Tawanda Musarurwa, Harare Bureau
Zimbabwe recorded Foreign Direct Investment (FDI) inflows of US$745 million in 2018, up from US$349 million the previous year, latest figures from the United Nations Conference on Trade and Development (UNCTAD) World Investment Report show.
The improvement in the FDI flows into the country over the period under review can be attributed to the ‘Zimbabwe is open for business’ mantra; an aggressive investment drive that has been prioritised by the new dispensation.
In line with the mantra, the Government has implemented a number of initiatives to boost FDI, including amendment of the Indigenisation Act to reduce ownership restrictions; opening up other sectors to unrestricted foreign ownership and increasing the opportunities for foreign direct investments.
And the setting up of the Zimbabwe Investment Development Agency (ZIDA) is expected to be also a game changer that will ensure the attraction of Foreign Direct Investment into the country.
The Zimbabwe Investment Development Agency Bill that was published in the Government Gazette recently is part of the reform agenda being pursued by the Government to ensure the country achieves upper middle-income status by 2030.
Expectedly UNCTAD said Zimbabwe’s FDI inflows were emerging from an “extremely low basis”.
“In Uganda and Zimbabwe, a small number of projects resulted in fast-growing FDI flows, but from an extremely low basis,” reads part of the report.
“Some new investments in the processing of natural resources may support the industrialisation process and a move up the value chain, such as the investment by Sinosteel (China) in Zimbabwe’s metal production, which has potential for major expansion in the medium term,” reads the report.
Notably the report has also highlighted that Zimbabwe has the largest announced greenfield project among landlocked countries, in the form of the US$4,2 billion Karo Resources platinum project.
The role played by FDI as a source of capital which enhances domestic savings is attracting close attention in all developing countries.
Comparatively, the report shows that FDI flows to the Southern Africa region recovered to nearly $4,2 billion last year, from -$925 million in 2017.
FDI flows to neighbouring South Africa more than doubled to $5,3 billion in 2018.
“The surge in inflows (for South Africa) was largely due to intra-company loans, but equity inflows also recorded a sizeable increase. In 2018, China-based carmaker Beijing Automotive Industry Holding opened a $750 million plant in the Coega Industrial Development Zone, while carmakers BMW (Germany) and Nissan (Japan) expanded their existing facilities in the country.
“In addition, Mainstream Renewable Energy of Ireland began building a 110MW wind farm, with a planned investment of about $186 million. FDI flows to Angola in 2018 continued to be negative (-$5,7 billion),” noted the report.
Angola has traditionally been an attractive FDI destination because of its oil and gas sector, but FDI inflows to the country have been negative for the last two years due to both profit repatriations by foreign parent companies and the decline in the country’s oil production, which weighed on new investments, said UNCTAD.
The current negative FDI flows contrast with almost $7 billion a year invested on average in the country between 2014 and 2015.
Recently, the Angolan government, in an attempt to encourage FDI, introduced an investment law that removes the mandatory national ownership share of 35 percent in greenfield investments and the minimum investment requirements.
Mozambique received FDI flows amounting to $2,7 billion in 2018, up from $2,3 billion in 2017. New equity investment accounted for less than 20 percent of inward investment flows, however.
The balance was due to intra-company transfers, that is, loans and other transfers by parent companies to affiliates already established in the country, mainly for gas exploration and production.
More broadly, last year’s FDI flows to Africa defied the global downward trend and rose to $46 billion, an 11 percent increase after successive declines in 2016 and 2017.
Meanwhile, FDI outflows from the continent dropped to $10 billion, mainly due to reduced outward investment from Angola and South Africa.
This year, UNCTAD said, the “expected acceleration of economic growth in Africa, progress towards the implementation of the African Continental Free Trade Area Agreement and the possibility of some large announced greenfield investments materialising could result in higher FDI flows to the continent”.