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

Image courtesy of http://www.thezimbabwemail.com/templates/xhtml/add_ons/thumb.php?src=http://www.thezimbabwemail.com/files/mugabe_zuma_762899081.jpg&h=300&w=336&q=100&zc=1

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.

Econet moves into banks?

No Econet has not invaded any bank! But this week Econet will acquire a 49% stake of TN bank as it progresses to consolidate its ownership and spread its brand across all sectors of the economy.

Image courtesy of 

http://www.euromoneyconferences.com/Assets/8/Partners/Sponsor%20-%20Africa/TN%20HOLDINGS%20LOGO_new.gif

The largest telcommunications producer in Zimbabwe sought partnership with the bank to synergize its EcoCash project further. @Business digest

According to @Business Digest. TN Bank was actively involved in the registration of EcoCash clients.

For any businessperson Econet’s Strive Masiyiwa is trying to diversify the Econet brand. 

The Econet brand already performing well on the stock market will encourage Econet customers to identify with the bank's portofolio. It is also believed the investment would reposition TN Bank among the top four banks in the country.

Blood is thicker than water

In a move to end investor -drought, the Zimbabwean business community is turning to the aid of neighbouring South Africa to provide much needed investment for the country.

There is a need to engage our African brothers in Sub-Saharan Africa in furnishing our economy. A high powered delegation this week addresses members of the South African business community on available opportunities in the country.  A  Zimbabwe Investor and Trade conference will provide the two countries with a platform to share notes on business prospects.

Countries such as South Africa which have strong bilateral relations with Zimbabwe provide an easy alternative for investors. 

Image courtesy of http://www.fine-african-art.com/infotonga/basketmaker.jpg

This scouting exercise comes at a time when South African firms like Implats are seeking to protect their stake in Zimplats from being engulfed by the Indigenisation law in Zimbabwe.

Apart from the European Union and United States, Zimbabwe has been relying on South Africa to provide them with  investor support for years particularly in the mining industry.

Zimbabwe: More donor funded than investor equipped?

Looking at a recent article in The Newsday of 1 March 20I2 on how Zimbabwe is one of five countries set to benefit from $1million Indian fund to train and empower craftswomen in Africa.

 It is evident that over the past decade how the country seems to be highly reliant on donor funded programmes than investor oriented approaches.  This has come to light  with the lack of confidence amongst businesspersons.

 Most talented craftsmen and women rely on mostly foreign agents to get their wares sold to foreign markets instead of forming partnerships with other Zimbabweans’ in the Diaspora.

 It is time for Zimbabweans particularly in the Diaspora to invest in their own country.  Strive Masiyiwa, the telecommunications magnet based in South Africa is taking initiatives in improving the lives of other ordinary Zimbabweans in the form of the  Joshua Mqabuko scholarship.  

Telecomm magnet Strive Masiyiwa actively giving back...

Image courtesy of

http://blogs-images.forbes.com/mfonobongnsehe/files/2012/01/Masiyiwa-300x200.jpg

 The introduction of the scholarship has harnessed the educational abilities of Zimbabwean students by providing them with a platform to advance their studies. 

Most  Zimbabweans in the diaspora could form partnerships with indigenous people in terms of financing which will result in a home grown solution for our problems.

Is there light at the end of the tunnel?

There have been some revelations that an Indian steel making firm, Essar Africa Holdings Limited (EAHL) is set to come to the rescue of power utility ZESA. The firm is set to construct  and operate a 600 Megawatt (MW) station to generate and supply electricity across Zimbabwe. The generation station by EAHL will be situated in the Sinamatela area, about 2kilometres from the Hwange airstrip.

Image courtesy of https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhONNROjpiUcUK1ueJSSglX2hMdmx8CnJItVVg1XsqJK3YaHe2yxr6p8Z66X75W8gxF7ecvbZ33Ma9YxUu6YQLNkWY7hpr7er27wpom9EnsxJKKp2nvKgDiIiTeHyn9qK2skI_ZMSnHXdiD/s320/Essar+Africa+Holdings+Limited.jpeg

This move will reflect positively on business as most companies are aching from losses resulting from absence of power. Industrial companies in most of Bulawayo are operating at 40% capacity, with their capacity utilisation deficit standing at a staggering 60%. 

Electricity hick ups have been a constant occurrence in most households and businesses.  Most companies have been running at an expense channeling their much needed revenue towards buying high capacity generators and fuel to run these generators at the expense of the organisations. 

