Lovemore Chikova Assistant Editor
The fully-fledged one-stop shop investment entity known as the Zimbabwe Investment Development Agency (ZIDA) being set up by Government will not be the first of its kind in the world.
There are many other countries that have gone through the same process in a bid to attract more foreign direct investment and change their fortunes. The process of establishing ZIDA has started in earnest with the recent publication of the Zimbabwe Investment Development Agency Bill, which is expected to go through Parliament soon.
Once it is made into law, the Bill will establish the agency that will act as a one-stop shop for handling all foreign direct investments coming into the country.
All other entities that have to do with foreign investment will be disbanded, with other institutions, especially those concerned with issuing operating licences to foreign investors having desks under ZIDA.
By establishing ZIDA, Zimbabwe is walking the same path that has seen other countries with similar institutions being able to move forward on the back of massive foreign direct investment.
What is important for the authorities is to learn from such countries in their implementation of the provisions of ZIDA without ignoring the unique situation that Zimbabwe’s economy faces.
For ZIDA to succeed, its provisions should be relevant to local conditions and work on the basis of the reality obtaining in various sectors of the economy.
This article will consider the case studies of other countries with the same institution like ZIDA, to indicate how beneficial this new investment agency is expected to be for Zimbabwe.
President Mnangagwa did not mince his words, making it clear that the new investment agency in Zimbabwe will be modelled along the lines of the Rwanda Development Board.
This was after the President visited Rwanda last year and toured the Rwanda Development Board and was impressed by its work in attracting foreign direct investment. The board is a true reflection of a one-stop investment agency and has enhanced the ease of doing business for foreign investors that come into Rwanda.
The Rwanda Development Board has been central to the economic reform process in Rwanda, which emerged from a devastating genocide in the 1990s.
In fact, after the tragedy, many people had written off the East African country from the world map because of its hopeless situation then.
President Paul Kagame embarked on a trajectory to change his country’s image, and the establishment of the Rwanda Development Board was one of the masterstrokes.
Today, Rwanda is being transformed on the back of foreign direct investment that is being attracted through the Rwanda Development Board.
Just like what ZIDA is expected to achieve, the Rwanda Development Board brings together all Government arms dealing with investors under one roof. The agencies that make up the Rwanda Development Board include those dealing with issues like business registration and environmental permits.
This is the same model that was adopted by the Government which will see entities like the Zimbabwe Revenue Authority, the Environmental Management Authority, Companies Office, the Reserve Bank of Zimbabwe, the National Social Security Authority, the Zimbabwe Energy Regulatory Authority, the Zimbabwe Tourism Authority and the State Enterprises Reform Agency being housed under the same roof at the ZIDA offices.
The Rwanda Development Board is modelled along similar entities in countries such as Costa Rica and Singapore.
Its vision is “to transform Rwanda into a dynamic global hub for business, investment and innovation”.
The creation of the Rwanda Development Board showed that President Kagame is taking the facilitation of foreign investment seriously.
Through the Rwanda Development Board, Rwanda managed to attract foreign direct investment worth more than US$2 billion last year, an improvement from US$1,041 billion in 2017 and US$650 million in 2016.
The foreign investments continue to increase due to that country’s efforts to ensure a conducive environment exists for investors. The formation of the Rwanda Development Board cut out at least 12 procedures that would require at nearly three weeks to complete at a cost of $450 on average to register a business.
Through provisions that come under the board, company registration is now done online and for free, making it easy for businesses to be established in Rwanda.
From registering 500 companies per year before the Rwanda Development Board was established, that country is now registering at least 13 000 companies per year.
Through the provisions that guide the board, an investor can now register a business within six hours, get the operating licence or the construction permit in just two weeks.
If the investor approaches the courts, they are assured the judgment will be delivered within 100 days. This is clear evidence that the board is making it easier for investors to choose Rwanda as their next destination because of the favourable conditions.
Making the process cumbersome and difficult will result in the investors just giving up and search for opportunities elsewhere.
Zimbabwe can learn vital lessons from Rwanda on how the country managed to make it easy for investors, what tools they used, the challenges they faced and how they managed some of the challenges.
It is also critical that Rwanda offers foreign investors a number of incentives which include a seven-year tax holiday for those who invest more than $50 million.
China is the most developed among the developing countries and credits its fortunes partly to foreign direct investment which is bringing in billions each year.
Most of such investments are in the Asian country’s Special Economic Zones and other industrial parks that are scattered throughout the vast country. The setting up of the China Investment Promotion Agency has been one of the instruments critical in contributing to the development of the Asian country.
Many of the provinces in China have offices of their own versions of the China Investment Promotion Agency which are linked to the mother organisation.
The investment agency organises and implements foreign investment promotion in China, and guides the work of the other investment agencies in the provinces.
China has since become the second largest recipient of foreign direct investment after the United States.
Last year alone, the Asian economic giant recorded US$142 billion in foreign direct investment, indicating the work China Investment Promotion Agency is doing.
The agency offers the relevant information to potential investors and organises investment promotion activities both internally and externally. The organisation deals with laws, rules and regulations that govern foreign direct investment.
It constantly updates potential investors with information on economic development, industrial market news, economic systems, investment procedure and available resources.
Attracting foreign direct investment is part of China’s reform and opening up, and the growth in foreign capital inflow indicates the confidence the investors place in this process.
Another case study ZIDA can learn from is Singapore’s Economic Development Board, which was set up to specifically deal with investments, both domestic and foreign.
The aim of the board is to create sustainable economic growth, with good job opportunities created through foreign direct investment. The board is achieving its aims, with Singapore securing US$7,9 billion worth of foreign direct investment last year alone.
When the secured investments are fully implemented, they are expected to create at least 17 400 jobs and contributed at least US$9,9 billion to the Singapore economy.
There has been an increase in technological transfer to Singapore due to increase in foreign direct investment, which has made its market competitive by producing goods of high quality. The Singapore Economic Development Board, just like the envisaged ZIDA, works closely with other government agencies to ensure the foreign investors feel their capital is safe and that they can reap their rewards.
The board helps investors with the necessary information and ensures the process for them to set businesses is smooth.
The investors are made aware of their benefits and the government’s benefits from the investment right from the start, including on issues such as critical regulations.
Another lesson ZIDA can learn from the Singapore Economic Development Board is the offering of incentives to eligible firms, especially on taxes.
For instance, investors and their families are offered Singapore Permanent Residence through the Global Investor Programme as an incentive.
India established the National Investment Promotion and Facilitation Agency which is the first reference for investors, and just like ZIDA, it is a one-stop shop.
The agency has managed to transform and simplify the investment climate in India.
Statistics show that in 2018 alone, India managed to attract foreign direct investment worth US$44,37 billion, a figure which indicates that the ease of doing business is yielding positive results.
In South Africa, the Trade and Investment South Africa, which is also similar to ZIDA, has been at the forefront of creating conditions necessary for investors to flock to that country.
The organisation aims at increasing the quality and quantum of foreign direct and domestic investment, while also coming up with incentives that help attract the investors.
As a result of its work, South Africa managed to growth its earnings from foreign direct investment from US$1,3 billion in 2017 to US$7,1 billion in 2018.
Recently, newly-elected President Cyril Ramaphosa said the foreign direct investment earnings for South Africa should grow to at least US$100 billion by 2023.