ZIMBABWE faces economic challenges that can be partly attributed to lack of foreign investment. Kuthula Njokweni
This happens at a time when the world is awash with investment funds seeking opportunities and Zimbabweans in the Diaspora are keen to invest back home.
The government, in partnership with the Diaspora should consider establishing an investment initiative I call fronting investment to boost investment and provide a conducive environment for the Diaspora moguls to return home.
Fronting investment entails a Zimbabwean in the Diaspora with little or no capital identifying an investment opportunity back home in his/her area of expertise.
That person pursues the opportunity by making arrangements with the government to obtain a licence that provides concessionary terms when setting up a business with a foreign partner.
The foreign partner will bring capital and agree to structure the business in a manner that gradually cedes 51% of shareholding to the Zimbabwean partner over a certain period upon agreed business terms. Fronting investment has many benefits.
Foreign investors come into the country fronted by a Zimbabwean, thus avoid many of the hassles and costs associated with a foreigner establishing a business.
Of course, there is the most-favoured countries provision under the World Trade Organisation’s General Agreement on Trade and Services free trade regime and bilateral investments arrangements, which requires countries to treat one’s trading partners equally on the principle of non-discrimination.
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However, such provisions are subject to lengthy and costly discussions, many times disregarded based on political imperatives.
Fronting investment can be ensconced within such arrangements, but will have an added advantage because investment is already considered a local business and compliant with the indigenisation and empowerment act, and the investor has avoided the hassles of business licensing.
The Zimbabwean in the Diaspora stands to gain huge benefits from fronting investment.
It provides an opportunity to utilise his/her skills; allows him/her to explore and fulfill his/her dreams, which in the first instance, was the reason he/she migrated.
The Diaspora community has an opportunity to make a cushioned home return, avoiding that dreaded, “What will I do when I get home?” scenario, which keeps most Zimbabweans in the Diaspora.
The country will benefit in terms of economic growth, which leads to more revenue streams. The new revenues will help the less fortunate, improve infrastructure for both communities and businesses.
In addition, the country will experience a brain gain that will establish a vibrant knowledge-based economy.
Fronting investment projects will lead to an increase in investment and inflows of foreign currency thus offsetting the precarious imbalance of payments situation we experience.
It will also create a diversified and strong private sector-led economy, which has been the clarion call to government by most economic players.
The government will get an opportunity to apply the indigenisation and empowerment law with a higher level of consensus because a super majority of the Diaspora who have a direct stake in their investment ideas will support a law that protects their interests in these investment arrangements.
There are challenges and opportunities associated with implementing fronting investment.
The main challenge is that the country remains under economic sanctions from its traditional Western trading partners.
The Diaspora could therefore search elsewhere for potential partners such as in India, and in Western countries who have indicated their strong opposition to the economic sanctions.
Increasing the number of Western investors will create a strong voice against those governments to lift the economic sanctions that would be, after all, hurting the investments of a large number of their investing community.
In fact, those countries understand that economic sanctions are detrimental to their strategic economic interests considering the cutthroat competition from China in the last global economic frontier, Africa.
To explore fronting investment, the government would need to conduct preliminary online consultations with the Diaspora community and potential investors to market the initiative; then incorporate a statutory provision for this initiative in the indigenisation and empowerment law.
The government, through the Zimbabwe Investment Authority would develop a website with a database that acts as a forum for the meeting of Diaspora communities and investors.
The Diaspora should commit itself fully to this initiative.
It should actively identify opportunities and seek investors in and beyond its professional networks.
This initiative is meant to not compete against existing investment programmes, but incorporate more investment players and create a wider investment drive.
