Investing In Zimbabwe - Inward/ Foreign Investment - Zimbabwe (2024)

INTRODUCTION

Zimbabwe is one of the countries in the world with 60 tradableminerals and top important minerals such as gold, platinum,diamond, coal and nickel. It is a remarkable resource center andits diversified economy makes it an attractive destination forinvestment, not forgetting to mention the good climate. Thepriority areas for investment include mining, manufacturing,tourism, ICT and infrastructure development. However, for Zimbabweto be able to attract investors, it needs to have a predictable,transparent and non-discriminatory business climate and it shouldhave a balanced framework on rules of foreign direct investment.Investors need assurance that there is a fair andnon-discriminatory framework in terms of the investment inZimbabwe. A rules-based system increases the opportunities ofattracting investors. The new dispensation post Former PresidentMugabe era has regulated policies to make sure that investors,whether foreign or local are afforded adequate protection.

Security in terms of property rights is essential to all foreigninvestors as it ensures that they will not face the arbitrarydisposition of any property they may invest in and suffer loss.Therefore, the Government of Zimbabwe has enacted certain laws thatgovern investors and investments and it has also signed a number ofinternational treaties that ensure and guarantee protection toinvestors and their investments. This paper will look into lawsthat govern investment and investors as well as certain proceduresthat investors should follow when they want to invest in thecountry.

GENERAL LAWS THAT GOVERN INVESTMENT

1. Constitution of Zimbabwe
2. Zimbabwe Investment AuthorityAct
3. Special Economic Zones Act
4. Indigenization and EconomicEmpowerment Act

a) Constitution of Zimbabwe

The supreme law of the land which is the Constitution ofZimbabwe 2013 guarantees any person, whether a citizen or not theright to acquire, hold, occupy, use, transfer, lease or dispose allforms of property, either individually or in association withothers¹. Zimbabwe also observes equal treatment andprotection of the law and guarantees against discrimination.Section 56 (3) of the Constitution of Zimbabwe states that everyperson has a right not to be treated in an unfairly discriminatorymanner on such grounds as their nationality, race, colour etc. Thismeans that whether you are a foreign investor or a local investoryou have a right to administrative conduct that is impartial,proportionate and lawful². The provision is important inthat it guarantees administrative justice in any dispute or issuethat may arise with regards investments that fall within theZimbabwean jurisdiction. The constitution protects againstcompulsory acquisition of land without adequatecompensation.³

b) Zimbabwe Investment Authority Act [Chapter 14.30]

The Zimbabwe Investment Authority (ZIA) is the country'sinvestment promotion body set up to promote and facilitate bothforeign direct investment and local investment.⁴ Thiswas done to create a quicker and easier facilitation of investment.It deals with what are called Greenfield investments, that isinvestments in new projects. There is a ZIA board that wasestablished⁵ for the purpose of applications forinvestment licences and to plan and implement investment promotionstrategies for purposes of encouraging investment among otherfunctions. The investment licence is required for purposes ofincome, taxation, export and exchange controls and import tariffdispensation. The Board fixes the period of validity of aninvestment licence. This means that the Board has the discretionfor the duration of an investment licence depending on the type ofthe investment. The Act also places a mandate on the Minister topublish guidelines for investment that provide for general andspecial incentives for investment. The topic on various incentiveswill be dealt with later in this paper.

c) Special Economic Zones Act

This is an ACT that governs investments in sectors of thecountry that have been declared Special Economic Zones by the SEZBoard. These are areas in which business and trade laws aredifferent from the rest of the country. The SEZs are located withinthe country's national borders and their arms include increasedtrade, increased investment, job creation and effectiveadministration. As a way to encourage businesses to set up in thesezones, financial policies are introduced as well as specialincentives. The benefits a company gains by being in a specialeconomic zone may mean that it can produce and trade goods at a lower price.

