General tips to attract FDI
look at these statistics considering that there are more than 180 countries in the world and that investors are risk averse. Investors need stable political and economic environments that engender confidence, they simply go where investing conditions are favourable. They prefer to invest in countries whose policies are consistent and favourable to market forces and where attractive rates of return can be earned.
At the moment, Zimbabwe does not fall into this category and is highly uncompetitive in terms of fundamental attractiveness. It is considered antagonistic to free enterprise.
Criticism and opposition to the indigenisation plan has been prevailing, and this has eroded the government’s credibility and foreign investors’ confidence, especially in light of the unclear presentation and implementation of the law. Despite the clarification by President Robert Mugabe in April, investors still find the document confusing and inefficacious.
Only a single element has changed and that is the time period. A candid investor will likely pose two puzzling questions: “How do I then manipulate, ignore or erase tangible historical evidence over a long run of a decade?” and “How do I go against all forms of knowledge to become favourable, effectively ignoring all forms of market efficiency theory and practice?” These are the realities of the present conditions.
I am struggling to see any form of light as I am dreadfully trying to respond to a question of what will be new in 2017, at the time of writing this note. There have been no significant policy decisions or change thereof to indicate a variation or departure from the previous policies which got the economy to mediocrity.
Questions remain. Will the government come up with policies which focus on areas that need vital attention? Will government provide a solution to give impetus to an economic turnaround? were to project economic growth of more than 4% for 2017, as questions remain on what will be done that failed to materialise in 2016. With the wage bill munching 96% of the actual revenue in 2016, can it be reduced to margins of 50%? The high wage bill simply means less funds for other economic activities into 2017.
Funds need to be channelled towards capital projects, so that the positive impact from Statutory Instrument 64 of 2016 can be fully realised. Yes, the Ministry of Finance is going to make some changes to the salary bill, but surely, this will not be reduced to margins of less than 75% of actual revenue. Going into 2017, limited aggregate demand will continue and the fiscal space will remain constrained.