News / National
Zimbabwe told to prioritise domestic capital
28 Jun 2018 at 04:52hrs | Views
ZIMBABWE should seriously consider boosting its economy by placing more emphasis on domestic capital over foreign investment through attractive investment packages and other incentives, analysts say.
This comes as the Confederation of Zimbabwe Industries (CZI) has called for "greater support and recognition" of local business as the country fights to turn around its economic fortunes, with key local institutions such as the Reserve Bank of Zimbabwe (RBZ) and the Zimbabwe Revenue Authority (Zimra) also working hard to mobilise internal resources.
"Domestic investors should be promoted because they are more stable. In the event of any economic challenges, domestic capital is also normally more resistant and this is why we are advocating for more partnerships as opposed to foreign investors coming in and taking away all the resources," CZI president Sifelani Jabangwe said this week.
"When we say Zimbabwe is open for business, we must ensure that local investors are also given the same incentives and opportunities as foreign investors.
"Domestic investors also have the capacity to turn around the economy, but require technical and financial assistance," he added, in the aftermath of the industry body's recent resolution to lobby the government on the urgent need to mobilise domestic capital to improve the country's stuttering economy.
Jabangwe's remarks also come as top regional commentator and this year's Top Companies Survey guest, Kevin Wakeford, has said Zimbabwe can raise up to 60 percent of its total capital needs domestically.
The South African-based businessman also told the gathering, co-hosted by the Financial Gazette and investment giant Old Mutual, that most global economies were thriving by blending both local and foreign investments — a move Zimbabwe could emulate "to be the Singapore of southern Africa". Francis Mukora, another economic commentator, also said Harare could achieve high growth rates by mobilising domestic financial resources.
"Zimbabwe can finance its development from its own domestic financial resources if innovative instruments are deployed and supported by appropriate means of implementation. A number of African countries have taken this route," he said.
He noted further that an efficient tax administration system, including broadening the tax base, could also help the country mobilise its resources, while diaspora bonds could be another avenue.
"Issuance of diaspora bonds as debt instruments … to raise development finance from its diaspora communities is a viable alternative to borrowing from international capital markets, multilateral financial institutions or securing bilateral loans.
"From the early 1930s, Japan and China, Israel and India have recorded successful diaspora bonds issuance," Mukora added.
South African-based investment banker Cynthia Moyo said considering that most developing countries faced significant resource constraints, Zimbabwe included, there was an urgent need for the country to turn to domestic sources of funding such as pension assets to finance long-term infrastructure projects such as power generation, transportation and telecommunications networks.
"Statistics from the African Development Bank show that Zimbabwe could be losing at least $1 billion in potential investment annually due to poor infrastructure.
"As such, using the country's pension fund assets that are valued at over $10 billion … would make the country an attractive investment destination," she said.
Moyo said further that pension funds could also be used to fund productive sectors of the economy such as manufacturing, agriculture, mining and tourism.
"This will in turn not only improve economic growth and increase employment, but will also eventually improve the lives of contributors to the pension funds," she said.
These views come as Zimra and the RBZ have been looking at ways of influencing policy and official attitudes to encourage the use of local capital to rebuild the country. Central bank governor John Mangudya has emphasised that the first step to realising the power of domestic capital is "behavioural change" — from a consumptive culture to production.
"I have always believed that the answer lies in production and, once we fix that as a country, we would have created sufficient resources and capacity to attract more funds from abroad. The solution lies in a combination of the two — both domestic and foreign capital," he said.
Mangudya has also been quoted as saying: "Domestic resources should act as a magnet of foreign resources instead of the other way round. We need to mobilise vast domestic resources."
However, businessman Nigel Chanakira urges caution, saying the domestic capital cake is still too small to play the desired role, given the low local savings base. As such, he says, reliance on this sector remains a medium-term dream.
"For an economy of our size, we require $5 billion annually in fresh capital to ensure that the country is on a sustainable path," the ex-Zimbabwe Investment Authority chairman said, adding: "It was always pure fantasy for anyone to think that the county would notch higher growth rates … to take millions out of the streets and save them from abject poverty, from internal resources alone".
"We have been there and done that and it didn't work. The reality is we need help. We are not yet there as a country. We need technology and fresh capital to ensure that our local companies are competitive enough to start producing processed goods for the export market," Chanakira said.
