Zimbabwe economy: Investments plunging, says bank governor

Someone holding South African rand and US dollars in Zimbabwe's capital, Harare Zimbabwe's economy is fragile and it does not have its own currency

Foreign investment in Zimbabwe more than halved in the first six months of the year, the country's central bank chief John Mangudya has said.

"The country received a paltry $67m [£40m] compared to $165m during the same period in 2013," he said.

The government policy to hand economic control to black Zimbabweans had been misunderstood by investors, he said.

Meanwhile, Zimbabwe has signed nine investment deals in China during President Robert Mugabe's visit.

The country's state-run Zimbabwe Herald newspaper says they included investment in sectors such as energy, roads, railways, telecommunications, agriculture and tourism - but no figures were given.

'Negative perceptions'

Mr Mugabe adopted a "Look East" policy during Zimbabwe's political isolation and alienation from the West in the early 2000s.

Under a unity government, when Mr Mugabe's Zanu-PF party shared power with the Movement for Democratic Change, Zimbabwe recovered from hyperinflation and its economic free-fall.

But his landslide victory last year - in which the indigenisation policy was a key campaign promise - has coincided with a rapid slowdown in the economy.

Mr Mangudya, who became central bank governor in May, said that the government should make its indigenisation policy clearer by issuing guidelines for investors.

The Reserve Bank of Zimbabwe governor also said exports, mostly minerals and tobacco, were down 13% in the first half of 2014, compared with the first six months of last year.

Zimbabwean President Robert Mugabe, and his Chinese counterpart Xi Jinping shake hands during a signing ceremony at the Great Hall of the People in Beijing, China, Monday 25 August 2014 President Mugabe has always had strong links with China - going back to before independence

"The nation needs to fight the negative perception that Zimbabweans continue to create, knowingly or unknowingly, for ourselves. The negative perception towards the country by foreigners is mainly emanating from within Zimbabwe," he said in his monetary statement titled Back to Basics.

The bank welcomed the European Union's easing of sanctions and urged the US to review its rules "to assist this small economy to attract the much-needed capital for recovery", Mr Mangudya said.

The governor also urged the government to issue 99-year leasehold agreements to new farmers, who were given land under the country's controversial land reform programme, so that they could secure loans.

At the moment many of these farmers only have letter guarantees or non-transferrable leaseholds, which were not regarded as sufficient security by banks, he said.

With regard to the commercial farmers who lost land, he urged the government to continue payments to them for improvements made to farms.

As part of measures to promote the use of "plastic money" and to deal the liquidity crisis, the governor also announced that the amount an individual can take out of the country at any one time has been reduced from $10,000 to $5,000.

Zimbabwe does not have its own currency and uses eight others as legal tender, with the US dollar and South African rand most commonly used.

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