Friday, 18 November 2016

The Introduction of Bond Notes To Affect Foreign Direct investment and Diaspora Remittances

THE introduction of bond notes will have a negative impact on foreign direct investment (FDI) and Diaspora remittances, the Zimbabwean Diaspora Network in North America has warned.

The Bulawayo City Council recently issued the network with a permit to develop a $1,6 million housing project in Hillside suburb, but the proposed introduction of bond notes now posed numerous challenges to the venture.

“The high-end Leander Villas development comes at a time when the government is introducing bond notes which will likely have a negative impact on attracting investments into the country,” head of the Diaspora Network and Comfort Creek Land Developers chief executive officer, Pedzi Makumbe, told NewsDay in a telephone interview from his United States base.

“We secured financing for the project a while ago. Hence, we don’t think the bond notes will have much impact on our ability to develop the properties. However, it will likely impact our potential clients, and we are monitoring the market developments carefully.”

According to the Reserve Bank of Zimbabwe, the bond notes are supported by a $200 million African Export Import Bank facility as a 5% incentive to exporters.

Zimbabwe is desperate for FDI and Diaspora investments, but due to poor economic policies, it has lost out to regional peers like South Africa and Zambia.

Last year, FDI inflows into Zimbabwe went down by 23% to $421 million from the previous year’s $545m.

The 2014 numbers were the highest since the country embraced a multicurrency regime in 2009

The Diaspora community contributes over $1 billion to the Zimbabwean economy and, as such, the country is eager to attract more from its nationals living elsewhere.

According to statistics, more than three million Zimbabweans live outside the country and contribute about 10% to GDP through remittances.

But the introduction of the surrogate currency could have negative effects on these figures.

As a solution to liquidity crisis, the Confederation of Zimbabwe Industries is lobbying the government to use South African rand as a transacting currency and United States dollar as a reserve currency.

The Bankers’ Association of Zimbabwe told the Parliamentary Portfolio Committee on Finance a few months ago that the use of the South African rand was ideal as it was no longer sustainable to continue use the greenback.
The Introduction of Bond Notes To Affect Foreign Direct investment and Diaspora Remittances

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