The SEZs have their own laws that apply in those areas that aredifferent from the rest of the country. These policies typicallyregard investing taxation, trading quotas, customs and laborregulations. The SEZ Authority has a duty to establish the SpecialEconomic Zones, to attract Foreign Direct Investment in SpecialEconomic Zones and also to grant investment licences to SpecialEconomic Zones among other things.⁶ The period forvalidity of an investment licence in a special economic zone areashall be 10 years from the date of issue ⁷ and isrenewable.⁸ This Act protects licenced investments inSpecial Economic Zones from compulsory acquisition unless with alaw which complies with section 71 of theConstitution.⁹

d) The Indeginisation and Economic Empowerment Act

The Government of Zimbabwe has amended the Indigenization andEconomic Empowerment Act in an attempt to attract investors to comeand invest in the country. Section 3 of the Indigenization Actallows foreign investors to own 100% shareholding in all otherminerals except for platinum and diamonds which the foreigninvestor is expected to jointly own with the nationals on a 49/51%basis in favour of the nationals or government.¹⁰

WAYS OF INVESTING IN ZIMBABWE

There are 3 ways in which investors come into a country viz;

1. Those that want to partner with alocal company also called brownfields investments (exchange controldepartment)
2. Those that want to start a newcompany also known as greenfield investments
3. Those that want to buy shares (stockexchange)

When an investor comes to invest in Zimbabwe, the first thing todo is to approach the respective ministries they want to invest in.The reason being that you should gather enough information and makean informed decision before starting the registering process. Forexample, if you want to invest in mining then you should approachthe Ministry of Mines and if it is in the Energy Industry thenMinistry of Energy and ZERA (Zimbabwe Energy Regulatory Authority).It is important to approach these ministries because each ministryhas specific requirements in which failure to meet the requirementsmeans you cannot operate in that sector. From the Ministry you canthen approach ZIA to apply for an investment licence.

Investing in an existing company (brownfield investments)

If you want to invest in an existing company (dilution) you haveto approach the Reserve Bank of Zimbabwe (RBZ) and get approval.The RBZ gives what is called an exchange control approval.Thereafter, you approach the Zimbabwe Investment Authority for aninvestment licence. The biggest advantage of Brownfieldsinvestments is that it permits tapping into existing skills,knowledge and finance, as well as accessing customer groups.

The government of Zimbabwe is encouraging local companies toenter into joint ventures with foreign companies because theformation of joint ventures is a swift and cheap route todevelopment of a foreign business they are involved with here inZimbabwe, than if it were to rely solely on their own resources andefforts to launch and fully operate. The Government of Zimbabweencourages partnerships between international firms and localfirms. Recently the Infrastructure Development Bank of Zimbabwe(IDBZ) signed a memorandum of understanding with Wah KongEnterprises Limited (WKEL), which will see the Chinese firmpartnering with the bank to implement university students and staffaccommodation projects. Possible benefits of forming a JV includepolitical connections, existing facilities, and an efficientdistribution channel.

Investing in new projects ( Greenfields projects)

This is a situation whereby an investor wants to set up acompany from scratch, also called Greenfields projects where thereis direct ownership. Direct ownership provides a high degree ofcontrol when it comes to operations, but it requires a high levelof resources and a high degree of commitment. After approaching therespective ministries and after registering the company, aninvestor who wants to invest in a Greenfield project should thenapproach ZIA for an investment licence. There is a non-refundableapplication fee of US$ 500. A company that wishes to obtain aninvestment licence with ZIA should register the company first andobtain various licences from the respective areas of investment,for example environmental assessment reports if it's a miningproject. Upon approval, the investor must pay a licence fee of US$2500.

Investing on the Zimbabwe stock exchange

The Zimbabwe Stock Exchange provides an alternative avenue forforeign Portfolio Investment injection into the local economythrough the stock market. This is the buying of shares of certaincompanies that are listed on the Zimbabwe Stock Exchange. Investingin stock helps in creating financial security and independence. Italso means that you now have a say in the affairs of the company.When the company holds meetings where shareholders come together tovote on important matters like the appointment of directors,executive compensation and dividend payment, you also sit anddecide over such important matters. There are various activecompanies listed on the Zimbabwe stock exchange from varioussectors of the economy including mining, agriculture, tourismservices and manufacturing.

