Zim investments wilt amid regulatory uncertainty

Harare – Zimbabwe is pleading with foreign investors to sink money into the cash-starved and struggling economy, pledging that up to 100% of profits and dividends can be repatriated outside the country.

However, bankers and fund managers insist that it is taking longer to process remittances. The central bank has previously said that dividend and profit remittances are top priority.

“It is still a cumbersome process and there have been frustrations over delays. We strongly feel this can be improved on because it gives investors the certainty that they have an exit strategy when the time to leave comes,” said a finance manager.

Zimbabwe has seen investments wilt, and analysts blame this on an uncertain economic and political framework. South African investors have largely maintained their investments in the country, although companies such as Impala Platinum and Anglo Platinum are limiting fresh capital advancements to their Zimbabwe projects.

“Foreign investors can therefore bring any amount of capital into the country and at the same time, repatriate up to 100% of profits and dividends generated from their investment,” Reserve Bank of Zimbabwe governor John Mangudya said in a report published on Monday.

The report, entitled Foreign Trade and Investment Guidelines, also said foreign investors and local entities are allowed “to borrow any amount to fund their activities”, with external borrowings of “$10 million and below processed at bank level” and without prior Reserve Bank approval. 

In a bid to help local companies escape Zimbabwe’s high-risk profile – which has seen most financiers develop cold feet in advancing money to Zimbabwean corporates – Harare now allows locally incorporated entities to establish offshore holding companies through share swaps.

“The offshore holding companies will be directly owning local assets. The policy objective is to allow local companies to raise capital offshore for purposes of funding local operations, managing the country’s perceived risk and enhancing market liquidity,” the central bank said in the report.

Changes to indigenisation policy

President Robert Mugabe recently clarified indigenisation policy, saying current mining companies will have to retain 75% content of their earnings inside the country through wages, taxes and other payments instead of the previous stance where they were required to cede 51% of shares.

However, mining investors in Zimbabwe – which include Sibanye Gold, Caledonia Mining Corporation and Asa Resource Group – are also required to give 10% shareholding into employee and community share ownership trusts under the indigenisation policy.

The central bank report said “foreign investors may invest up to 49% in unlisted companies for existing projects" and exchange control permission is granted for such investments, while “special dispensations are also granted to allow foreign equity participation of up to 100%”.