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Zimbabwe records US$328mln in FDI

by Staff reporter
12 Feb 2023 at 07:20hrs | Views
ZIMBABWE recorded USS327,9 million in foreign direct investment last year, an increase from USS237,5 million recorded in 2021.

Despite the strong growth, analysts say the investment inflows remain the lowest in the region due to hurdles in the ease-of-doing business reforms.

In his monetary policy statement released last week, RBZ governor John Mangudya said the inflows mainly reflect efforts by the government to improve the investment climate through a raft of measures.

"Significant expansions and new projects, particularly in the mining sector, also explain the improvement in direct investment inflows," Mangudya said.

According to central bank data, foreign investors accounted for two percent of foreign currency earnings last year, after bringing in US$184,86 million of the US$11,57 billion earned in 2022.

Analysts say the country's business environment remains unfavourable relative to neighbouring countries and as a result of this and other factors, foreign direct investment inflows have been generally below US$500 million, except in 2018, when it reached a peak of US$717 million.

Last year, treasury said the country was considering lowering its investment administrative costs to align with regional peers.

According to the United Nations Conference on Trade and Development, Zimbabwe was at the tail-end of foreign direct investment with critics citing multiple layers of tax for pushing costs.

Finance minister Mthuli Ncube said despite Zimbabwe's improvement in World Bank doing business index ranking from 155 to 140 in 2020, the country's environment remains unfavourable compared to neighbouring countries.

"Going forward, efforts will be made to resuscitate inter-ministerial collaboration to streamline some of the bottlenecks to the doing business environment. This will also include the review of the levels and multiple administrative costs with a view of benchmarking and alignment to neighbouring countries," Ncube said in the 2023 national budget.

Ncube said the establishment of the Zimbabwe Investment and Development Agency had resulted in a substantial reduction in the number of days for business registration processes, although the duration remains long and uncompetitive.

Business has consistently raised concern over the lack of tangible progress in the ease-of-doing business environment with a recently released 2022 industry and commerce survey saying 74 percent of respondents viewed the environment as unfriendly, down marginally from 79 percent in 2021.

Only nine percent said the environment was user-friendly while 17 percent were neutral.

According to the report, which was compiled by the Zimbabwe National Chamber of Commerce, the ease-of-doing business remained a topical issue in Zimbabwe as it continued to negatively affect competitiveness.

"In the 2021 ZNCC Inaugural State of Industry and Commerce Survey, it was flagged out that among the key pillars on the easeof-doing business, paying taxes, getting electricity, getting credit, and trading across the borders, were the poorest performing indicators.

"Considering the issues raised by stakeholders then, it is crucial to assess the current situation and check whether there is an improvement or not..," ZNCC said in the report.

Respondents were asked to indicate the challenges weighing on the ease-of-doing business in Zimbabwe.

According to the survey results... the major challenges related to costs brought by high levels of corruption (94 percent), complex taxation system (93 percent), poor utility delivery (e.g, electricity, water, and sewage) (90 percent), and policy inconsistency (80 percent).

"With regards to paying taxes, the intermediated money transfer tax (IMTT), getting a tax clearance certificate, excise duties and levies were reported as key factors denting the ease-of-doing business and the profitability of businesses in certain sectors such as cigarette manufacturing.

"Taxpayers view the IMTT as a tax on tax and an expense which should be actually a deduction."

Zimbabwe is currently pursuing its international re-engagement policy through the "Zimbabwe is Open for Business" mantra, which seeks to re-establish the country as a lucrative investment destination.

Source - Gazzette