Procedure

An investor who wants to buy shares has to go through a stockbroker. The list of registered brokers is found on the ZSE website.The broker will then give an account form which has to becompleted. Requirements include a national ID and a valid bankaccount. It is important that for an investor to buy shares on theZSE he/she should have a custodian; the custodian being a financialinstitution that holds customers' securities for safe keepingto minimize risk of theft or loss. After opening a trade accountwith the broker, the broker will provide bank details for thefunding of the account. An investor then has to identify stocks tobuy and place an order with the stockbroker who then places theorder on the ZSE via ZSE Automated Trading systems. The order canbe placed on the phone or in person, for example "buy 500shares of Delta Beverages at the current market price". Afterthe purchase, an electronic share certificate is issued that willbe sent to your custodian.¹¹

RESIDENTIAL PERMITS FOR INVESTORS OR THEIR EMPLOYEES

An investor who wishes to stay in Zimbabwe after he has investedin the country can apply for a residential permit with Immigrationof Zimbabwe. He can do this after he has obtained an investmentlicence from either the Zimbabwe Investment Authority or theSpecial Economic Zones Board.

REQUIREMENTS

• Fully completed Residence Permitapplication forms in duplicate.
• A written application letter by theprospective investor stating the project proposal
• Zimbabwe Investment Authoritycertificate of approval.
• Certificate of incorporation from theRegistrar of Companies.
• Local bank statement for the fundstransferred.
• Bill of lading or Customs clearancepapers for the importation of capital equipment.
• Permit can be processed withinfourteen normal working days after submission of theapplication.

REGISTRATION FOR TAXES

The laws of Zimbabwe require every person conducting a businessto register for tax. Registration is done by the Zimbabwe RevenueAuthority. After an investor has obtained an investment license,they can approach the Zimbabwe Revenue Authority for taxregistration.

Income Tax

All clients, including individuals, companies, partnerships andco-operatives who want to venture into any business are required toregister with ZIMRA online and comply with all obligations asstipulated in the legislation. With regards income tax, there is noregulated time in which you are supposed to register for it.Companies are supposed to register for income tax when they startreceiving income. To register, clients are required to have a bankaccount among other requirements.¹²

Value added tax

Any person who intends to carry on trade must be registeredonline with ZIMRA for value added tax. You are supposed to beregistered within 30 days from the date on which you reach thethreshold which is US$60,000 sales per year or when you realize orproject or there are signs based on your forecasts that you willreach your threshold. In instances where you make money thatexceeds the threshold for the first month and there is a likelihoodthat you will exceed the threshold you should register. That iscalled compulsory registration. Voluntary Registration is when youcan register for VAT even if you don't meet the threshold.

Pay As You Earn (PAYE)

As for PAYE tax (pay as you earn) you should register within 14days after you have become an employer. Every business person whobecomes an employer is required to apply to the CommissionerGeneral for registration within 14 days of becoming anemployer.

Customs and Excise

If you intend to import goods, you are still required toregister with ZIMRA so that you have the BP number that willidentify you as an importer. You will need a clearing agentapproved and registered with ZIMRA to handle your importations oryou may register with ZIMRA to do your own clearances. For exports,you will also need an agent to handle the exports or register onyour own with ZIMRA.

INCENTIVES

The Minister responsible for investment has a mandate to publishguidelines for investment that provide for investment incentivesthat apply to all investments including those in the SpecialEconomic Zones. These incentives which were published by theMinister in January 2018 in an article called the InvestmentGuidelines and Opportunities in Zimbabwe are part of the economicreform packages being rolled out to attract investment. Theycomprise of fiscal and non-fiscal incentives forinvestors.¹³

Fiscal incentives in the SEZs include:

• corporate tax exemption for the firstfive years of operation and a corporate tax rate of 15 percentthereafter, while specialized expatriate staff will be taxed at aflat rate of 15 percent. There is also
• scope for duty free importation ofcapital equipment and exemptions for non-residents withholding taxon royalties. Raw materials and intermediate products imported foruse by companies in SEZs will be imported duty-free, but theexemption will not apply where raw materials are producedlocally.
• Inputs which include raw materialsand intermediate products imported for use by companies set up inthe SEZs be imported duty free. The duty exemption will however notapply where such raw materials are produced in Zimbabwe.

Non fiscal incentives

• Automatic work permits forexpatriates for investments above US$50 million and 5 working daysprocessing period of work permits for investment below US$50million
• Automatic residence permits forinvestment above US$50 million and 5 working days processing periodfor investment below USD$50 million.
• Dedicated power and water supplycompanies operating in Special Economic Zones.

