Govt needs to build investor confidence
IT is a new year and most companies and individuals use the early months to refocus and reset their strategies to improve on the shortcomings of the past year. President Emmerson Mnangagwa’s administration could do with a similar overhaul in its strategy to revive the country’s economy after a difficult 2021 which was characterised by policy inconsistencies, currency volatility and power outages among other challenges.
Government has claimed to have made progress on the economy in 2021 but the situation on the ground is in stark contrast to that claim. The parallel exchange rate ran amok in the second half of last year resulting in the rapid deterioration of the local currency with the parallel market rate surpassing the ZW$220 mark by the end of the year against the official rate of around ZW$108.
The disparities have resulted in the weakening of the local unit and the erosion of incomes against the skyrocketing prices of basic commodities.
Government’s flip-flopping on its policies also wreaked havoc on business confidence particularly the promulgation of Statutory Instrument 127 in May last year which prohibits business operators from charging above the official exchange rate and empowers authorities to punish those that refuse to accept the Zimbabwe dollar for local transactions. After it caused widespread outrage, Reserve Bank of Zimbabwe governor John Mangudya changed tack saying that S127 would now be limited to those who wantonly abuse the foreign exchange auction system, exchange rate manipulation and non-compliance with anti-money laundering rules and regulations.
Such policy flip-flops have contributed to the country being viewed as a high risk destination to invest in. American market research firm, Fitch Solutions revealed in its December 2021 report that Zimbabwe remains the highest economic risk country in the southern African region. In the outlook report, Zimbabwe scored the lowest on the economic stability index in the region both in the long and short term even below strife-torn Mozambique.
In its recent report, the United Nations Conference on Trade and Development revealed that Zimbabwe is ranked bottom on the Trade Openness index. In an ominous sign of the challenges that lie ahead for Mnangagwa’s government this year, Chinese explosives company Hunan Nanling Industrial Explosive Materials recently cancelled its contract to invest in a US$7,5 million 12 000-tonne emulsion explosives fixed production line in the country through one of its subsidiaries, Qianhai. It attributed its decision to what it says is a “turbulent domestic situation” in the economy.
In its inaugural State of Industry and Commerce Survey 2021 the Zimbabwe National Chamber of Commerce found that 76% of respondents said the ease of doing business in 2021 remained unfriendly. For the year 2020, the survey found that 92% of the respondents said the ease of doing business is unfavourable.
These indicators show that the government has its work cut out in 2022 to not only breathe life in the economy but to restore battered business and investor confidence.