eBusiness Weekly
Nelson Gahadza
The continued exodus of international brands from Zimbabwe is a complex issue with multifaceted causes and consequences, and while the negative impacts are undeniable, the situation also presents an opportunity for positive change, experts have said.
The recent departure of Deloitte, a global professional services giant, from Zimbabwe has cast a spotlight on the growing trend of the exodus of international brands and businesses from Zimbabwe.
This trend, marked by the exits of companies like Nestle, Unilever, Barclays, Murray & Roberts, and most recently, LaFarge Cement, has sent shockwaves through the Zimbabwean economy, raising concerns about its attractiveness as a business and investment destination.
“Understanding the reasons behind this exodus, its impact on Zimbabwe, and the potential paths forward requires a nuanced analysis of the complex interplay between ongoing reforms, lingering challenges, and the harsh realities of the business environment.
“By addressing the root causes of business departures, implementing meaningful reforms, and fostering a more conducive investment climate, Zimbabwe can navigate this challenging period and emerge as a more attractive destination for international brands and investors.
“The road ahead will require a delicate balancing act, but with potential rewards for Zimbabwe,” Malvin Chidzonga, chief investment and research officer at Nivteil Capital, told Business Weekly.
He said attributing the international exodus solely to one factor would be an oversimplification, but there are a multitude of motives at play, each contributing to the decision of companies to pull out of Zimbabwe.
Chief among them, he said Zimbabwe’s economy has been plagued by stagnation for over two decades, characterised by hyperinflation, currency instability and high unemployment, which created a challenging environment for businesses to operate profitably.
“Deloitte itself cited ‘the increasingly challenging economic environment’ as a key reason for its exit,” said Chidzonga.
He added that policy inconsistency and an unpredictable regulatory landscape create uncertainty for investors, as the periodic issuance of statutory instruments also causes anxiety in the private sector.
The investment analyst also highlighted that Zimbabwe’s infrastructure, from power grids to transportation networks, suffers from chronic deficiencies that raise operational costs and hinder efficiency, making it difficult for businesses to compete globally.
“Despite ongoing efforts to combat corruption, the perception of widespread graft persists, deterring potential investors who fear unfair competition or expropriation of assets.
“There are some businesses that have exited not because of the challenges in Zimbabwe but because of ideological differences and perception issues with the local empowerment initiatives spearheaded with good intentions by the government for its people,” said Chidzonga.
Victor Bhoroma, an economist, said it has become increasingly difficult to audit Zimbabwean firms due to currency inconsistency, foreign exchange disparities that make reporting a nightmare, economic risks, high levels of corruption in the corporate sector, and economic instability that negatively impacts earnings.
He said organisations that follow codes of ethics could have their reputations on the line in a globalised village.
“The country’s standing as an investment destination remains precarious. It also speaks to the complex ease of doing business that businesses face every day. It definitely needs a policy change and reforms to improve,” he said.
Another economist, Vince Musewe, said an unstable economic policy environment is not attractive to anyone, and the key discouragement is currency issues, where new policies come up too often, creating financial chaos in the economy.
“A deterioration in corporate governance in general also makes it very difficult for audit firms to operate. It is a high-risk environment,” he said.
However, Chidzonga noted that the exodus of international brands has profound ramifications for Zimbabwe’s economy, both negative and positive.
He said that as companies shut down or downsize, jobs are lost, impacting livelihoods and exacerbating the unemployment crisis, and the closure of major manufacturing plants can have a domino effect on entire communities.
He added that the departure of established brands discourages new investment, further limiting the opportunities for economic growth and diversification, and this can create a vicious cycle as a lack of investment makes the economy less attractive, leading to more exits.
“Skilled professionals, often employed by international companies, may leave the country seeking better opportunities elsewhere, and this deprives the nation of valuable human capital, hindering its long-term development prospects.
“The exodus can also damage Zimbabwe’s international reputation, signalling to potential investors that the country is not a viable business destination, and this can further isolate the economy and limit its access to much-needed capital,” said Chidzonga.
On the other hand, Chidzonga said the departure of international brands can create space for local companies to step up and fill the gap.
He said a good example is the takeover of Standard Chartered Bank by FBC Financial Holdings, which will enhance the balance sheet strength of FBC Bank and its underwriting capacity.
“The exits can be an opportunity for domestic businesses to grow and gain market share,” he said.
He indicated that the exodus can also act as a wake-up call for the government, highlighting the need for urgent policy reforms to improve the business environment and attract investment.
“With less competition from international giants, local companies may be able to focus more on serving the domestic market, potentially boosting local production and consumption,” he said.
Dr Prosper Chitambara, an economist, said a lot of work is needed in terms of ensuring that the business environment, the doing business environment, is conducive for investors, especially around ensuring there’s macroeconomic sustainability.
“Low and stable inflation and exchange rate stability are critical essentials in terms of incentivising greater levels of foreign investment.
Chidzonga said for the country to reverse this trend and attract new investment, several key steps are crucial, including implementing consistent and predictable policies, tackling corruption effectively, and stabilising the currency.
He said investing in critical infrastructure, such as power, transportation, and communication networks, is crucial to reducing operational costs and improving efficiency.
Investment analyst Enock Rukarwa said the presence of Deloitte Africa in Zimbabwe was necessitating technology transfer and knowledge spillover which contributes to innovation in relevant operations, however this discontinuation of operations may slow down technology transfer locally.
He added that while the discontinuation in Zimbabwe by Deloitte may affect the nation as a stable and attractive destination for foreign investments, this will enable other businesses to penetrate the niche market.
