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Bernard Gwarada Correspondent
To do justice to the topic of investing in Zimbabwe, it is necessary to look not only at what is happening now, but also, what may happen, say in the next five years.
Such an approach is also necessary especially considering that huge investments are required into various sectors of Zimbabwe’s economy for impactful outcomes.
Therefore, this article is meant for those who have a desire to invest in Zimbabwe particularly in light of Government’s pronouncement that Zimbabwe is open for business.
Background information to Zimbabwe’s economy
Zimbabwe is a strong candidate for huge investments in its various sub-sectors of the economy.
As a country, it is endowed with natural resources of different types and has got infrastructure in place which if strengthened can assist the country to optimise its full potential.
The major economic sectors in Zimbabwe are agriculture, mining and tourism.
The country is party to international trade agreements such as AfCFTA, WTO, COMESA, EU-ESA and SADC.
The estimated population of Zimbabwe is 16 million, comprising of females at 52,26 percent compared to males at 47,74 percent.
Life expectancy which is estimated at 62 years, should be an incentive to long-term planning and investment. The youth aged 18-34 years constitute 67,7 percent of the country’s population and is a potential source of human capital especially in view of millennial literature that identifies this generation as being tech-savvy.
Education in Zimbabwe is still rated as the best in Africa. Zimbabwe has 16 official languages and the dominant business languages are English, Ndebele and Shona.
Agriculture plays an important role, not only as a source of food and household income, but also in contributing towards economic development.
In 2000, Zimbabwe implemented land reform to correct the imbalances created by the colonial regime.
While this move satisfied the aspirations of the majority, production however declined due to consecutive droughts and inadequate skills on the part of some farmers.
Government has since put in place strategies to address productivity in the agriculture sector.
Strategies include provision of training, adoption of new agricultural technology and land audits to encourage the efficient use of land as a scarce resource.
Tourism in Zimbabwe has the potential to broaden the economic base through economic diversification.
The country has magnificent tourist attractions which should qualify as a strong attraction to the would-be an investor. Tourism encompasses an array of economic activities such accommodation, transportation, entertainment and attractions.
Zimbabwe has abundant minerals and research show that there are over 65 known minerals in the categories of base metals, industrial metals, precious metals and gemstones. Statistics indicate that the sector account for 12 percent of the country’s GDP and the Government’s target is to achieve a US$12 billion mining sector by end of 2023.
Through the Government initiatives, the mining sector is working hard to ensure it is more attractive to investors.
What follows is an analysis of the country’s political economy since research has shown that politics and the economy has an influence on investor decisions.
Analysis of Zimbabwe’s
Political Economy
A common framework which can be used to understand the relationship between politics and the economy is the PESTEL framework as shown below.
The political environment
Zimbabwe which attained its independence in 1980 has a parliamentary democracy where elections are held every five years.
It has three main political parties and Zanu PF has been the dominant party since independence.
It is also the party that has formed the Government since independence except for the period of the inclusive Government between 2009 and 2012.
The politics of Zimbabwe has been characterised by tension between the ruling party and the main opposition party.
Research shows that corruption and abuse of resources has been a serious issue potentially threatening the fabric of Zimbabwe’s fragile institutions and leading to further polarisation in the society.
However, it can be noted that Government has shown its political will in combating corruption through for example, the establishment of anti-corruption agencies which have been given arresting powers.
Economic environment
Government has put in place measures to indigenise the economy. A good example is the Indigenisation and Economic Empowerment Act of 2007 which gave locals the right to take over and control over 51 percent of foreign-owned companies in Zimbabwe.
However, due to various concerns from stakeholders, Government has pragmatically moved away from this position so that the Act in its unadulterated state, is now only applicable to specific sectors of the economy such as companies involved in the diamond or platinum extractive industries.
With the Open for Business mantra, more changes can be expected in response to investor needs. The strategic engagement of investors by the Government is a sign that augurs well for Zimbabwe’s economy.
Social environment
A large part of the population of Zimbabwe typically depends on informal economy for its livelihood.
Reports show that the size of the country’s informal economy is estimated to be 64,1 percent which represents approximately $42 billion at GDP levels.
Some scholars suggest that a country with a large informal sector can be associated with low productivity, reduced tax revenues and income inequality.
However, in the case of Zimbabwe, the Government is in the process formalising the informal sector on account of its importance.
On a positive note, the new Zimbabwean Constitution enshrines gender equality as a cardinal principle. HIV prevalence has declined from 26,5 percent in 1997 to 14,3 percent in 2022 meaning that Zimbabwe has a potentially health workforce.
Technological environment
Zimbabwe is ranked among the top 10 most technological countries in Africa. However, Zimbabwe is a country that is in transition in terms of moving towards a digitised economy.
Mobile penetration rates are higher in urban centres compared to rural centres and this has implications for business that may be technologically driven.
It should also be noted that the rural population is higher than the urban population and therefore from a business perspective, a business may be limited in its market penetration because of the technological barriers in the rural areas.
Environmental factors
The Zimbabwean Government is conscious of the importance of protecting the environment.
In this regard, a parastatal Environmental Management Agency (EMA) was put in place to spearhead this policy.
However, EMA has met some challenges such as people who break the law by constructing houses on wetlands.
Research has shown that in the 21st century, some investors are averse to investing in countries that do not respect the environment.
In their investment analysis process, investors may consider the following; pollution prevention, waste management, corporate climate policies and natural resource conservation.
Legal environment
The administration which has declared itself as listening Government has been continuously engaging with stakeholders to improve the legal environment for investment and this is an ongoing exercise.
Scenarios planning
By its nature, scenario planning is futuristic in its orientation and driven by contingency thinking. Under the circumstances as described above, the writer can think of the following scenarios;
First Scenario
Under this scenario Zimbabwe is under a reformist leadership which successfully implements economic reforms as was done by the Asian Tigers such Malaysia and Singapore. These countries created an environment conducive to foreign direct investment(FDI)and this resulted in increased investment and rising standards of living.
Second Scenario
In this scenario, a pact is formed among Zimbabwe political parties thus creating a basis for a mandate along reformist lines. This can increase political stability and lead to economic growth, a scenario that is conducive to FDI.
Zimbabwe is a potentially attractive destination for foreign direct investment.
There may be impediments that have been identified above but these apparent obstacles cannot be viewed as permanent.
This is because the Government has realised the need for taking a pragmatic approach to the management of the economy through creating a wider basis for a consensus in this regard.
Investors should seriously consider Zimbabwe as a safe destination for investment.
Bernard Gwarada is a business consultant. He is a Doctoral Research candidate focusing on Entrepreneurial Innovation at Binary University. He holds an MPhil in International Business from University of Pretoria and an MBA. He writes in his own capacity. Feedback: [email protected].
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