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Z I M B A B W E

1 P O L I C Y , P L A N S A N D P R I O R I T I E S

Zimbabwe has an economic blueprint ‘Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset)’ which will guide national development over the next five years. The plan will focus on the full exploitation of and value addition to the country's abundant resources. Various financing mechanisms for the programme have been proposed, among them tax and non-tax revenue, leveraging resources, Sovereign Wealth Fund, issuance of bonds, accelerated implementation of Public Private Partnerships (PPP), securitization of remittances, re-engagement with the international and multilateral finance institutions and other financing options.

2 I N V E S T M E N T P R O M O T I O N

2 . 1 2 . 1 I n s t i t u t i o n s

Zimbabwe Investment Authority (ZIA) was established by the Zimbabwe Investment Authority Act No. 4 of 2006 as statutory body with the mandate to promote, facilitate and coordinate investment (both national and foreign) in Zimbabwe. ZIA is a merger of the Export Processing Zones Authority (EPZA) and the Zimbabwe Investment Centre (ZIC) developed in 2006 and implemented since 2007. The intention is to provide a One-Stop-Shop for investors providing them all relevant investment information and facilitation to obtain necessary permits, licenses and authorisations required for establishing a business in Zimbabwe. One major objective of this reform process is to shorten the approval process to a few days or even a few hours from the current one month to get approval. The government has been inspired by other countries like Mauritius, Rwanda or Egypt where the investment approval process takes only some few hours to one day. Like that, it would also improve its ranking in World Bank’s “Doing Business Ranking” where it was ranked number 145 in the ease of starting a business out of 183 countries in 2010.

The functions of ZIA cover, among others, the following (article 7, ZIA Act (2006) :

Plan and implement investment promotion strategies to encourage investment by international and domestic investors;

Facilitate and process investment applications for approval; Identify sectors with the potential for investment; Promote the decentralisation of investment activities in accordance with the

development policy of the Government; Promote and co-ordinate investment activities in enterprises or economic

sectors that are of strategic importance to the national development; Recommend to the Minister the granting of additional incentives outside of the

existing policy investment procedures, where necessary; Advise the Minister on investment policy and all matters relating to investment

in Zimbabwe.

The Zimbabwe Revenue Authority (ZIMRA) is the agent of the state that is in charge of assessing, collecting and reinforcing the payment of all revenues in terms of the Revenue Authority Act (chapter 23:11). Investors have to register Tax registration with ZIMRA.

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ZIAZIMRA

The Zimbabwe Stock Exchange (ZSE) is regulated under the Zimbabwe Stock Exchange Act (chapter 24.18) and plays an essential role in the raising of capital funds and as a link between the entrepreneur and the investing public. Even though the number of shares listed is small by world standards, investors have a diverse selection of shares they can choose from. For new investors it should be noted that the regulatory powers of the exchange are based on the contractual agreement each company enters into when it signs the listing agreement. The Exchange has set guidelines to keep both shareholders and the general public informed of the progress of listed companies. A policy provides public disclosure of the fullest information.

Export Processing Zones Authority (EPZA) was in charge of investments in export Processing Zones in Zimbabwe and was responsible for all relevant processes such as project approval, administration, regulation, control and permit granting approvals. Under the ZIA Act (2006), it was agreed to merge the Zimbabwe Investment Centre (ZIC) and EPZA into one institution, ZIA.

The ZIA Act was concluded in 2006 and got in effect in 2007. It repealed the Zimbabwe Investment Centre Act (ch. 24:16) and the Export Processing Zones Act (ch. 14:07), and led to a merger of the two respective institutions Zimbabwe Investment Centre (ZIC) and the Export Processing Zones Authority (EPZA) into the Zimbabwe Investment Authority (ZIA).Lately there have been statements that government is considering to enact a revision of existing laws and regulations to further protect foreign investors and to provide a comprehensive investment policy.

2 . 2 I n v e s t m e n t a n d E x p o r t I n c e n t i v e s

The government provides diverse incentives for local as well as foreign investors in Zimbabwe. Incentives are dominantly fiscal incentives as well as permits facilitating both imports and exports or the entry of foreign exchange.

Income tax rate from mining operations is only taxed at 15% for companies and trusts. Investors can also claim capital allowances on housing of mining staff based on actual costs. In addition, a rebate on duty on imported goods is possible, such as on goods (i) for specific mine development operations; (ii) when there is a special mining lease agreement, (iii) and for prospecting and searching for mineral deposits once entered into contract with the Government.

Incentives in the Mining Sector are the following:

Royalties not deductible for income tax purposes shall be calculated as a percentage of the gross fair market value of minerals produced and sold as follows:

Precious stones 10%Precious metals 3%Base metals 2%Industrial minerals 2%Coal bed methane gas 2%Coal 1%

Surface rentals not deductible for income tax purposes, are charged at different rates/levels during the prospecting/exploration phase and the development/mining phase of mining project. They will be levied according to a published table of the rates of surface rents. A 10% withholding tax on dividends for both residents and

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Zimbabwe Stock ExchangeEPZAZimbabwe Investment Authority Act 2006

Mining SectorRoyalties & Rental Incentives

non-residents apply for companies listed on the Zimbabwe Stock Exchange (ZSE). All other companies are levied at a rate of 20%. In addition, the taxable income of holder of a special mining lease is 25%.

Mines operating under separate mining titles shall, as a general rule, be ring fenced. Upon application to the appropriate authorities, however, combinations could be entertained for exploration that has been relinquished by a mining company. In exceptional situations where a combination of mining operations of a similar nature and for a limited period will avert a mine closure, accounts could be combined for tax purposes. General and administrative costs as incurred at a Head office or by a Parent Company shall be limited to a maximum of 0.75% of allowable deductions (as it is defined in the Income Tax legislation) during the pre-production phase of the project, as well as a maximum of 1% of gross income for that year in the production phase of the project.

In addition, interest paid on borrowing of a debt to equity ratio of up to a maximum of 3 to 1 is allowed as deduction, and any payments in excess of this figure shall be treated and taxed as a dividend. All capital expenditure (for exploration, development and operating) incurred wholly and exclusively for mining operations will be allowed as a deduction at the rate of 100%. Mining companies may claim capital redemption allowance on capital expenditure incurred. Tax losses occurred by Mining companies shall enjoy indefinite carry forward.

Companies in the Mining sector enjoy exemption from Customs Duty, Value Added Tax and Surtax. They are granted the right to market their minerals directly, in accordance with the provisions of the Minerals Marketing Corporation of Zimbabwe Act. However, they have to follow adequate monitoring arrangements and reporting obligations.

Government wants to encourage investments in the tourism sector as it is a rapidly growing sector and provides a large proportion of the country’s foreign exchange earnings. Investors in the tourism investors receive incentives in a form that they are recognized as exporters and can therefore enjoy all incentives or facilities offered to exporters by the Government and the Reserve Bank of Zimbabwe. Government has also identified designated Tourism Development Zones to be exploited by new investors. There are currently 9 areas declared TDZs:

Beitbridge/ Shashe/ Limpopo and surroundings Gonarezhou (GLTP)/ Chiredzi and surroundings Great Zimbabwe National Monument/ Lake Mutirikwi and surroundings.

