On the back of news that foreign investment into Zimbabwe fell 59% to a mere $67 million in the first half of this year, it has become a moot point that Zimbabwe needs to urgently create an environment conducive to boosting investment into that country.
Some have argued that the liquidity crunch this is causing is creating space for the reintroduction of the Zimbabwean dollar. I disagree.
The problem with this train of thought is that until the country’s underlying problems – including the lack of investor confidence – are dealt with, reintroducing the currency will not fix anything. All it will do is set the stage for a return of the hyperinflation that cost everybody so dearly.
That is not to say that things should stay as they are. Perhaps, rather than reintroducing the Zimbabwean dollar, policy makers should consider Zimbabwean economist Gilbert Muponda’s excellent suggestion and officially make the rand the only currency that gets used in Zimbabwe and that the US dollar, pound, pula and all the others that are now being used get removed from local circulation.
This would make sense as an interim measure on the road to restoring Zimbabwe’s financial sovereignty and when the time is right, which I believe it will be at some point, the Zimbabwean dollar can be reintroduced.
The rand would work better for Zimbabwe than the dollar or the pound as it is a fairly weak currency. This can be useful when you’re trying to build up exports and develop a domestic manufacturing base. Although South Africa is so much bigger than Zimbabwe, it shares many of the same developing-country characteristics.
I believe the reality is that Zimbabwe has everything required for a healthy economy. It just needs to be unlocked.
While its human and physical capital have been degraded, there is a rising corps of sensible, educated and pragmatic leaders who have what it takes to get things right again. And taking care of the business climate and the basics, such as the current cash shortage, is the right place to start.
Investors must again be made to feel welcome and given assistance and incentives where necessary. They also need to be given comfort that their investments will be safe and not susceptible to anything other than the normal vagaries of doing business.
I have argued before that I am especially bullish on Zimbabwe’s medium- to long-term prospects. I think that the country is an elephant about to stand up, a fact that is still escaping many, but not all, investors. But it needs help and the formal sector needs to grow – it is all well and good to have an enormous informal economy (some estimates have put this at 84% of all economic activity) and this may help stave off starvation for millions, but it doesn’t help the government raise the taxes it needs to rebuild the nation.
New businesses are needed as these are the conduit through which fresh money, ideas and technology can flow into the economy, creating new industrial capacity, pumping up liquidity and generally allowing things to normalise.
Zimbabwe has been growing since 2009, when it emerged from a decade of recession, but, according to Reuters data, still only 500 000 out of 13 million people are in formal employment.
The data show there is an enormous amount of unutilised industrial capacity, but what I have seen in my many trips there over the past few years is that much of this is simply unfit for purpose and needs to be rebuilt.
I am of course not alone in believing that opportunities exist north of the Limpopo. A giant chicken franchise has announced plans to “paint Zimbabwe red with KFC” with initial plans to open 25 stores. The company previously had stores in Harare and Bulawayo but quit the country in 2007 at the height of the crisis.
Without underestimating the impact of things like the liquidity crunch and the country’s problematic indigenisation and land reform policies on investor confidence, I am convinced that things are being done by the Zimbabwean government which will start rebuilding investor confidence.
To my mind there is ample evidence that those in charge of the country’s finances know what needs to be done and, within the bounds of their political and economic constraints, will do what needs to be done to get things right.
As KFC and other forward looking businesses, both in the consumer and industrial spaces, return to Zimbabwe, the country will start recovering, jobs will start being created and it will begin the long process of becoming again what it should always have been: a successful and prosperous country and a lucrative place for investors to ply their trade.
Andrew Robinson founded his first multinational consumer goods company by the time he was 30. He now focusses on investing in Africa’s emerging markets, primarily in the alcohol, beverages, food and pharmaceutical sectors. He is also the chairman of the Johannesburg Golden City chapter of the Young Presidents Organisation (YPO).LINK