ZIMBABWE requires an injection of new capital as the current liquidity crisis cannot be restored through financial engineering alone, British deputy ambassador to Zimbabwe Chris Brown has said.
BY TARISAI MANDIZHA BUSINESS REPORTER
Financial engineering entails the creation of new and improved financial products through repackaging of existing financial instruments.
Speaking at the Zimbabwe National Chamber of Commerce (ZNCC) economic symposium in Harare yesterday, Brown said Zimbabwe’s economy badly needed fresh capital injection.
“Liquidity, however, won’t be restored through financial engineering alone. Zimbabwe needs new money to come in and to encourage those in the country who are holding money, some outside the banking sector, to invest it,” Brown said.
He said if Zimbabwe had kept pace with African average economic growth since 1998, it would be producing three times the current output while an average workers would be earning three times their present income.
This year, Africa’s average economic growth stands at 4,8% and it is projected to increase to 5% in 2015.
Brown said Zimbabwe’s foreign direct investment of $400 million as of last year was disappointing as compared to Zambia’s $1 billion and Mozambique $5 billion. He said the reason for low investment in Zimbabwe was low investor confidence.
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“Confidence of foreign investors here is that the economics are such that they may produce output at competitive cost, and that in turn there will be the demand to buy it,” Brown said.
He added that he was negotiating with a British firm which was considering a several investments in Zimbabwe’s banking sector worth millions of dollars.
Brown said many investors were interested in recapitalising Zimbabwe’s rolling stock and investing in dramatic enhancement in electricity transmission.
“I see more interest now, most who visit Zimbabwe still decide, reluctantly, not to put their money here,” he said.
“This is not about trade fairs or branding. We know that what holds them back and actually, holds back many domestic investors are concerns about the business climate.”
Speaking at the same event, Industry and Commerce minister Mike Bimha said the government and the private sector were currently in discussions on how to address the economic challenges in the country.
“We are therefore looking forward to research findings that will proffer recommendations that will provide policymakers with pragmatic, action-oriented recommendations to address the economic challenges we face as a nation,” Bimha said.
ZNCC in conjunction with the Confederation of Zimbabwe Industries, Chamber of Mines of Zimbabwe, the Bankers’ Association of Zimbabwe and the Employers’ Confederation of Zimbabwe has conducted surveys and has presented seven economic research papers which are expected to address some of the economic challenges in Zimbabwe.
The seven research papers include labour laws in Zimbabwe: challenges and mitigation; the analysis of the Zimbabwe tax regime; import duty structure; and liquidity challenges in the country among many others.
“The seven papers that will be presented today all designed to make input to the public for investment climate reform are coming at a time when, according to the World Bank Doing Business Index Ranking of 2013, Zimbabwe was ranked no 172 out of 185,” Bimha said.
“This is reflective of the difficulties that investors and business in general encounter when they want to transact business in our country. In other words, our investment climate leaves a lot to be desired.”
Bimha said the commissioning of the seven economic researches had come at an opportune time when the country was implementing the new economic blueprint, Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAseet), to provide an enabling environment for sustainable economic empowerment.
He, however, said the country needed to put in place credible policy proposals and initiatives to address issues such as strengthening fiscal management, reducing financial sector vulnerabilities, improving the business climate to attract investment in a bid to enhance the country’s competitiveness and ensure sustained economic growth.
