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Changing business opportunities, challenges in Zimbabwe highlighted

24th April 2024

By: Schalk Burger

Creamer Media Senior Deputy Editor

     

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Zimbabwe is undergoing change and aims to attract more companies to do business in the country, but risks and challenges remain for businesses aiming to capitalise on the opportunities in the country.

These were some of the views raised by Zimbabwean and international representatives during an information session on 'Doing business in Zimbabwe' hosted by the Southern African-German Chamber of Commerce and Industry this week.

Zimbabwe had started dialogues to deal with some of its international perception issues, including compensation for land reforms, addressing its debt default and honouring its bilateral business promotion and protection agreements, said Ambassador of Germany to Zimbabwe Udo Volz.

"Discussions started in 2021 with informal consultations to see how Zimbabwe can get out of its credit default to access international lending. Germany, as one of the largest creditors, was part of the discussions.

"This led to a process of structured dialogue that officially started in December 2022, facilitated by [development finance institution] African Development Bank president Dr Akinwumi Adesina and former Mozambique President Joaquim Chissano," he said.

The Zimbabwe elections in 2023 were seen as a potential milestone, although there were some shortcomings, and it was up to the government to find a way forward in terms of electoral reforms, he said.

Further, investment in agriculture was constrained as there was uncertainty as to who owned the land, and for how long use was permitted. However, tourism in Zimbabwe had picked up following the Covid-19 pandemic, Volz noted.

The introduction of a new currency, the Zimbabwe Gold, or ZiG, may help to ameliorate some of the inflation challenges the country has faced in the past with the dual Zimbabwe dollar and US dollar system. Access to foreign exchange has also been a persistent problem.

"It is crucial to note that, if expenditure is not restrained in the budget, then the Zimbabwe Gold currency will face similar rates of inflation as the other currencies," he said.

However, Zimbabwe was focused on growing its economy and improving the livelihoods of its people, and there were many significant opportunities in agriculture, mining and the green economy, said Ambassador of Zimbabwe to South Africa David Hamadziripi.

"Our most immediate and current challenge is climate change. The 2023/24 summer cropping season was disastrous owing to the El Niño-linked drought. On 3 April, our President Emmerson Mnangagwa asked for international support to mitigate the effects of the drought.

"While we need food in the short term, we must mitigate the impact of climate change in the medium to long term," he said.

As part of initiatives to develop its agriculture and mitigate climate impacts on food, the country has formed the Irrigation Development Alliance, which targets increasing land under irrigation to 350 000 ha by 2025.

"The country has invited the private sector to participate in this initiative to ensure the risks are shared among key stakeholders, including the government, farmers and financial institutions," said Hamadziripi.

"Zimbabwe also offers a platform for climate mitigation and the green economy, as it has the required minerals, including lithium, chrome, nickel and platinum.

"We also have an educated workforce, and we aim to stimulate investment in mining and minerals processing, as well as value additive manufacturing, such as by encouraging the building of lithium batteries," he said.

Similarly, the country aims to promote carbon trading, renewable energy investments and the use of green finances for investments with climate action targets.

Zimbabwe was also continuously engaging in resolving its international relations. It was also engaged with multilateral partners to resolve its external debt challenges, he added.

The country's economic policy and strategy are centred on its Vision 2030 policy document. Under this, Zimbabwe aims to achieve a stable macroeconomic environment, inclusive and equitable growth, modernised infrastructure, and energy, information and communication technology, and agricultural, transformations.

It also aimed to enhance services provided, the value addition of raw materials and environmental sustainability, said Hamadziripi.

"We believe the implementation of Vision 2030 offers opportunities for domestic and foreign investors to exploit," he said.

Meanwhile, a key benefit of doing business in Zimbabwe was that it had one of the most literate populations in Africa, and this meant it was easy to find skilled labour and that businesses dealt with people who were literate when doing business in the country, said export promotion organisation Zimtrade CEO Allan Majuru.

Between 2022 and 2023, the country recorded growth in exports and imports, and it wants to reduce its trade imbalances by exporting more.

