Magazine article Global Finance

Zimbabwe: Economic Overview

Magazine article Global Finance

Zimbabwe: Economic Overview

Article excerpt

ECONOMIC OVERVIEW

Led by President Robert Mugabe, Zimbabwe is a politically stable and socially peaceful country that has increasingly attracted the attention of the international investment community, thanks in part to a wealth of mineral resources.

While inflation is falling and GDP is rising at a healthy rate, broad fiscal reforms still are necessary to assure sustainable growth in the nation. The government controls much of the economy and has been slow to implement reform in such areas as privatization.

Over the past two years, the Zimbabwe Investment Centre, a one-stop office for foreign investors, has reduced some bureaucratic requirements and helped to reorient the government role in the economy.

Areas in which the administration has made substantial progress include a relaxation of controls on foreign exchange, trade liberalization, and a reduction of price controls.

FOREIGN INVESTMENT CLIMATE

While the government is eager to attract foreign investment, minority foreign equity ownership is preferred in many cases.The degree of local ownership is a prime criterion in the evaluation of investment proposals. The government will consider up to 100% foreign ownership in high-priority projects, but it encourages arrangements for the eventual transfer of majority ownership to Zimbabwean interests. Further, President Mugabe has linked the privatization of state assets to so-called indigenization, or a policy of transferring company administration to black Zimbabweans at the end of foreign white managers' tours, according to the US Commerce Department.

The government often becomes a partner in joint ventures with private or domestic investors for basic infrastructure projects and in sectors deemed strategic.

Among businesses and industries reserved for domestic companies are retail and wholesale trade, including the distribution of locally produced goods; public water provision for domestic and industrial purposes; railway operations; grain milling and other agricultural food processing; armaments manufacture, marketing, and distribution; and a variety of commercial services, such as photography.

The Industrial Development Corporation is a government-owned holding company primarily involved in developing joint ventures in the manufacturing sector. The Zimbabwe Development Corporation is a similar mixed state-private company, which invests government funds in for-profit commercial businesses that often include joint ventures with both local and foreign firms. …

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