Zimbabwean President Robert Mugabe’s failure to address indigenisation and uncertainty around economic policies in the state of the nation address he delivered on 25 August are the country’s biggest threats to foreign direct investment.
“Indigenisation and uncertainty are the biggest threats to foreign direct investment which is key in any efforts to revive the economy and prop up economic activity. But this was not fully addressed (in his address) and the signal is that we are in for a long winter period,” said an executive at a foreign-owned company. Mugabe called for reforms at government-owned companies in his first state of the nation address in eight years. Analysts had said ahead of the address Mugabe delivered in parliament that austerity, belt-tightening measures and policy pronouncements were needed to save the ailing economy.
Mugabe skirted controversial economic issues such as the indigenisation policy and the slowing down of foreign direct investment. He did however say that his government would seek to improve the ease of doing business in the country. “We will pursue policies that will improve the business environment. We need an urgent overhaul of the Companies Act and other legislations that have hindered the ease of doing business,” Mugabe told a joint seating of the country’s parliament and senate houses. He outlined measures to revitalise the economy such as creating special economic zones, pursuing anti-corruption policies, modernising labour laws, restricting the financial services sector and unlocking the potential of small-scale companies.
Mugabe also said the government would have to focus on infrastructure investments in energy, water and information and communications technology as well as value addition and mineral beneficiation. He said corporate governance in public entities should be a focus area, adding that the level of compliance has fallen below acceptable levels.
Mugabe also castigated management at government institutions for awarding themselves extravagant salaries and associated benefits, which he said borders on obscenity and greed. Focus would also be on “encouraging private sector investment”. However, executives in Zimbabwe said on Tuesday afternoon that Mugabe did not address the biggest threat to foreign investments around the indigenisation policy.
Mugabe said Zimbabwe’s current economic performance reflects growth in agriculture, mining, construction, tourism and telecommunications although Finance Minister Patrick Chinamasa had cut the country’s economic growth outlook for 2015 from 3.2% to around 1%. The economy is also under threat from weakening currencies in major trade partners such as China and South Africa.
The ageing Zimbabwean leader blamed drought conditions for a poor crop season, which saw production go down in 2014. However, critics say there has been little support for the sector, whose productivity tumbled after the farm invasions in 2000. “Mining in 2015 exhibits stronger growth despite declining global commodity prices. The government will maintain a policy thrust on beneficiation,” said Mugabe. He also talked of finalising the national diaspora policy, relaxation of visa regimes, overhaul of the Companies Act, and the promotion of an open skies policy to promote tourism.