Attracting investment: the very different approaches of Tanzania and Zimbabwe

Jun 21, 2011

The presidents of Tanzania and Zimbabwe have joined many others in Malaysia this week for a meeting of global South countries on how to meet the general challenges of development they face. It is also an opportunity for them to network and try to make a pitch for investment in their respective countries. As both countries compete with the rest of the world for foreign investment, it is interesting to look at some of the very different ways they are going about it.

Zimbabwe's Robert Mugabe said his country "offers an array of limitless opportunities in terms of the investment potential in the agro-processing, mining development, manufacturing, tourism and the infrastructural areas of power, water, roads, rail, air, telecommunications and information communication technology. You are invited to participate and add value to developments in these sectors."

Yet at the same time he makes this pitch, his government has gained notoriety for attitudes that range from seemingly mixed feelings about foreign investment to outright hostility.

Thousands of white Zimbabwean farmers who had their farms expropriated from them, destroying not only the farming of basic crops, but agri-processing and other related value-addition industries, the type that he is appealing for investment for from foreigners in Malaysia this week. The attitude was to destroy what was there that could have been re-arranged without bringing the country to its knees, and then try to rebuild almost from scratch.

Zimbabwe has a new requirement that all investors be willing to accept that the maximum equity they will be permitted to hold will be 49%, with the balance having to be in the hands of black Zimbabwean partners.    

"People have said it will drive away investment. We say it won't," Mugabe said in April 2010 at an investment conference in Tanzania. "Companies have been forthcoming ... I don't think it's a painful thing for them. Forty-nine percent is a lot," he said. 

A minister of Mugabe's in charge of spearheading the implementation of the new requirement said, “Foreign-owned (Western) companies are very arrogant, especially mining firms. The Chinese and the Indians are waiting to come in. Zimplats and other foreign-owned companies and mining firms should go back to Australia and their countries if they don’t want with our 51 percent share.”

The Minister cautioned the foreign-owned companies against taking legal action against his ministry for grabbing their claims under black empowerment saying whichever way, they would lose.

“You can take us to court but you will never win,” Kasukuwere said.

Contrast that with the statement of Tanzanian president Jakaya Kikwete at the current Malaysia meeting. He made a point of stressing, "You can have 100 per cent ownership or set up joint ventures with local companies."

If anything, Tanzania has been accused of being too friendly and welcoming to foreign investors. Some NGOs have alleged that rural communities have been displaced to make way for foreign agricultural concerns, including from Britain and Scandinavia, for farming for biodiesel.

So Tanzania has adopted a wide-open door policy to foreign investors, while Zimbabwe has adopted a more circumspect and selective approach to the conditions under which they will be welcome.

Which approach will work to attract investment in the first place, and in the second instance to achieve the benefits African countries hope to from foreign investment?

The Zimbabwe Review


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