Fix rule of law, tackle corruption or forget investment: EU

LIVINGSTONE MARUFU

The European Union (EU) has turned up the pressure on Zimbabwe, warning that without urgent reforms to strengthen the rule of law, fight corruption, and ensure policy predictability, the country’s economy will remain stagnant and its vast industrial potential untapped.

Speaking at the Zimbabwe National Chamber of Commerce (ZNCC) Annual Conference in Victoria Falls last week, EU Ambassador to Zimbabwe, Jobst von Kirchmann, delivered a blunt assessment of the country’s investment climate, saying Zimbabwe has the resources and talent but lacks the institutional foundations needed to drive growth and attract capital.

“Lots of the aforementioned things are available, but why does the manufacturing sector remain low?” Kirchmann asked. “Actually, the manufacturing sector, in my view, has the same criteria as you need for any other business. You can have a beautiful plant, but that plant will only grow if you put it in fertile soil. If the soil is not good, the plant cannot grow.”

Kirchmann drew parallels with global success stories like post-war Germany and South Korea, once among the world’s poorest nations, which achieved rapid industrialisation by building strong institutions and fostering good governance.

“The ingredients for that soil are always the same,” he said. “What is needed are strong institutions, good rule of law, regulatory clarity for predictability, and a low level of corruption.”

His remarks come as Zimbabwe’s manufacturing sector continues to falter, contributing less than 6% of total exports due to high production costs, weak infrastructure, and a climate of policy uncertainty. According to industrialists, local factories are operating at barely 50% capacity, with the remainder lying idle due to the high cost of doing business.

While acknowledging that the government has outlined its policy intentions through the National Development Strategy 1 (NDS1), Kirchmann stressed that tangible reforms are needed to create an environment where businesses can thrive.

“The government needs to be fully committed to letting businesses thrive, including investing in people, education, health, and ensuring sufficient capital is available on the market,” he said. “If I’m a company putting my money in, I’m not looking for a zero-risk environment. What I’m looking for is predictability. I need to know where I’m getting myself into. What will the monetary policy be? Will I get my rights if I go to court? These are fundamental for investors.”

The EU, he added, is ready to support Zimbabwe’s efforts to boost manufacturing and export growth but stressed that real progress depends on the government’s ability to create a stable, transparent, and investor-friendly economy.

“We can support Zimbabwe to be more export-oriented,” Kirchmann said. “The EU already has a trade agreement with Zimbabwe, and we are finalising the deepening of this agreement to cover services, which allows any Zimbabwean company to export duty-free and quota-free to the EU.”

The EU has also introduced on-lending facilities with local banks, including Stanbic, NMB, First Capital, and CABS, offering longer-tenure loans of up to seven years at lower interest rates. But Kirchmann cautioned that these are merely stop-gap measures.

“It’s a drop in the ocean,” he said. “What is really needed is a full unlocking of capital to companies.”

Despite the tough environment, Kirchmann praised the professionalism of Zimbabwe’s private sector, describing it as one of the most reliable the EU has worked with.

“All the loans we’ve provided have been repaid. Not one has defaulted,” he said. “In other countries, we see five to ten percent default rates. Here? Zero. It’s a good private sector.”

However, Zimbabwe’s mounting debt arrears continue to weigh down the economy and discourage foreign investment. Reserve Bank of Zimbabwe (RBZ) Deputy Governor, Dr Innocent Matshe, admitted that the government’s ability to provide funding to businesses has run its course.

“This economy needs much more patient, affordable capital,” Matshe said. “We have also said that banks and financial institutions should strive to get offshore lines of credit. The time where the Reserve Bank dishes out money to companies and banks is gone. Forget it. Ambassador said it very clearly. We need to go out there and do it ourselves.”

Matshe added: “The era of borrowing until countries default repeatedly is over. We must be prudent and self-reliant. No one will lend to Zimbabwe as a country, but this is a good time for private companies to secure their own capital.”

Beyond finance, the EU continues to invest heavily in Zimbabwe’s human capital, with significant funding committed to health and education.

“We have just decided to put €500m into health for the next two years,” Kirchmann said. “We also have over €50 m in education programmes. Zimbabwe already has a highly skilled workforce, but it’s crucial to maintain that.”

Interest from European investors is also growing. Kirchmann revealed that the EU-Zimbabwe Business Forum held recently exceeded expectations, with 70 European companies attending and hundreds more expressing interest.

“Over 600 companies wanted to participate, but we only had room for around 300,” he said. “It was a big success.”

Still, Kirchmann made it clear that attracting sustained foreign investment requires more than business forums and speeches.

“It’s a joint task,” he said. “The government must show these companies they are welcome, that they want them to come, that they are serious about joint ventures, equity funding, and investments. There’s still work to do to motivate more companies to come here.”

The EU is also rolling out its €150 bn Global Gateway initiative across Africa, which provides funding opportunities for local companies—but only if countries like Zimbabwe create the right conditions to access it.

“The opportunities are there,” Kirchmann concluded. “But the responsibility to unlock them lies firmly in Zimbabwe’s hands.”

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