Over the last couple of years, one of the things that both Reserve Bank of Zimbabwe governor Dr John Mangudya and Finance and Economic Development Minister Patrick Chinamasa were in agreement, was that there was lack of confidence in the economy. They both talked about the need to build confidence if the economy was to be on a sustainable growth path.
“The issue is about confidence and we need confidence building policy measures to win this war. We need to remove the ambiguity in the market,” said Mangudya in September this year.
Minister Chinamasa was also quoted as saying: “Confidence is built by a multiplicity of factors, which include clarity on our policies and (as we) try to avoid inconsistencies in our policies. Those are the issues, which we should take in building confidence.”
We note that the new Government, led by President Emmerson Mnangagwa, has since come up with bold measures to bring the much needed confidence and results are beginning to show.
In his inauguration speech on November 24, 2017, President Mnangagwa allayed several investor fears declaring that “key choices will have to be made to attract Foreign Direct Investment.”
“Our system of economic organisation and management will incorporate elements of market economy in which enterprise is encouraged, protected and allowed just and merited rewards, while gainfully interacting with strategic public enterprises run professionally and profitably, all to yield a properly run national economy in which there is room and scope for everyone,” President Mnangagwa said.
His confidence boosting speech was supported by the 2018 National Budget Statement presented by Minister Chinamasa, which was viewed as progressive and investor friendly. The Budget also included amendments to the Indigenisation and Economic Empowerment Act to say the 51/49 percent requirement now applies only to diamonds and platinum.
As a show of confidence in the new Government, Zimbabwe has already started receiving the necessary support aimed at reviving and boosting the economy. First off the block was the Chinese government, which signed agreements worth about $220 million for the development of key infrastructure in the country. The loan has a 20-year tenure and seven-year grace period at two percent interest per annum.
On Tuesday, the African Export-Import Bank (Afreximbank) announced a $1,5 billion economic stabilisation package for Zimbabwe that will go towards the revival of the productive sectors of the economy.
Speaking about the package, Afreximbank president and board of directors chairman Dr Okey Oramah said the funds being provided by Afreximbank would also be used to provide investment guarantees for investors, to entice them to come to Zimbabwe.
There is nothing better to boost investor confidence than to have guarantees for investment from reputable institutions such as the Afreximbank. Capital, especially FDIs and portfolio investments, normally follow where big players such as the Afreximbank, African Development Bank and the Bretton Woods Institutions are investing or extending credit.
The confidence that the Afreximbank has shown Zimbabwe cannot be overemphasised as it is showing through the levels of financial support given to the country. Apart from the $1,5 billion, the regional bank had earlier availed a $600 million nostro stabilisation facility to enable Zimbabwe to meet its foreign currency requirements for productive foreign payments.
The bank speaks Zimbabwe’s language and understands the country’s needs as it made reference to issues of ensuring good supply of essential items like fuel, fertilisers as well as supporting the minerals sector.
Confidence is a good foundation for attracting both domestic and foreign investment and as Minister Chinamasa said, the gesture shown by AfreximBank “sends very good signals to the rest of the world that Zimbabwe is open to do business.”