- Zimbabwe ranked worst investment destination in Africa by Rand Merchant Bank's research
- Country struggles with persistent inflation, currency fluctuations, and unemployment
- Mmining sector shows promise, but electricity demand and infrastructure challenges persist
Harare- South Africa's Rand Merchant Bank conducted research on 31 African countries, producing a ranking chart for the best and worst places for investment among these nations.
According to the 2024 report, Zimbabwe ranked 31st out of 31, making it the worst place to invest.
Zimbabwe performed the worst in all these categories, even being outdone by war-torn countries like the DRC. This situation worsened from 0.78% in 2023 to 0.80% in 2024.
President Mnangagwa, upon assuming office, pledged to implement various measures to reset relations with America and the West and improve the economic environment.
These measures included fighting corruption, addressing fiscal mismanagement, ensuring free and fair elections, and promoting economic freedoms.
This research by RMB is significant and carries substantial weight, as it was conducted by a fellow African country and SADC member, which is Zimbabwe's greatest ally on the continent.
RMB is a South African-based financial services company with extensive expertise in African markets. Its research and rankings are widely respected due to its deep understanding of the continent's economic landscape.
As a financial institution, its assessments are grounded in economic data and market analysis, providing a reliable perspective on investment opportunities in Africa.
Since the advent of the Second Republic, Zimbabwe has struggled with persistent inflation, prompting the introduction of various currency instruments, including Bond Notes, RTGS, and ZWL.
Zimbabwe has also been battling hyperinflation since 2019, with July 2020 recording an inflation rate of over 800%, according to official statistics from Zimstat.
Ultimately, the Zimbabwe dollar was abandoned in favor of the Zimbabwe Gold (ZWG) in April 2024.
However, the efficacy of ZIG remains uncertain, and its performance thus far suggests a premature demise, mirroring the trajectory of its predecessor, ZWL.
Regarding investment climate, Zimbabwe's efforts to diversify its investment portfolio have been skewed towards China, while struggling to make inroads in European and American markets due to high debt levels and corruption.
Nevertheless, there has been a marginal improvement in corruption perceptions compared to the Robert Mugabe era.
Notwithstanding, Chinese investments in Zimbabwe have been on the rise, particularly in the mining sector, with a notable focus on lithium extraction.
This surge in lithium mining activities has led to an increased demand for electricity.
Meanwhile, the government has allocated significant funds, running into billions, towards infrastructure development, including road rehabilitation and agricultural enhancements.
However, these efforts appear insufficient to reverse the country's economic fortunes which needs more of political reforms and abating financial mismanagement and corruption.
Rand Merchant Bank assessed various factors, including economic performance and potential, market accessibility, economic stability and investment climate, and social and human development.
In terms of economic performance and potential, this category captured issues such as GDP, per capita income, and growth structure. Zimbabwe’s growth structure is being adversely affected by power challenges and droughts, with the government’s turnaround plans proving unfeasible, at least in the short term.
The pillars of the country’s economy are manufacturing, mining, and agriculture. Agriculture is heavily impacted by drought, while the growth efficacy of the manufacturing and mining sectors is diminished by high taxes and power challenges.
Currently, 20% of miners’ costs are attributed to electricity issues.
Market accessibility and innovation are areas where Zimbabwe significantly lags. The country is a net importer and does not produce much on its own, relying heavily on South Africa and other neighboring countries.
This dependency stifles the country’s innovativeness. Additionally, connectedness—referring to the integration of a country's economy with global markets—is similarly lacking. Zimbabwe’s connections are largely confined to Africa, particularly SADC and China, due to strained relationships with the West.
Regarding economic stability and the investment climate, Zimbabwe continues to struggle with economic stability, a challenge that has persisted since 2000. The foreign exchange market is unstable, with a premium of 75% existing between the parallel and formal markets.
Property rights and business-friendly regulations remain areas the government is still working to improve.
Although there was a positive change in corruption transitioning from the Mugabe era to the Second Republic, Zimbabwe remains highly corrupt, ranking among the worst in Africa.
The Gold Mafia documentary and the latest Auditor General’s report exposed high-level graft in government-run parastatals, where the country is losing close to billions annually.
Recent revelations indicate that over US$17 million was spent on purchasing vehicles for chiefs, funds many believe could have been better utilized in healthcare or the energy sector.
Though there are notable improvements of inflation using the official data, Zimbabwe’s inflation remains unstable.
Finally, on social and human development, unemployment is one of the critical issues the government is facing. In 2023, the number of unemployed individuals in Zimbabwe was close to 3 million, translating to 47% of the working-age population.
However, unofficial statistics suggest that unemployment may reach as high as 90%, with only 10% of the population employed.
Human development, a broader measure of well-being that encompasses health, education, and overall quality of life, reveals significant challenges for Zimbabwe as a whole.
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