Special incentives apply to TDZs. Taxation of income of an operator in the TDZ:

First five years of operation 0%Second five years of operation 15%Third five years of operation 20%Thereafter normal rates of corporate tax applyDuty exemption on specified capital equipment imported for use in the TDZs.

Investors are encouraged to engaging in Build Operate and Transfer (BOT) and Build Own Operate and Transfer (BOOT) investments. BOT and BOOT structures qualify for tax concessions under the incentives scheme. The incentives for approved BOT activities are:

First 5 years 0%Second 5 years 15%Third 5 years 20%

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Allowable deductionsCustoms DutiesTourism Sector IncentivesBOT and BOOT

Thereafter 25%

To promote exporting activity among new investors, a fiscal incentive was created that allows the double deduction for non-capital expenditure which incurred in seeking new opportunities and markets for the export of goods or which are creating or increasing demand for such goods.

2 . 3 E P Z s , F r e e p o r t s a n d o t h e r S p e c i a l E c o n o m i c Z o n e s

The system of an Export Processing Zone was not confined to a specific area or region, but an individual enterprise could acquire EPZ status. In 2008, there have been about 183 companies operating under EPZ status in Zimbabwe.

Until 2007, the Zimbabwe Export Processing Zone Authority (ZEPZA) was in charge of investments in Export Processing Zones in Zimbabwe. It was regulated under the Export Processing Zones Act (chapter 14:07), 2002, as a corporate body and was controlled and managed by the Zimbabwe Export Processing Zones Board.

With the amendment of the ZIA Act (2006), the Export Processing Zones Act (2002) was repealed. EPZA was merged with ZIC from 2007 and now operates as one institution, the ZIA. There is conversion of provisions under Section 37 of the ZIA Act (2006) providing that every holder of an EPZ license issued under the old Act shall apply at ZIA for an investment license in terms of the new ZIA Act. ZIA shall grant the investment license to every such applicant on the same terms as those granted to the applicant under the previous license or certificate, except if the Authority is feeling that the applicant has not complied with the terms of its previous license or certificate. Incentives and permits granted according to the old Act are therefore still valid for those companies that had already received EPZ licenses or permits.

For EPZs granted under the old Act, there is a comprehensive set of incentives:

5 year tax holiday; After the tax holiday , the corporate tax rate is 15%; Duty free importation of raw materials and capital goods; Exemption from liability to pay Non Resident Shareholders’ Tax (NRST) on

dividends distributed to non- residents; No liability for branch profits tax on a branch of a foreign registered company in

an EPZ; No liability for withholding tax with regard to dividends distributed locally by a

company licensed to operate in an EPZ; Exemption from withholding taxes on management & technical fees,

remittances and royalties for a person operating in an EPZ; No liability for tax on any capital gains arising from the sale of property forming

part of an investment in an EPZ; Exemption from income tax on fringe benefits for persons employed by a

licensed EPZ investor to the extent of 50% of the employee’s other taxable income from the investor;

Refund of VAT paid on procurement from customs.

Article 40 of the Export Processing Zones Act (2002) covered import and export licensing in EPZs:

(1) “Licensed investors shall not be required to obtain a licence or permit under the Control of Goods Act [Chapter 14:05] for

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Export market search IncentiveEPZAZIA Act (2006)EPZ Incentives

(a) The import of any goods into an export processing zone from a country outside Zimbabwe; or

(b) The export of any goods from an export processing zone to a country outside Zimbabwe.

(2) The export of goods from an export processing zone to the customs territory shall, save as otherwise provided by this Act, be subject to the same requirements in regard to the obtaining of licenses or permits under the Control of Goods Act [Chapter 14:05] as apply to goods imported from other countries outside Zimbabwe.”

As stated, a revision of existing investment laws and regulations is in discussion. Laws and regulations on EPZs which were scrapped when the Export Processing Zone Authority was merged with ZIC are expected to be reinstated under Special Economic Zones.

Growth Point Areas were established to encourage commercial and industrial development in selected parts of the country and which the Minister of Finance may prescribe as such. Commercial and industrial operations carried out in such growth point areas are granted additional allowances and qualify for more favourable incentives, as follows:

AllowancesFor non-recoupable investment, the investor can claim an allowance of 15% of the cost of all buildings constructed additions or alterations thereto, as well as on the cost of new articles, machinery, implements and utensils.

Rates of TaxFor the first five years of operations the tax rates will be:

New Manufacturing Projects 10%New Infrastructure Projects 15%For the first 5 years thereafter 20%

2 . 4 T a x I n c e n t i v e s

Aside of the already described incentives in section 2.2, the following tax incentives are provided for investors.

Companies investing in the manufacturing or processing industry have to pay 20% income tax. Holders of a special mining lease are only required to pay 20% income tax.

2 . 5 I n t e r n a t i o n a l T r a d e & E x p o r t P r o m o t i o n

Companies operating in the manufacturing sector and exporting at least 50% of their manufacturing output are taxed at 20%.

Imports and exports for Commercial purposes and in general have to follow the processes as described below.

1. Present the Bill of Entry Import (Form 21) supported by: Invoices for goods Freight and insurance statements where applicable Bills of lading

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Review of the Investment ActGrowth Point AreasIncome Tax IncentivesManufacturing ExportsGuidelines on Import and Export

Airway bills, rail advice notes, road consignment notes depending on mode of transport

Import permits for controlled/restricted goods Certificates of origin where goods are imported in terms of certain bilateral

agreements.

2. Pay the clearance fee at the prescribed rate in addition to Customs Duty, Value Added Tax (VAT) and Surtax.

Importers can take advantage of the pre-clearance facility where the importer or his agent may lodge documents with ZIMRA on or before the arrival in Zimbabwe of goods dispatched by railway train, road or air transport.

For exporting, all commercial exports need an Exchange control approval with the CD1 Form that can be obtained from any commercial bank. It applies to goods exported for the purpose of repair and return. In addition a Bill of Entry Export (Form 21) is needed supported by invoices and consignment notes as determined by the mode of transport:

Export permits for controlled/restricted goods A clearance fee is also payable at the prescribed rate Certificates of origin should be submitted where goods are exported under

bilateral or any agreements e.g. SADC, COMESA agreements.

Recently, licensing requirements were revised and new procedures will be introduced in the near future.

The Customs and Excise Act (chapter 23:02) regulates all customs and excise duties on imported and locally manufactured goods. Specific rates are set out in the Customs Tariff and vary according to the category of goods.Surtax is payable on goods attracting at least 40% as Customs Duty and in case of application of a specific or combination of duty rates. It is normally charged at a rate of 15% of ad valorem. Exemptions are light motor vehicles of tariff heading 8703 with more than 5 years of age as they attract 25% ad valorem rate.It is possible to get duty reduced or waived under the circumstances of suspension, rebates, bilateral and multilateral agreements, or remissions. There is no duty levied on exports.

Immigrant Rebate: The definition of an immigrant is any person who enters Zimbabwe to take up employment or permanent residence, or who is a visitor remaining to take up employment or permanent residence, or who is a diplomat coming for work purpose or permanent residency and anyone attending an educational institution. It also includes spouses and children of above mentioned persons and persons who have resided or been employed in Zimbabwe and have been outside Zimbabwe for a period not more than 2 years. Any immigrant can import duty free household effects and one motor vehicle provided that he owned the goods at the time of arrival in Zimbabwe or at their importation; any goods imported at the time of the immigrant’s arrival, goods that are intended for personal use, and goods not for resale or for commercial use. The immigrant importing a motor vehicle must be above 16 years of age.

