Foreign Direct Investment in Jeopardy

Foreign direct investment in Zimbabwe is in jeopardy after the majority of Zimplats shares were handed over to locals through the ongoing indigenisation policy.

What this experience has brought forth according to the  @dailynews.co.zw as Richard Honey, an investment principal with Investec Asset Management explains  that The government’s handling of the Zimplats case was a clear picture of Zimbabwe’s investment climate.

Important synergies should be formed such as those with European Union nations...Image courtesy of http://www.freedomsphoenix.com/Uploads/Graphics/002-0731162132-European-Union.jpg

“Zimplats came to invest in Zimbabwe at the most difficult time and they complied with what was required then…now they are required to do something else because the environment has changed,” said Honey.

The indigenization policy should take care not to overshadow any form of foreign direct investment

Regional strategic partnership key in economic growth

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Businesses in Zimbabwe are channeling their efforts to regional partnerships.  These partnerships enable businesses to fill in the gaps, through offering each other advice and interaction across borders.

The recent two day Zimbabwe-South Africa trade and investment business forum proved to be a success.  This forum and other such fora enhance business growth, by allaying fears of doing business across borders.  Zimbabwean business in the light of economic sanctions bedeviling the country can look elsewhere rather than lean on developed countries for economic support.

In this globalised world with markets in different countries influencing each other, it is necessary that economic ties be promoted.  The recent move of indigenisations has seen South African Implats index on the Johannesburg stock exchange plummet.  Therefore there is need to harness business contributions by businesses from regional countries to reduce the implications of exercises like indigenisation and increase employment for the indigenous people in the region.

Information Communication Technologies pivotal to business growth: The value of a website

Zimbabwe has seen increased use and participation of new information and communications technologies (ICT’s).  As a result local business people should be encouraged to invest in websites for wider visibility and better interaction with customers.  

Information and Communication Technology Minister Nelson Chamisa.  Image courtesy of http://www.swradioafrica.com/faces/chamisa270212.jpg

Websites help companies with publicity hence attracting customers and prospective business deals.  More competition is likely to lead to improved customer relationships, reinforced by better web management strategies.  Most businesses activities are now computerized hence companies need to stay upgraded technologically so as to fight off competition.

Mobile money would also continue to help combat falling revenues with potential extensions into mobile commerce goods and solutions. Information Communication Technologies allow for efficiency particularly where plastic money is concerned.  After the onset of multi-currency initiative in the country most frims felt they were being shortchanged because of the absence of smaller denominations of multicurrency. E-banking and E-commerce present business with solution to this problem.

 Businesses should embrace technology, in so doing businesses should invest in technology and put their businesses on Internet through websites which are informative and interactive.  Business questions can be resolved quickly at the touch of a button by viewing traffic on a given website.

Information technologies allow faster communication amongst business hence business growth in the long run.

Indigenisation to take over banks?

First farms, mines and now your money.  I believe that it is impossible to indigenise banks, plainly because the public’s money is kept there.

What would taking a stake of banks mean? Would it mean people will be indebted to certain individuals to run and fund their finances? Or does it mean that some clients of a given banking system would be allowed to have a stake such as the Zimplats 10-10-31 deal, with 10% workers shares, 10% for the community and 31% for the government indigenization programme, therefore ensuring that government does not impede regular operations and have ultimately a larger share.

Image courtesy of  http://www.chinadaily.com.cn/english/doc/2005-01/05/xin_350102051016742208539.jpg

Obviously one should be alarmed about this development as it brings forth a sense of déjà vu with concern over the resurfacing of cash shortages,  in recent times which have threatened to shut down banking operations in the country.  We saw a repeat of nightmarish scenes were some of the country’s major banks have threatened to shut down operations. 

Mostly foreign owned banks like Barclays Bank Zimbabwe Limited and Standard Chartered Bank Zimbabwe Limited managed to stay afloat.  And it is this same banking machinery that we need to grow our economy in the long

Tar-iffic or is it? : Why importation tariffs are set to ruin economic growth

image courtesy of http://perkinsvehiclecarriers.webs.com/flag_Zimbabwe.gif

The recent volatility in import tariff prices is a cause for concern. It has sent business into a spiral of confusion, and the Ministry of Finance should move to rectify the issue.

In a normal situation tariffs are a means by which governments should raise revenue. Arguably foreign products entering through the country’s borders have to undergo this measure.

Tariffs offer the government the reassurance that local products are not losing out to foreign products.

The dilly dallying by the Finance Ministry on import tariffs has harmed the ordinary business. The Minister has suddenly developed a system of trial and error with regards to import duty.

