Hatfield Member of Parliament and former cabinet minister Tapiwa Mashakada says the proposed One-Stop Shop Investment Centre, meant to ease investment into the country should come under the President’s office because that is the only way to make sure that everyone can be commanded to play ball because if it is left to one ministry other ministers will not co-operate.
“I know I have been a cabinet minister, they will not co-operate, it will be about turfism,” he said in his contribution to the President’s Speech at the official opening of Parliament.
President Robert Mugabe said that the Zimbabwe Investment Authority Amendment Bill which seeks to convert ZIA into a One-Stop-Shop Investment Centre will be tabled during the current session of Parliament.
Mashakada, a member of the Movement for Democratic Change and Minister of Economic Planning during the inclusive government, said a One-Stop-Shop Investment Centre had in fact been established on 12 December 2010 and was officially opened by Mugabe.
“However, what killed the One Stop Shop Investment Centre was lack of political will and a lot of ‘takeism’ among ministries because you know as cabinet you must have collective responsibility,” he said.
“But, there is a tendency in government for turfism. If it is the Ministry of Investment which has initiated the One-Stop-Shop, the Minister of Mines, the Minister of Transport and the Minister of Home Affairs will resist and at the end of the day these other ministries and government departments failed to second people to go into the One-Stop-Shop investment centre.
“So, I would suggest that these reforms of investment facilitation be done by the highest office, the President’s Office. That is the only way to make sure that everyone can be commanded to play ball, because if it is left to one Ministry other ministers will not co-operate.”
Mashakada also said the Indigenisation Act must be replaced by an Investment Charter where partners can negotiate instead of having a legislated 51 percent local ownership because this is stifling investment.
Under an Investment Charter, Mashakada said: “You get into an understanding or agreement with an investor before they invest. An agreement on transfer of skills and technology into Zimbabwe, you sign and agree. An agreement on corporate social responsibility, what would the company do when they come to your country. An agreement on environmental protection, an agreement on job creation and an agreement on local supply chain, how local indigenous people will benefit from the foreign investor in terms of the raw materials and input supply chain. Therefore, you will have an ab initio understanding with the investor before they set up shop through an investment charter, which is a business-friendly dialogue you engage with the investor.”
DR. MASHAKADA: Thank you Mr. Speaker Sir. I rise to make contributions to the President’s Speech and the agenda that he set for us as the august House of Parliament. Firstly, I want to thank Hon. Mutomba for his motion and for ably articulating it. I want to zero in on investment because in his speech, the President touched on amending the Zimbabwe Investment Authority Act, so as to create an enabling environment for investment and to create an enabling environment for doing business in Zimbabwe. So I will not delve into many other things but tackle investment.
Mr. Speaker Sir, we must appreciate and understand the role of investment in the economy, especially at this historical juncture that we are into. We know that investment can drive economic growth, lead to economic development and lead to more capital inflows coming into the country. Where we are, Zimbabwe is in short of new capital or new money. In fact, in economics we talk about an uneasy triangle. When it comes to the availability of money or capital in an economy, we talk about an uneasy triangle. This is because if you look at the domestic revenues, we are struggling to generate enough revenue to move the budget or to sustain the fiscus. So already we have got a problem in terms of resources and capital domestically. That is one pillar of the uneasy triangle.
The second pillar is Official Development Assistance (ODA). Where we stand, we have got limited flows of ODA for obvious reasons. We owe the multilateral and bilateral institutions a lot of money. Therefore, we are not receiving grants and loans. The third aspect of the uneasy triangle is trade and investment. Of these three items, you find that trade and investment contribute a lot of revenue or capital inflow into the country. Therefore, I cannot over emphasise the role of investment in the development paradigm of the country. It is a king pin when it comes to development.
In fact, the level investment stands at 12% of GDP. Best practice is that FDI should grow to 25% of GDP and 30% of GDP. That is when it can become instrumental in promoting growth and economic development and creating jobs and reducing poverty. So, investment is very important as an economic variable in Zimbabwe. Let us examine where we stand in terms of our investment climate. What are the elephants in the living room and the bottlenecks which prevent the flow of new capital by way of FDI into the country? We know that Zimbabwe has been ranked poorly year- in- year out by various bodies. If you take the World Bank doing business report, Zimbabwe has been ranked successively very poor. The last ranking of 2014 put Zimbabwe at number 171 out 183 countries, which is really very bad.
In terms of doing business, Mauritius is ranked one of the best African countries because it is easy to set up business, shop and getting licences and permits. So, we are ranked number 171. In terms of the competitiveness index of the World Economic Forum, we also do not fare very well. We have got a lot of homework to do to make sure that we improve the ease of doing business. We improve our chances of developing Zimbabwe as a viable investment destination. Let us try to tackle some of the challenges that are a hindrance to the inflow of investment.
One of the greatest challenges with due respect is our regulatory environment or our legal environment. We have to amend various laws that are bureaucratic and that limit the smooth flow of investments. Some of the laws which need urgent amendment include the following; the Mines and Minerals Act, the Companies Act, the Immigration Act, the Incomes Tax Act and the Environmental Management Act, among other pieces of legislation which make it very difficult to do business in Zimbabwe. So what we need to do is for the Minister of Justice, Legal and Parliamentary Affairs to introduce a General Laws Amendment Bill which is an omnibus Bill to reform these pieces of legislation so that we have an investor friendly environment.
