Policy inconsistency undermines BIPPAs

In the past 10 years, Zimbabwe has ratified BIPPAs with South Africa, India and Botswana, among other countries.

 

In separate interviews, economic analysts said while the agreements were good in promoting investments between the parties, lack of policy consistency by Government undermined the effectiveness of the BIPPAs.

“In their nature, the BIPPAs are good in terms of promoting investments and trade between the parties. But if you look at our situation, for example trade with South Africa has not been all that effective because of issues to do with property rights and of course the uncertainty  surrounding our politics as well as the Indigenisation and Empowerment Act,” said an economic commentator, Mr Bradwell Mhonderwa.

He said because the Indigenisation and Economic Empowerment Act stipulates that at least 51 percent of  shares in foreign-owned entities should be reserved for locals, it undermined the effectiveness of the investment and trade agreements Zimbabwe had signed.

“Without the current economic issues, Zimbabwe’s economy would have benefited much from the BIPPAs signed so far. The current situation has tended to negate trade and investment to levels they should be. As a country, we have an element of policy inconsistency which is not good for trade and investment,” he said.

Mr Mhonderwa said because of policy inconsistencies, the $750 million Essar deal was failing to take off despite having been signed more than a year ago.

Last year, Government and the Indian conglomerate signed an investment deal to revive operations at Zisco (now New Zimsteel).

Discussions to renegotiate the New Zimsteel share ownership structure began last week with Government upbeat that the impasse over the renegotiation of shares would be brought to finality resulting in the resuscitation of operations at the Redcliff-based steel manufacturing company.

“Lack of policy consistency as shown in the Essar deal also reflects that the state of affairs is the same with other agreements that we sign with other investors.”

Permanent Secretary in the Ministry of Economic Planning and Investment Promotion, Dr Desire Sibanda has said the BIPPAs Zimbabwe has signed should not be expected to reap benefits in the shortest possible time as luring of investors was a process that did not happen overnight.

However, Mr Mhonderwa disagreed.

“That statement is misplaced as it justifies the inconsistency that I have already alluded to. It is an obvious fact of life that if we have proper policies for the other parties the benefits of the BIPPAs we have signed will become much effective,” he said.

An economist, Mr Christopher Mugaga, said BIPPAs were an agreement that governments sign in order to open up trade and investment.

“From the BIPPAs that we have signed in the last 10 years with other countries, we have not seen benefits because of the policies that do not promote private sector environment. For example, Zimbabwe has negative trade with South Africa as we have become a net importer of products from that country. On the other side there is very limited number of products imported by South Africa from Zimbabwe.”

Mr Mugaga challenged business organisations to present to Government papers that reflect accurate information on economic issues.

“To benefit much from the BIPPAs, business organisations such as the Confederation of Zimbabwe Industries and the Zimbabwe National Chamber of Commerce should give politicians accurate information on economic issues so that the right policies are adopted. For example, the manufacturing survey report released by CZI in 2011 is demoralising as it is far from the truth,” he said.

CZI reported that capacity utilisation in the manufacturing sector was at 57,2 percent.

Mr Mugaga said the figures were unrealistic considering that the economy was still underperforming on the back of a tight liquidity situation as well as inconsistency in policy framework to attract investment.

Another economic analyst, Ms Wendy Mpofu, said Zimbabwe was far from benefiting from the trade and investment agreements it signed with countries such as South Africa and India.

“Our political situation, among other issues, needs to be sorted out. Recently, election talk has gripped the nation and investors are still uncertain as to when Zimbabwe will go to the polls.

“Also over the past decade, our economy has been battered to such an extent that it could hardly attract investment,” she said.