Doing Business In Zimbabwe

Doing Business In Zimbabwe

"Zimbabwe is an economic success story waiting to take off." Many people have stopped waiting because the boom is inevitable.

Ernst & Young's (EY) Emerging Markets research office released a study titled 2013 Africa Attractiveness Study. This study utilized EY's African presence to give some insight into business on the ground in Africa. Zimbabwe was featured nearly a dozen times throughout this 70-page study.

But what is it really like doing business in Zimbabwe? When speaking to people outside of the African Continent, the number one issue with the “Invest in Africa Talk,” and specifically in relating to Zimbabwe, is that people have a stigma in their mind of what it's like to do business there.

This article is designed like a rocket: The goal is to break through the stigmatism barrier in hopes that you’d find a whole new world ripe with opportunity both financially and philanthropically.

The World Bank's "Doing Business In" 2012 research team did a study on Doing Business in Zimbabwe. Here's what they found. It’s deterrently shocking or completely exciting, depending on how you look at it:

It takes 90 days to start a business. Getting electricity takes 127 days. There is ZERO credit available at this time—you have to use cash (and most of it is dirty—literally). Enforcing a contract legally takes 410 days and trading across borders takes 73 days to import with a cost per container of $5,101 and 53 days to export (container cost of $3,280). 9 docs to import. 8 to export.

Foreign Direct Investment (FDI) neared its historic high in Africa in 2012 at $37 billion. In-flows to Sub-Saharan Africa is at an all time high. As a whole, the continent of Africa is growing at 5% a year. The small country of Zimbabwe is growing at 5.3%. Africa's middle class is rising and Zimbabwe is slated to hit that dominant middle class level by 2025, which happens to coincide directly with our goal of launching 100 ideas that impacts 500,000 people by 2025.

Interestingly, Zimbabwe is growing at 5.3% annually and that is with a government that is crippled and at a standstill (or sluggish crawl at best). Imagine the growth in Zimbabwe with more favorable business laws and governance.

"Policy matters for maximizing positive and minimizing negative effects of FDI." via UNCTAD's study in 2012.

Even though Zimbabwe is last in on the list of countries alphabetically, and may always be, Foreign Direct Investment (FDI) projects produced a 24.6% return per year. Along the lines of governance, Zimbabwe's government has set a precedent of growing to a $100 billion USD economy by 2040 (a growth of 10 times). This initiative started in the private sector, but is gaining increasing traction in the public sector.

Another success story to mention here is the Chirundu one stop border post (OSBP) between Zambia and Zimbabwe. This post has cut import times from 3 hour waits to 30 minutes, and increased traffic flow to 300 to 400 vehicles a day. This OSBP is an important achievement in the region. More posts like this will continue to open Zimbabwe's borders and increase the regional trade capacities.

In EY's conclusion, they directly call out Zimbabwe by saying, "Zimbabwe is an economic success story waiting to take off." With historical lack of governance and an economic collapse not even 6 years ago, the fact that Zimbabwe is churning 24.6% on FDI projects and is keeping growth pace with the best of the best in Africa is an amazing feat.

How To Do Business In Zimbabwe

Relationships are everything—in business, in family and in politics. This cliche statement comes to life in Zimbabwe. We see deals and opportunities done every day that with the right relationships can produce incredible rates and returns. With this magnificent upside, there is a large risk factor, but when you do business with people you know, like and trust, we've found this risk to be diminished significantly over time.

Things to expect while working here:

  • "Make A Plan" mentality. Zimbabweans by nature want to figure things out. They are entrepreneurial minded and are very good at adapting to curveballs.
  • "Just now." Communication is lacking significantly. When we find someone who communicates at a high level, they pique our interest. Lack of communication is a huge cultural and societal business problem.
  • Potholes in the road. No texting and driving here, you may end up in a pothole the size of a small quarry. Keep your ear to the ground and on the pulse of your project. If you don't, you'll be taken for a loop.
  • Set deadlines and expect them to be missed. We constantly look to create hard deadlines. If you can get your team to abide by a schedule and hard deadlines, you'll be well on your way to successfully growing your venture. If you don’t create a “give” in your expectation (where all parties share in responsibility)—you’ll leave because of high blood pressure.

Consider it. That is, Investing in Africa.

When considering the opportunities and challenges in Africa, it is important to remember that Africa is a continent and not a single country. There are 55 countries at different stages of development with different agendas. However, the majority of these belong to regional groupings, which implies different cross-border arrangements between states, depending on membership of these groups.

Africa is not isolated and is rather, an integral part of the global interconnected world. This implies that, whatever happens, the global economy affects Africa, and issues in the developed world impact Africa.

Investment word to the wise

One of the key issues with investment in Zimbabwe is the risk/reward balance which investors need to understand. Investment-grade countries like South Africa, Botswana and Namibia might offer lower returns than seen elsewhere on the continent, though this is associated with a lower risk. Other countries with higher risk like Nigeria, Tanzania and Zimbabwe could offer higher rewards in return.

Regardless of who the investor is, Africa continues to offer numerous opportunities in the post-global financial crisis world, though the options are as varied as the countries themselves.

According to the Foreign Direct Investment to Africa research paper conducted by Elsabé Loots and Alain Kabundi, one of the major challenges for "African countries relates to the fact that natural resource-driven FDI, and especially oil, has limited linkages to domestic enterprises and little impact on downstream activities in host economies. African countries need to implement programmes to channel petroleum and mining revenues for investment in physical and human capital that is supportive of broader economic growth and development."

This is where Philanthropic Investment comes in. Investors and organizations must stop shipping money to Africa that isn't accounted for. Zimbabwe can hit a $100 billion economy and Africa can continue it's rise, but businesses and investors must do the work, establish relationships with trustworthy businesses and connections, and push for complete transparency in their dealings. Africa needs FDI, but it needs it with added accountability and responsibility to sustain longterm growth and change.

(feature photo via tim morch)