President Emmerson Mnangagwa is vigorously pushing Zimbabwe as a safe investment destination under his “Zimbabwe is open for business” mantra.
Business Times reporter Mona-Lisa Dube (MD) caught up with Douglas Munatsi (DM), the CEO of the Zimbabwe Investment Development Agency (ZIDA) to discuss how the organisation has fared in the promotion and facilitation of investment in Zimbabwe.
Below are excerpts of the interview:
MD: What would you say are some of ZIDA’s successes so far?
DM: The work that we do in terms of investment promotion falls into three broad categories.
We handle all Public Private Partnerships (PPPs) meaning any investment, being an investor or a third party working with the State or State agencies such as parastatals or any organisation which is linked to the State, we process all that.
We are also in charge of the designation, management and administration of special economic zones.
The third leg of our investment activities involves what we call general investments.
So anything which is not in a special economic zone, PPPs, falls into this category.
These include mining, medicinal cannabis, tourism, agriculture, and many others. We categorise these as general investments.
So, the most active, obviously by volume, is mining, being medium sized, large scale mining, ventures in gold, chrome etc.
As you are aware, the company running oil and gas activities (in Muzarabani has made progress). The seismic equipment is already in the country. They’re going to start drilling in the next couple of weeks.
Apart from that, we have seen activities across the board.
There has also been a lot of activity we processed in the PPPs space.
There have been joint ventures in the mining sector, with a number of investors resuscitating old mines.
The local authorities have also entered into joint ventures.
So all these activities demonstrate that although we started very slowly, because I was appointed on April 1, 2020, and so was my advisory board, I think we’ve been very busy.
MD: Who has been most interested in investing in Zimbabwe?
DM: Well, it’s both domestic and international investors. In other words, we have dealt with investors from across the spectrum. We have investors from South Africa, Europe, China, and the US.
Mining has been the most active.
And it ranges from small scale mining, guys, who are just going to have got some basic equipment, and they are involved in opencast mining to guys who are going into small scale mining.
With some significant equipment, some of them employ between 30 and 100 people.
And again, like I said, it involves both foreign and domestic investors, and the interest is growing.
MD: What really are you selling to investors about Zimbabwe?
DM: When we look at resource seeking investors, you know, we are the second biggest repository of platinum. So if you want to have a platinum play, you come to Zimbabwe, or you go to South Africa. We got very large iron ore deposits, as you would be aware, the price of iron ore has recently significantly bumped up.
And what it means is that we have seen quite a lot of interest.
And so, the interest is very varied that we’ve got some South Africans looking into the gold mining sector, they’ve already started their activities.
So, interest is coming from all angles. And of course, domestic investors are also quite significant.
Both expansion and virgin investments, and also new areas like medicinal cannabis.
We’ve licenced over 15 new investors in that space and the government agreed to be very proactive with that sector by offering them some various significant incentives.
And in addition, the government also sees that new investors need to be given significant opportunities, particularly if they create significant employment and exports.
Government has been very supportive. It has come up with a new or incremental investment policy because you assume that in the early stages, investors would not be making much profit.
MD: We have been hearing about foreign investors externalising cash. What policies have you put in place to deal with this?
DM: I’m one of the few people who think that the talk of externalisation is always exaggerated.
Because if you are an investor, a genuine investor, the ones I can speak on behalf of are investors that come through the front door, we licence them, we examine their investment proposition, we interrogate their investment ideas, before we licence them. We ask, you want to come into this country to invest, how many people are you going to employ?
How much are you going to generate? Are you going to generate exports? Where are your facilities going to be located?
Is this an area that is going to benefit our people?
Yes, there may be cases here and there of them taking money, but you must always remember that in general, no company can externalise turnover.
You can only externalise profits, because if you externalise turnover, you soon go out of business. So I think that as a country, we must be vigilant, we must, get investors to account for the money they’re bringing into the country and the one that they can take out,
MD: Are you making them account for their money then?
DM: Absolutely, we look at the production base, we look at all those things before I sign off the licence by ZIDA.
And as a matter of process before we renew a licence, we send our team on the ground to check how much did you say you were going to invest?
How much have you actually invested because we can verify how much they’ve invested through the ZIMRA Bill of entry, right?
And if there’s a gap between what they promised and what they’ve achieved, we want them to account for the variance.
Maybe, some will say we were implementing a project in 2020 or 2019.
