HomeOpinion & AnalysisWill investor confidence ever change for the better?

Will investor confidence ever change for the better?

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THE one big question on the minds of the generality of the Zimbabwean citizenry in the period after elections is: Are things ever going to get better in the country?

Editorial

The answer is not as simple as assumed. Much depends on how the economy will perform.

Going into elections, the economy was plagued by numerous, unsustainable macroeconomic imbalances, notably the twin deficits; high and unstable inflation; the cash crises and foreign currency squeeze; a mounting government debt; growing economic informality and negative employment growth.

In urban areas, many wished for opposition victory in the elections, believing it to be the only answer to Zimbabwe’s economic woes. More precisely, they hoped a change of government would help restore business and investor confidence.

Those who hold this opinion are not entirely wrong, for their perspective has a strong historical basis in the untoward behaviour of successive Zanu PF governments under former President Robert Mugabe, which showed little regard for investors, passing policies that were unfriendly and at times openly hostile.

At this juncture, the next big question is: Would investor confidence still return to Zimbabwe if the Constitutional Court uphold the results of the 2018 elections?

One needs to understand the dynamics of investor confidence and review the country’s investment profile to have a fair understanding of what to expect.

Given the state of Zimbabwe’s capital markets, by investment reference is implicitly being made to foreign direct investment comprising equity capital and comprising portfolio inflows.

Typically, the mobilisation of capital from offshore capital markets depends on what is commonly known as investor confidence, a term which refers to how investors think and feel about both the business prospects of their venture and the business environment of the country hosting their enterprises.

Before anyone makes the decision to go into business, they will assess all dimensions of risk, especially political and country risk which they can’t control, to ensure that nothing goes wrong with their investment once made.

Investment risk in its multidimensional nature is a matter of perception or attitude.

Even investment indexes such as the Doing Business Survey and the Fraser Institute Annual Survey of Mining Companies are built on a conceptual and methodological framework based on the perceptions and opinions of the investors themselves.

What this means for Zimbabwe is that the country’s investment prospects do not necessarily depend on which government comes to power, but on how well the next government performs in changing the negative perceptions of the international investment community on Zimbabwe.

This involves taking positive steps in addressing all the salient issues about investment that investors are concerned with.

These include policy certainty; property rights; equitable taxation; competitive investment regulations; ease of legal dispute settlement mechanisms, commitment to democratic rule and rule of law, among others. A government which pulls off these reforms can turn the economy around.

In fact, investors are least worried about who’s in power. All they are about is whether the country presents great business opportunities and whether their businesses are free of threat.

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3 COMMENTS

  1. An investor comes in when he sees possibility for profit. The investment process is always accompanied by risk. If the investor sees that the risk is too high for him, he will go where perceived risks are at least manageable. In Zim there are high political risks. Property rights are not full recognized, court processes are always dubious, there is high corruption, there is risk of getting primitive diseases like cholera, the people are angry………etc etc. In short, as a country we can do better in issues pertaining to governance at all levels. An investor would rather invest in Botswana or Namibia than risk his capital and health in Zim. We need to put our house in order, particularly on the political sphere.

  2. Under Zanu govt, investors risk losing their businesses just like what happened during chaotic land redistribution. An investor setting up a business in Zim will be shocked, 5 to 10 yrs down the line to see his business grabbed by Zanu thugs. Mxnangaz, is waiting to see investors coming in large numbers and pounce on them after they have built their factories. Zanu pple are lazy, they wait to grab anything they did not work for. INVESTORS SHOULD THINK TWICE B4 THEY INVEST

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