sure that economic growth is based on reality, mean that we can expect ever more investment into industry, especially as the AfCFTA market will be accessed by those operating inside that market.
The local content rules will apply to the raw materials and the processing within AfCFTA, but the ownership of businesses can be held by anyone in the world.
Foreign investment does not mean exploitation, rather mutual benefits for everyone. Obviously the foreign investor is looking for a fair return on what they commit to Zimbabwe, and everyone accepts that.
But those coming into Zimbabwe know they have to follow environmental, health and safety, labour and planning law and regulations, and need to be registered with Zimra and pay their taxes. This means that when new jobs are created, they are normally good jobs, since most investors find there is a good pool of skills inside Zimbabwe and they can fill almost all newly created posts, at least after conversion training.
The Second Republic has been streamlining the application and approval processes to make decision-making simpler, but foreign businesses still have to follow the same rules as Zimbabwean businesses, who tend to be leading the charge on the consolidation of the necessary rules and regulations.
Ease of doing business does not mean dumping required conditions, but rather aiming for a single business licence and having what is needed checked out by as few people as possible.
dyton mupawaenda