SECURITY FOR INVESTMENTS

The main regulator in Zimbabwe when investment security isconcerned is the Securities and Exchange Commission. The Securitiesand Exchange Commission of Zimbabwe was established through theenactment of the Securities Act (Chapter 24:25). Section 3 of theAct provides for the establishment of the Commission which is theregulatory body for the securities and capital markets in Zimbabwe.Commissioners were appointed on 1 September 2008 whilst theSecretariat was established in 2009. Amongst its key functions, thecommission regulates the exchange of securities, the licensing ofapproved dealers and promoting investor education.

One of the significant measures that have been put in place tosecure an investors investment is:

a) The Investor protection fund

In terms of the Securities Act (Chapter 24:25) the Securitiesand Exchange Commission was obliged to create the InvestorProtection Fund, for the purpose of providing compensation toinvestors for losses suffered as a direct result of a financialcollapse of a market player licensed by the Commission for beingunable to meet its liabilities through insolvency, malpractice orother causes. An investor will therefore have recourse to the Fundwhere a licensed entity is unable, or likely to be unable, to payits liabilities, in the event of (a) cessation of trading, or (b)such firm having insufficient assets to meet its liabilities or (c)insolvency declared by a competent court in Zimbabwe.

Zimbabwe is also a signatory to a number of bilateral andinternational agreements that guarantee investment security to allinvestors in accordance with international best practices. Theseinclude:

1. Multilateral investment GuaranteeAgency [MIGA]
2. International convention onsettlement of Disputes [ICSID]
3. New York Convention on theenforcement of arbitral awards
4. United Nations Convention onInternational Trade Law
5. The World Trade Organisation

THE INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES(ICSID)

Zimbabwe became a member of ICSID on the 25th of March 1991.ICSID is an international arbitration institutionestablished in 1966 for legal dispute resolution and conciliation between international. It is anautonomous, multilateral specialized institution that encouragesthe international flow of investment and mitigates non-commercialrisks by a treaty drafted by the International Bank for Reconstruction andDevelopment's executive directors and signed by membercountries. Its decisions are final and binding.

WORLD TRADE ORGANISATION (WTO)¹⁴

Zimbabwe became a member of the World Trade Organization inMarch 1995. The WTO's role is to facilitate international tradein goods by progressively and eliminating national governmentalissues that are restrictive to trade. Its purpose is to providelegal rules for international commerce that will facilitate thesmooth operation of international trade. By virtue of being amember of the WTO the principles and agreements that are comprisedare legally binding on all members of the WTO. The WTO is governedby the most favored nation principle (MFN). The MFN enables thenationals of the contracting parties to benefit from favorabletreatment that may be given to nationals of 3rd states. When afavorable treatment is extended to one state by way of its citizenswho engage in goods, citizens of a 3rd state engaging in trade ofthe same goods are entitled to claim the same treatment.

The WTO is also governed by the National Treatment principle. Itentitles the foreign investors to be treated the same way thenational investors are treated. It encourages that a foreigninvestor and its investments are accorded treatment no lessfavorable than that which the local investors are given by theState

Investors and lenders in today's dynamic investment climateunderstand the potential benefits of investing in emerging markets.They also understand the critical importance of addressing thepolitical risks that may accompany an investment in such markets.By virtue of being a member of this organization Zimbabweguarantees security for all trading deals investments.

MIGA (MULTILATERAL INVESTMENT GUARANTEE AGENCY)

Zimbabwe became a member of MIGA in September 1980. MIGA helpsinvestors and lenders deal with risks byinsuring eligible projects against losses relatingto:

• Currency inconvertibility and transferrestriction
• Expropriation
• War, terrorism, and civil disturbance
• Breach of contract
• Non-honoring of financial obligations

MIGA provides political risk insurance (guarantees) for projects in a broad range of sectors indeveloping member countries, covering all regions of the world.

