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Investment approval: Mugabe further centralises functions

Investment approval: Mugabe further centralises functions

mugabe from the photo

By
Published: 25 September 2015

ZIMBABWE – President Robert Mugabe’s decision to have his office take charge of the economy and investment promotion is an admission that the country is in a mess due to bad governance and ineptitude. It also shows Mugabe now understands his government is dysfunctional and paralysed by bureaucratic incompetence, analysts say. 

As of last week, investors who are in the process of making business enquiries and those wishing to come will be handled by an Inter-Agency Platform co-ordinated by the Office of the President and Cabinet (OPC).

While questions have been raised about the prudence of having the OPC taking charge of investment promotion, it points to centralisation of processes, which may lead to more corruption and rent-seeking. Government, however, argues the move was necessary to cut through the bureaucratic red tape.

According to Chief Secretary in the OPC, Misheck Sibanda, this approach aims to improve the turnaround time on approving investment. The period for investment approval is expected to be reduced from 21 days to 24 hours in respect of company registration.

However, economic analysts say if Mugabe is serious about improving the ease of doing business in the country, he should also swiftly move to repeal toxic legislation and policies which militate against investment.

That Zimbabwe has fared dismally on the World Bank’s doing business rankings as a result of its poor policies is no longer news. Year in and year out, the country is ranked poorly. Yet several calls on government to improve the ease of doing business and reform its policies and laws fall on deaf ears.

In a period of over a decade, Zimbabwe has built a reputation for not respecting its laws and property rights.

Since the country embarked on the controversial land reform programme, thousands of farmers have lost their land without compensation. According to government, all agricultural land now belongs to the state. Even farms belonging to indigenous Zimbabweans have not been spared.

Mugabe’s wife, Grace, seized Interfresh’s productive land only to turn it into an orphanage. As if to underscore the apparent disregard for the rule of law, even a Supreme Court judge — Ben Hlatshwayo — also occupied a piece of land owned by a listed company, Ariston Holdings Ltd, in 2010.

This was after Hlatshwayo lost his farm in Banket in 2008 to the First Family.

Then there is the Indigenisation and Economic Empowerment Act, which compels foreign investors to cede controlling equity stakes to indigenous Zimbabweans.

The piece of legislation has acted as a deterrent to foreign direct investment (FDI).

Economic analyst John Robertson said indigenisation laws should be repealed to attract investment.

“If we are to compare to other countries, which get more investment than us, we are far below in the region. The investment climate is still not good. We don’t compete very well with other countries,” he said. “Investors are waiting for the indigenisation policy to be repealed. Most investors don’t want the indigenisation policy.”

FDI flows to Zimbabwe have slightly increased from US$400 million in 2013 to US$545 million last year, but still fell far behind most regional countries. South Africa has recorded FDI inflows of US$5,7 billion, Mozambique US$4,9 billion, Zambia US$2,4 billion, Malawi US$130 million and Swaziland US$13 million.

This year, Zimbabwe was ranked 171 out of 189 countries sampled by the World Bank in the doing business survey. It ranked better than Syria, Congo, Guinea-Bissau, Angola, South Sudan, Libya and Eritrea. In other words, Zimbabwe is ranked among war-torn countries like Syria and others emerging from years of war such as Liberia or some sort of political unrest such as Libya.

Robertson said: “Many people seek (investment) approval and it takes many months. We will wait to see if the conditions will improve after investments approval are moved to the Office of the President. The process of getting approval is lengthy, expensive and investors are asked to pay exorbitant fees. After years of struggling, they get approval after the enthusiasm has died down. The condition is not good enough.”

Apart from being a generally difficult place to do business, Zimbabwe also tops the list of some of the most corrupt countries in the world.

On another note, basic utilities like water and electricity are a challenge. The country is also enmeshed in a labyrinth of bureaucracy. To illustrate the level of bureaucracy; it takes seven days to reserve a company name with the Chief Registrar of Companies, another 14 days to file the memorandum of association with the same office.

That is not all. After getting a certificate of incorporation, it takes another 14 days to register with the tax authorities for income tax, VAT, and PAYE.

Then there is registration with the National Social Security Authority for Pension and Accident Prevention and Compensation Scheme which takes 14 days.

Another day is needed to register with the Manpower Development Fund. An investor needs to pick up the form of licence application notice from the City Health Department then advertise the application for a trade and business licence in a local newspaper.

After all these processes, business owners have to wait for 34 days on average and submit an application form for the issuance of new licences to the Licencing Office in Harare Municipality. Fortunately, the city inspector shows up in 24 hours.

In Singapore, which ranked first in the doing business index, registration is done on-line with ACRA including company name search and filing the company incorporation and tax number.

Another day is required to make a company seal and is done online. After which an investor needs another day for signing up for Employee Compensation Insurance at an insurance agency, and a company becomes operational.

Against such a background, it is clear Zimbabwe needs to abandon its culture of red tape. Mugabe now wants amendments to the Companies Act and other relevant investment regulations to align them with the best business practices.

Other analysts say Mugabe’s commitment to policy and legal reforms is in doubt, given that he did not include amendments to the indigenisation Act when he outlined the legislative agenda for the third session of the Eighth Parliament last week. Also consipicuosly absent were the proposed amendments to the Mines and Minerals Act meant to make the extractive industry more transparent, accountable and sustainable.

Mugabe announced that 23 Bills will be brought before parliament during the third session.