David Bridgman, Africa manager for the Investment Climate Advisory Services of the Bretton Woods institution told delegates attending the American Business Association of Zimbabwe Just Business Forum in the capital on Wednesday that bureaucratic apathy in the country could continue to deter investors from the emerging economy which suffered a decade of decline.
Government, which at the beginning of the year said it would restructure the Zimbabwe Investment Authority in July to reduce lethargy in starting or closing a business, postponed this process to next year citing “procedural delays”.
The country, which recorded the first GDP growth of 5% in 10 years last year, attracted US$60 million in foreign direct investment, down from US$103 million recorded in 2005. It, however, remains uncompetitive compared to neighbouring Zambia which received US$959 million.
Zimbabwe is currently ranked 159 out of 183 countries in the World Bank Doing Business Report.
For instance, so cumbersome is the process of setting up business in Zimbabwe that a would-be investor would take 96 days and 500% of income per capita to start a business and more than three years to close business operations. Mauritius is the only African country in the top 20 of the Doing Business Report.
Bridgman said political leaders should have the will to transform state institutions responsible for investment promotion, citing Rwanda which jumped 76 places in rankings to position 67, making it the top reformer in the history of the five year old World Bank Doing Business survey.
“Government should eliminate the waiting period in confirming business registration at the National Social Security Authority (NSSA) to improve conditions for starting a business,” Bridgman said.
Apart from NSSA, potential investors have to endure registration and assessment at local authorities, Registrar of Companies and the Environmental Management Agency.
“Rwanda and Mauritius show that there is no obstacle to African countries being counted among the best in the world. Other rapid reformers –– Burkina Faso, Liberia, and Kenya –– have reinforced lessons on how rapid reform can be achieved,” Bridgman said.
He said the state should also eliminate colonial requirements of announcing company registrations in government gazettes, saying this would again slow down the company registration process.
He added that the state should license only those companies that engage in business activities that may impose risks to environment, health, and public safety. The World Bank official said government should create an electronic search system for company names at the Registrar of Companies’ office which would replace the tedious manual system currently in place.
Meanwhile, a paper prepared by Common Market for Eastern Southern Africa senior investment promotion officer Thierry Kalonji recommended the coalition government sets up a national commission on business climate coordinated by the prime minister or Industry and Trade minister. He said the commission should be mandated to examine policy and practices negatively affecting business.
Government is yet to establish a National Economic Council — responsible for advising government on economic policies — that is envisaged in the September 15 2008 power sharing pact.
Prime Minister Morgan Tsvangirai, who closed the business forum, admitted “bureaucratic obstacles” are turning away potential investors to more investor-friendly destinations. Tanzania, for example, introduced wide-ranging mining incentives which resulted in the country becoming the third largest gold producer after South Africa and Ghana. Zimbabwe on the other hand was de-registered from the prestigious London Bullion Market after production plunged in recent years. At its peak the country produced 27 tonnes of the precious metal.
Tsvangirai said: “Too often, business people and investors are discouraged from establishing formal enterprises due to bureaucratic obstacles or uncertain policy environment. In the case of investors, they are tempted to look elsewhere for a reliable return on their capital while our business people also seek opportunities elsewhere or opt to operate informally within our economy”, Tsvangirai said.
“Zimbabwe is far behind the majority of progressive nations in facilitating the establishment of businesses and dealing with regulations inherent in running a business.”