It is my hope that an eventual growth in the power sector due to privatisation will enhance economic growth particularly in the industrial sector which had to retrench several of its employees. 

In just a few easy steps

Sanctions or no sanctions economic reform can be achieved. Zimbabwe formerly Rhodesia performed quite well under a sanctioned environment. It was self sufficient and largely avoided the impact of the embargo.  Self sustainability this time could enhance the lives of the majority rather than a few minorities.

This week, I took the liberty to explore various steps in which the Zimbabwean economy could take on an eventual recovery scheme:

Image courtesy of  http://www.zimeye.org/wp-content/live_images/2010/07/tendai-biti.jpg

Firstly it is imperative that the country’s leaders reach consensus on important political matters. From this realisation, credit lines will open up and debt may be cancelled to encourage the state’s fiscus to grow.

Secondly, a moral boost for the people directly affected by the economy would be significant. To benefit from ‘within’ government policies should be ‘without’ oriented. Investment opportunities in natural resources should be increased as diamonds revenue is expected to rack in excess of US$600million annually.

 A complete overhaul of the financial sector is needed, with the employment of the Diasporan community which for over a decade acquired immense skill in all sectors of the economy in countries such as South Africa and Australia. 

Salaries which have been at the height of disputes between the Finance Ministry and civil service will increase thereby motivating the populace.

By then the economy will be following in the footsteps of market driven economies like Canada.

All this can take place in a matter of 5years if the leadership adopts all available means to ensure all citizens are satisfied within and without Zimbabwe’s borders.

Indigenisation stunt poses serious ramifications for Zim

A series of articles have been written about the issue of Indigenisation but what really is indigenisation.  In layman terms, indigenisation refers to the ownership of property by people native to a certain country.  The indigenisation has sparked numerous debates in the country centered on whether it benefits  the ordinary man on the street or whether it is just a mere machination by political fat cats to increase their coffers.   From my own understanding the Indigenisation process may harm the economy in much the same way as the land reform process spiralled the economy out of its bread basket status into a basket case in a matter of a few years.



The face of land reform...

Economists present the argument that the economy is at a critical stage of growth; it will hurt the economy to lose the little investment offered by countries such as South Africa in the form of Impala Platinum (Implats) - which owns 87% of Zimplats practical. It would virtually destroy the country's last remaining chance of staging a worthwhile economic recovery.  The country cannot on it’s own finance recovery and development. The insistence on majority local ownership will reduce the availability of capital while raising its cost. It will mean less investment and slower growth. Another debate, would I as an individual have enough buying power to access shares from such entities.  The ordinary individual in this context needs to be redefined because of the social and political dynamics behind this so called “indigenization”.

Under the Zimbabwe's indigenisation law, from the regulations  first published in February 2010 stipulate that any foreign-owned business with net assets of more than $500,000 must divest 51 per cent of its shares to indigenous Zimbabweans within a five year period. An indigenous Zimbabwean is defined as persons who suffered under colonial-era racial discrimination and their children born after independence in 1980 – which in practice means mainly black Zimbabweans. Those include reneging on contracts previously struck with Implats and grabbing 51% of the assets of all the mining companies operating in the country.

 

International airlines fizzle out Air Zimbabwe?

The competitive airline set to grace Zimbabwean skies...

One of the world’s leading airlines Emirates recently launched its inaugural flight to Zimbabwe via Zambia on the 1^st of February 2012.  A first for Zimbabwe, Emirates will fly 5 times a week. Although this has sparked renewed hope for horticultural producers and business people alike, our local airline continues to bleed. 

In recent times Air Zimbabwe has been experiencing industrial action by pilots, debilitating air traffic control equipment, not to mention the ageing fleet of aircraft.  According to sources Air Zimbabwe is in the process of near liquidation with most of its assets undergoing Judicial Management with debt in excess of USD 140million. 

The airline will be plying the Dubai-Harare route.  Such trends have also seen Zimbabwe losing the Johannesburg-Victoria Falls route to SAA.  It has been revealed that Emirates employs 87 Zimbabweans worldwide of probably foreign educated universities which leave several local trained pilots and airline staff in the doldrums.  It appears the adoption of more foreign airlines at the expense of our own local airline industry.

International flights has opened up the country to new markets and increased the possibility of growth within the tourism industry.  Unfortunately the ordinary Zimbabwean is deprived of a wholly Zimbabwean national carrier.