‘Zim should get back to basics’

Reserve Bank governor, John Mangudya giving keynote address at the Financial Gazette Top Companies Survey awards gala. Picture: OPIUM

THE Reserve Bank of Zimbabwe governor, John Mangudya, has called on Zimbabweans to create partnerships anchored on sincerity, best business practice and sound corporate governance to allow foreign capital inflows into the country. Mangudya, who was a guest of honour at the Financial Gazette’s Top Companies Survey 2014, sponsored by financial services giant Old Mutual and held under the theme “Building Partnerships Anchored on Excellence” on August 27, said the central bank was reviewing investment policies to improve working capital inflows for the productive sectors.

“We need partners with foreign capital to build the economy. These partnerships should be based on sincerity, best practice of doing business and good corporate governance,” he said, saying he had noted with sadness a tendency among Zimbabweans to squander working capital, prejudicing foreign investors with whom they would have joined hands with. The country’s foreign direct investment figures last year stagnated at US$400 million, the United Nations Conference on Trade and Investment (UNCTAD) World Investment Report 2014 shows.

The country’s investment figures show that FDI figures only doubled between 2010 and 2011 when the Zimbabwe Investment Authority’s One Stop Shop was introduced in 2010, but the figures have leveled since then. The U$400 million figure is not the lowest in the region, but pales in significance when compared against that of neighbouring countries. The UNCTAD report shows that South Africa received the highest FDI in the Southern African Development Community at US$8,1 billion out of the US$13,1 billion that flowed into Sadc, followed by Mozambique with US$5,9 billion.

Zimbabwe’s northern neighbours Zambia received US$1,8 billion in FDI last year. Mangudya said the Empowerment Act was instrumental in building partnerships between locals and foreigners. He said the indigenisation policy was not going to be a one size fits all.  “Based on three fundamentals, each sector will have its own way of complying with the policy; banking will be different from agriculture,” said Mangudya.

“We do not want partnerships to be limited or hindered by our policies. But at the same time we will be monitoring you (companies). Those who will be caught on the wrong side will be fined. Zimbabwe’s regulators are so nice and lenient that is why the same mistakes and violation of policies are done often by the same offenders,” he said.

Mangudya said when production goes up the country would have more exports and less imports meaning more jobs would be created and the economy would grow. The huge trade deficit averaging US$250 million per month is creating a situation where money, which is supposed to circulate internally thereby creating liquidity, is in fact being exported by financing imports. The gap is expected to widen further as the local industry continues to struggle to meet consumer demand.

Zimbabwe is importing goods worth about US$500 million versus exports of about US$250 million per month. If imports are high it means that there is opportunity to sell.  Zimbabwe’s trade deficit declined by 25,7 percent to US$1,76 billion in the six months to June this year from US$2,37 billion last year.  Figures from the Zimbabwe National Statistics Agency show that imports amounted to US$2,99 billion, from US$3,92 billion during the same period last year. Exports were at US$1,22 billion from US$1,54 billion last June.

“We need to be realistic and say no one will do it for us. Zimbabweans we are full of self hating and we should change this mind set, be disciplined and stick to basics. Leadership is an opportunity and you should leave a legacy when someone takes over. If given an opportunity use it positively to the best of your ability,” Mangudya said.

He said good corporate governance was key to the management of companies. It required companies to create value and partnerships.  “It is about respect of defined values from the top to bottom…The hyperinflationary era corrupted our minds. People no longer want to work and want to be millionaires overnight. Let us restart the formula and start with the basics of self discipline,” Mangudya said.

He said the present environment characterised by high non-performing loans no longer allows for such an environment to prevail. “NPLs are worrying, good money is chasing bad money.  Banks appetite for lending has reduced.  There is a close relationship between lending and growth of a company,” he said.

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