Alongside the legal changes required to make Zimbabwe more attractive to external investment, there are administrative changes and a need to change some cultures.
One particular problem is how external investors can get their dividends out, that is their profits minus taxes, and if they decide to sell out how they can get the sale price of their investment out.
Concerns have already been raised. The delay in making external payments is now long and some of those who put money into Zimbabwe are complaining that it is taking forever to get their dividends out or to liquidate their investment.
Admittedly these rarely concern foreign direct investments.
Many of those running into problems are those who buy shares on the Zimbabwe Stock Exchange, sometimes in the hope of selling them quickly at just the right moment, and move their money somewhere else to make another fast dollar. And these people like to see instant transfer so they can move in quick and move out quick.
Some of these portfolio investors might have made rather large sums during the bull run in the last months of the previous administration, and those profits were all denominated in US dollars and for the foreigner wanting to repatriate his profits they are real profits. Although the Zimbabwean who overbid on buy orders might well have been inflating the price in anticipation of massive inflation that never happened, the foreign seller was not operating in that environment.
There were even reports that some of the Old Mutual shares that were trading at prices well out of kilter with the prices on other exchanges were in fact being brought into Zimbabwe by foreigners who noted the possibilities of arbitrage of a fungible share, sold these here at the far higher price and now that foreigner wants to exercise his legal right to take his profits on a single day’s dealing out of the country.
Then there is another group, people who were let into Zimbabwe and given a residence permit on the basis that they brought in a few thousand dollars of cheap foreign consumer goods and opened a little shop in Harare Street. Now, with the environment being different, they want out with their money. They were even listed as foreign direct investors.
There might well be only very modest sympathy in official circles for either group. After all none of them created jobs or added to Zimbabwe’s wealth.
There might well have been some benefits as to increasing forex inflows by the portfolio investors and satisfying some consumer demand by the little traders, but the general benefit was minimal.
But when these investors sent their money to Zimbabwe, or brought their goods to Zimbabwe, this was legal. And the more desirable investors may well wonder when they listen to the complaints and could well give them more weight than they deserve and more weight than the assurances of the Reserve Bank of Zimbabwe that arrangements have been made, and are being made, to safeguard the large invited foreign direct investments.
So we need to do something.
One problem is our use of the US dollar. A country with its own currency does not face this particular problem in the same way. If a lot of portfolio money heads towards the average emerging economy its currency hardens, making the portfolio investments more expensive for the foreign financier. As money wants to leave that same economy its currency weakens, meaning that the foreign financier gets less in hard currency. As we saw with South Africa these wild swings in exchange rates create their own problems, but at least they do not lock in foreign portfolio investors and create a “sure thing” that allows such an investor to make a profit without risk.
We need another solution and probably the only way out of this bind is to start allocating a fixed percentage of export earnings to clearing those delayed dividend and capital payments. Another solution would be to tie the export of capital to the import of capital, in other words allow a dollar to go out for every dollar someone else brought in.
The dishing out of residence permits to foreigners claiming to be investors is simply solved with proper immigration rules. Almost every country, including those who have a policy of seeking suitable immigrants, have minimum levels of investment required to get a residence permit on investment grounds and often have two sets of rules, a high minimum for the person who just wants to sit in the sun and a lower minimum for the person who undertakes to create a set number of jobs.
So as we continue to press ahead with the very necessary policy of opening Zimbabwe for business we also need to be thinking very clearly about what we are doing and back the legal changes with administrative rules and an administrative culture that whisks the serious investor who will add value to Zimbabwe and create decent jobs for Zimbabweans through a simplified process at speed while discourages the paper shuffler whose only ambition is to drain some of our vitally needed wealth into his pockets giving no value in return.