Profitable Investment In Zimbabwe

Profitable Investment In Zimbabwe – I certify that this dissertation conforms to the preparation guidelines presented in the faculty guide and dissertation typing instructions.

I confirm, to the best of my knowledge, that the necessary procedures and criteria for the preparation of this thesis have been met.

Profitable Investment In Zimbabwe

I, NIONI THABANI., declare that this project is an original copy of my own work and has not been previously published or submitted to any other institution or university.

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I dedicate this work to: Almighty God without whom nothing is possible; to my loving mother, Mrs S Niona; who raised me and taught me the values ​​of hard work and love, and whose prayers and encouragement remain my main source of inspiration; and finally to my objections Mr. M Nyoni and Dr SP Nyoni for their unparalleled and endless support to which I acknowledge that my academic achievements are a product that owes a lot to their contribution.

Private investment is a powerful tool for innovation, economic growth and poverty reduction. Countries with wider and deeper private sector investment show accelerated growth (Majeed M.T. and Khan S, 2008). Motivated by concerns about the continuous decline in private investment in Zimbabwe since 1980, this study empirically investigated the determinants of private investment in Zimbabwe using time series data for the period 1980-2013. The study used OLS assessment criteria. The results show that public investments; FDI and GDP are statistically significant in explaining the determinants of private investment in Zimbabwe, while interest rates and inflation are statistically insignificant. The study basically recommends that the government of Zimbabwe, particularly through ZimAsset, should promote PPPs, initiate partnerships between foreign and local investors and create an enabling macroeconomic environment to encourage private sector investment.

I would like to thank Bindura University of Science Education for giving me the opportunity to study Economics in their reputed institution. I would also like to express my sincere gratitude to my supervisor Mr. Chigusiva for his help and guidance during my research project. His wisdom helped me greatly to build my resilience and character that motivated me despite seemingly insurmountable challenges. His unconditional inspiration and support greatly contributed to the success of this thesis. Thank you sir! May God bless you.

I am also grateful, especially; Mr. Damian and Mr. Tafireii for their unconditional knowledge and material support they provided me. Her wisdom greatly contributed to the success of this thesis. Thank you! I am not forgetting all the other lecturers, who contributed to me with their knowledge and encouraged me through training to become a soldier. Thank you! I would also like to express my gratitude to the management of ZimStats and the staff in the Harare offices for giving me access to the national accounts data. May God bless you.

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To my loving mother, Mrs S Nyona; brothers, Mr M Nioni and Dr S.P Nioni; sisters, Mrs S.L Mafa and Mrs F Makoni; and Mr. T Dube. I don’t have enough words to express my gratitude for the support you have given me. I could not have done it without your unconditional financial, moral and emotional support, a special thank you. May God bless you.

I also acknowledge the pioneers of this work whose works guided me in writing this research paper. They really did a great job, without them this thesis would not have been possible. Finally, to my fellow students and friends, Talkmore Magora and Jonathan Shoko; Your help is greatly appreciated and I am very grateful and will remain indebted to you all for the help you have given me. May God bless you.

The determinants of private investment and their impact on economic growth continue to be the subject of much debate in economic theory and policy. Majeed and Khan (2008) point out that some components of public investment can be complementary to private investment and therefore beneficial for growth, while others can substitute and have a less positive or even negative effect on growth. According to Frimpong and Marbuah (2010), private investment is a key condition for economic growth. Aieni (2014) states that the private sector contributes more significantly to economic growth than the public sector. Seruvatu and Jaiaraman (2001) attribute this to less corruption in private sector investments compared to public sector investments.

Private sector-led growth has a stronger positive effect on economic growth than public investment, Khan and Reinhart (1990). This is because private investment is relatively more efficient than public sector investment (Serven and Solimano 1990; Countinho and Gallo, 1991). More importantly, in developing countries, private investment plays a greater role than public investment in determining economic growth (Oshikoya, 1994; Nakvi, 2002). As a result, numerous studies have investigated the determinants of private investment in developing countries (Atukeren, 2005). The researcher believes that the expansion of private sector investment in Zimbabwe should be the main impetus for economic growth and development.

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At independence in 1980, Zimbabwe embarked on development planning as a means of achieving rapid socio-economic development. The first two development plans, the Transitional National Development Plan (1981-1983) and the First Five-Year National Development Plan (1985-1990) were formulated in the context of a command economy where government controls were common (Chingarande, 2012). Development planning aimed to increase investment to a sustainable level in order to, among other things, improve people’s living standards. The implementation of the development plans was faced with many problems, and the planned goals were not achieved. In the private sector, the government used incentives as a tool to implement development plans. According to the World Bank (1995), the decade of the 1980s witnessed a decline in investment in developing countries. This statement also applies to Zimbabwe, as confirmed by the chart below:

As shown in the graph above, private investment for the prescribed period started at 12.31% in 1980 and rose to 15.18% the following year. The performance of private investment gradually declined until it reached 12.2% in 1985. Between 1985 and 1987, private investment as a percentage of GDP showed some signs of recovery as it rose slightly to 13.7% in 1987. Unfortunately, private investment investments refused. from then until 1989 it reached 10.76%. The worrisome downward trend in private investment that began in 1981 and ended in 1990 resulted in a marked decline in total investment.

When it became clear that the economy was not generating enough employment, especially in the context of reduced investment, the government adopted a more market-oriented reform program in 1991, the Economic Structural Adjustment Program (ESAP). The main goals of ESAP were to: GDP growth of 5% in 1991-95; increase savings to 25% of GDP; increase investments to 25% of GDP; achieve export growth of 9% per year; reduce the budget deficit from more than 10% of GDP to 5% in 1995 and reduce inflation from 17.7% to 10% by 1995. In order to achieve these goals, the government set out to liberalize all markets, in accordance with the recipes of the world. Bank and IMF (Kanienze, 2006).

The performance of the economy under ESAP was not impressive. Private investment remained very low, despite the fact that there were some slight improvements as shown below:

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Overall, private investment has signaled some element of improvement as shown above for the ESAP era compared to the first decade after independence, indicating the positive impact ESAP has had on private investment. There was a gradual increase from 1990 when private investment started at 14.82% to 1993 when it reached 19.93% followed by a slight decline in 1994 where it fell to 18.27%. In the last year of ESAP, there was a 3.41% increase in private investment after reaching 21.68% in 1995. It is clear from the above chart that ESAP failed where it counted the most as it did not lead to a significant and sustainable increase in private investment despite the fact that it instituted radical economic reforms that successfully demanded and supported macroeconomic stability, such as trade liberalization and consolidation of the financial system. Due to the failure of ESAP, socio-economic problems such as poverty and unemployment continued to plague Zimbabwe. There are several reasons why ESAP failed. Kanienze (2006), points out that the performance of the economy in the period 1991-95 cannot be fully attributed to ESAP (there was a severe drought in 1992 and a lack of fiscal discipline by the government), many of the results can be traced back to the regulations on program policies.

After the end of ESAP in 1995, there was indecision in the policy area. It was not until April 1998 that the successor to the economic policy, the Zimbabwe Program for Economic and Social Transformation (ZIMPREST), was launched, but the program was to run from 1996-2000. This means that when the program was launched, it was already two years late. ZIMPREST sought to achieve a target average annual GDP growth of 6%, creation of 42,200 new formal sector jobs per year, per capita income growth of 3.4% and consumption growth of 4.4%. In order to achieve the minimum

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