Zimbabwe urged to improve perception

Zimbabwe urged to improve perception
President Emmerson Mnangagwa

President Emmerson Mnangagwa

ZIMBABWE should improve international perception and reduce investment risk to attract foreign capital and revive the struggling economy, a financial expert has said.
Ngoni Mudzamiri, a partner with Ernst & Young, told The Financial Gazette that Zimbabwe’s difficulties in attracting international finance were caused largely by the high risk associated with the country.
“Over the last few years, Zimbabwe has been seen as a risky investment destination such that when you try to access loan financing, the interest rates are very high and punitive.
“If you look at European companies, they are able to borrow money for as little as three or four percent, sometimes less. Yet our banks, a lot of our institutions, are borrowing at more than 10 percent,” Mudzamiri said.
He said a reduction of risk would help unlock cheap funding, “enabling businesses to start performing a lot better because they are not paying high interest rates for the borrowings”.
Mudzamiri said in addition to the high cost of funding, the cost of equity was also too expensive.
“A lot of our assets right now are underperforming yet people, because they have a view of what the country used to be, think they are worth more than the international community is prepared to pay for them.
“If you have an asset and you want to charge a million dollars for it, you may find a foreigner who is only prepared to pay $500 000 because of the perceived risk. So the more we are open to the international community, the more people have confidence in our country (and) the easier it will be for businesses to grow,” he said.
President Emmerson Mnangagwa last year launched a campaign to attract foreign investment when he took over power in November, declaring that Zimbabwe was now open for business.
Mudzamiri said political statements should now be accompanied by action. “Government needs to be seen to be walking the talk. A lot of people are waiting for the election. Right now I think there is a lot of excitement, but people want to see what’s actually happening,” he said.
Zimbabwe has also pledged to come up with an international debt arrears clearance plan in its re-engagement strategy with the international community. Debt clearance will unlock funding for both the private sector and government.
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