Zimbabwe tries to reassure foreign business on investment potential
Salisbury, Zimbabwe — Standing before the packed green benches of the Zimbabwe Parliament, Finance Minister Enos Nkala outlined a series of budget measures which he said went "as far as is possible at present to meet the demands of foreign investors."
Though largely a restatement of existing practices, Senator Nkala's message was clearly aimed at countering foreign investors' uncertainty about putting money into this new southern African nation.
In the three months since Zimbabwe become independent, few foreign companies have made firm commitments to invest here.
By one reckoning, only about $1.6 million in new investment has occurred since independence. Some of that total may represent profits of foreign corporations which accumulated here during 14 years of economic sanctions and tight foreign-exchange controls.
One diplomat here says that a businessman from his home country, after a recent visit to this mineral-rich country, pronounced it "an entrepreneur's dream," with vast potential for mining, manufacturing, service, and transportation industries.
But why hasn't the dream become reality?
Part of the reluctance of foreign investors can be traced back to fears that Zimbabwean Prime Minister Robert Mugabe will eventually press for large-scale nationalization of private interests here.
Yet, one local analyst notes that "Mugabe has said a number of times that he's not going to nationalize interests in this country."
Another businessman notes, however, that Mr. Mugabe adds a caveat to that pledge: "He always adds: 'At this time' to the end," the businessman complains.
Some observers think that qualifier may be aimed at mollifying some of the more extreme elements in the ruling Zimbabwe African National Union -- Patriotic Front Party. Moreover, they say the fledgling government here is in need of some quiet encouragement and guidance from the private sector in formulating its economic policies.
"They're looking to us to give it [advice]," says one leading local businessman, adding, "They wouldn't admit it, of course. Our task is to remain unseen."
Some analysts say foreign investors are being much too reticent about approaching the Mugabe government.
"I sense hesitance on the part of some of the less experienced international businessmen," a Western diplomat says.
"They want everything spelled out in black and white. They're not comfortable with negotiating with the government."
Some businessmen who have come here to sound out the Mugabe government have found officials helpful and encouraging.
"We have had nothing but complete and full cooperation from the government," says Wayne Fredericks, a Ford Motor Company executive and former US State Department official.
Under the investment guidelines announced by Finance Minister Nkala, a foreign company investing in Zimbabwe may withdraw capital invested here after two years. The amount of profits exported during that period would be deducted from the total. But the government would also allow companies to withdraw more than the original investment (if, for example, they sold a business at a profit) , provided it is over a six-year period.
Most companies will be permitted to send only 50 percent of after-tax profits outside the country, but that limitation is not expected to affect many companies here. (A notable exception might be high-profit mining companies.)
Even though foreign investment in Zimbabwe has so far been sluggish, many officials say there is not yet cause for concern.
"It's only three months since independence. I think it's still to early," says one Western diplomatic source.
Future months may well see some firm American investments in Zimbabwe. The Union Carbide Corporation is known to be exploring expansion of its mining interests here, as are other mineral companies. Two American banks -- Bank of America and Citibank -- are reportedly contemplating takeovers that would give them a share of the Zimbabwe banking market. And some American interests are said to be exploring the possibility of exporting sugar from this country.
Mr. Fredericks of Ford says the sooner American investment dollars come into Zimbabwe, the better.
"This is a tremendous success story," he says.
"One would hope for a prompt and effective response from the American business community, and a prompt and effective response from the US government in areas such as aid and [refugee] resettlement, where private business involvement is inappropriate."
"And the key word," he adds, "is prompt."