And then Covid-19 hit and therefore there was a slowdown in the in their value chain. We examine all those issues. So what happens is that if for example, when my team brings me these recommendations for a renewal of the licence and there is a gap between what they promised and what they delivered, I then want to know you what accounted for the gap? And when is the gap going to be closed?
And if it’s not been close to my satisfaction, we have to say, okay, we don’t think that you are genuine investor. Therefore, we are reporting to immigration so that you should find your way back to your country.
Am not saying registration cases are done perfectly.
I’m also training my staff and so forth.
But definitely, one of the things that I want to happen during my watch is that if we say we approved investments with US$2bn, we want to make sure that US$2bn is real. If it’s not real, we must then account for the difference.
If the difference is something that is reasonable, it’s fine, but then it means that all the other promises employment creation, exports, and so forth, must also be accounted for.
MD: Speaking of relicensing, do you also factor in issues around conditions of employment? We have also been hearing reports about Chinese investors are coming and abuse workers, is this something that you also look into?
DM: No, Mona-Lisa that is not our place but the Ministry of Labour.
And every person, every citizen has got a right to be employed under the country’s labour laws. So that is not acceptable, definitely.
But the enforcement of that is outside our control. What we can do, which we have done is to say, we are not seeing the jobs that you promised, and therefore we would then report that particular company to the responsible authorities.
I have seen some documents and some renewal requests, which I think are a bit suspicious, in one form or the other. And then call my staff to investigate and establish the facts.
But in general, we take all our investors to be bonafide investors who genuinely come into this country or are in this country, to run their business in their businesses in terms of the country’s laws. If they don’t, we have an obligation to report them to the responsible authority.
MD: How is ZIDA striking the balance between local and foreign investment, because it would appear that the mantra “Zimbabwe is open for business” would simply apply to foreign investors?
DM: A lot of effort is being done. Remember we are coming from environment in which we were not necessarily the most favourable by the international community. So we encourage our domestic investors to take the lead in that process.
That’s exactly what has happened elsewhere. Companies which have huge amounts of savings are able to deploy those savings into the expanded domestic economy. Unfortunately, for us, our levels of savings are too low or were too low. And therefore, we’re going to rely to a greater extent on foreign investment. Maybe foreign investors will be more active than domestic investors because the domestic market simply has no long term capital.
MD: But how do you ensure equal distribution of opportunities among those capable local investors because we keep hearing about cartels, we keep hearing about corruption/
DM: Certainly under my watch, there is no possibility that we can be accused of favouring either this cartel or this foreign investor. No, in fact, the ZIDA Act is very clear that we should not discriminate among investors for whatever reason, whether they’re domestic or foreign, black or white.
The law does not allow us to discriminate among investors. I would love to give opportunities to domestic investors, whether they’re corporate or personal, because they are huge opportunities.
But, some people come to me to say, what opportunities do exist?
Where should I put my money?
The opportunities are plenty but our role is not to help you to be an entrepreneur. We will promote existing investment opportunities. We will assess your investments, we will assist you to make them work. So that’s our job, but we are not going to be an entrepreneur on your behalf.
MD: How independent is ZIDA in its decisions?
DM: 100%, unless there is a pronounced government policy in a specific area.
For example, government says that in the diamond and platinum sectors, they would decide who and what sort of level of investments otherwise everywhere else, it’s free for all. The only time we have to consult with a government system is when we are dealing with PPPs because it is government giving an investor an opportunity to provide a service that the government would have otherwise provided. The same applies to tolling the roads or building a prepaid metres etc.
They’re treated in a very transparent way.
So we as ZIDA assess them, we take them to a committee of permanent secretaries. And I think so far all our recommendations been supported by government.
Some people come to us and say we are stuck with this regulator or with this particular person. We will always say to them you should come to us, don’t go anywhere, don’t be charged, commissioned by anybody.
You know, going to the president doesn’t mean your project is going to happen, because the President will still say go to ZIDA.
And we will have to subject that project to our normal procedures of evaluation. So there’s absolutely no need for anybody to use any other route.
MD: What have been the negatives about Zimbabwe, that have made it difficult for you to maybe get in some other investors
DM: One of the biggest challenges is that we are competing for capital with everybody else. So if you go to the ease of doing business ranking of the World Bank, we are ranked 140. And we were I think, we’ve made progress, but the ease of doing business is not where we would like it to be.
MD Why?
DM: Well, it’s a process that you have to achieve over a period of time. So I mean, I’ve already indicated to you that since 2017, we’ve moved from, from about 180 something to 140 that’s a big task.
But if you compare us to our neighbours in the region, we are the second worst or the third worst.
