PATRICK CHINAMASA
Minister of Finance
Economy / Zimbabwe
“Zimbabwe is open for business.”
What is being done to stabilize the financial sector?
Our financial system is still recovering from the hyperinflation we had prior to 2008. To combat this, we adopted the multi-currency system where the US dollar became the most widely used currency. This didn’t solve all the problems straight away, but following a number of confidence building measures, stability has been greatly improved. The central bank and the inter-bank market have been strengthened, allowing, for example, interest rates to drop to around 15 percent. Currently there are 18 banking institutions, as well as microfinance institutions, asset management companies and insurance companies. Now we have a fairly diversified and sophisticated financial system.
How is the government dealing with the liquidity problems facing the banking sector?
To increase liquidity, the government has been encouraging interbank activity, inward foreign investment, diaspora remittances, as well as increasing exports. Also, we are engaging with our creditors with a view to resolving our debt situation, and work is progressing very well, even if there is still a long way to go. We are promoting effective financial intermediation, and so restoring and building confidence in the financial sector.
How is this newfound confidence benefiting Zimbabwe’s recent economic development?
The previous debt situation and international sanctions strongly affected our economic potential. We are emerging from a “lost decade” where infrastructure investment collapsed and unemployment rose dramatically. Since the reforms real GDP growth returned, peaking at 11.9 percent in 2011, before declining to 3.2 percent in 2014. However, the current level of growth of 3 percent is lower than our targets, due to excessively high interest rates. Because of this, access to capital and long term project finance is very difficult. So, we are working to attract investment into areas such as power generation, roads, water and sanitation. The development of important infrastructure will form an effective base for sustainable growth.
How would you characterize Zimbabwe’s financial relationship with China?
Most of our FDI has come from China and financial relationships are first and foremost based on trust. Our confidence building measures are sending the right signals to all potential investors. We are confident that these steps will encourage Chinese investors to not only provide capital, but also to provide frameworks to ensure that loans go to our most productive areas.
What assets are most attractive to foreign investors?
We have huge mineral resources, with investors able to start working at an early stage to build our mining industry. There is a lot of “low hanging fruit” that is very attractive to any foreign investor. Another example is that Chinese investment is currently playing a big role in tobacco contract farming. We invite Chinese investors to extend their support to critical sectors such as cotton, horticulture and food production. Investors can also establish manufacturing plants to add value to commodities in sectors as diverse as agriculture, pharmaceuticals, clothing, the leather industry and many more. There are plenty of investment opportunities here and people should know that this country is changing fast. Zimbabwe is open for business.
