The overwhelming interest shown by foreign investors to commit their funds into Zimbabwe has rattled local entrepreneurs, who fear they might be forced to significantly scale down operations or close shop altogether.
The locals are worried that the new players, with access to latest state- of-the-art equipment, advanced Information Technologies and cheap capital with long repayment grace periods, will squeeze them out of business.
Some of these industrialists have already pressed the panic button after Government tweaked the Indigenisation and Economic Empowerment Act, particularly over the removal of the 51 /49 percent shareholding structure on other minerals apart from diamonds and platinum, in tandem with the ‘Zimbabwe is open for business’ mantra.
Following the relaxation of the Indigenisation Act, there has been a flurry of foreign investor inquiries over opportunities obtaining in the country.
The Government says foreign direct investment have hit over $16 billion since November 24 when President Mnangagwa was sworn-in.
Such FDI statistics have sent a chill down the spines of local entrepreneurs, who fear that they could be forced out of business due to stiff competition brought by the foreigner investors.
Chief among their concerns is the fact that foreigners stand a great chance to obtain cheaply priced funds for capital and working capital.
Locals are struggling to access funding in the country due to foreign currency challenges, while where the loans are available, they punitively priced despite a Reserve Bank of Zimbabwe (RBZ) interest rate ceiling of 12 percent while individuals pay more.
The unavailability of foreign currency has also impacted on foreign payments for raw materials as it takes some companies up to a year before their applications are processed.
The Confederation of Zimbabwe Industries (CZI) president Sifelani Jabangwe, conceded there were fears by some local entrepreneurs that the coming in of foreign investors would squeeze them out of business.
“There was a worry among some local players especially after the revision of the Indigenisation and Economic Empowerment Act. The approach (indigenisation) used to support locals and FDI would come to partner and not substitute locals,” he said.
“However, we are telling our membership not to worry about that since His Excellency has clarified this issue.
“So for now we are happy with the coming in of FDI, but we will continue to lobby Government to ensure local businesspeople get the incentives they require to become first class players,” said Mr Jabangwe.
Govt position on F D I
Minister of Industry, Commerce and Enterprise Development Dr Mike Bimha, told Business Weekly that it was not going to happen that foreign investors kick-out locals.
Dr Bimha said some local industrialists might have panicked after the huge response from foreign investors after the country opened up.
“It’s not true they (locals) would be kicked out. It might be because there has been too much noise created by those foreign players but there is so many of our local players investing in our economy,” said Dr Bimha.
“The policy of Government is to encourage both local and foreign investors. When, we talk about investment, when we talk about Special Economic Zones, it’s opened for whoever is an investor, whether local or foreign.
“Incentives don’t discriminate against anybody and we have said in terms of our own policies, in terms of strategic industrialisation of SADC, the players who lead this are our private sector. So we are very much encouraged to see our local players taking the lead.”
A local agro-processing firm, Davipel Group, invested $12 million into state-of-the-art milling and snacks making plants as the firms gears for changes likely to be ushered in by the wave of investor interest in the country. The plans were obtained from South Africa and Turkey, and were commissioned by President Mnangagwa on June 7.
Dr Bimha said such investments by locals are a demonstration of Government’s commitment to support local entrepreneurs.
“We are happy to see our own businesses going into investment in other areas; we are encouraged by that.”
RBZ on forex
Dr Bimha believes that foreign companies’ chances of accessing well-priced foreign currency cannot be seen as an opportunity for them to eclipse local players.
He said available foreign currency is generated by the private sector and the RBZ priority list for foreign payments does not discriminate on the basis of whether one is a local or foreign firm.
“Whoever that wants foreign currency, as long as they are looking for raw materials, they get the support. Yes, foreign companies can probably access off-shore facilities but that’s a different matter.
“We also want to encourage even our own people to source funding from elsewhere. We have been encouraging joint ventures and we see that happening everyday so there is no way in terms of policy, where Government would encourage or prefer foreign investment as opposed to local investment,” said Dr Bimha.
CZI boss Mr Jabangwe, said they are currently in advanced negotiations with some financiers for the availing of a package for the manufacturing sector. Mr Jabangwe declined to name the financier they are talking to.
“We are in talks with some funding providers to come and provide financing targeted at the manufacturing sector, mining and perhaps agriculture.”