We got a lot of heavy lifting to do.. So it means that we need to address those things that drag us down. One of the biggest challenges that we have is that our systems in government are very manual.
So because an investor cannot log on to our website, for example, and, you know, apply for company registration be able to do that easily be able to get their work permit and so on. So these are some of the things that we are addressing.
MD: We have also heard about concerns from investors with the policy inconsistency issue?
DM: Yes, for sure. I mean, investors have complained to us about that as well. But mostly, it is really to do with issues around and may be to a lesser extent, indigenisation rules.
But, again, the issue of currency is going to be a process. You know, we are in a much better place to where we were 18 months ago. We are also lucky that we’ve got this SDR allocation, which is going to give us much better capacity to support our balance of payments position.
And hopefully, we are going to now start building reserves to position ourselves to be at three to six months import cover, which we have not done in a long time without lines of credit.
So we are on the right track.
Yes, it is true that investors do complain.
But I also have to tell you that in some cases government has gone out of its way to give further assurances. For example, in the medicinal cannabis space, government even agreed that besides the ZIDA licence and the Constitution of Zimbabwe, government is willing to sign what we call the Investment and Stability Agreement, which gives the medicinal cannabis investors added advantages, to protect them against expropriation to protect them.
So, it is a journey, but I think we are making good progress.
And obviously a journey is not a sprint; a journey is going to be a marathon. You got to pace yourself. If you overrun, you may not finish the marathon.
MD: So while you’re on this journey, how are you addressing the issue to do with corruption because if you look at some statistics about Zimbabwe, for example from the Transparency International, Zimbabwe is ranked, 157 out of 180 countries as one of the most corrupt countries. And obviously, this can be a drawback in getting someone interested in bringing their investment here.
DM: Well, some of these publications are just meant to raise money for the NGOs.
MD Are you saying the statistics are not correct about corruption in the country?
DM: They are cases that have not been acceptable to all of us as citizens.
But, these cases are being dealt with. But like everything else, corruption needs to be avoided, rather than for you to deal with it.
MD: But investors use this ranking, right? Despite your opinion of them, investors do use these rankings as a reference.
DM: True but I’m saying to you that you never use one instrument to measure even, like, performance and progress.
So I would say to you look at the World Bank, look at UNDP. Look, at the IMF, look at all these other highly credible institutions. They are converging on the narrative that Zimbabwe is improving. Zimbabwe is making progress; there is still a lot to be done. But for the first time, all these institutions are saying Zimbabwe is making progress. And remember that also, that the only issue that I believe as a banker is the big challenge is the fact that whereas countries like Malawi, which exports less than a billion dollars, it does not have exchange control issues, because they’ve got lines of credit.
In our case, we have got this challenge that where is that gap would have been closed by lines of credit, because historically, anyway, our foreign exchange behaviour is now between November and April before the tobacco auction for floors open, that is our trough.
Since independence, even before independence in what used to close that gap were lines of credit, we would access lines of credit. That’s why I say to you, part of the SDR programme must be used by the government to start building reserves, because a country with no reserves leaves its currency, very vulnerable.
The Minister of Finance, actually recently did say that he will be using some of those funds towards rebuilding reserves. So I guess that addresses some of your concerns there.
MD: As a renowned banker yourself who is now heading a government agency, is there a difference working in a private sector and government?
DM: Oh, by the way, I didn’t just run the bank. I started it. So I can humbly say that the experience out there is very different from when you’re in government, because government requires you have to make sure that you have got all stakeholders on board, whereas in the private sector your main party, the party to please are your shareholders. Of course we broadly defined that as stakeholders, but their demands are slightly narrower. You just need to deliver value and they will be happy. But in the case of government, you need to also be very sensitive to what the government is trying to do.
So it is easy for a private company to make a decision because the numbers make sense.
But some numbers even if they make sense for a State project they may not make sense for an individual. For example I can say I am going to build a dam and sell water to people in Chitungwiza but that water may not be affordable so the government needs to think about those things and part of our creativity as ZIDA is to see how make some of these things work.
MD: As we wrap up, what are the issues within the government that need to be addressed that can make your work easier?
DM: I think for now let’s get the basics right. Let’s digitise government and limit human intervention. Because where there is the human intervention I can make you skip the queue because I know you. That’s where we start getting things wrong. Hopefully, in the next three to five years under NDS1, we will end up with a system with minimum human intervention, with no room for corruption.
Then I think we will significantly improve because in some cases we are not offering investors basics which may be a problem.