After the General Laws Amendment Bill is enacted, we need to look at the Indigenisation and Economic Empowerment Act with a clear mind. Let us remove ideological underpinnings and any dogmatic feelings about it and look at it vis a vis the object of attracting investment.
Mr. Speaker Sir, the world over when investors come with capital, at times it is not their own monies, they will be investors on behalf of the principal owners of that money and capital is very expensive to raise in capital markets. You raise a lot of capital and there is a lot of interest that has to be paid. Imagine an investor bringing in five billion to Zimbabwe and we say 51% should be localised. There is a problem already because that money has been borrowed. Secondly, if the investor seeds 51%, in business terms you are losing controlling interest of your own enterprise.
So before we have even started, we have put our own stumbling blocks for the investor and remember that capital is timid, it flies away. The next option is that the investor will go to Mozambique, Zambia, Namibia or South Africa. This is what has been happening for the last years as we have not been able to be flexible with our Indigenisation Act. That is why the levels of investment in Mozambique are now over a billion, investments in Zambia are over two billion, South Africa at US$5 billion, Angola US$10 billion per annum and for Zimbabwe we only registered US$500 million in 2014. So we need to up our game and talk investment and business.
I am happy that there appears to be a new paradigm shift in Government, a new understanding of the dynamics of money and capital investment and business. That is a trajectory that we need in order to grow this economy because we need new money. Since we dollarised our economy, Zimbabwe no longer has the power of the printing press to generate or create new money supply. Therefore, in order to get the US$, you have to depend on either exports which are currently depressed or new capital in the form of Foreign Direct Investment (FDI). We cannot leave any stone unturned to try to motivate investment to come into the country.
The Indigenisation and Economic Empowerment Act has now become the greatest stumbling block to the flow of investment into this country. I hope we can soberly reflect on how we can design this law to make sure that it is investor friendly sector by sector. We do not have to insist on 51% on all sectors of the economy, certain sectors and even investors can even get 100% depending on what the investor brings on the table.
In fact, in other countries they do not have an Economic Empowerment Act or Indigenous Act. What they have is what you call the Investment Charter. You get into an understanding or agreement with an investor before they invest. An agreement on transfer of skills and technology into Zimbabwe, you sign and agree. An agreement on corporate social responsibility, what would the company do when they come to your country. An agreement on environmental protection, an agreement on job creation and an agreement on local supply chain, how local indigenous people will benefit from the foreign investor in terms of the raw materials and input supply chain. Therefore, you will have an ab initio understanding with the investor before they set up shop through an investment charter, which is a business-friendly dialogue you engage with the investor.
One of the things that must be included in the Investment Charter is a question of banking locally. Most investors that come into Zimbabwe do not bank locally; they just exploit the resources and repatriate the money to their countries. They do not have financial or banking records and they therefore, do not contribute anything to the economy, they just plunder the economy. So there is need for an investor charter that will regulate the conduct of foreign investors in a friendly and amicable manner rather than a hard and fast piece of legislation which scares them.
The second thing that we need to do to promote investment is to look at the security of investment. Investors want to be sure that their property and interest are safe and secure and that there are no connotations of expropriation or rationalisation. One best way to do that is to make it very clear that we have got straight forward arbitration rules. If a dispute arises between an investor and a local partner or Government, there will be clear cut arbitration rules where the investor can go and get fairness. If the local arbitration system is not adequate, let us have provisions for the investor to approach the international centre for the settlement of investment disputes. That is the modern practice.
The other thing that is very important if we want to attract investment is that – the President talked about amending the Zimbabwe Investment Authority Act (ZIA). However, I want to suggest that in the days in which we are living in, gone are the days of those authorities, the world no longer operates on the basis of authorities. What we need is to substitute ZIA with what we call a board of investment, which is a commercial entity, a business minded entity which looks beyond investment regulation. What we need is a board that understands the terrain of capital market, the terrain of doing business and investment facilitation. Let us emphasise more on investment facilitation rather than investment regulation because that is the order of things.
Talking about the One Stop Shop, hon. Speaker, my heart grieves because we established the One Stop Shop Investment Centre on 12th December 2010 and it was opened by His Excellency, President Mugabe at ZIA offices. However, what killed the One Stop Shop Investment Centre was lack of political will and a lot of ‘takeism’ among ministries because you know as Cabinet you must have collective responsibility. But, there is a tendency in Government for turfism. If it is the Ministry of Investment which has initiated the One-Stop-Shop, the Minister of Mines, the Minister of Transport and the Minister of Home Affairs will resist and at the end of the day these other Ministries and Government departments failed to second people to go into the One-Stop-Shop investment centre.
So, I would suggest that these reforms of investment facilitation be done by the highest office, the President’s Office. That is the only way to make sure that everyone can be commanded to play ball, because if it is left to one Ministry other ministers will not co-operate. I know I have been a Cabinet minister, they will not co-operate, it will be about turfism, but if it is driven in the President’s Office I think it might see day light. Otherwise, the institution is there and what we require is goodwill and a new business culture. So, that we generate investment and we develop our country. Thank you Mr. Speaker Sir.