However, a significant portion of the imports were equipment and machinery, which showed that there were signs of activity in the economy, he added.

"One of the challenges is that, if we export more raw materials, we are also exporting value and jobs out of the country. This is why we are highlighting the prospects in value addition of minerals, as well as in clothing and textiles," he said.

"We also want to restore Austria, Germany and Switzerland to among our top ten trade nations, and there are significant opportunities to scale up the current exports and imports that we currently have with these nations," he noted.

Further, Majuru highlighted opportunities to import machinery to support mining and agriculture, and the significant potential to increase the amount of organic food grown and exported to European markets.

"About 85% to 90% of our organic food exports are to Europe, and there is significant scope for joint ventures to grow horticultural value chains," he said.

MINING LAWS
There are issues, but also opportunities, in Zimbabwe. Legal changes had happened, and others were likely to be implemented, and these would affect doing business in Zimbabwe, said law firm NSDV Law Johannesburg senior construction and mining lawyer Methembeni Moyo.

"However, it takes time to realise returns on investments from mining and construction projects, and the future of these industries hinges on fiscal policy and stability," he said.

The Mines and Minerals Amendment Bill has been sent through public consultations and will overhaul the existing Act and mining regulations once it is signed into law.

"We hope it will be enacted within a year or two, as it can transform Zimbabwean mining and also help the country to establish itself as a contributor to international climate actions."

Under the proposed amendments, mines will be required to remit a certain portion of their revenue for a local fund, which will be used for mine rehabilitation, accidents and environmental damage incidents.

Mining rights will be proportional to the financial contribution to the fund. This is intended to ensure that mines have a local accountability mechanism.

Further, the amendment Bill defined strategic minerals which were critical minerals, and mines for these minerals would need to secure an agreement with the government upfront to develop such projects. There would also be a free State carry in these projects, said Moyo.

The country also aims to introduce a cadastral system, similar to the successful one implemented in Namibia.

The amendment Bill also explicitly named the Paris Climate Agreement as part of its aim to ensure environmental sustainability of mining, and mines would have to meet carbon emissions and environmental targets, he noted.

Zimbabwe had more than 40 minerals, including nickel, copper, platinum-group metals and lithium, said Southern African-German Chamber of Commerce and Industry representative Bernd Doppelfeld.

"There are more than 800 mines in the country with a revenue capacity of about $8-billion a year, excluding the about 50 000 artisanal mines. Revenue from beneficiation can contribute a further $5.5-billion a year, and this is why the country does not only want to export ores, and generate more revenue, jobs and opportunities," he said.

However, in terms of infrastructure, the country had significant deficits, with frequent electricity outages. Efforts had been made in this regard, but they were not satisfactory. Most companies had to revert to generators to support their operations and this added costs and had led to high investment in solar systems, he highlighted.

"The national electricity provider is struggling to cope with demand and private power producers are gaining more importance. There are opportunities for foreign companies, including in hydro and solar power plants," he said.

Water was also a problem, and most companies got water from a borehole. Additionally, while there were fibre optic and Internet services, communications were not yet satisfactory, he added.

Further, the rail network was basically nonexistent, and transport was mainly by roads and there was lots of congestion. Road construction was underway, including making the Harare road a dual carriage. Also, the Harare to Chimburu road was being upgraded and, once it was complete, there would be a continuous through-carriageway from Zambia to South Africa, Doppelfeld said.

Zimbabwe did, however, have a solid industrial base and the capacity used in industries was increasing and had reached 60%. Most industrial areas in the country remained in good shape and demonstrated extreme resilience even throughout the pandemic-impacted periods, he highlighted.

"Despite all the challenges, I believe Zimbabwe will take off owing to its human capital. Its people are well-educated, have a good work ethic and are able to manage crises. Companies entering the country will be able to find good business partners and clients," he said.

However, the government would have to make an effort to build trust and confidence. The government must change the perception of the investment climate and must be prepared to assist investors to drive development, he concluded.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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