For the past ten years, Zimbabwe has been riddled with economic stagnation as well as being the subject of political instability, thus that been the reason why many companies and countries have turned a blind eye as concerns investing. Once known as the bread basket of Africa, Zimbabwe has the ability to rise up again especially with the internationally accepted new government of Unity were the two major political parties, ZANU PF and MDC have come together to work as one for the betterment of the country and to fulfil the needs of the people.
There has been little to no investment in Zimbabwe as many pulled out during the past decade. Foreign investment is when a company invests financially in a country abroad, whether in the form of portfolio investments which include shares, stock and bonds, or in the form of direct investment where locally based operations are owned and controlled by the foreign investing corporation. Such investments are controlled by laws known as International trade laws. International Trade law includes the appropriate rules and customs for handling trade between countries or between private companies across country borders. Most countries are part of a body that has made an agreement for trading internationally. Zimbabwe is part of several including UNICTRAL (United Nations Commission on International Trade Law), BIPPA (the Bilateral Investment Promotion and Protection Agreement) and COMESA (the common Market for Eastern and Southern Africa). Zimbabwe’s local body, governing foreign investment is the Zimbabwe Investment Authority with approval necessary from the Reserve Bank of Zimbabwe and Registrar of companies. The extract below shows the depths to which the Zimbabwean economy had fallen.
Foreign Direct Investment Statistics
52. Zimbabwe Net Investment Flows 1998-2007 (US$ million) |1998 |1999 |2000 |2001 |2002 |2003 |2004 |2005 |2006 |2007 | |Direct Investment |436 |50 |16 |0 |23 |4 |9 |103 |40 |69 | |Portfolio Investment |11 |21 |-1 |-68 |-2 |4 |2 | | | | |Source: IMF, UNCTAD, Ministry of Finance
However, what is common is that Africa is the one continent that most global capitalist powers compete for due to its vast resources and wealth, examples being of Nigeria and its oil, The Congo, Zimbabwe, South Africa and Botswana for their diamonds and precious stones as well as many other aspects such as Tourism. Zimbabwe to one of the Wonders of the world, and some people like investing in tourism, but over the past decade they decided not to. Countries would have loved to do that for reasons such as the 2010 world cup but in as much as opportunities arise, if a country is not politically and economically stable, it becomes almost obsolete to even the most interested investors.
Zimbabwe economic situation was is dismal, having the “largest peacetime drop [in GDP] ever recorded” (http://www.state.gov/e/eeb/rls/othr/ics/2009/117167.html) at roughly 50%. The Economist Intelligence Unit (in the USA) estimates that 12.8% of the GDP dropped in just one year- 2008. The inflation rate is the highest in the world, officially estimated at about 231 million percent in July last year. Unofficially however, inflation rates of the Zimbabwean dollar are said to be hundreds of billions if not quadrillions; and this is only the tip of the ice berg. The reasons why foreigners had pulled out were because of:
• the instability that was brought about after the land return programme • political instability - divisions between the two parties and how that affected the country • Economic sanctions - these can cripple a whole economy and country • the breakdown of the stock exchange
• the non transparency of the companies and their involvement with government • high taxes
• unprofitable economic environment
• inflation that started in the thousands and ended in the millions • the laws and regulations governing foreign investment • limited...
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