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UK warns citizens against doing business in Zimbabwe

by Staff reporter
18 Aug 2021 at 15:43hrs | Views
THE United Kingdom (UK) has warned its citizens against doing business in Zimbabwe as the southern African country ranks among high-risk countries to set up enterprises due to prohibitive and volatile foreign exchange controls.

It also said the country was plagued by high inflation, fragile property rights, and pervasive corruption.

The UK also blamed President Emmerson Mnangagwa's ally and petroleum mogul, Kudakwashe Tagwirei for eroding Zimbabwe's currency by engaging in arbitrage deals, which also spawned food price hikes.

Through an advisory statement issued Tuesday, the UK government said; "Under the UK's Global Anti-Corruption sanctions regime, Zimbabwean Kudakwashe Regimond Tagwirei was sanctioned, including an asset freeze and travel ban this year, for profiting from misappropriation of properties when his company, Sakunda Holdings, redeemed Government of Zimbabwe Treasury Bills at up to ten times their official value.

"His actions accelerated the devaluation of Zimbabwe's currency, increasing the price of essentials, such as food."

The statement further noted; "As well as targeted sanctions on the five individuals referenced on the UK sanctions list, the UK implements an arms embargo and transit restriction on military and dual-use goods trade with Zimbabwe as part of Export Control Order 2008.

"It should be noted that these are targeted sanctions, and not intended to deter trade and investment with Zimbabwe. Indeed, the UK continues to work with Zimbabwe to increase bilateral trade, with the UK-ESA Economic Partnership Agreements.

"Doing business in Zimbabwe can be challenging, with a number of obstacles and pitfalls. Repatriating profits and paying overseas suppliers is cited as the main challenge, and exporters to Zimbabwe should engage with their customers and/or bank to ensure that this risk is mitigated.

"The high and volatile inflation also makes the business environment more uncertain: many businesses price in US dollars but as discussed above the supply of foreign currency is erratic."

The UK also raised concern over Zimbabwe's poor human rights record while continued abuses have resulted in the placement of targeted sanctions, including travel bans and asset freezes, on four security chiefs on 1 February this year to reflect their role in the most egregious human rights violations involving six deaths protesters in August 2018 and 17 demonstrators in January 2019, it was also noted.

"Necessary currency reforms have been slow, and whilst businesses are currently able to pay overseas suppliers and repatriate profits through the foreign currency auction, this process is slow and unreliable.

"Exchange rate management by the Reserve Bank continues to leave a large gap between the official and parallel market rates, increasing the risk of arbitrage."

It further stated; "A legacy of the Fast Track Land Reform programme of the 2000s is the inability to use agricultural land as collateral, stymying investment in the agricultural sector.

"The current administration's relaxation of indigenisation requirements, and fledgling attempts to compensate dispossessed farmers, is a promising step, but occasional and localised instances of land invasions continue to damage the credibility of property rights in Zimbabwe.

"As a result, Zimbabwe's global competitiveness has been declining since 2015 and is below the sub-Saharan African average. Zimbabwe ranks 124th out of 137 in the Global Competitiveness Index (GCI)."

Source - newzimbabwe