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Think Zimbabwe is a basket case? Just wait; it could become region’s hottest economy

IT might not look likely today, but the unique circumstances in Zimbabwe give it the potential to become one of the most economically successful countries in Southern Africa. Rich in minerals, human capital, and opportunities in technology and finance, it has the raw materials to create a wildly successful economic environment.

Unfortunately, Zimbabwe is standing in its own way when it comes to economic success. The political environment has a heavy and often negative influence on the free market. Unemployment and underemployment are high.

According to government statistics, over half of the population is unemployed, and jobs for new graduates and students are almost impossible to find.

Although assets are inexpensive, the global market sees these obstacles as insurmountable, and chooses to invest capital elsewhere. For instance, in 2009 PepsiCo looked at both Zambia and Zimbabwe as locations for their new plant, but chose to invest in Zambia where the economic environment was more stable compared to Zimbabwe.

A PR problem

Zimbabwe has a big public relations problem. Investors are uncomfortable and lack confidence in the economy, and in the government’s ability to maintain control. It is perceived as one of the least attractive investment destinations in the world. Yet the country has the ingredients to bounce back to success – with the right policies, it could dramatically change the investment landscape in Africa.

The first step is to create consistent policies to pull the economy from the brink of its liquidity crisis.

Zimbabwe needs to attract capital to address this challenge and achieve economic growth. The mining, manufacturing, and agricultural industries are poised for explosive actualisation.

The diamonds and mining industry is particularly ripe for change. More stringent mining regulations would ensure that only competent, globally proven players are given licenses to mine alluvial deposits, rather than politically-connected individuals without the relevant experience. Mining laws emphasising transparency would increase the confidence of investors. Diamonds are a unique and rare resource, and more time and money should be spent exploring potential mines. Because this industry is fraught with corruption and potential dire environmental outcomes, any expansion should be accompanied by stringent laws and regulations regarding the technical capabilities of mining companies. This would give Zimbabwe far more revenue from this precious resource.

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Pick from Botswana’s book

Zimbabwe can attract more global investors by following the lead of other countries. Botswana, for example, has implemented low taxation that allows for tax-deductible royalties. If Zimbabwe followed suit in the mining industry, it would encourage potential investors to explore opportunities here. Although profits might decrease in the short term, the additional investors that would be lured to the country would make up for those losses in the long run.

One of the biggest obstacles to the implementation of these policies is widespread political corruption. In 2012, for example, former South African president Thabo Mbeki claimed that senior government ministers had tried to extort ten million dollars from investors linked to the African National Congress (ANC).

And in 2014, an international group of investors came close to suspending a $750 million investment in New Zimbabwe Steel (formerly Zisco Steel) because of corruption and demands for bribes by cabinet leaders.

Although President Robert Mugabe has stated in the government’s new economic blueprint for the next five years – the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIM ASSET) –  that combating corruption and fostering good governance is a primary goal for the government, much more must be done. The government needs to aggressively root out, pursue, and punish the perpetrators via a criminal court specifically charged with this task. This will send a clear message to investors: we are serious about this transformation.

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Sort out the courts

An efficient, fair judicial system is a prerequisite for growth in any developing country. While this may not appear to directly impact the economy, the influence will create a hospitable business climate and contribute to altering global perception of Zimbabwe.

With a credible system of law and the reduction of corruption, Zimbabwe will be able to reduce the bureaucratic red tape that currently inhibits and intimidates investors. A streamlined government bureaucracy will ensure that policy changes can be made smoothly and efficiently, increasing confidence in the Zimbabwean government and leveling the playing field for all potential and current investors.

These changes are only half the battle. The country must evangelise and market the new policies. The challenges faced by Zimbabwe have been well-documented and publicised around the world. An updated global perception of Zimbabwe will encourage investment.

Zimbabwe needs to partner with international investors to succeed, but we can’t expect others to invest unless our house is in order.

-Zimbabwe-born Martin Ganda is an Africa focused Investor, Advisor and Strategist. He can be contacted at www.MartinGanda.com and follow him on twitter @martinganda.

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Nigel Mugamu is extremely passionate about the use of tech in Africa, travel, wine, Man Utd, current affairs and Zimbabwe.

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