Friday 23 April 2021
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newsday - 2 month ago

Editorial Comment:Policy inconsistencies scare away investors

ON Thursday, the Confederation of Zimbabwe Industries published its Manufacturing Sector Survey for 2020. The report was quite refreshing for a country long used to decades of economic meltdowns, industrial closures and capital flight. The report revealed that capacity utilisation increased to 47% during the period, from 36,4% in 2019, after firms were able to access cheaper foreign currency from the auction system introduced by the Reserve Bank of Zimbabwe in June. This was good news for a country that has gone through various crises and industrial decline. What government now needs is to roll out policies that will bolster economic recovery and encourage industrialisation. These policies must encourage long-term planning. It just needs to invest in policies that bring confidence, such as assuring investors that they can easily repatriate their dividends, or that currencies will not be changed overnight. Discordant policy announcements will surely drive away capital investments as they affect decision-making and make it difficult for companies to look ahead. When Zimbabwe adopted the multi-currency system for a decade, investor confidence returned because for a decade, businesses were able to make forecasts and sink capital with proper predictions of when they would begin to generate profits. President Emmerson Mnangagwa announced in November 2017 that the controversial Indigenisation and Economic Empowerment Act was history. He said he wanted to pursue policies that would woo back investors. But only last month, his government tried to sneak the law back on its statutes, leaving investors in a quandary. In 2019, government changed the currency again, bringing back the Zimbabwe dollar. Immediately, the crisis returned, with annual inflation rising, prices skyrocketing and value of the Zimbabwe dollar plummeting. A few months later, government allowed trade in United States dollars, bringing back investor confidence again. The switch from one currency to another doesn’t bode well for companies as it carries with it exchange losses and a general uncertainty about how to budget. There have been several changes in the past few months that have affected investors, particularly in the mining sector and this could spell doom in the long term.


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