daniel chigunwe
Oliver Kazunga
Zimbabwe’s projected value of investments slumped 66 percent to US$1,171 billion in the third quarter this year from US$3,408 billion prior year comparative, according to official data, with economic observers arguing the knock was a result of economic uncertainty in local and global economic trends.
The Zimbabwe Investment and Development Agency (ZIDA), in its quarterly report for the third quarter ended September 30, 2024, said in the period under review, there was also a seven percent decrease to 168 in the number of investment applications issued.
In the corresponding period in 2023, ZIDA issued a total of 180 new investment applications.
“During this period (Q3 2024), the agency recorded a 66 percent decrease in the projected investment values, when compared to the same period in 2023,” said the agency.
The value of projected investments for the third quarter of this year was split as: capital equipment from abroad (US$334,20 million) – local contribution (US$128,28 million) — foreign currency cash injection (US$376,47 million) — foreign exchange debt/loan (US$327,38 million) and initial components (US$5,1 million).
In the corresponding period last year, capital equipment from abroad was projected at US$224,93 million — local contribution (US$27,99 million) — foreign currency cash injection (US$1,93 billion) while foreign exchange debt/loan was estimated at US$1,2 billion and initial components value was projected at US$27,43 million.
The investment licences were issued to prospective investors in various sectors of the economy that include mining, manufacturing, services, construction, agriculture, tourism and energy, among others.
The mining industry is one of Zimbabwe’s major economic centrepieces anchoring the country towards an upper middle-income society by 2030.
According to ZIDA, the local mining sector presently contributes 70 percent to Foreign Direct Investment (FDI), 80 percent to exports—19 percent to Government revenues, 3 percent to direct formal employment and 13,5 percent to national income.
During the period under review, ZIDA said: “Of the 168 new licences issued with a projected value of US$1,171,42 billion in the third quarter of 2024, the mining sector had the highest projected investment value which accounted for 50 percent of the aggregate investment value, followed by the energy sector with 22 percent and the mining sector which accounted for 16 percent.”
Economic analyst, Wendy Mpofu, said the decline in Zimbabwe’s projected investment value by 66 percent in the third quarter of this year could be attributed to a number of factors, among them, local economic uncertainty and global economic trends.
“The global economic trends are also a pivotal factor to take into account. For instance, the African Development Bank (AfDB) forecasts Zimbabwe’s growth at 3,6 percent this year, slightly above the Treasury’s forecast of 3,5 percent, but lower than previous years. This slowdown in global economic growth can impact investment decisions,” she said.
Economic uncertainty is a major concern, with high inflationary pressures and fluctuating exchange rates making it challenging for potential investors to predict returns on the proposed investments.
“Zimbabwe’s economic instability characterised by inflation spiking in August to reach its highest level since the introduction of the Zimbabwe Gold (ZiG), the country’s new medium of exchange introduced in April this year, I think further exacerbates this uncertainty.”
The ZiG, which is backed by gold, other precious minerals and foreign currency reserves, was launched in April this year as part of a broader scope to address exchange rate volatility, curtail inflation and restore macro-economic stability.
Last month, the Reserve Bank of Zimbabwe devalued the ZiG by 44 percent against the US dollar resulting in the exchange rate at the time reaching ZiG24 to US$1, in a bid to stabilise the volatile economy.
The rate has also moved northwards on the black market with some dealers demanding up to over ZiG 40 for US$1, fuelling a vicious cycle.
The devaluation was due to an increase in demand for the US dollar and the Central Bank is on record saying its monetary committee made the move to devalue the local currency to allow greater exchange rate flexibility.
Another analyst, Chipo Warikandwa, echoed similar sentiments, adding that investor confidence was also another critical factor that has led to the decline in the projected investment value in the third quarter this year.
“The mandatory use of an official exchange rate, which retailers have claimed is inflated and harms competitiveness, could be a deterrent to potential investors. Additionally, Zimbabwe’s history of policy inconsistency and bureaucratic hurdles has the potential to discourage investments,” she said.
Government is, however, working flat out to address currency stability and is working with local industry players to find an amicable solution to retain investor confidence.
Bongani Ndlovu