About 16 percent of Zimbabwe's $18 billion gross domestic product must be generated from FDI, the former banker said
This comes as the Confederation of Zimbabwe Industries (CZI) has called for "greater support and recognition" of local business as the country fights to turn around its economic fortunes, with key local institutions such as the Reserve Bank of Zimbabwe (RBZ) and the Zimbabwe Revenue Authority (Zimra) also working hard to mobilise internal resources.
"Domestic investors should be promoted because they are more stable. In the event of any economic challenges, domestic capital is also normally more resistant and this is why we are advocating for more partnerships as opposed to foreign investors coming in and taking away all the resources," CZI president Sifelani Jabangwe said this week.
"When we say Zimbabwe is open for business, we must ensure that local investors are also given the same incentives and opportunities as foreign investors.
"Domestic investors also have the capacity to turn around the economy, but require technical and financial assistance," he added, in the aftermath of the industry body's recent resolution to lobby the government on the urgent need to mobilise domestic capital to improve the country's stuttering economy.
Jabangwe's remarks also come as top regional commentator and this year's Top Companies Survey guest, Kevin Wakeford, has said Zimbabwe can raise up to 60 percent of its total capital needs domestically.
The South African-based businessman also told the gathering, co-hosted by the Financial Gazette and investment giant Old Mutual, that most global economies were thriving by blending both local and foreign investments — a move Zimbabwe could emulate "to be the Singapore of southern Africa". Francis Mukora, another economic commentator, also said Harare could achieve high growth rates by mobilising domestic financial resources.
"Zimbabwe can finance its development from its own domestic financial resources if innovative instruments are deployed and supported by appropriate means of implementation. A number of African countries have taken this route," he said.
He noted further that an efficient tax administration system, including broadening the tax base, could also help the country mobilise its resources, while diaspora bonds could be another avenue.
"Issuance of diaspora bonds as debt instruments … to raise development finance from its diaspora communities is a viable alternative to borrowing from international capital markets, multilateral financial institutions or securing bilateral loans.
"From the early 1930s, Japan and China, Israel and India have recorded successful diaspora bonds issuance," Mukora added.
South African-based investment banker Cynthia Moyo said considering that most developing countries faced significant resource constraints, Zimbabwe included, there was an urgent need for the country to turn to domestic sources of funding such as pension assets to finance long-term infrastructure projects such as power generation, transportation and telecommunications networks.
"Statistics from the African Development Bank show that Zimbabwe could be losing at least $1 billion in potential investment annually due to poor infrastructure.
"As such, using the country's pension fund assets that are valued at over $10 billion … would make the country an attractive investment destination," she said.
Moyo said further that pension funds could also be used to fund productive sectors of the economy such as manufacturing, agriculture, mining and tourism.
"This will in turn not only improve economic growth and increase employment, but will also eventually improve the lives of contributors to the pension funds," she said.
These views come as Zimra and the RBZ have been looking at ways of influencing policy and official attitudes to encourage the use of local capital to rebuild the country. Central bank governor John Mangudya has emphasised that the first step to realising the power of domestic capital is "behavioural change" — from a consumptive culture to production.
"I have always believed that the answer lies in production and, once we fix that as a country, we would have created sufficient resources and capacity to attract more funds from abroad. The solution lies in a combination of the two — both domestic and foreign capital," he said.
Mangudya has also been quoted as saying: "Domestic resources should act as a magnet of foreign resources instead of the other way round. We need to mobilise vast domestic resources."
However, businessman Nigel Chanakira urges caution, saying the domestic capital cake is still too small to play the desired role, given the low local savings base. As such, he says, reliance on this sector remains a medium-term dream.
"For an economy of our size, we require $5 billion annually in fresh capital to ensure that the country is on a sustainable path," the ex-Zimbabwe Investment Authority chairman said, adding: "It was always pure fantasy for anyone to think that the county would notch higher growth rates … to take millions out of the streets and save them from abject poverty, from internal resources alone".
"We have been there and done that and it didn't work. The reality is we need help. We are not yet there as a country. We need technology and fresh capital to ensure that our local companies are competitive enough to start producing processed goods for the export market," Chanakira said.
About 16 percent of Zimbabwe's $18 billion gross domestic product must be generated from FDI, the former banker said
Source - fingaz
