HARARE – Zimbabwe attracted $319 million in foreign direct investment (FDI) last year compared to $421 million in 2015, the World Investment Report has shown.
The annual report, compiled by the United Nations Conference on Trade and Development (Unctad), southern African country’s FDI has been on a sustained decline for the past five years.
Foreign investment inflows into Zimbabwe stood at $387 million in 2011 stagnated at $400 in 2012 and 2013 and then reached an all-time high of $545 million in 2014 before declining to $421 million and $319 million in 2015 and 2016 respectively.
The latest figure compares unfavourably with the country’s neighbours such as Mozambique, South Africa and Zambia which registered $3 billion, $2,3 billion and $469 million FDI inflows respectively.
Lack of policy consistency, indigenisation law, disregard for property rights and the unwillingness of authorities to deal with corruption have often being identified as factors dissuading investors from a country which boasts of vast mineral deposits.
Global residential and commercial property consultancy firm, Knight Frank, said the continued decline of the Zimbabwean economy has led to several manufacturing companies closing operations.
“Very little foreign direct investment has come into the country as a result of the government’s indigenisation policies, the high cost of capital and socio-political instability,” Knight Frank said in its 2017 Africa Report.
“This has led to an oversupply and under-utilisation of industrial space. The sector is therefore characterised by high vacancy rates, declining rents and the voluntary surrender of leased space by tenants,” the property consultancy firm said.
The report added that a number of investors in this sector were looking to disinvest, but there was little or no demand except from a few owner-occupiers.
Knight Frank noted that Zimbabwe’s continued low economic activity with the current liquidity challenges have stagnated uptake of industrial space and office market activity.
Despite the implementation of several import restrictions, namely, Statutory Instrument 6 and 126 of 2014, SI 18, 19, 20 and 64 of 2016 only 10 percent of manufacturers were able to fully capacitate.
In terms of office space, buildings in Harare’s central business district (CBD) now have void rates of between 50 percent and 90 percent, which is warding off investments.
“Suburban offices have become more sought-after investments, due to their lower void rates, but there continue to be few sales transactions,” the report read.
While critics assert that Zimbabwe’s indigenisation drive is leading to a drying up of investment, economist Gift Mugano said the country should come up with orthodox policy measures aimed at attracting FDI.
“Rather than proposing narrowly defined FDI policies, it is argued that effective investment incentive packages should be seen as part of the country’s overall industrial policy, and be available on equal terms to all investors, foreign as well as local,” he said.
The academic noted that incentives should focus in particular on those activities that create the strongest potential for spill overs, including linkages between foreign and local firms, education, training, and research and development.
“It should also be noted that the country’s industrial policies in general are important determinants of FDI inflows and effects of FDI,” Mugano said.
“By enhancing the local supply of human capital and modern infrastructure and by improving other fundamentals for economic growth, a country does not only become a more attractive site for multinational firms, but there is increased likelihood that its private sector benefits from the foreign participation through spill over benefits,” he added.