Research Desk
Conclusion and TLDR;
Trust is a critical path for actually driving FDI, and investors will continue to avoid Zimbabwe until it is addressed. Even as Zimbabwe pulls out of the recession that had begun prior to COVID and hyperinflation descends into merely high inflation, the hallmarks of lack of investor trust remain: remittances exceeding net FDI and development aid inflows, the majority of daily economic activity occurring in informal or black market settings, and the lack of liquidity.
While there have been numerous attempts to create a bridge with Diasporans, including the recent 2021 revision of the Diasporan Policy, Diaspora policy without Diaspora trust will fail to drive greater investment beyond remittances in volumes that move the needle for Zimbabwe's economy.
At the end of the day, Zimbabwe is economically dependent on Diasporans to provide investment to the private sector because its government has chosen to prioritize currency over ensuring liquidity. In pursuit of currency control, it has engaged in monetary policy that effectively disincentivizes bank lending and has created a stock market bubble as no other asset classes have been able to appreciate faster than the rate of inflation - not even real estate.
Ultimately, to unlock meaningful growth that moves Zimbabwe out of its quasi-permanent debt trap its government must:
  • demonstrate it values Diasporans and treats them as actual partners in collaboration to ensure sustained and increased providing of liquidity
  • treat its Diasporans as a corporation does its major shareholders through approaches such as
    1. 1.
      Ongoing direct engagement
    2. 2.
      Transparency and early involvement in decision-making
    3. 3.
      Leveraging as valuable source of research into foreign investor sentiment towards investing in Zimbabwe
    4. 4.
      Being open to Diasporan leadership in the creation of financial institutions designed to drive greater FDI
Without costly signals of good faith in this direction, Zimbabwe’s economy will continue to under perform, and the majority of its resident population will remain impoverished and forced to rely on remittances and informal sector work to survive.
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