For the promotion of exports, Zimbabwe has allowed duty free importations of raw materials that are designated for the manufacture of goods for export. There are two systems in place for this issue: the Duty Export Draw Back Scheme and the Inward Processing Scheme.

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Customs and Excise DutyCustoms RebatesDuty Free Importation Schemes

Under the Export Drawback Scheme refund for the import duties paid can be claimed back when the qualifying goods are exported from Zimbabwe. Qualifying goods are defined as any goods that are exported unused upon which import duties were originally paid in form of custom duties, surtax or import tax. They can exist in the following forms:

Same State Drawback: This rebate is granted on goods that were duty paid, and that are exported unused and in the form in which they were imported.

Industrial Drawback: It is granted on duty-paid raw materials used in the manufacture of Zimbabwean products, and which are exported unused in Zimbabwe.

Anyone investing in the assembly of commercial motor vehicles may apply for a rebate of duty in respect of component parts imported or removed from bond warehouses for use in the assembly of commercial motor vehicles.

Condition for claiming a drawback of duty is that duties shall be claimed back within two years from the date of payment and submitted within thirty days from the date of export. All places and towns with a Customs House process claims for drawbacks.

The Inward Processing Rebate (IPR) works as a claim for refund and applies to processing or repair of imported good for re-export. The applicant has to be involved in repairing or processing of imported goods for re-exportation. Processing is understood as the manufacture of goods and includes anyone of the following operations (such as listed in the ZIC publication on Rules & Regulations):

Fitting or assembling; Industrial packaging or re-packaging; Use of agents such as catalysts, accelerators or retarders of chemical reactions

which disappear entirely or partially in the course of production and are thereafter indistinguishable in the goods produced;

Mixing and blending.

The application for registration for Inward Processing Rebate should be made to the ZIMRA office nearest to the premises of the applicant. Once it is approved, the registered person should operate in accordance with the provisions of the Customs and Excise (Inward Processing) Regulations (Statutory Instrument 59 of 1997).

2 . 6 O t h e r I s s u e s

In the 2010 Mid-Term Fiscal Policy Review Statement from the Ministry of Finance, a lack of capital was identified as a major structural bottleneck for the development of the Zimbabwean economy. The need was stressed that Government should engage into negotiations with countries and financiers for lines of credit. Another advice from the Ministry of Finance was the establishment of the Zimbabwe Economic and Trade Revival Fund (ZETREF). End of August 2010, the establishment of ZETREF has been successfully concluded with the support of the African Export-Import Bank (AfreximBank).

ZETREF will provide a line of credit facility for benefiting the private sector with US$100 million and an initial drawdown of US$70 million. The facility has longer term maturities which is convenient for the industry. ZETREF will be available to

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Export Drawback SchemeCommercial Vehicle RebateInward Processing RebateZimbabwe Economic and Trade Revival Facility (ZETREF)

Zimbabwean registered companies but with a bias towards small and medium scale enterprises. In particular, it will finance the acquisition of equipment and capital goods for use in enhancing the output and quality of goods and services on one hand; and the purchase of raw materials and spare parts on the other hand.

Beneficiaries can access funding through designated commercial banks which still have to be selected. Safeguards have also been put in place to ensure that no speculative tendencies could derail the initiative.

3 A C C E S S A N D A D M I S S I O N O F F O R E I G N I N V E S T O R S

3 . 1 F o r e i g n I n v e s t m e n t & C a p i t a l M o b i l i t y

Anyone who wants to invest in Zimbabwe, either foreign or national, has to register his company with the Registrar of Companies. The investor has to apply for an investment licence with the Zimbabwe Investment Authority (ZIA). The Immigration Act (ch. 04:02) together with additional regulations issued by the Minister is the legal provision to obtain residency in Zimbabwe.

Under the ZIA Act (2006) section 2, the interpretation for investment is the following:“(a) an investment in Zimbabwe or a proposal therefore which will necessitate the expenditure of convertible foreign currency; or(b) any other investment or proposal therefore of a class specified by the Minister for the purposes of this definition by notice in a statutory instrument”.

A foreign company is defined as a company incorporated outside of Zimbabwe and which has established a place of business within Zimbabwe. Such companies can create branches or subsidiaries, or they can appoint agents in Zimbabwe. In general, foreign companies are treated in the same manner as local companies.

Aside of some additional registration requirements and except for transactions where foreign-owned companies require exchange control approvals, foreign-owned companies in Zimbabwe possess the same rights as locally owned company.

Foreign investment is possible in various sectors as follows:

Up to 49% foreign ownership in the Mining sector and at least 26% indigenous shareholding in manufacturing sector progressing to 51% by the 5th year.

Up to 70% Foreign Shareholding in specialised services such as management consultancy and construction in the 1st but indigenous shareholding has to reach at least 51% by the 5th year.

With the Statutory Instrument 108 of 1994, the government has established a list of sectors that are reserved for domestic investors, as well as to encourage joint ventures between foreign and local partners. The joint venture should assist the local partner to access foreign capital, expertise and technology. A maximum of 35% Foreign Ownership in selected sectors where foreign investors wish to participate but can only do so in joint venture partnership with Zimbabwe firms or individuals.

Other sectors of the economy are reserved for indigenous people. Foreigners can only participate in these sectors after obtaining the approval of the Minister of

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Definition of InvestmentDefinition of Foreign CompanyGenerally equal TreatmentForeign shareholdingReserved Sectors

Economic Planning and Investment Promotion and Minister of Youth Development, Indigenization and Economic Empowerment. The sectors are:

Agriculture forestry: Primary production of food and cash crops, primary horticulture, game, wildlife ranching and livestock development, forestry, fishing and fishing farming, poultry farming (excluding processing)

Transport services excluding air: road haulage, passenger bus, taxi and car hire service, tourist transportation

Retail or wholesale trade Barber shops, hairdressing and beauty salons Commercial photography Employment agencies. Estate agencies Armaments manufacture, marketing and distribution Public water provision for domestic and industrial purposes Rail operations except on a build, operate & transfer basis Barkers and grain milling Sugar products Tobacco packaging and grading, tobacco products.

The Indigenisation and Economic Empowerment Act has been passed by Parliament in 2008 to encourage the involvement of indigenous Zimbabwean in the economy. However, the regulations of this Act were only published in February 2010 with the Indigenisation and Economic Empowerment (General) (Amendment) Regulations, 2010 (No. 2). The regulations prescribe that every non-indigenous company with an asset value of more than $1 in Mining and $100,000.00 in any manufacturing to sell a 51% stake to indigenous Zimbabweans within a period of five years (section 3 and 4). Failure to do so attracts a jail sentence. From 1 March onwards, foreign-owned firms had 45 days to inform the government how they will achieve the majority indigenous shareholding within five years. The regulation applies to any “company, association, syndicate and partnership whose objective is the acquisition of gain. That effectively covers everything except literary and charitable associations. After filling out the respective forms and providing the plan for indigenisation of a business, the Minister has 45 days within which he can either approve the business’s indigenisation plans or make his approval dependent on the plans’ conformity with a notice which the Minister is supposed to publish in the Gazette before the 1 March 2011. For new company seeking registration, the shareholding in mining has to be at least 51%:49% indigenous to foreign, in manufacturing at least 26% should reserved for the indigenous person at the onset progressing to 51% in the 5th year. The Ministry Youth Development, Indigenisation and Economic Empowerment is still yet to come up with shareholding thresholds for other sectors of the economy.

