By Idah Mhetu
PRESIDENT Emmerson Mnangagwa’s reforms anchored on his short-term policy, the Transitional Stabilisation Programme (TSP) could resolve most of Zimbabwe’s structural problems, his most vocal foreign critic the United States (US) has said.
In an assessment titled: 2019 Investment Climate Statements, Zimbabwe published by the US’s Department of State, the Western economic and political power however raised a red flag around property rights which it said remained fluid under Mnangagwa.
“The Transitional Stabilisation Programme announced in 2018 includes structural and fiscal reforms that, if fully implemented, would resolve many of the economy’s fundamental weaknesses,” the executive summary of the report said.
Mnangagwa took over from former strongman Robert Mugabe in November 2017 on the back of a military coup projecting himself as a reformer but the US noted that he seemed to have squandered the goodwill that came with Mugabe’s fall after a slowdown on promised reforms.
The new Zanu PF leader was lauded by the US for his move to remove investment restrictions in the mining sector by repealing what was then characterised as a toxic law.
The TSP aims at guiding economic policies and reforms from October 2018 to December 2020 and to implement Mnangagwa’s Vision 2030, which seeks to transform Zimbabwe into a middle-income country inside 12 years.
“The new government did move quickly to amend the restrictive indigenisation (local ownership) law to apply only to the diamond and platinum sectors, opening other sectors to unrestricted foreign ownership.
“Nevertheless, investors remain cautious. Zimbabwe has attracted low investment inflows of less than US$500 million annually over the past decade. Between 2014 and 2017, foreign direct investment inflows fell from US$545 million to US$289 million, but rose to approximately US$470 million in 2018. The government announced its commitment to improving transparency, streamlining business regulations, and removing corruption, but the last two years have brought only modest progress,” the Department of State said.
“Investor optimism following the November 2017 fall of President Robert Mugabe has weakened as President Emmerson Mnangagwa’s government has been slow to follow through on reforms to improve the ease of doing business, and a protracted currency crisis strains the economy.”
Critics have argued that the country’s hopes of attracting meaningful foreign direct investment (FDI) on the back of the ‘Zimbabwe is open for business mantra’ will remain dead in the water, unless the government addresses the confidence deficit in the country.
The US also highlighted what it said was Zimbabwe’s most attractive areas for would be investors.
“Zimbabwe’s incentives to attract Foreign Direct Investment (FDI) include tax breaks for new investment by foreign and domestic companies, and making capital expenditures on new factories, machinery, and improvements fully tax deductible.
“The government waives import taxes and surtaxes on capital equipment. The government has been working to improve the business environment by reducing the regulatory costs measured in the World Bank’s Ease of Doing Business index, but the pace of such reforms has been slow, and policy inconsistency remains a major challenge to foreign investors,” said the report.
“Zimbabwe’s sectors that attract the most investor interest include agriculture (tobacco, in particular), mining, energy, and tourism. Investors appreciate the high education levels of Zimbabwean workers.”
Mnangagwa, who was part of Mugabe’s government of 38 years, seems to have learnt little about investment and property rights according to the assessment. Corruption according to the statement remains a major problem.
“In addition, corruption remains rife and there is little protection of property rights, particularly with respect to agricultural land. Historically, the government has resorted at times to expropriating land without compensation, although it has indicated a new commitment to protecting property rights,” the US’s most powerful government arm said.
Mugabe was slapped with sanctions by the US that remain in place to this day after funding the violent seizure of white owned farms across the country in what he said was aimed at redressing colonial land imbalances.
Zimbabwe’s arrears in payments to international financial institutions and the country’s high external debt (public and private) of over US$10.7 billion was also picked out as an impediment with the report indicating the twin evils “complicate the situation by limiting the country’s ability to access official development assistance at concessional rates.”