
Economy Uncensored with Tapiwanashe Mangwiro
Zimbabwe’s economic story has long been marked by volatility, with its financial sector often mirroring the turbulence of its broader economy.
Yet, amidst the challenges, the development of capital markets and efforts to attract Foreign Direct Investment (FDI) remain pivotal to the nation’s recovery and long-term growth.
With initiatives such as the Victoria Falls Stock Exchange (VFEX) and reforms aimed at enhancing investor confidence, Zimbabwe is signalling its intent to position itself as a viable destination for investment. However, the road ahead is fraught with obstacles that require strategic navigation.
The promise of the Victoria Falls Stock Exchange (VFEX)
Launched in 2020, the VFEX is a bold initiative aimed at attracting foreign investors and providing a platform for international capital. Operating in US dollars and offering incentives such as tax breaks and the ability to repatriate dividends freely, the VFEX is positioned as a gateway for regional and global investors seeking exposure to Zimbabwe’s economy.
The VFEX’s potential lies in its focus on export-oriented companies, mining firms and regional players. These sectors align with Zimbabwe’s comparative advantages, particularly in natural resources such as gold, platinum and lithium.
Through providing a platform that mitigates the risks associated with the Zimbabwean dollar, the VFEX addresses one of the most significant barriers to investment: currency instability. However, the exchange has struggled to gain traction. As of late 2024, only a handful of companies are listed, and trading volumes remain low. For the VFEX to thrive, it must overcome scepticism about Zimbabwe’s regulatory environment and demonstrate consistent, transparent governance.
Building trust among investors will require a sustained commitment to policy stability and the enforcement of investor protections.
FDI Trends and Sectoral Opportunities
FDI inflows to Zimbabwe have historically been subdued, constrained by factors such as political uncertainty, inconsistent policies, and infrastructure deficits. Yet, there are signs of progress.
The government’s efforts to streamline investment processes through the Zimbabwe Investment and Development Agency (ZIDA) and the establishment of Special Economic Zones (SEZs) are steps in the right direction.The mining sector remains the most significant draw for FDI, contributing over 70 percent of export earnings. Recent discoveries of lithium deposits have generated excitement, with global demand for electric vehicle batteries driving interest.
Companies from China, Australia, and other nations have begun to invest heavily in Zimbabwe’s lithium reserves, positioning the country as a potential key player in the global energy transition.
Agriculture and tourism also present opportunities for FDI. Zimbabwe’s fertile land and favourable climate make it a natural hub for agricultural production, while its iconic attractions such as Victoria Falls and diverse wildlife have untapped potential for tourism.
However, both sectors require significant investment in infrastructure and value addition to realise their full potential.
Barriers to investment
Despite these opportunities, Zimbabwe faces several barriers that deter FDI and limit the growth of its capital markets.
Chief among these is the perception of economic fragility, the legacy of hyperinflation, land reform policies, and currency crises has left investors wary. While recent efforts to stabilise the economy are commendable, persistent inflation and a lack of policy consistency continue to undermine confidence.
Another critical challenge is the regulatory environment, investors often cite concerns about bureaucratic inefficiencies, corruption and opaque legal frameworks.
For example, the indigenisation policy, which initially required majority local ownership in certain sectors, created uncertainty among foreign investors. Although the policy has been relaxed, lingering doubts about the government’s commitment to protecting property rights remain.
Infrastructure deficits also pose a significant hurdle. Power shortages, poor road networks, and outdated telecommunications infrastructure increase the cost of doing business and reduce the competitiveness of Zimbabwean enterprises. Addressing these deficits will require substantial public and private investment, as well as partnerships with international development organisations.
Policy recommendations for attracting FDI
To unlock the full potential of FDI and capital market development, Zimbabwe must adopt a multi-pronged strategy that addresses investor concerns while leveraging its unique strengths. Consistent and predictable policies are critical for building investor confidence.
The government must ensure that reforms are not only announced but also implemented transparently and consistently. Clear communication about policy changes and their implications will help reduce uncertainty. Robust institutions that enforce contracts, protect property rights and combat corruption are essential for attracting and retaining investment.
Strengthening the judiciary and regulatory bodies will go a long way in assuring investors of a fair and stable business environment.
Public-private partnerships (PPPs) can play a vital role in addressing infrastructure deficits. By creating an enabling environment for PPPs, Zimbabwe can leverage private capital and expertise to improve critical infrastructure such as energy, transportation and telecommunications.
The VFEX must be actively marketed to regional and global investors as a unique platform for accessing Zimbabwe’s growth sectors. Partnerships with international financial institutions and stock exchanges could help enhance its visibility and credibility.
Additionally, incentivising local companies to list on the VFEX will increase liquidity and attract more investors.
A focused approach to FDI attraction, prioritising high-potential sectors such as mining, agriculture and renewable energy, will maximise returns.
Tailored incentives and support for investors in these sectors can help catalyse growth and create a ripple effect across the economy.
Conclusion
Zimbabwe’s efforts to attract FDI and develop its capital markets are steps in the right direction, but they must be accompanied by bold and sustained reforms.
The VFEX represents a promising platform for integrating Zimbabwe into the global financial system, but its success hinges on addressing broader economic and governance challenges.
Through fostering a stable and transparent investment climate, investing in infrastructure, and leveraging its natural and human capital, Zimbabwe can position itself as a competitive destination for FDI.
The journey will not be easy, but with strategic action and a commitment to reform, the country can unlock its potential and chart a path toward sustainable growth.
Tapiwanashe Mangwiro is a resident economist with the Business Weekly and writes this in his own capacity. @willoe_tee on twitter and Tapiwanashe Willoe Mangwiro on LinkedIn