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Industrial and Commercial Bank of China is funding $9,3 billion projects in Africa

Golden Sibanda Senior Business Reporter
ZIMBABWE needs to undertake economic reforms and open up the economy to attract the foreign direct investment it needs to rejuvenate growth in an economy suffocating due to tight liquidity, a Chinese industrial bank has said.Industrial and Commercial Bank of China chief executive Mr Wenbin Wang said China had to open up its economy and create the right conditions to attract foreign investment in laying the blocks to its fairytale economic growth.

ICBC is the largest bank in China with total assets of $3,1 trillion, $1,6 trillion loan book, 17 000 branches and 450 000 employees.
The bank is funding $9,3 billion projects in Africa.

Mr Wang made the remarks at a seminar held in Harare on Wednesday to educate Members of Parliament on Government’s new term economic blueprint, Zimbabwe Agenda for Sustainable Socio-economic Transformation 2014 /18.

As such, the ICBC CEO said Zimbabwe needs “to ‘build the nests and wait for birds’, setup special areas for foreign investment, build up necessary infrastructures, roads, utilities, offices and streamline governmental approval process.”

Zimbabwe is facing economic challenges characterised by tight liquidity, low industrial output, high cost of production (power, labour, water), poor infrastructure, lack of raw material, external competition, pointing to the need for fresh investment.

This comes on the back of a highly volatile decade of economic instability to 2008 during with inflation peaked at 231 million percent that year, which wiped all corporate savings and left industry on its knees.

Mr Wang said there is need for policies that are favourable towards FDI including relatively cheaper land price, fiscal regime that allows for tax exemption and deduction, rules and laws protecting foreign investment and policy framework for foreign currency trade and settlement facilities.

The lessons on the economic success story of China come as the Asian country is on overdrive to build stronger economic ties with Africa and is already Zimbabwe biggest investor, accounting for 45 percent of the FDI inflows in 2012.

It remains Zimbabwe’s single largest investor since 2010.

“China invested in projects worth $180,2 million in 2012, and accounts for 45 percent of the $400 million of foreign direct investments pouring into Zimbabwe during 2012,” Mr Wang said.

China has invested more than $500 million into various sectors of Zimbabwe, sinking $180 million in 2012 alone.
Mr Wang underscored the importance of such FDI to growth.

The high growth of the Chinese economy has seen its overseas investment increasing rapidly. More Chinese companies are going abroad with FDI.

By 2012, China outward direct investment worldwide amounted to $532 billion with outward investment towards Africa totalling $21 billion.

Mr Wang said the Chinese government began to introduce FDI since early 1990s with the foreign investment playing an important role in stimulating economic growth and with  it an increase in new jobs, tax growth and technology transfer.

However, the sustained economic growth trajectory started with the experimental special economic zone , Shenzhen, in 1979.
The special economic zone was an experimental ground for the practice of “socialist” market capitalism through special policies to attract foreign investment, encourage foreign joint ventures and private enterprise development and free trade zone with tax exemption.

Subsequently, China set up four more economic zones, namely Zhuhai, Xiamen, Hainan, Shantou while 14 coastal cities were opened up thereafter, all with good infrastructure.

Zimbabwe could borrow lessons from China, which registered three decades of double digit expansion and is now a key source of FDI to Africa.