When President Mnangagwa announced as part of the reform package at the start of his term that “Zimbabwe was open for business” along with promises, being steadily fulfilled, that legal and financial reforms were being implemented to turn a slogan into a practical policy, he did not put any limits on who could invest.
Everyone was welcome. Of course you have to obey the laws, but these are largely the streamlined tax, labour, financial and licensing laws, and even here if you have some good ideas to make the reformed set-up even better Zimbabwe will listen. The other point, which is a positive attraction rather than a law that hampers business, is that the Second Republic is totally opposed to corruption so if anyone offers to “smooth your way” for a fee, pass the word promptly.
Investors have been moving in from many countries. We have American, Australian and Russian mining and prospecting companies joining the South African companies who have been here forever; there have been some European companies quietly increasing their investment and business; and there has been Indian and south Asian investment, largely via their subsidiaries already in the region, building up their stake in Zimbabwe.
So it is wrong to suggest that China, and Chinese companies have been among the biggest investors, has some sort of hold and are favoured.
But there are a number of reasons why Chinese investors have been prominent in the investment area and in the provision of specialist contracts. For a start China is big. Depending on how you do the sums it is the world’s largest or second largest economy, and is easily the dominant global manufacturer plus having a lot of companies that have built up huge expertise in infrastructural work as China accelerated its own development. So regardless of any other fact there are more potential Chinese investors and when it comes to tendering for the really big stuff, a Chinese company will almost always be on the list of suitable suppliers.
A second factor is the access to trustworthy and correct information. Chinese company owners and managers do not rely on the media, and especially not on social media. They want the real low-down. When Zimbabwe changed the thrust of its foreign policy and embassies to emphasising trade and business, we were to a large extent following in the footsteps of the Chinese diplomats.
We have absolutely no idea what the Chinese embassy in Harare tells its own Government and tells Chinese businesspeople, but we suspect that the information is likely to be fairly complete and include the downsides as well as the upsides so that a Chinese company can make a full assessment.
Any Chinese investor, or any Chinese supplier, will have information needs and topping the list they will want to know if the country is stable, honest and pays the bills. Extra information on infrastructure availability and the pool and cost of skilled labour will be useful.
What we do know is that the present Chinese ambassador is remarkably energetic, both in gathering information and in making sure that where he can smooth out misunderstandings these are smoothed out. In other words he is doing a first-class professional job to help his own look for the “win-win” openings. He also works pretty hard to make sure that there is no xenophobia in Zimbabwe, and appears to give Chinese companies advice here as well.
The third factor arises from the sanctions regime imposed by the US, the other international economic giant, and what was done in the European Union. Technically these do not affect private companies, but because of the financial curbs they certainly sharply limit what can be done.
It is very difficult for an American or European company to use their banking systems for the normal trade and investment finance, even in the private sector, and when it comes to Government or parastatal contracts the difficulties become almost impossible. Obviously more would like to do more business in Zimbabwe, and they are, but they tend to have to be careful on the financing side so they do not run foul of their own laws.
Chinese banks are not in this boat and are not integrated into the American banking system. They will want to know the things all bankers want to know: Are the end customers reliable? Do they pay their bills? What sort of guarantees are in place if a deal turns turtle? Here the fiscal and monetary reforms of the Second Republic provide a lot of positive answers, and word of Zimbabwe’s growing reputation of being a decent business partner must get around.
So major Chinese companies are in the interesting and fortunate position of being among the world leaders in their particular business sectors, of having access to decent information on exactly what is happening in Zimbabwe and what sort of customer or business partner they are dealing with, and having access to normal prudent bankers who will consider each matter purely on its business merits without having to worry about the politics, and in particular without having to worry about the wilder side of the US Senate.
We need to remember that Chinese companies and their bankers are also in business. They are not charities. Good relations between the two countries help, but are not the most critical factor. We get investment from Chinese businesses for exactly the same reasons we get investment from other people, that Zimbabwe under the Second Republic is a sound business partner. If we lose that reputation then all the nice speeches on national days will mean nothing.
If the Western sanctions were lifted then not only would Zimbabwe have better access to global financial institutions, an important point for a developing country that has fixed its economic fundamentals, but would see more investment and trade from countries whose own business sectors are also hit by the sanctions regimes.
Chinese companies, so long as Zimbabwe keeps our present reputation, would obviously still be coming in and would still be extremely welcome, since our dealings with them are on a pure business level and we want all the business and investment we can get. But others could join them. Zimbabwe is not rationing investment openings, and if investment doubled so would our growth rates.