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Zim investment outflows up 50% to $33mln as FDI declines 24% in 2016

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Zim investment outflows up 50% to $33mln as FDI declines 24% in 2016

HARARE – The country’s investment inflows declined last year to $319 million compared to $421 million in the prior year, according to the World Investment Report released this afternoon by United Nations Commission for Trade and Development. However, Zimbabwe’s investment outflows surged 50 percent to $33 million during the same period.

Business has been complaining that the country’s indigenisation laws are an albatross to investment inflows into the country.

Last month, Confederation of Zimbabwe Industries past president, Busisa Moyo, told FinX that: “The outstanding clarifications on indigenisation continue to be a stumbling block to investors even though  President Robert Mugabe made the clarifications 12 months ago and mandated Government and Parliament to align these laws.

There is still a fair amount of ambiguity around indigenisation and there is a dire need to present a seamless revised Act in line with the latest thinking in Government base on His Excellency’s Clarification in April 2016. Most investors have adopted a wait-and-see attitude or proceeded to invest in neighbouring countries and are equally awaiting with great anticipation a revised Act”.

The report noted that foreign direct investment flows to Africa continued to decline in 2016, by three percent to $59 billion and that the inflows remain unevenly distributed, with five countries (Angola, Egypt, Nigeria, Ghana and Ethiopia) accounting for 57 percent of the total.

“In Southern Africa, FDI inflows fell by 18 percent to $21.2 billion, as flows declined in eight of the ten countries in the sub-region. In Angola, FDI flows declined by 11 percent to $14.4 billion as reinvested earnings shrank. South Africa, the economic powerhouse of the continent, continued to underperform, with FDI at a paltry $2.3 billion, up 31 percent from 2015’s record low, but still well below its past average”, the report says. Botswana also recorded a significant drop, from $679 million in 2015 to $10 million last year. Mozambique recorded FDI inflows of $3.09 billion and Zambia $469 million.

It was also highlighted in the report that multinational enterprises (MNEs) from developed economies remained the largest investors in Africa, although investors from developing economies (such as China, India, and South Africa) are increasingly active. It further opined that African MNEs were also prominent in buying assets located in Africa.

“Barclay’s (United Kingdom), for example, sold its 150-year-old affiliate in Egypt to Morocco’s Attijariwafa Bank for $500 million. Liquid Telecom, owned by telecommunication company Econet Wireless (Zimbabwe), bought the South African fixed-line operator Neotel (majority owned by India’s Tata Communications) for $430 million, in a deal that will create the continent’s biggest broadband network”, the report says.

In terms of increases of foreign ownership ceilings in stock exchanges the report noted that Zimbabwe expanded foreign ownership limits, allowing foreign investors to own up to 49 percent of companies listed on the Zimbabwe Stock Exchange.

FDI inflows to Africa are expected to increase in 2017, to about $65 billion, in view of modest oil price rises and a potential upturn in non-oil FDI. The report says that growing regional integration should foster Africa’s competitive global integration and encourage stronger FDI flows.

The report further finds that 79 percent of the newly adopted investment policy measures in 2016 were aimed at investment liberalisation and promotion, while only 19 percent introduced new restrictions or regulations.

“The new investment restrictions or regulations introduced in 2016 largely reflect concerns about foreign ownership of strategic industries, national security and the competitiveness of local producers. These concerns manifest themselves not only in legislation but also in administrative decisions of host countries, particularly in the context of merger controls related to foreign takeovers”, says the report.

Meanwhile, global FDI is expected to rise by 5 percent, to almost $1.8 trillion in 2017, after retreating by 2 percent to $1.75 trillion last year.

“The new, more optimistic projections for 2017 are attributed to higher economic growth expectations across major regions, a resumption of growth in trade and a recovery in corporate profits. The modest increase in FDI flows is expected to continue into 2018, taking flows to $1.85 trillion. However, this still puts FDI below the all-time peak of $1.9 trillion in 2007”, the report says.

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