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EU Warns Zimbabwe
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The European Union (EU) has issued a stark warning to Zimbabwe, urging the government to implement urgent reforms to strengthen the rule of law, combat corruption, and ensure policy predictability. Without such changes, the EU cautioned, Zimbabwe's economy will remain stagnant, and its vast industrial potential will continue to lie dormant.
Delivering a candid assessment at the Zimbabwe National Chamber of Commerce (ZNCC) Annual Conference last week, EU Ambassador to Zimbabwe Jobst von Kirchmann highlighted the disconnect between Zimbabwe's abundant resources and talent and the weak institutional environment that hinders growth and deters investment.
"Why does the manufacturing sector remain low despite available resources?" Kirchmann asked. "You can have a beautiful plant, but it will only thrive if planted in fertile soil. Without good ‘soil'-meaning strong institutions, rule of law, and regulatory clarity-the plant cannot grow."
Drawing parallels to countries like post-war Germany and South Korea, which achieved rapid industrialisation through strong governance and institutional foundations, Kirchmann emphasized that these elements are essential for Zimbabwe to succeed.
Zimbabwe's manufacturing sector currently contributes less than 6% to total exports, hampered by high production costs, poor infrastructure, and policy uncertainty. Industrialists report that many factories operate at just 50% capacity due to the high cost of doing business.
While acknowledging government efforts through the National Development Strategy 1 (NDS1), the Ambassador stressed the need for tangible reforms that create an enabling environment for business growth.
"The government must commit fully to letting businesses thrive, investing in people, education, health, and ensuring sufficient capital availability," Kirchmann said. "Investors are not looking for zero risk but for predictability-knowing the rules, monetary policy, and access to justice."
The EU stands ready to support Zimbabwe's manufacturing and export ambitions. Kirchmann noted ongoing trade cooperation, including a duty-free and quota-free agreement that facilitates Zimbabwean exports to the EU, currently being expanded to cover services.
The EU has also introduced on-lending facilities through local banks such as Stanbic, NMB, First Capital, and CABS, providing longer-term loans at lower interest rates. However, Kirchmann acknowledged these are stop-gap solutions.
"It's a drop in the ocean," he said. "Zimbabwe needs full unlocking of capital for companies."
Despite challenges, Kirchmann praised Zimbabwe's private sector professionalism, citing a flawless repayment record on EU loans-a stark contrast to default rates seen elsewhere.
However, Zimbabwe's mounting debt and arrears continue to weigh heavily on the economy. Reserve Bank of Zimbabwe Deputy Governor Dr Innocent Matshe admitted that government funding capacity is limited and urged businesses to seek offshore credit lines.
"The era of borrowing until default is over," Matshe said. "We must be prudent and self-reliant. Private companies should now secure their own capital."
Beyond finance, the EU continues significant investments in Zimbabwe's health and education sectors, committing €500 million to health over two years and over €50 million to education initiatives to sustain Zimbabwe's skilled workforce.
Interest from European investors is growing, with the recent EU-Zimbabwe Business Forum attracting 70 companies and hundreds more expressing interest.
"Over 600 companies wanted to attend, but we had space for only 300," Kirchmann revealed. "It was a big success."
Nonetheless, the Ambassador warned that attracting sustained investment requires more than events and rhetoric.
"It's a joint task. The government must show it welcomes investors, is serious about joint ventures, equity funding, and creating a business-friendly environment," he said.
The EU's €150 billion Global Gateway initiative also offers funding opportunities for African companies, but only countries that create the right conditions-like Zimbabwe-will benefit.
"The opportunities exist," Kirchmann concluded. "But unlocking them is Zimbabwe's responsibility."
Delivering a candid assessment at the Zimbabwe National Chamber of Commerce (ZNCC) Annual Conference last week, EU Ambassador to Zimbabwe Jobst von Kirchmann highlighted the disconnect between Zimbabwe's abundant resources and talent and the weak institutional environment that hinders growth and deters investment.
"Why does the manufacturing sector remain low despite available resources?" Kirchmann asked. "You can have a beautiful plant, but it will only thrive if planted in fertile soil. Without good ‘soil'-meaning strong institutions, rule of law, and regulatory clarity-the plant cannot grow."
Drawing parallels to countries like post-war Germany and South Korea, which achieved rapid industrialisation through strong governance and institutional foundations, Kirchmann emphasized that these elements are essential for Zimbabwe to succeed.
Zimbabwe's manufacturing sector currently contributes less than 6% to total exports, hampered by high production costs, poor infrastructure, and policy uncertainty. Industrialists report that many factories operate at just 50% capacity due to the high cost of doing business.
While acknowledging government efforts through the National Development Strategy 1 (NDS1), the Ambassador stressed the need for tangible reforms that create an enabling environment for business growth.
"The government must commit fully to letting businesses thrive, investing in people, education, health, and ensuring sufficient capital availability," Kirchmann said. "Investors are not looking for zero risk but for predictability-knowing the rules, monetary policy, and access to justice."
The EU stands ready to support Zimbabwe's manufacturing and export ambitions. Kirchmann noted ongoing trade cooperation, including a duty-free and quota-free agreement that facilitates Zimbabwean exports to the EU, currently being expanded to cover services.
The EU has also introduced on-lending facilities through local banks such as Stanbic, NMB, First Capital, and CABS, providing longer-term loans at lower interest rates. However, Kirchmann acknowledged these are stop-gap solutions.
"It's a drop in the ocean," he said. "Zimbabwe needs full unlocking of capital for companies."
However, Zimbabwe's mounting debt and arrears continue to weigh heavily on the economy. Reserve Bank of Zimbabwe Deputy Governor Dr Innocent Matshe admitted that government funding capacity is limited and urged businesses to seek offshore credit lines.
"The era of borrowing until default is over," Matshe said. "We must be prudent and self-reliant. Private companies should now secure their own capital."
Beyond finance, the EU continues significant investments in Zimbabwe's health and education sectors, committing €500 million to health over two years and over €50 million to education initiatives to sustain Zimbabwe's skilled workforce.
Interest from European investors is growing, with the recent EU-Zimbabwe Business Forum attracting 70 companies and hundreds more expressing interest.
"Over 600 companies wanted to attend, but we had space for only 300," Kirchmann revealed. "It was a big success."
Nonetheless, the Ambassador warned that attracting sustained investment requires more than events and rhetoric.
"It's a joint task. The government must show it welcomes investors, is serious about joint ventures, equity funding, and creating a business-friendly environment," he said.
The EU's €150 billion Global Gateway initiative also offers funding opportunities for African companies, but only countries that create the right conditions-like Zimbabwe-will benefit.
"The opportunities exist," Kirchmann concluded. "But unlocking them is Zimbabwe's responsibility."
Source - Business Times