According to the Act, the definition for “indigenous” is the following: "Indigenous Zimbabwean as defined in the Act, refers to anyone who, before independence in April 1980, "was subjected to unfair discrimination [presumably in Zimbabwe] on the ground of their race, and includes a descendant of such a person".

For companies listed on the Zimbabwe Stock Exchange (ZSE) up to 40% of their shareholding (traded after 1993) may be foreign held, and no single foreign shareholder may hold more than 10% of shares. Investors bringing in funds through registered commercial banks are allowed to repatriate their income and sale proceeds, but the following withholding taxes will be levied on individuals:

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Indigenisation and Economic Empowerment Act

Definition of “Indigenous”Companies listed on the ZSE

15% on dividends from companies listed on the ZSE; 20% on dividends from non-listed companies; 10% withholding tax on sale of listed marketable securities.

It is important to note that a different rate may apply where a Double Taxation Agreement (DTA) between Zimbabwe and the Investors country of origin exists. Furthermore, the Reserve Bank has placed controls on dual listed shares: Investors importing foreign scrip require approval to sell this locally, while locally acquired dual-listed scrip may not be sold outside of Zimbabwe.

The Banking sector is well developed in Zimbabwe with the Reserve Bank of Zimbabwe and major international and domestic commercial banks in place. The Zimbabwe Stock exchange enables trading of listed shares and a state-owned Agribank provides agricultural loan financing. The banking sector has been gradually deregulated and banking regulations continuously have and are being reviewed to encourage greater competition in the financial sector. Interest rates are market-determined. Commercial Banks issue credit cards in line with international banking practice and several Asset Management companies are operational. There are several broking firms offering comprehensive advisory services on local and foreign markets. Also export insurance is available for trading debts to the extent of assessed political and commercial risk. The sector also covers over 60 direct insurers, professional reinsures and insurance brokers, operating life and non-life funds.

3 . 2 F o r e i g n I n v e s t m e n t E s t a b l i s h m e n t , R e g i s t e r i n g a n d L i c e n s i n g P r o c e s s e s

All new foreign investors and those who wish the approval of the authority to take advantage of investment incentives granted by ZIA have firstly to apply at ZIA for approval of the investment project according to the ZIA Act (2006). Foreign investments into existing companies need the approval of the Reserve Bank. This approval is obtained by submitting an application to the Exchange Control Department of the Reserve Bank of Zimbabwe through the investee company’s commercial bank or merchant bank (Authorised Dealer).

When applying at ZIA, the investor has to submit his project proposal in form of the ZIA 1 Form which is available from ZIA directly or the website (http://www.zia.co.zw). Together with the application, all company registration documents and other necessary documents have to be submitted. The non-refundable application fee is US$500 and the license fee for the ZIA Investment License US$2500. ZIA will check the provided information for completeness and return it in case of clarifications. The investment committee will then decide if the project is in accordance with all rules and regulations and will then be discussed in a Board Meeting for final approval or decline. It is intended that ZIA processes the application within 5 days and will issue the Investment License in case of successful approval.

Factors that are considered by ZIA for the evaluation of the project are provided in Article 14 ZIA Act (2006):

The extent and possibility to which skills and technology will be transferred; The extent to which the proposed investment creates employment

opportunities and develop human resources; The extent to which local raw materials will be utilised;

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Financial SectorApproval RequirementZIA applicationImportant Factors for Investment Approval

The value of convertible foreign currency transferred to Zimbabwe in connection with the project;

The impact the proposed project is likely to have on the environment and which measures will be taken to adverse any environmental consequence, where necessary;

The impact the project is likely to have on existing industries in the economy;

The degree of export orientation and use of raw materials for export, and Any other considerations that the Board may consider appropriate.

The Investment License issued by the Board specifies the description, nature, approved activities and conditions of the investment, the nature and value of foreign assets to be invested, the period within which it shall be invested, date of issue and expiry of the license, and any other matters considered necessary. Every investment License is valid for 2 years from the date of issue and may be renewed by applying for extension 3 months before the date of expiry. ZIA keeps a registry of all investment licenses, including the conditions to which each license is issued, as well as of all amendments, suspensions and cancellations of investment licenses. This registry is open to members of the public on payment of a prescribed fee (article 18, ZIA Act (2006)).

All companies have to be registered under the Companies Act (2005) at the Registrar of Companies. The required forms for registration can be obtained from ZIA as well as from normal stationary shops.The first step in this process is to conduct a name search which can take up to 2 weeks and is only carried out in Harare. The name approval is then granted by the Registrar within a period of 60 days. Within 30 days, the company’s Memorandum and articles of Association have to be submitted which can be handed in either in Harare or in Bulawayo. Within one month, the applicant then has to notify the Registrar of the appointment of the company directors and secretaries. Registering the company costs US$170. Once the company is successfully registered, it receives a Certificate of Incorporation. Any additional business licenses are issued by local authorities.

Foreign companies incorporated outside of Zimbabwe can operate in Zimbabwe without having to form a separate locally registered company. When setting up branch operations, however, the approval from the Ministry of Justice Legal Parliamentary Affairs is required. Investing foreign investment into existing companies requires the approval of the Reserve Bank.

There is generally the possibility to register as Public Company or Private Company.

The Public Company is the equivalent to a joint stock corporation in other countries and able to offer shares to the general public with no limit to the number of shareholders participating. It is legally required to have annual audited accounts and annual financial statements lodged with the Registrar of Companies.

A Private Company is the equivalent to private limited liability company in other countries and may not invite the general public to subscribe to shares. This form is restricted to a maximum number of shareholders and is not required to submit financial statements to the Registrar.

In addition, the business can be conducted in either an incorporated or unincorporated form:

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Investment LicenseCompany RegistrationOther forms for investingTypes of Business Enterprises

Unincorporated entities are most widely used in form of a sole proprietorship or a partnership. No specific legal instruments are applicable to these forms of business, which are governed by common law. Partnerships may not consist of more than 20 persons, unless they consist of persons in designated professions.

Incorporated entities can include:

Co-operative societies; Any corporate body established in Zimbabwe (including private and public

companies); Foreign companies.

The main legislation applying to these entities is the Companies Act as well as additional legislation governing Banks and Insurers such as the Banking Act (chapter 24:20), the Insurance Act (chapter 24:17), and others.

Some forms of business enterprises are restricted to Zimbabwean residents only: Sole Proprietorship: A business undertaken by one person in his/her own

right with no legal formalities required to affect formation and with unlimited liability.

Private Business Corporation: Comprised of small-scale entrepreneurs not more than 20 in number in partnership with others or through the medium of the company.

