Zimpapers Logo

Christopher Farai Charamba Correspondent

I recently stumbled upon the Zimbabwe National Competitiveness Report (NCR) for 2015, and it made for interesting and harrowing reading. Compiled by the National Economic Consultative Forum (NECF), the NCR, which had contributions from persons at various institutions such as the Ministry of Industry and Commerce, the Reserve Bank, the Ministry of Agriculture, the University of Zimbabwe, assesses how competitive Zimbabwe is in comparison to the region and internationally.

To quote the NECF directly, “The report benchmarks the country’s performance on carefully selected indicators globally and against selected comparator country economies. The assessment uses current (or as current as possible) and trend data. It includes the national side of the story by including current, locally available information and it uses dozens of data sources; hence not just Global Competitive Report (GCR) and Doing Business (DB) data.”

Basically, the NCR explains what the issues are with Zimbabwe and why we are struggling to compete with neighbouring countries. Looking through the report, there were glaring policy issues which Government needs to urgently address as these negatively affect Zimbabwe’s competitiveness and access to much needed investment, both local and foreign.

The issues are as follows; if one wants to build a factory for a $100 million project in Zimbabwe they will have to pay on average 1,5 percent of the project cost to get Environmental Management Authority (EMA) clearance. That translates to $1,5 million for one clearance certificate.

The same environmental clearance costs $150 000 in neighbouring Zambia, in South Africa, R10 000 and in Mozambique 0,2 percent of the cost, so $200 000. Why then must Zimbabwe charge 10 times for the same certificate what our neighbours Zambia and Mozambique are charging?

One also wonders where all this money that EMA receives goes to. If one were to base their assumption on the trend of other State institutions, it is likely there are irregularities in the books of EMA, but I digress.

Another revelation from the NCR is that the fixed water charge in Zimbabwe is $5 while in Zambia it is only $1. This means that an individual in Zimbabwe pays five times as much for fixed water as their Zambian counterpart. Water which for most has become a scarce resource due to the frequent water shortages particularly in Harare?

And it gets more worrying for industrial users in Harare where there is an $80 fixed charge for water while in Lusaka, Zambia the fixed charge is $2. What justifies the fixed charge for water of 40 times in Harare what it is in Lusaka, a city 495km away?

If one were a businessman looking to set up in Zimbabwe or Zambia, based on the environmental fee and fixed charge for water, Lusaka certainly looks more attractive than Harare.

In fact, due to the unreliability of water in the capital, one would perhaps have to make an alternative plan such as buying water or drilling a well or borehole.

When it comes to the importation of a container into the country, the NCR shows that it costs on average $3 800 to do so, this compared to an average of $2 100 for the rest of Africa. Again our neighbours in Zambia, which is every bit as landlocked as Zimbabwe, it is about 25 percent cheaper at $2 800 per container.

This is worrying particularly considering how much the manufacturing industry has suffered over the past few years and if it is to pick up then new equipment would need to be brought into the country. The cost of doing so however might prove to be too expensive and any investor would soon choose to set up elsewhere.

Not only that but it takes anywhere between 21-50 days more to import a container into Zimbabwe in comparison with our neighbours. In Zimbabwe, it takes 71 days while in South Africa it takes 21 days and Zambia 49 days. What is perhaps ironic is that a number of the containers which take 49 days to be imported into Zambia likely travel through Zimbabwe to get there.

One of the major costs in any industrial operation is power and in comparison to our neighbours, power in Zimbabwe is considerably more expensive. Our hydro electric power costs 2,35c per kwH which is for some reason 0,35c more than Zambia though we share Lake Kariba. So too is power in Mozambique 2c per kwH, where the country imports some of its electricity.

Again the fact that power is priced cheaper in the region,means it is likely that any investor or business operator, even a Zimbabwean one, would rather set up shop outside Zimbabwe.

Such serious policy pricing issues have a direct and negative impact on investment in Zimbabwe and the evidence of this is clear for all to see. While Zimbabwe waits for the fulfilment of a number of mega deals from the Chinese, others on the continent have already started benefiting from their foreign investment.

According to the Lusaka Times, construction of a bridge at Kazungula Border across Zambezi River has so far created more than 500 jobs in Zambia and Botswana from the time construction works commenced in December 2014.

The US$259,3 million Kazungula Bridge project, is funded through a co-financing arrangement with African Development Bank and EU-Africa Infrastructure Trust Fund and being implemented by the Zambia and Botswana Governments, while Daewoo Engineering and Construction Company Limited of South Korea is the contractor for the bridge. The project is expected to be completed in December 2018.

Elsewhere in Africa, Ethiopia recently launched a 752,7km railway that links the country’s capital city Addis Ababa with Djibouti, giving the landlocked country’s 95 million people easy access to a port. Previously such a journey would take almost a week via road but has now been reduced to 10 hours.

The railway project cost US$3,4 billion and was 70 percent financed by China’s Eximbank, the same institution with which Zimbabwe signed a concessionary loan agreement in 2014 for the expansion of the Hwange Thermal Power station.

That project has actually been stalled, as The Herald reported last week, due to $7,2 million Zimbabwe owes a Chinese insurance company.

Kenya has already started construction of the 609km long Mombasa-Nairobi Standard Gauge Railway project also financed by the China Eximbank. Phase one of the project is expected to be completed by July 2017 with further expansion of the $13 billion railway project to happen in other East African countries, South Sudan, Uganda, Rwanda and Burundi.

Another beneficiary of financing from China’s Eximbank is Tanzania which has plans to construct a $7,6 billion railway that will help the East African nation’s landlocked neighbours transport goods to its port on the Indian Ocean.

Egypt recently secured a deal for $20 billion for the construction of a new capital city from The China Fortune Land Development Company. In comparison to the other deals on the table for other nations, one might label this one, a mega mega deal. So why is it that Zimbabwe is falling behind? Not only in terms of securing such major investment opportunities and projects but also seeing the implementation of the deals that exist already? One major concern is definitely that Zimbabwe is not competitive due to the various costs involved in operating.

Government needs to show the requisite political will to change policies that make it a whole lot cheaper for investors and business people to set up shop in neighbouring countries.