BUSINESS REPORTER
Zimbabwe’s long term prospects and investment opportunities are contingent on the country’s ability to address underlying structural challenges such as prohibitive and volatile foreign exchange controls, high inflation and fragile property rights, the UK Government has said.
London said the structural challenges comes against the backdrop of the economy expecting to record some improvements due to a bumper harvest and a post-Covid recovery.
“Necessary currency reforms have been slow, and while businesses are currently able to pay overseas suppliers and repatriate profits through the foreign currency auction, this process is slow and unreliable. Exchange rate management by the Reserve Bank continues to leave a large gap between the official and parallel market rates, increasing the risk of arbitrage,” it said in brief note to British investors.
“Repatriating profits and paying overseas suppliers is cited as the main challenge, and exporters to Zimbabwe should engage with their customer and/or bank to ensure that this risk is mitigated.”
The British government said the high and volatile inflation also makes the business environment more uncertain as businesses price in US dollars at a time the supply of foreign currency is erratic.
A legacy of the Fast Track Land Reform programme of the 2000s, the UK said, is the inability to use agricultural land as collateral, stymying investment in the agricultural sector. This comes as banks continue to shun 99-year leases as collateral.
“The current administration’s relaxation of indigenisation requirements, and fledgling attempts to compensate dispossessed farmers, is a promising step, but occasional and localised instances of land invasions continue to damage the credibility of property rights in Zimbabwe,” it said, adding the move has affected Zimbabwe’s global competitiveness which has been declining since 2015 and is below the sub-Saharan African average. Zimbabwe is ranked 124 out of 137 in the Global Competitiveness Index.
London said corruption in Zimbabwe is widespread and politically connected individuals are often awarded large state contracts, or allocated state-controlled resources, such as foreign currency. President Emmerson Mnangagwa has declared zero tolerance to corruption and says there is a favourable investment climate as he drives the “Zimbabwe is open for business” mantra.
Fiscal and monetary authorities say they have laid a solid foundation to anchor growth notwithstanding the headwinds brought about by the Covid-19 pandemic.
Analysts say the anti-corruption dragnet mainly targets critics of the administration.