Partnership: is regulated by the principles of the Roman Dutch Law comprised of individuals or companies, usually restricted to a maximum of 20 with each partner liable for all debts and obligations incurred.

Cooperative Society: Normally restricted to agriculturally based business or manufacturing and regulated through an act of parliament.

Aside of that, foreign-owned companies in Zimbabwe have the same rights as locally owned company except in case of transaction where foreign-owned companies require exchange control approvals.

Once the Investment license is approved by ZIA, the investor has to register with the Zimbabwean Revenue Authority for tax issues.

The legal framework for mining operations is based on the Mines and Minerals Act (chapter 21:05) and the Base Minerals Export Control Act (chapter 21:01). Generally, the rights to minerals are vested with the President. Mining claims can be obtained from the Ministry of Mines and Mining Development. Exploration entities have to obtain an Exclusive Prospecting Order (EPO) from the Ministry, and all mining entities have to carry out an Environmental Impact Assessment (EIA) for the project. The EIA has to be submitted to the Environmental Management Agency (EMA). For export of minerals that do not involve gold or platinum, the Minerals Marketing Corporation of Zimbabwe is responsible. New amendments to the Mines and Minerals Act in 2010 will give government 25% shareholding free of charge in foreign owned mines.

After licensing with ZIA as operator in that sector, one has to register with the Zimbabwe Tourism Authority (ZTA). Projects operating in national parks and Game Management Areas (GMAs), etc. have to acquire permits from respective bodies like the Zimbabwe Parks and Wildlife Management, the Zimbabwe Tourism Authority, or the Ministry of Environment and Tourism. If infrastructure is developed such as hotels, lodges, or guest houses, a permit from the respective local authority has to be acquired. If the operator offers transport services like car hire or boat tours, he must also register with the Ministry of Transport and

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Restrictions for Zimbabwean residents only

Tax registrationMining SectorTourism Sector

Communications. In addition, boat operators have to acquire a seaworthiness certificate from the Ministry of Transport.

Investors for financial institutions such as banks, insurance companies, and brokers need the approval of the Reserve Bank of Zimbabwe (RBZ). The banking sector is regulated under the Banking Act (chapter 24:20), and the Money Lending and Rates of Interest Act (Act 14:14). Please see section 5.5 on Monetary Policy, Foreign Exchange and Foreign Investor issues for more details on the regulations of the banking sector.

Medical projects such as clinics, surgeries, dispensaries and drug companies need an approval from the Ministry of Health and Child Welfare and/or the Medical Council of Zimbabwe and/or the Medicines Control Authority.

Investments seeking to operate haulage trucks, commuter omnibuses or any other form of transport classified as public transport must obtain approval from the Ministry of Transport and Communications. Investment projects in telecommunication such as cellular companies, internet service providers (ISPs), and others require a telecommunication approval from Potraz, the Postal and Telecommunications Authority of Zimbabwe.

3 . 3 F o r e i g n E m p l o y m e n t & R e s i d e n c e

Business visitors can only stay for a period of 6 weeks. If more time is required, the visitor has to apply for a Temporary Employment Permit for the desired period of time. A visitor qualifies as Business Visitor when coming for the following reasons:

Consultancy work; Installation and backup service for machinery purchased outside Zimbabwe by

a local company; Attend a Board meetings; Assessing investment opportunities in Zimbabwe.

Investors with approved investment projects by ZIA qualify to obtain a residence permit upon fulfilling certain requirements:

Investor with not less than US$1 million investment qualify for a permanent residence on application;

Investor with at least US$300,000 invested in a sole business venture qualifies for a residence permit for 3 years at the end of which a permanent residence may be granted;

Investor with US$100,000 invested in a joint venture, with a bonafide Zimbabwean qualifies for a 3 year residence permit at the end of which a permanent residence permit may be granted.

Apart of this regulation, any person who resided in Zimbabwe for a continuous period of 5 years on a work permit, or a dependant, can apply for a permanent residence permit.

It is important to notice that only the foreign investor can acquire a residence permit. Other foreign workers (expatriates) that will work for the respective investment project can only acquire a work permit which is the temporary employment permit (TEP). When employing foreign employees, the employer has to complete the TEP application forms and residence permit application forms for his workers and present them to the Department of Immigration Control.

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Banking SectorMedical SectorTransport and Telecommuni-cations

Business VisitorEmployment and Residence PermitsWork Permit

Spouses, minor children of foreign workers as well as retired persons who seek to live with close relatives can reside in Zimbabwe under the restriction that they do not seek paid employment.

All application forms can be received from ZIA or the Department of Immigration Control. Normally, work permits and other immigration permits shall be obtained within 14 days after submission of documents.

3 . 4 F o r e i g n I n v e s t o r A c c e s s t o L a n d a n d P r o p e r t y R i g h t s

No legislation or regulations on the private purchase of land could be identified.

However, the Land Acquisition Act (ch. 20:10) specifies the conditions and procedures for compulsory acquisition of land, and the Communal Land Act defines the communal lands.

If an investor wants to construct a factory premise the company needs a license from the respective local authorities. The building plan for any new building to be constructed furthermore needs to be approved by the local authority. The plan is also sent to other utility providers for their consideration. Relevant legislation for such construction and land use are the Regional, Town and Country Planning Act (ch.29:12), the Rural Districts Councils Act (ch.29:13) for constructions in rural areas, and the Communal Land Act (ch. 20:09).

4 F O R E I G N I N V E S T M E N T O P E R A T I O N S

4 . 1 E m p l o y m e n t

The labour legislation is covered by the Labour Act (ch. 28:01), last amended in 2006, the Labour Amendment Act (2005), Act 7/2005, and the Manpower Planning and Development Act (ch. 28:02). Regulations on the Social welfare systems and respective obligations by employers and employees are covered by the Social Welfare Assistance Act (ch. 17:06), the Presidential Pension and Retirement Benefits Act (ch. 02:05), the Pensions and other Benefits Act (ch. 16:01), and the Pensions (Increase and Adjustment) Act (ch. 16:02).

Employers are required to remit contributions to the National Social Security Authority (NSSA) on a weekly/monthly/etc. basis. Employees contribute 3% of the gross monthly insurable earnings and employers contribute a further 3% and they are responsible for paying the total contribution to NSSA. It is to be noted that insurance earnings ceilings are subject to review from time to time.

The Minimum wage requirements differ from industry to industry. Respective workers’ unions and national employment councils negotiate the minimum wages. However, the Ministry of Labour and Social Welfare sets the minimum wage for unclassified sectors.

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Labour Laws and Social SecurityNSSAMinimum Wages

Beginning of the year a vivid discussion started on the reform of the existing labour laws and standards. The government wants to review laws and related institutional arrangements in order to bring more flexibility to the labour market. Furthermore it wants to assure that wage and salary payments are within the capacity of the economy as there are currently a large number of unmet wage demands and resulting arbitration cases. The Zimbabwe Congress of Trade Union (ZCTU) warned the government with strikes on the implementation of their intended change of labour laws arguing they favour employers at the expense of the workers. If reforms should occur, then they should be conforming to the recommendation of the ILO who recently conducted a report on Zimbabwe. The discussions will be ongoing.

