Zim FDI plunges as economy volatility increases

  • FDI inflows for FY 2020 expected to decrease to US$150.4 million
  • Africa’s FDI projected to contract between 25% and 40%
  • Socio-economic instability fuels Zim FDI decrease

Harare- Government anticipates a 40% decline in foreign direct investment (FDI) inflows for 2020 mainly due to the COVID-19 pandemic which has slowed economic activities across the globe.

In his 2020 mid-term budget presentation, Finance and Economic Development Minister, Professor Mthuli Ncube said FDI inflows for 2020 is expected to end the year as US$150.4 million from the US$249.5 million recorded in 2019.

He added that FDI inflows during the first half of the year is estimated at US$71.2 million compared to US$111.6 million recorded in the prior comparative period.

The decline in FDI is however not unique to Zimbabwe at the moment, with the United Nations Conference on Trade and Development (UNCTAD) forecasting a global decline of up to 40% in 2020 from $1.54 trillion, bringing FDI below $1 trillion for the first time since 2005.

FDI is projected to decline by a further 5-10% in 2021.

According to UNCTAD’s World Investment Report 2020, FDI flows to Africa are forecast to contract between 25% and 40% based on gross domestic product (GDP) growth projections and a range of investment specific factors.

The declines are attributed mainly to the twin factors of the coronavirus pandemic and low prices of commodities.

However, UNCTAD says FDI was already in decline before the COVID-19 pandemic evidenced by the 10% drop in inflows in 2019 to $45 billion with Southern Africa being the only sub-region to have received higher inflows in 2019 as FDI increased by 22%.

In the case of Zimbabwe, the decline in FDI is beyond the COVID-19 pandemic as the socio-economic instability in the country has made it a risky location to invest in.

Trading on the Zimbabwe Stock Exchange (ZSE) was recently suspended following a directive by Government which accused the ZSE of having a hand in driving the exchange rates and currency trades together with mobile money platforms, a move which among other such factors has the potential to repel foreign investors.

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