Locals jostle to engage Indian business delegation

Business
A business delegation from India was in the country last week to scout for investment opportunities, joining a long list of foreign businesses that have visited Zimbabwe since the dollarisation of the economy in 2009.

A business delegation from India was in the country last week to scout for investment opportunities, joining a long list of foreign businesses that have visited Zimbabwe since the dollarisation of the economy in 2009.

BY TATIRA ZWINOIRA

Part of the Indian business delegation that came to scout for opportunities last week. Picture: Aaron Ufumeli
Part of the Indian business delegation that came to scout for opportunities last week. Picture: Aaron Ufumeli

The 16-member delegation visited from Monday through to yesterday and was selected by the National Small Industries Corporation Limited (NSIC) for business-to-business meetings with local small-to-medium enterprises (SMEs) at a Harare hotel.

NSIC engaged the Zimbabwe India Chamber of Commerce and Zimbabwe National Chamber of Commerce to send out invitations to 100 local businesses in the SME space. However, at the official proceedings of the visiting Indian business delegation, the final number of local businesses present was well over the number of invitees.

The meeting resembled the trading floor of the New York stock exchange in the United States as local businesses scrambled to engage the NSIC chairman Ravindra Nath, Indian businesses and India’s ambassador to Zimbabwe Rungsung Masakui looking for opportunities.

In response to the interest shown by local businesses, Nath told Standardbusinesss that for Indian businesses to seriously consider local investment, there was need for trust and confidence in the system.

He said collaborative, viable, long-term projects along with evident ease of doing business in the country were necessary to attract investors into the country.

The country slipped six places to position 161 out of 189 countries on the ease of doing business 2017 rankings whereas the previous rating had seen Zimbabwe ranking on position 155.

“But, I am optimistic about the outcome of these proceedings. We will have to wait and see what happens,” Nath said.

According to the Zimbabwe Investment Authority (ZIA), Indian investment for 2016 was just under $60 million, which was an improvement from the previous year’s $10 million.

A representative from one of the local companies jostling to engage with the Indian business delegation said such a visit was important at a time when foreign currency shortages had severely affected business.

“It has not been easy, especially on the part of procurement. In our case, we would need solar panels, inverters, batteries and charge controllers which are key components in building solar systems. It has been very difficult to acquire some of these due to foreign currency challenges.  Probably engaging some of these foreign investors will help to localise investment here,” Bricel Technologies representative Brian Mufambirwi said.

He said although some components in the solar business could be acquired locally, the costs were too high to make business viable.

Zimbabwe has hosted numerous business delegations over the years. Since 2015 the country received Chinese, Russian, German, and South Africa business delegations and just before then, President Robert Mugabe had led a business delegation to China where mega deals were signed.

In 2015, investment projects worth $3 billion were approved. Though there were many projects approved, businesses have continued to give Zimbabwe a wide berth due to unfriendly legislations such as the Joint Venture Act, the Indigenisation and Empowerment Act, and the Income Tax Act.

Under The Joint Venture Act, investors complained it was heavily skewed in favour of local businesses despite foreign investors bringing in more investment capital into the partnership. As for the Indigenisation and Empowerment Act — arguably the most controversial law of the different investment related legislation — investors complained about the 51%:49% stake ratio in favour of local businesses. Investors argue they are in business to make a profit and such legislation made it impossible.

Though Mugabe made clarifications to the Indigenisation and Empowerment Act, the clarifications are yet to be made law.

Finally, investors complained the Income Tax Act imposed penalties that were higher than international best practices. Investors have also expressed concerns over the time it takes to set up a business and the lack of a central business registry centre that can handle all the processes involved.

Foreign investors have largely raised concerns that the legislation and regulatory environment presented an unconducive business investor environment.

One example of how this matters to investors was highlighted by local representative at the German-African Business association, Bernd Doppelfeld, when he said “for Germans, they merely have to check the country’s ease of doing business ranking before visiting a country”.

Another example was in September 2016, when the Zimbabwe Netherlands Business Link (ZNBL) was launched to spearhead investment in the horticulture sector.  At the time, Dutch businesses expressed interest in investing but only on condition that their investments would “be safe in Zimbabwe”. No responses could be obtained from ZBNL despite Standardbusiness sending questions to committee member Goof de Jong.

The result of all the delays and lack thereof in investment is that the Zimbabwe Investment Authority (ZIA) recorded an estimated drop of over $1 billion in foreign direct investment (FDI) projects approved in 2016 from the previous year’s $3 billion.

ZIA chief executive officer Richard Mbaiwa said the slow realisation of FDI projects was due to the investment process being long, current legislation and old laws that were still in place.

Under ZIA rules, an investor has up to at least two years to report on their progress with their investment project. 

“It can take three to four years at a time [realisation of investment projects]. We have got to look at it from our own side as Zimbabwe in terms of what we are doing, you know, the ease of doing business reforms. We have to continue improving our policy environment,” Mbaiwa said.

“We have got a lot of laws that came from long back that are being reviewed. I think there are a whole lot of things that need to be done. I can never say that I am satisfied until such a situation where maybe I can say there are too many investors in this country, let us put a break. But at the moment, we want investment and capital. We have to look at each and every area where we can unlock investment to see if there are any constraints.”

He said the fact that delegations were coming to Zimbabwe was a positive sign “because at least they are showing interest in investing in the country”.

Desire Sibanda, ministry of Macro-Economic Planning and Investment Promotion permanent secretary, said they were working on investment deals with Russian, Canadian, British and South African investors.

“We are not on holiday so there have been follow-ups on delegations. You are aware that the Special Economic Zone Act came into being on October 30 so before that there were a number of problems, regulatory issues, but now that we have the Act which attracts the FDI, [delegates] they are quite happy,” he said.

“Before the Act there were all these questions about indigenisation, regulatory framework and how competitive we are. Now, we are trying to offer competitive rights and conditions in what we call incentives which are highly competitive; because of that we are highly optimistic.”

Sibanda said they were expecting results from the business delegations by June next year where the ministry hoped to have increased by 25% investment over the gross domestic product.

The laws have hampered investment so much that in mid-March 2016, a 33-member South African business delegation that visited the country left immediately after government started driving the enforcement of the Indigenisation and Empowerment Act forward.

The situation was worsened when government promulgated SI 64 in June 2016 which placed restriction on 43 products.

It is estimated that South Africa’s export sector lost $500 million in the period June to August 2016, resulting in a brief trade war with Zimbabwe.

Frank Stevens, a representative of the Department of Trade and Industry at the South African Embassy in Harare, did not respond to inquiries on the state of affairs following the visit by the delegation.

Last year, the Confederation of Zimbabwe Industries and the Foreign Economic Relations Board of Turkey (DEiK) signed an agreement allowing local producers to partner with their Turkish counterparts to boost production.   DEiK co-ordinating chairman of Turkish-African Business Councils Tamer Taskin said he could not give an update as he was travelling.

For now, investment reprieve is expected to come from the incentives offered under the Special Economic Zone Act.