4 . 2 B u s i n e s s T a x a t i o n

All companies operating in Zimbabwe have to pay their taxes through the Zimbabwe Revenue Authority (ZIMRA). For that, they have to register for a business partner (BP) number. Tax schemes for which ZIMRA is in charge are the followings:

Income Tax Pay As You Earn (PAYE) Value Added Tax (VAT) Customs Duty Excise Duty Special Excise Duty Capital Gains Tax Carbon Tax Road Tolls Surtax Stamp Duty Withholding Taxes Presumptive Taxes

The income tax is regulated and levied under the Income Tax Act. The rates of tax and deductions are fixed by The Finance Act and enacted every year. An outline draft of the Zimbabwe Income Tax Act is published on the website of the Ministry of Finance (http://www.zimtreasury.org/news-detail.cfm?News=714). Some extracts relevant to investment are:

“Residence Based Tax System The current income tax law is based on the source principle, where tax is levied on income originated in Zimbabwe. However, the Income Tax Act has since been expanded from a purely source basis. This has been achieved through deeming certain types of income especially of a passive nature, to be from a source within our tax jurisdiction, hence subject to tax in Zimbabwe.

Although the current exchange control regulations limit to a large extent the outflow of capital, Zimbabwean residents are increasing the offshore elements of their investments especially in the service sector. As a developing country, Zimbabwe remains a net capital importer, subject however, to the international phenomenon of mobile financial and human capital. A residence basis of taxation would thus bring a revenue advantage.”

“Taxation of Net Gains from the Disposal of Business and Other Assets

15

Discussion on Labour Law ReformIncome TaxIntended changes in the Income Tax Law

Under the current legislation, taxation of capital gains or losses is restricted to specified assets, that is, immovable assets and marketable securities and this is taxed under the Capital Gains Tax Act. However, under the new Act, all capital gains or losses on the disposal of assets will be subject to income tax unless if specifically excluded by the regulations. Disposal of assets includes sale, donation, loss or destruction of an asset.

“Restriction of Deductions to Expenses Incurred “In the Production of Income’ by Excluding Deductions Incurred ‘For Purposes of Trade’Under the current legislation, deductions are allowed on the basis of expenditure “incurred in the production of income” and “for the purposes of trade”. It thus provides for a wider base for allowing expenditure. The new Act will streamline the allowable deductions to those expenses “incurred in the production of income” only. This therefore eliminates expenses that are not directly linked to the production of income. “

The taxable income of non-resident companies is taxed in the same way as that for resident companies. One exception is that non-resident companies are subject to various withholding taxes at source. Income derived such as business profits, fees, interest, dividends and royalties is computed together. Companies’ taxable income is calculated as income less any allowable deductions that include assessed losses brought forward from prior years.In general, deductions allowed include any expenditure incurred for the purposes of trade, or in the production of such income, except if it is of a capital nature. Approved donations of up to ZW$500 million to hospitals for the purchase of drugs or medical equipment, or for the construction, extension or maintenance of the hospital are deductible. Allowances dealing with capital expenditure are treated separately. Special allowances are also available to miners and farmers, and to businesses trading in specifically designated areas of Zimbabwe.

Corporate Tax Rates are as follows:

Corporate tax rate 25%Corporate tax on capital gains 20%Shareholder’s tax on dividends:Listed shares 15%Unlisted shares 20%Aids levy (on tax payable) 3%Foreign dividends (taxed gross) 20%

According to the sector, different income tax rates are applicable. The taxable income is as following:

Individual from Trade & Investment 25%Company Trust (general) 25%Special mining leases 15%Company or Trust: Mining operatives 25%Individual mining operations 25%Boot or Bot arrangements:

First 5 years 0%Second 5 years 15%Third 5 years 20%Thereafter 25%

Industrial Park Developers:First 5 years 0%Thereafter 10%

Export Manufacturing Company 20%

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Corporate Income TaxDifferent Income Tax Rates

Tourist operator 20%Tourist Operator in Approved Zone

First 5 years 0%Second 5 years 15%Thereafter 20%Rebate of duty on approved capital goods for the use in the TDZs

The taxpayer can claim initial allowances applied to certain asset categories:

Industrial Buildings: 50% of costsFarm Improvements 50% of costsArticles, Implements etc 50% of costsPassenger Motor Vehicles (Maximum of $300 000) 50% of costsAll other vehicles 50% of costs

After that, the taxpayer can elect to use either the “Special Initial Allowance” (SIA) for assets acquired by him or to use the “Wear & Tear” system. In case SIA is selected, 25% accelerated wear and tear (on straight-line basis) is allowed for the following 2 years.

Mining: The initial allowance for assets for Mining operations is 100% for mining equipment. All capital expenditure (exploration, development and operating) incurred wholly and exclusively for mining operations will furthermore be allowed as a deduction at a rate of 100%.

Farming: Allowances for boreholes, fencing 100, and water conservation works are 100% of the costs. In addition, one may elect to use either the “Special Initial Allowance” (SIA) for assets acquired, or the “Wear & Tear”. Again, where SIA is elected, 25% accelerated wear and tear (on a straight-line basis) is allowed to be deducted for the following 3 years.

An assessed loss may be carried forward for a maximum of 6 years. The exception applies for mining companies, which may carry forward losses indefinitely.

In Zimbabwe, a branch does not constitute a legal persona, and thus is not liable to tax in its own right. The branch profits will be consolidated into the profits of the company as a whole, which then will be subject to tax in the company’s hands.

Foreign BranchUntil today, Zimbabwean income tax is source-based but is in the process of reforms. Based on that fact, generally business profits accruing to a foreign branch situated in Zimbabwe which result from business operations in Zimbabwe will be subject to Zimbabwean income tax. If the country of residence does not have a DTA with Zimbabwe, all profits from a Zimbabwean source will be subject to income tax in Zimbabwe. In case that the country of residence of the foreign-incorporated company has a DTA with Zimbabwe, then the following applies:

If the branch in Zimbabwe operates through a “permanent establishment”, then the profits will be taxable in Zimbabwe in terms of the DTA.

The branch does not operate through a permanent establishment; the profits will be payable only in the foreign country.

Also a joint venture does not constitute a legal persona. In that case, each participating company/individual is subject to income tax on its share of the joint venture’s taxable income.

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Capital AllowancesLossesTaxation of BranchesTaxation of Joint Ventures

A partnership is not assessed for income tax as a company, but each partner is liable to income tax in his individual capacity on his/her share of taxable income.

Every company has to register for the Pay as you Earn (PAYE) system via the Form REV1. It is the method of paying income tax on remuneration. The employer deducts tax from employee salaries or pension earnings before paying the employee the net salary or pension.

If the company meets an annual threshold of US$60,000 turnover, it also qualifies for VAT registration through the VAT1 form to the Commissioner General of ZIMRA. The VAT incurred by a registered operator is known as Input Tax. When VAT is charged for goods or services by the registered operator, it is known as Output Tax. The registration is completed once the company starts operations and post the ZIA approval for foreign companies. The applicable legislation is the Value Added Tax (VAT) Act [Chapter 23:12].

