Country risk reference rating: 7 (7/9)
Country Risk Outlook: Stable
Economic and trade risks
In 2012, Zimbabwe’s nominal GDP was US$2.25 billion, the real economic growth rate was 3.1%, the per capita GDP was US$178, and the inflation rate reached 8.2%. The country’s industrial structure is agriculture (20.3%), industry (25.1%), and service industry (54.6%). Zimbabwe is rich in resources and has great potential for economic development. After the new government came to power, it promoted the “localization” policy, which may have a certain impact on the inflow of foreign investment. At the same time, under European and American sanctions, Zimbabwe’s economic foundation is still weak, with long-term economic account deficits, high international balance of payments risks, and foreign debt repayment risks that will exist for a long time.
Bilateral economy and trade
Since the establishment of diplomatic relations between China and Zimbabwe, economic and trade cooperation has developed rapidly. They have signed a number of agreements on economic and technological cooperation, trade and investment protection, etc. The two sides also have a mixed economic and trade committee to jointly promote bilateral economic and trade development. In 2012, bilateral trade volume reached US$1.02 billion. China mainly imports tobacco, cotton, ferrochrome and other products from Zimbabwe, and exports mechanical and electrical products, textiles, etc. to Zimbabwe.
In recent years, due to the deterioration of relations between Zimbabwe and the West, a large number of Western companies have withdrawn from the country or been nationalized due to the “localization” policy, and the West has reduced investment in Zimbabwe. The Zimbabwean government is conscious of strengthening ties with China. China has now become one of its most important partners and its largest investor. The main investment areas are mining, manufacturing, transportation, tourism, and agriculture.
Due to the small amount of Chinese investment in Zimbabwe before, the country’s “localization” policy has limited impact on Chinese companies. Coupled with the close relationship between China and Zimbabwe and the withdrawal of Western companies, Chinese companies have increased opportunities to expand in the country’s mining, tobacco and other fields. However, as Zimbabwe faces heavy pressure in finance, debt, foreign exchange and other aspects, risks for Chinese companies in project contracting still exist.
Business environment
The business environment in Zimbabwe is poor. For China, Zimbabwe’s economy has been stuck in a quagmire for many years due to sanctions, and fiscal revenue and foreign exchange reserves have plummeted. The government urgently needs to attract foreign investment and regard China as its most important economic partner. , has repeatedly stated that it will protect the interests of Chinese companies. At the same time, due to the large-scale withdrawal of Western capital, there are vacancies in Zimbabwe’s mining and tobacco fields that were previously controlled by Western companies and have the greatest investment potential, bringing certain opportunities to Chinese companies.
Agriculture, mining, manufacturing and tourism are key areas for attracting foreign investment in Zimbabwe, and have certain preferential policies.
Zimbabwe is a landlocked country, and its main transportation relies on railways, roads and aviation. Maritime transportation mainly passes through the port of Durban in South Africa, the port of Beira and Maputo in Mozambique. At present, the country has a total length of 19,000 kilometers of roads, 4,300 kilometers of railways, and 3 international airports. The country’s power infrastructure is insufficient and power outages are common.
Legal risks
The Ministry of Industry and Trade is in charge of trade in Zimbabwe. Trade-related laws include the Trade Law, the Competition and Fair Trade Law, the Customs and Tariff Law, the Trade Arbitration Law, etc. The government stipulates that imported goods worth more than US$10,000 must entrust a British inspection company to conduct mandatory inspection and price review before shipment. It also stipulates that Chinese goods inspected and certified by the Chinese commodity inspection agency must go to Hong Kong, China or Singapore for a “cleaning report” Foreign exchange can be settled only with “order”.
The department in charge of investment in Zimbabwe is the Zimbabwe Investment Authority. In 2008, the President signed the “Indigenization and Economic Empowerment Act”, which stipulates that all enterprises in Zimbabwe must achieve more than 51% local ownership, especially enterprises owned by foreigners and whites. 51% of the shares must be sold to local blacks or the government; new investment companies must reserve more than 51% of the shares for locals before they can be allowed to operate. (Issuing agency: China Export and Credit Insurance Corporation)
