President Emmerson Mnangagwa says his government is committed to attracting and promoting domestic capital the same way it is promoting foreign direct investment.
This was after several economic experts told The Financial Gazette last week that the new administration should prop up local investors first before opening the country to foreign capital, which is sensitive to political upheavals.
“As we focus on attracting foreign direct investment in the country, my government equally understands the importance of domestic investment in driving growth,” he said at an Old Mutual Zimbabwe anchoring in Africa gala dinner.
“Zimbabwe needs its own heroes, big and small. We are, thus, equally determined to also promote domestic investment and create domestic entrepreneurs,” he added.
Since he took the levers of power last November, Mnangagwa has made various foreign trips to Switzerland and China among other nations appealing for foreign direct investment to jumpstart the country’s ailing economy.
However, research has shown that domestic investment is one of the most important components of the economic growth of any country and the main engine of economic growth.
Confederation of Zimbabwe Industries president Sifelani Jabangwe last week said there was need for greater support and recognition of local business as the country fights to turn around its economic fortunes.
“Domestic investors should be promoted because they are more stable. In the event of any economic challenges, domestic capital is normally more resistant and this is why we are advocating for more partnerships as opposed to foreign investors coming in and taking away all the resources,” he said.
“When we say Zimbabwe is open for business, we must ensure that local investors are also given the same incentives and opportunities as foreign investors.
“Domestic investors also have the capacity to turn around the economy, but require technical and financial assistance,” he added, in the aftermath of the industry body’s recent resolution to lobby the government on the urgent need to mobilise domestic capital to improve the country’s stuttering economy.
Jabangwe’s remarks also come as top regional commentator and this year’s Top Companies Survey guest, Kevin Wakeford, has said Zimbabwe can raise up to 60 percent of its total capital needs domestically.
The South Africa-based businessman also told the gathering, co-hosted by The Financial Gazette and investment giant Old Mutual in June, that most global economies were thriving by blending both local and foreign investments – a move Zimbabwe could emulate “to be the Singapore of southern Africa”.
Economic analysts argue that Zimbabwe can finance its development from domestic financial resources if innovative instruments are deployed and supported by appropriate means of implementation.
A number of African countries have taken this route.
International best practice has also shown that an efficient tax administration system, including broadening the tax base, could also help the country mobilise its resources, while diaspora bonds could be another avenue.
South Africa-based investment banker Cynthia Moyo said considering that most developing countries faced significant resource constraints there was an urgent need for the country to turn to domestic sources of funding such as pension assets to finance long-term infrastructure projects such as power generation, transportation and telecommunications networks.
“Statistics from the African Development Bank show that Zimbabwe could be losing at least $1 billion in potential investment annually due to poor infrastructure.
“As such, using the country’s pension fund assets that are valued at over $10 billion … would make the country an attractive investment destination,” she said.