MIGA guarantees offer much more than just the assurance thatlosses will be recovered. The Insurance also benefits investors andlenders by:

• Deterring harmful actions.
• Resolving disputes
• Accessing funding
• Lowering borrowing costs
• Increasing tenors
• Providing environmental and socialexpertise

NEW YORK CONVENTION ON THE ENFORCEMENT OF ARBITRAL AWARDS

New York Arbitration Convention" or the "New YorkConvention", is one of the key instruments in internationalarbitration. The New York Convention applies to the recognition andenforcement of foreign arbitral awards and the referral by a courtto arbitration. Zimbabwe signed the New York convention on theconvention of arbitral award on the 29th September 1994.

The Government has embarked on a journey to make Zimbabwe safefor investors again. It is with great regret that the execution ofthe land redistribution has had unfortunate outcomes andconsequences and the Government is setting up mechanisms to addressthese. The Government of Zimbabwe has not forgotten and it hasacknowledged the role that was played by both foreign and domesticinvestors, and wish to express its commitment to companies thatinvest in the country and to be consistent in its implementation ofpolicies. The Government of Zimbabwe has committed itself totreating all foreign and domestic investors and investments asfavorably as any other investor in situations relating to theestablishment, expansion and operation of their investments. TheGovernment of Zimbabwe has embarked on a journey to compensate thefarmers who lost their investments through the Land Reform Program.The Government is also working on establishing a tribunal based oninternational good practices to determine among other things thevalue of compensation payable and modalities of payment to thosethat lost their land as a result of the Land Reform Program.

REFORMS FOR SMOOTHER INVESTMENT

The Government of Zimbabwe is committed to improve theinvestment platform in Zimbabwe and various measures are currentlybeing put in place to attract investors but more importantly, tosecure an investment once it is there. Some of the imminent reformmeasures in place are:

1. Special CommercialCourt

   This reform falls under the wing of the judiciary and it servesmostly for dispute resolution in matters that arise from purelycommercial transactions. This special court aims at curtailing thelengthy time of dispute resolution and also to improve the qualityof adjudication in commercial matters. Very complicated legalquestions arise from complex transactions and justice will only beserved by a competent panel of judicial officers. A solid andcompetent judiciary is vital to the survival of any investor. Whenthe judiciary can be relied on, it brings balance to the investmentenvironment, as our courts are a key feature in attractinginvestment.

2. Zimbabwe Anti CorruptionCommission

   This commission obtains its existence from the Constitution ofZimbabwe as well as the Zimbabwe Anti-Corruption Commission Act.Its key constitutional functions include: combatting corruption,promoting honesty and financial discipline and directing thecommissioner general of police to investigate corruption and toreport back to the commission. The anti-corruption commissioninvestigates both public and private sectors which makes it anideal tool to deal with underhand dealings of any individual orgovernment agency that want to solicit bribes from investors. TheCommission is mandated to report to parliament, annually, itsoperations and findings and this assists with regard to accountingto the public. What separates the anti-corruption commission fromthe other law enforcement agents is that it is specialized,particularly addressing concerns arising from corruptactivities.

CONCLUSION

The investment route in Zimbabwe is straightforward and with theaid of a competent legal representative, the processes are evensmoother and faster. Zimbabwe is open for investment and effortsare being made to align all the laws and processes to ease thedoing of business in the country.

Footnotes

1. Section 72 of the Constitution of Zimbabwe2013

2. Section 56 (3) on the Constitution of Zimbabwe2013

3. Section 72(3) of the Constitution of Zimbabwe2013

4. Investment Guidelines and opportunities in ZimbabweJanuary 2018

5. Section 4 of the ZIA Act [Chapter 14:30]

6. Section 18 of SEZ Act [Chapter 14:34] (herein afterreferred to as SEZ Act)

7. Section 27 of SEZ Act.

8. Section 28 of SEZ Act.

9. Section 35 of SEZ Act

10. Section 3 of the Indigenization and Empowerment Act [Chapter 14:33]

11. https://startupbiz.co.zw/invest-zimbabwe-stock-exchange/#comment-4267

12. http://www.zimra.co.zw/index.php?option=com_content&view=article&id=73&Itemid=72

13. Investment guidelines and opportunities inZimbabwe

14. Foreign investor Protection in Zimbabwe, thePrinciple of non-discriminaton

The content of this article is intended to provide a generalguide to the subject matter. Specialist advice should be soughtabout your specific circ*mstances.