Foreign Direct Investment Will Help Counter Liquidity Challenges in Zimbabwe

Republic of Zimbabwe Vice-President Joice Mujuru of the ZANU-PF party. Mujuru recently paid tribute to the nations of the Southern African Development Community (SADC) for their ongoing support for the country., a photo by Pan-African News Wire File Photos on Flickr.

FDI will help counter liquidity challenges, says VP Mujuru

Friday, 20 May 2011 22:31
Herald Reporter

INCREASED foreign direct investment inflows will help counter the effects of liquidity challenges in Zimbabwe's economy, Vice President Joice Mujuru has said.

VP Mujuru was addressing participants at the official opening of the Imara Investment Indaba in Harare yesterday.

She said although there had been improvements in cash flow in the economy since dollarisation, this was still inadequate to sustain targeted economic growth.

"The new economic dispensation has, of course, brought its own peculiar problems. Chief among these is the evidence of limited liquidity in financial markets.

"Although bank deposits have grown from close to nothing, on the introduction of the multi-currency system, to US$2,2 billion at present, this still represents a limited capital stock, particularly in an economy trying to rebuild itself.

"In light of this and in the absence of significant lines of credit, the role of foreign investor capital is absolutely vital," she said.

VP Mujuru urged foreign investors to invest on the Zimbabwe Stock Exchange, which is traditionally an important contributor to foreign investment inflows.

Net foreign investment on the ZSE since 2009 amounts to US$200 million, representing some 40 percent of the total value added traded on the market over the last two years.

The Government has been implementing strategies to boost foreign direct investment into the country, notably the establishment of the Zimbabwe Investment Authority One Stop Shop meant to expedite new investor registration processes.

The Ministry of Economic Planning and Investment Promotion is also currently reviewing the country's investment policy framework.

However, observers have noted the need for greater engagement with the global investor community in view of the country's poor ratings on international business environment indices.

VP Mujuru acknowledged the recent investment by the Essar Group into the Zimbabwe Iron and Steel Company, which she said "represents a landmark transaction in the post-Global Political Agreement Zimbabwe".

Government has shown commitment to the provision of a conducive environment and for the security of ownership of investment, which includes the Bilateral Investment Protection and Promotion Agreements (Bippas) that have recently been concluded with South Africa and Botswana.

VP Mujuru called on relevant authorities to speed up implementation of a number of bilateral investment agreements that Zimbabwe had signed.

"Further, under my witness, agreements worth US$742 million were signed with our Chinese counterparts during the recent visit by the Chinese Deputy Premier.

"I urge all signatories to those agreements to move with speed in the implementation phase," she said.

Additionally, the Ministry of Industry and Commerce is in the process of reviewing the Zimbabwe Industrial Development Policy, which will provide a framework for further recovery and development of the manufacturing sector.

Government has also established a Debt Management Office to oversee the Zimbabwe Accelerated Debt and Development Strategy aimed at addressing the country's debt arrears.

VP Mujuru noted some of the significant improvements that the economy had undergone since the consummation of the inclusive Government in 2009, notably the growth in the telecommunications sector with mobile penetration increasing from around 10 percent at the beginning of 2009 to over 60 percent of late.

She also said manufacturing output had risen to around 45 percent last year with firms such as Delta Corporation investing in capacity growth.

The mining, agriculture, and tourism sectors have also registered significant growth during the period.

The Imara Investment Indaba (2011) was the third in a series since 2009 and saw the participation of over 60 investors from the Americas, Europe, the Far East and Africa.