Zimbabwe’s economy threatened by plunging foreign investment
Please note that we are not authorised to provide any investment advice. The content on this page is for information purposes only.
Foreign investment generated in Zimbabwe has fallen by more than fifty percent over the first six months of this year, according to the chief of the country’s central bank, John Mangudya. In comparison to the $165 million figure that was received throughout the same period in 2013, Zimbabwe only managed to gain $67m in investment this year. The policy considered by the government to return economic control to black Zimbabweans has been met by a degree of misunderstanding by foreign investors, according to Mangudya.
Foreign investment generated in Zimbabwe has fallen by more than fifty percent over the first six months of this year, according to the chief of the country’s central bank, John Mangudya. In comparison to the $165 million figure that was received throughout the same period in 2013, Zimbabwe only managed to gain $67m in investment this year. The policy considered by the government to return economic control to black Zimbabweans has been met by a degree of misunderstanding by foreign investors, according to Mangudya.
These type of irrational financial decisions made from the top are what is happening in France and America as well.
Table of Contents
Lack of Trust
A once prosperous nation of over thirteen million people, Zimbabwe has struggled since the 90-year-old president Mugabe defeated his rival, Morgan Tsvangiria in a vote that was marked by allegations of irregularities. The victory ended an uneasy sharing of power with the opposition, however foreign investors have been put off by concerns regarding corruption, and policies to force white-owned and foreign-owned businesses to hand 51% of their shares back to black Zimbabweans.
Mugabe considered a ‘look east’ strain of policy during the isolation and alienation that Zimbabwe experienced from the West during the early 2000s. Mugabe’s landslide victory, which promised that the indigenization policy would be kept as a primary campaign promise, has coincided with a significant slowdown of the overall economy. According to the central bank governor, the government needs to make the indigenization policy clearer by providing guidelines for investors.
An Unimpressive Economy
In the past year, hundreds of manufacturing companies have begun to close down, whilst Zimbabwe signed nine investment deals throughout China during the president’s visit. The newspaper run by the state for the country has said that investment sectors such as:
* Railways
* Roads
* Energy
* Agriculture
* Tourism
have been included in these deals, yet no numbers were given.
Attempts at Improving the Economy
In an attempt to improve and promote the use of ‘plastic’ money in the form of cards and credit, or debit cash, to deal with the issue of the liquidity crisis, the governor in Zimbabwe announced that the amount any individual may take out of the country at any given time has been reduced by 50%. The number has been taken from $10,000, down to $5,000.
Furthermore, the governor has also prompted the Zimbabwean government to issue leasehold agreements which are viable for periods of ninety nine years for new farmers, who have been given new land under the country’s somewhat controversial program for land reform. These leasehold agreements can be used so that the farmers may be allowed to secure new loans, whereas at the moment, these professionals only have non-transferable leaseholds, or letter guarantees.
These documents are not currently considered by banks to be sufficient security. Furthermore, the governor has suggested that the government continues to make payments to the farmers who have lost land, so that improvements may be made to farms.
