We don’t quite know what Zimbabwe’s gross domestic product (GDP) was in 2023 yet. Official estimates say $36bn, up from $27.4bn in 2022, the Vice President said it was $40bn in the 10 months to October and World Economics say if we factor in the informal market it was around $66bn.
Whatever the actual case, I mentioned those figures so that we can compare them to the investment Zimbabwe was able to pull in. According to the Zimbabwe Investment and Development Agency (ZIDA), the country attracted investments worth $8bn in 2023.
That’s 22% of GDP if we go by official estimates of GDP. Needless to say, that’s a big deal. Zimbabwe has had struggles attracting investment and this $8bn is both surprising and encouraging.
Economists have long theorised that investment, foreign direct investment (FDI) especially, leads to economic growth. It’s common sense really, if more money is invested into businesses, machinery, systems and the like in an economy, it is reasonable to expect increased output.
However, some studies have shown that economic growth does not follow FDI, rather FDI comes when there is economic growth. If you think about it, that makes sense. Investors need to see some progress before they commit.
That raises a few questions – the first is obviously, can we trust the $8bn figure? Then, if $8bn is accurate, what has changed to lead to this turn in fortunes? How has the Zimbabwean economy fared to attract investors like this?
$8bn
First off, not all the $8bn is FDI, some of it is from local investors.
For context, ZIDA issued 246 licences to first-time applicants who wanted to invest in the country in 2022. These applicants injected $2.4bn.
In fact, in just Q3 2023 alone, the total projected investment value licensed by ZIDA was $3.4bn. A full billion more than we attracted in the whole of 2022. Impressive stuff.
As a result, ZIDA set a target of $4bn in 2023. Said ZIDA CEO,
In 2023, we set out a target of US$4 billion and FDIs which is our main preoccupation was US$1,5 billion and we were also targeting domestic investments coming through ZIDA of US$500 million from companies registered under ZIDA.
As you can see, it really is crazy that we managed to double that and attract $8bn.
One wonders though, should we not be feeling the effects of $8bn pumped into a $36bn economy? We should, so how come $8bn did not make a dent? The ZIDA CEO explains why,
When we say US$8 billion people are going to ask where is that money, but at the stage of an investor coming in what we can only record is their commitment, you cannot go beyond that.
Ah, it all comes crashing down. When ZIDA told us the country had attracted $8bn, who would have imagined that they were talking about commitments.
I love the work that ZIDA is doing, we don’t want the “Keep your England” kind of attitude and so actively wooing investors as ZIDA does is appreciated. However, commitments ≠ investment.
I’m sorry, on a personal level I have not followed through on so many commitments it’s embarrassing. Investors are human too, they do the same. Especially if we consider that some investors may be taking their time because they are still evaluating their options.
Simply put, counting $8bn is counting chickens before they are hatched. I propose we count our eggs and seek out Omelette recipes, it’s a little too immature to be Googling chicken recipes.
$15bn
Well, ZIDA is well and truly counting the $8bn as chickens. ZIDA is targeting a whopping $15bn in investments in 2024. The CEO says that’s achievable.
My friend, we are coming from $2.4bn in 2022 to $15bn two years later. Incidentally, $15bn is the same amount that disappeared once in this country.
That would be some amazing exponential growth. I’m just afraid we might be getting a little too excited here.
I don’t doubt that there is increased interest from investors, I just think we should talk about amounts actually invested, not promises.
ZIDA engaged with more than 3000 potential investors and I hope they engage more. If there is money to be made, investors won’t need persuading.
That said, I still think the $15bn might be a little too unrealistic and getting that much even if it’s just ‘commitments’ would be a huge deal.
Attraction
There are many considerations before an investor takes the plunge. How much do I stand to make? How safe is my investment? Is the economy stable? Will I be able to take my profits out? And so on.
Zimbabwe is a tricky one for many but I guess that also means there is a huge opportunity for great profit since most investors will skip on it.
ZIDA cannot do much about most of the questions I posed above but they have done what they can to make the process smoother for investors.
We have often complained that for as much as Zimbabwe is open for business, it’s still quite a faff to set up a business, which is then taxed to hell and back.
ZIDA has rolled out the red carpet for investors and assists them in navigating the Zimbabwean govt offices. They say they have managed to significantly lessen the time it takes to set up and commence operations for investors.
When we deployed our system on the 1st of April, we were able to bring down the time it takes for a client to start the application process to them getting the licence from upwards of 21 days, we are now down to 48 hours and in that process we will register your company, open a bank account for you and we can even register you for tax
It’s ridiculous that it took upwards of 21 days and still does for those that don’t go through ZIDA, something that needs to change. However, at least ZIDA is assisting in that regard.
ZIDA also launched matchmaking platforms that it believes will be instrumental in attracting $15bn in 2024. These are not Tinder competitors dear single Zimbo, so sorry to disappoint. The platforms match investors to opportunities.
The platforms deserve their own article and we shall discuss that in the next one.
For now, we can celebrate the fact that we at least had investors interested enough to commit to invest $8bn in the country. We may see a fraction of that actually invested but it’s encouraging to see that kind of interest nonetheless.
Who knows, we might see $15bn this year like ZIDA predicts.-techzim