In a statement on business risk in Zimbabwe, the UK said the challenges included prohibitive and volatile foreign exchange controls, high inflation, fragile property rights, and pervasive corruption.
“Necessary currency reforms have been slow, and whilst businesses are currently able to pay overseas suppliers and repatriate profits through the foreign currency auction, this process is slow and unreliable,” the UK said.
“Exchange rate management by the Reserve Bank continues to leave a large gap between the official and parallel market rates, increasing the risk of arbitrage.”
Inflation has dropped from 837.5% in July last year to 56.4% last month whilst the exchange rate under the foreign currency system has remained stable at $85 to the greenback.
The black market rate is, however, between $130 and $150.
Zimbabwe promised to clear the foreign currency allocation backlog at the auction within 45 days.
On the business environment, the UK said: “Repatriating profits and paying overseas suppliers is cited as the main challenge, and exporters to Zimbabwe should engage with their customer and/or bank to ensure that this risk is mitigated.
“The high and volatile inflation also makes the business environment more uncertain: many businesses price in US dollars but… the supply of foreign currency is erratic.”
While the UK is worried about the current business environment in Zimbabwe, it has never explained why more than 400 British companies were doing business in Zimbabwe prior to independence when Rhodesia was under United Nations sanctions, had declared unilateral independence against the UK itself and when human rights violations were more rampant.