This inconsistency affects businesses and firms in the country. The constant imposition and reversals of duty on clothing, shoes and some foodstuffs affects not only the ordinary person but business at large in the short term at a time when business needs to grow from the economic downturn.

Although it is an honest attempt to try and stamp corruption and protect local business by creating space for local business within Zimbabwe and discouraging ‘free’ trading by foreign firms

Economic sanctions have also crippled Zimbabwe business because of too much political involvement in the economy. But, if all the goods from foreign companies are banned there will be no goods on most of our shelves.



Industries are already performing at below capacity, improtation of goods alows some self emplyed individuals to maintain an income to support thire families.Either way importation of these goods is a necessary evil.

For now honourable Minister Tendai Biti should wait for Zimbabwean business to get back on their feet and increase tariffs when need arises.

Diversification way to go for Zimbabwe business

One of the most sussecful diversified brands Kingdom Meikles Africa Limited

For Zimbabwe business diversifying in several sectors of the economy helps manage business risk when one business unit fails the other unit might be performing at capacity and uplift the underperforming sectors.

Companies like Kingdom Meikles Africa have found ways to synergise their business operations with others that are of a completely different nature.

Diversification is a technique t6aht reduces risk by allocating investments among various financial instruments, industries and other catergories. It aims to maximize return by investing in different areas that would each react differently to the same event. www. investopedia.com

A new player in the telecommunications sector has been announced this week.  Broadcam has since joined giants like Telecel, NetOne and Econet to become the fourth network in the country.  The company already owns other businesses like MARS, Suremed Health Insurance, hospitals, Spiritage and eTranzact.  In post inflationary times Zimbabweans or Zimbabwean Business should learn from international moguls like Richard Branson whose interests range across owning Virgin airline business to gym to even a visionary to allow for space travel. 
www.islandconnections.com/edit/branson.htm 

The Virgin conglomerate encompasses balloon flights, motorcycles, airlines, trains, books, a bridal emporium, cars, cinemas, cosmetics, credit cards, drinks, gas and electricity, limousines, mega-retail stores, finance, Internet service provider and digital radio broadcasting.

Diversification also maintains a company’s competitive edge in all sectors of the economy. 
This may only be achieved through an innovative mind and persistence.
Image courtesy of   http://www.commalliance.co.zw/images/meikles.png

Bank lending in Zimbabwe

According to the Newsday, if last week’s announcement by Reserve bank governor Gideon Gono has anything to go by banks participating in interbank lending will receive a major boost in their coffers soon.  

Gono says ‘banking institutions had committed themselves to repatriate $200 million for on-lending to the productive sectors of the economy after they were directed to maintain a maximum of 25% of their foreign currency account balances in offshore nostro accounts’.


@NewsDayZimbabwe

Our local banks have been hit by a wave of cash shortages with has resulted in the resurfacing of meandering queues over major cities in Zimbabwe particularly in Harare.  The solution by the Reserve bank governor is significant to a re-boost of the banking sector.  So how different is Interbank lending to bank to client lending.

Reserve Bank Governo Gideon GonoImage courtesy of 

http://img.thezimbabwean.co.uk/310_201_Gono.jpg

Well for starters bank lend to each other in large volumes at low cost for periods ranging from overnight to a few months.  These interbank loans are the marginal source of funds for many banks. 
Even for banks that are mostly funded by deposits, interbank loans may be a critical source of additional funds.

Cash shortage nightmares...Image courtsey of  

http://newsimg.bbc.co.uk/media/images/41999000/jpg/_41999112_queue_b203_ap.jpg 

In other words banks are seen as low risk borrowers than customers because banks are seen as low‐risk borrowers.

 The occurrence of interbank lending is a major highlight of how liquid a bank becomes at a particular point in time.

 In Zimbabwe this revelation will not only aid banks in receiving much needed cash but boost confidence in banks once again.

 Interbank lending resolves temporary imbalances of supply and demand of cash in the country.

Where most Zimbabweans are borrowing loans from banks like BanAbc to build houses and purchase vehicles, an imbalance in cash results because on any particular day, some banks receive more payments than expected, while others receive less than expected. 

Some banks face an unexpected demand for loans while other banks experience the opposite pattern.   Lending then comes to the aid of banks to offset these imbalances.

Similarly if a bank is too liquid the extra cash holdings waste resources that could be lent profitably elsewhere.  

In Zimbabwe this revelation will not only aid banks in receiving much needed cash but will ensure banks support each other in times of need.