Taxable supplies attract VAT of 15%, 5% or 0%. Items with zero rate are: basic food such as mealy-meal, sugar, milk, meat, salt, bread, etc.; agricultural inputs such as fertilizer, seeds, and pesticides, animal feed, animal remedy, plants, tractors, etc.; and exported goods with the exception of un-beneficiated chrome which is taxed at 15%. Some items are fully excluded from VAT and traders who exclusively provide these exempt goods are not required to register for VAT. They are: medical services, educational services, rentals from residential properties, transport of fare-paying passengers, water for domestic use, electricity for domestic use, and fuel.

4 . 3 E n v i r o n m e n t , P h y s i c a l P l a n n i n g , H e a l t h & S a f e t y , C o n s u m e r P r o t e c t i o n

The government is a signatory to International Labour Organisation (ILO) conventions protecting worker rights. Although, ILO has acknowledged that Zimbabwe continuously attempts to limit workers' right to organize and hold labour union meetings. The 1985 Labour Relations Act sets strict standards for occupational health and safety, but its enforcement is fairly lax and inconsistent across the industrial sectors.

Collective bargaining takes place through a National Employment Council (NEC) in each industry, which is comprised by representatives from labour, business, and government. The ZCTU is Zimbabwe’s umbrella labour organisation and traditional advocate for workers to both business and government. In addition, a Tripartite Negotiating Forum (TNF) was established in 2001 for labour, business, and government to tackle macro-social issues. However, these talks have been fitful and unproductive since their inception.

The Regional, Town and Country Planning Act (ch. 29:12) last amended in 1998 provides all procedures, rights and obligations for regional planning, acquisition of land, its compensation, planning or roads and other relevant issues.

Consumer welfare and protection is scattered in the diverse parts of the Competition Policy, Competition Act (ch. 14:28). Three unfair business practices are, e.g. consumer-related unfair trade practices that attract fines and/or

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Taxation of PartnershipsPAYE SystemVAT Registration and TaxesLabour Health & Safety RegulationsWage Negotiations and Collective Bargaining

Physical PlanningConsumer Protection

imprisonment. They are: (i) misleading advertising; (ii) false bargains; and (iii) distribution of commodities or services above advertised price.

Almost all other parts are related to the pricing of goods and services. Kubaba (2009) identified the following:

“For example: (i) in the definition of ‘restrictive practice’, one of the effects that determines an anti-competitive practice is the “enhancing or maintaining the price of any commodity or service”; (ii) orders made by the Commission against restrictive practices include: (a) requiring the offender to publish lists of prices, or otherwise notify prices; and (b) regulating the price which the offender may charge for any commodity or service (provided that the Commission should not make any such order unless it is satisfied that the price being charged by the person concerned is essential to the maintenance of the restrictive practice to which the order relates); (iii) factors considered by the Commission when making orders include the promotion of “the interests of consumers, purchasers and other users of commodities and service in regard to the prices, quality and variety of such commodities and services”; and (iv) the Commission does not regard a restrictive practice as contrary to the public interest if: (a) that restrictive practice is reasonably necessary, having regard to the character of the commodity or service to which it applies, to protect consumers or users of the commodity or service, or the general public, against injury or harm; and (b) the termination of the restrictive practice would deny to consumers or users of the commodity or service to which the restrictive practice applies, other specific and substantial benefits or advantages enjoyed or likely to be enjoyed by them.”

4 . 4 C o m p e t i t i o n P o l i c y & L a w

Zimbabwe has a formally adopted competition policy and law since 1996 with the enactment of the Competition Act [Chapter 14:28]. However, the Act only came into operation in 1998. In the same year the competition agency was established for its implementation. The Competition Commission of Zimbabwe is an autonomous body that does not have to refer to any other authority for its competition decisions. It consists of two principal arms: (1) A Board of Commissioners, which is the Commission’s adjudicative arm; and (2) a Directorate, which is the investigative arm.

Developing the policy, Zimbabwe had received valuable help and input from other Competition Commissions in the region, international Commissions and agencies. Based on the broad support in its development, the Zimbabwean competition law covers the main competition concerns like many other policies in the region, such of: (i) anti-competitive agreements (both horizontal and vertical agreements); (ii) abuse of dominant position (or monopolisation); and (iii) anti-competitive mergers and acquisitions. The Act provides for the consideration of most restrictive practices and all mergers using the ‘rule of reason’ approach. There are also some restrictive practices, termed ‘unfair business practices’ that are however per se prohibited.

In case of infringement, any appeals have to be made to the Commission. Orders of the commission can be lodged with the High Court of Zimbabwe for registration and will, hence, enable it to have the effect of a civil judgement of the High Court.

The Zimbabwe competition authority has actively participated in the formulation and adoption of a regional competition policy and law under COMESA. This initiative is represented on the Regional Competition Commission. The regional competition policy and law benefit Zimbabwe, and other COMESA member States,

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COMESA Competition Policy

as they can deal with restrictive business practices of a cross-border nature, and are better placed to effectively handle hardcore international cartels.

4 . 5 M o n e t a r y P o l i c y , F o r e i g n E x c h a n g e a n d F o r e i g n I n v e s t o r s

According to the IMF staff report 2010, a major challenge for Zimbabwe is the recovery from a decade of hyperinflation and economic decline.

Foreign exchange is controlled by the government via the Zimbabwe Reserve Bank. Foreign investors and visitors are allowed to bring any amount of foreign currency into the country. Equity of a foreign investor can be in form of cash, machinery and equipment, but not in form of raw materials, technical fees and other services. However, bigger sums have to be approved by the ZRB. Especially the outflows are restricted to certain limits. According to the latest negotiations and information from the Ministry of Finance (2010),

The current Exchange Control guidelines allow 100% remitability rights to profits and dividends from foreign investment (net after tax profits have been paid). Foreign investors have to use local authorised dealers for the transfer. Generally, since 1 August 2004, profits and dividends in respect of investments by non-resident Zimbabweans are accorded the same status as that of a foreign investor. Investors who become permanent residents may not remit their dividends without prior approval of the Exchange Control authorities.

In the event of disinvestment, foreign owned companies are allowed to remit 100% of their original capital investment.

Individual and corporate Foreign Currency Accounts (FCAs) can be opened with local banks in Zimbabwe. Any export administration and payment system is done through banks. Export proceeds are eligible for credit to a corporate foreign currency account. Unutilised amounts, however, are required to be drawn-down into local currency on a carrot and stick basis.Based on the Monetary Policy Review Statement of 21 April 2004, all Zimbabweans, within and outside the country are free to operate individual foreign currency accounts (FCAs).

In terms of local borrowing, no restrictions exist for working capital.Companies operating in Zimbabwe are allowed to borrow off-shore up to US$5 million under the restriction that it has to be done through an authorised dealer in Zimbabwe. For loans above US$5 million, the approval of the External Loans Coordinating Committee (ELCC) is required.

The financing of capital projects can only be undertaken using funds that came from outside of Zimbabwe or by utilizing retained earnings.

Legislation on monetary and exchange matters include:

Banking Act (chapter 24:20) Bank us Promotion and Suppression of Money Laundering Act (ch. 24:24) Exchange Control Act (ch. 22:05) Finance Act (ch. 23:04) Finance Act, 2005 (Act 6, 2006) Finance Act, 2007 /Act 8, 2007) Finance Act, 2009 (Act 3, 2009) Finance Bill, 2005 (H.B. 26, 2004)

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Foreign Exchange ControlsRemittance of Dividends & ProfitsForeign Currency AccountsLocal and Foreign LoansLegislation:

International Financial Organisations Act (ch. 22:09) Money Lending and Rates of Interest Act (ch. 14:14) National Payment Systems Act (ch. 24:23) Prescribed Rate of Interest Act (ch. 8:10) Reserve bank of Zimbabwe Act (ch. 27:12) Troubled Financial Institutions (Resolution) Act (ch. 24:28), Act 31/2004 Zimbabwe Stock Exchange Act (ch. 24.18)

4 . 6 P u b l i c P r o c u r e m e n t

The 4 main legal texts with relevance for tendering in Zimbabwe are:

The Procurement Act 2 of 1999 (ch. 22:14) The Procurement Regulations, 2002 The Procurement (Amendment) Regulations, 2003 No 2 Urban Councils Act of 1995 (revised 1996).

The Procurement Act describes the rules governing the State Procurement Board (SPB) which is the central government body in Zimbabwe in charge to procure services on behalf of government departments, and to ensure compliance with the procurement laws by other procuring entities. Members of the SPB are appointed by the president for a term of 3 years, and thereafter may be re-appointed. If a member of the SPB (or a relative of the member) is participating as a bidder in a tender, the member may not take part in the discussion of the proceedings of that tender. In case that a member is found guilty of contravening this prohibition, he or she is liable to a fine of Z$2 000 or 3 months imprisonment, or both. Seen the high inflation of the Zimbabwean Dollar, such a low fine would not appear to be a very serious deterrent.

The Procurement Regulations are based on the Model Law on Procurement of Goods and Construction as it was adopted by the United Nations Commission on International Trade Law in 1993. The exact procedures and current thresholds can be found in the law. An exceptional challenge for the process is the high inflation and economic crisis in Zimbabwe, which undermines governmental ability to call for tenders effectively and consequently to deliver services.

4 . 7 I n t e l l e c t u a l P r o p e r t y

Intellectual property is regulated by several Acts and regulations in Zimbabwe. The Copyright Act (ch. 26:1) as last amended in 1979 covers all rights on original works, sound recording, cinematographic films, broadcasts, etc., and remedies for infringement of copyrights. The Industrial Designs Act (ch. 26:02) regulates all issues on industrial designs, and the Integrated Circuit Layout Act (ch. 26:07) on layouts. The Patents Act (ch.26:03), last amended in 2002 regulates all processes of application, granting, and registering of patents, as well as the rights I case of infringements. The Trade Marks Act (ch.26:04), the Plant Variety Protection Act from 1974 and the Geographical Indications Act (ch. 26:06) are covering their respective particular fields.

4 . 8 I n v e s t m e n t P r o t e c t i o n a n d D i s p u t e S e t t l e m e n t

Section 16 in the Constitution of Zimbabwe (as amended at 30.10.2007) prohibits the compulsory acquisition of private property except under the authority of a law that fulfils certain specific conditions as listed in section 16 (1). If such exceptional

21

Constitution of Zimbabwe

conditions occur, compensation has to be provided. A special section in the constitution is addressed to the topic of Agricultural land acquired for resettlement (section 16A) in the context of the programme of land reform, and section 16B for Agricultural land acquired for resettlement and other purposes.

Zimbabwe is signatory of the Multilateral Investment Guarantee Agency (MIGA), the Overseas Private Investment Corporation (OPIC), the International Convention on Settlement of Investment Disputes (ICSID), the New York Convention on the enforcement of Foreign Arbitral Awards, the United Nations Convention on International Trade Law (UNICTRAL), and several Bilateral Investment Promotion and Protection Agreements. A list of the BITs can be found below.

4 . 9 I n t e r n a t i o n a l A g r e e m e n t s a n d O b l i g a t i o n s – T r a d e a n d o t h e r A g r e e m e n t s , B I T s , D T T s

Besides the already mentioned memberships to MIGA, OPIC, ICSID and UNICTRAL, Zimbabwe is also member of the WTO and has signed the EU Economic Partnership Agreements under the ESA EPA group.

Zimbabwe forms part of the SADC group at the same time as being part of COMESA. Under COMESA, Zimbabwe is engaged in the development of a regional competition policy as described above.

5 S A D C R E L A T E D I S S U E S

Zimbabwean Government has recognized the potential of regional integration for its economy and the national development. It has established a ministry of Regional Integration and International Co-operation which is dealing especially with such issues.

Latest developments were the work on a system that can solve challenges affecting local firms in terms of regional exports, especially in regard to the COMESA Customs Union. A regional integration policy shall facilitate local companies to venture more into regional markets in order for Zimbabwe to regain its market share in the regional markets. It is expected that an annual trade revenue inflow of up to US$ 1 billion can be realized from increased regional exports. This, however, is based in expectations from within the COMESA trading bloc which several SADC members form part of as well.

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International Agreements for Investment Protection

Regional Integration GroupsRegional Integration Policy

Bilateral Investment Treaties with Zimbabwe as of 1 June 2009Partner Country Date of signature Date of Entry

into force1 Austria 10-Nov-00 -2 Belgium and

Luxembourg01-Jul-03 -

3 Botswana 30-Jun-03 -4 China 21-May-96 01-Mar-985 Croatia 18-Feb-00 -6 Czech Republic 13-Sep-99 -7 Denmark 25-Oct-96 02-Feb-998 Egypt 02-Jun-99 -9 France 04-May-01 -10 Germany 29-Sep-95 14-Apr-0011 Ghana 30-Jun-03 -12 India 10-Feb-99 -13 Indonesia 10-Feb-99 -14 Iran, Islamic Republic 09-May-99 -15 Italy 16-Apr-99 -16 Jamaica 10-Feb-99 -17 Malawi 04-Jul-03 -18 Malaysia 28-Apr-94 -19 Mauritius 17-May-00 -20 Mozambique 12-Sep-90 -21 Netherlands 11-Dec-96 01-May-9822 Portugal 05-May-94 -23 Serbia 19-Sep-96 22-Jul-9724 Singapore 01-Sep-00 -25 South Africa 27-Nov-09 11 May 1026 Sweden 06-Oct-97 -27 Switzerland 15-Aug-96 09-Feb-0128 Tanzania, UR 03-Jul-03 -29 Thailand 18-Feb-00 -30 Uganda 01-Jul-03 -31 United Kingdom 01-Mar-95 -

Double Taxation Agreements with Zimbabwe as of 1 June 2009Partner Country Type of Agreement Date of Signature

1 Bulgaria Income and Capital 12-Oct-882 Canada Income and Capital 16-Apr-923 France Income and Capital 15-Dec-934 Germany Income and Capital 22-Apr-885 Malaysia Income and Capital 28-Apr-946 Mauritius Income and Capital 06-Mar-927 Netherlands Income and Capital 18-May-898 Norway Income and Capital 09-Mar-899 Poland Income and Capital 09-Jul-9310 Serbia Income and Capital 19-Oct-9611 South Africa Income and Capital 10-Jun-6512 Sweden Income and Capital 10-Mar-8913 Switzerland Income and Capital 30-May-6114 United Kingdom Income and Capital 19-Oct-82

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Bilateral Investment TreatiesDouble Taxation Agreements

24