Doing Business in Zimbabwe: A 2022 Synopsis of the Business, Policy, Legal and Regulatory Landscape

Introduction

This article seeks to present an analytical overview of the business, policy, legal and regulatory environment as of the year 2022, which has been developed with the objective of providing information that may be relevant to any potential investors, entrepreneurs, tourists or other businesspeople that may have an interest in either establishing a business in Zimbabwe or visiting Zimbabwe for tourist purposes. What may need to be understood, or mentioned beforehand, is that the business, policy, legal and regulatory environment is always shaped by politics, and politics in any polity is fluid and dynamic, responding to local, regional and international needs, forces, trends, opportunities, circumstances and developments. This article utilizes a variety of authentic sources of information that are duly acknowledged and cited throughout, in conjunction with empirical on-the-ground observations by the author.

Zimbabwe: Country Profile

Zimbabwe is a landlocked (or land-linked in trade facilitation parlance) country that is located in Southern Africa, sharing borders with four countries, namely Mozambique, South Africa, Zambia and Botswana. The country gained independence from Britain in 1980 following a prolonged liberalization struggle against colonial rule that had been established in 1890. Zimbabwe’s total area is 390,757 square kilometres. Being a former British colony, the official language of communication is English.

Zimbabwe is a presidential republic, whereby the President is the Head of State and Government. The Government exercises executive power whereas the legislative power is vested in both the Government and Parliament, resulting in separation of powers between the Executive, Judiciary and Legislature. The country was ruled by Robert Mugabe for 37 years from 1980–1987 (as an elected Prime Minister) and from 1987–2017 (as a President). In November 2017, Robert Mugabe—under pressure from a military-facilitated and military-led “Operation Restore Legacy”—resigned from office. He was replaced by President Emmerson Dambudzo Munangagwa, who came in on an interim basis in November 2017, was re-elected as the President of the Republic in July 2018 elections and is still serving as the current President. The next presidential, parliamentary and local government elections are scheduled for 2023.

Demographically, Zimbabwe currently has 15.817 million people (compared to 7.4 million people at independence in 1980) and its population density is 38 per km². The urban areas account for 38.4 percent of the national population, whilst 61.6 percent of the population resides in rural areas as of 2020.[1] In terms of forecasts, Zimbabwe is expected to have 24 million people by 2050.[2]

The Socioeconomic and Governance Metrics of Zimbabwe

Whilst it is not a sufficient condition for determining whether an environment is safe, sound and conducive for doing business, the general social, economic and governance state of a country substantially contributes towards creating an environment where business enterprise can thrive and optimally perform. Presented in Figure 1 below are some of the key socioeconomic and governance indicators of Zimbabwe as of 2021.

Figure 1: Socioeconomic and Governance Indicators of Zimbabwe (as of October 2021)[3]

Socioeconomic Development Indicator	Status
National population	15.82 million
Gross Domestic Product	US$27.8 billion
Real GDP growth (Annual percent change)	3.1%
General government gross debt (% of GDP)	60.3%
Inflation rate, average consumer prices (Annual % change)	30.7%
Exports and imports of goods and services (% of GDP)	44.1%
Services, value added (% of GDP)	37.4%
Industry (including construction), value added (% of GDP)	12.6%
Agriculture, forestry and fishing, value added (% of GDP)	5.1%
Total Foreign Direct Investments inflows (in 2019, 2020 and 2021)	US$280 million in 2019, US$194 million in 2020[4] and US$91 million in 2021[5]
Literacy rate (15 years and older)	88.7%[6]
Human Capital Index score for 2020 (min 0, max 1)	0.47
Access to electricity (% population)	40% (16% in rural areas, 78% in urban areas)[7]
Population using at least basic drinking water services (%)	64.1%
Population who feel safe walking alone at night in the city or area where they live (%)	45.1%
Quality of trade and transport-related infrastructure (1=low to 5=high)	1.83[8]
Ranking on the 2020 World Bank Doing Business Index (out of 190 countries in the world)	140 out of 190[9]
Ranking on the 2022 Investment Freedom Index (out of 175 countries in the world)	163 out of 175[10]
Ranking on the 2022 Economic Freedom Index (out of 177 countries in the world)	173 out of 177[11]
Ranking on the 2021 Global Peace Index (out of 163 countries in the world)	133 out of 163[12]
Ranking on the 2021 Corruption Perception Index (out of 180 countries in the world)	157 out of 180[13]
Ranking on the 2020 Mo Ibrahim Index of African Governance (out of 54 African countries)	33 out of 54[14]

Legal and Regulatory Reforms on Investment, Trade and Doing Business

The post-Mugabe Government (popularly referred to as the ‘New Dispensation’) substantially reformed the country’s investment regimes since late 2017 with a view to strategically reposition the country as investment-friendly, attract new capital and foreign direct investments, and reduce the cost of doing business whilst creating a business environment that promotes a competitive private sector and provides legal protection to all investments.

Following reforms of the legal, regulatory and policy frameworks that govern investments, Zimbabwe’s ranking on the World Bank’s Doing Business (EoDB) Index has improved as shown in Figure 2 below. The World Bank’s EoDB Index ranks countries based on their assessment of the countries’ business and investment climate, focusing on the procedures, time, cost and minimum capital required for starting a business; dealing with construction permits; getting electricity; registering property; getting credit; protecting investors; paying taxes; trading across borders; enforcing contracts; and resolving insolvency. In the EoDB Report of 2020, the World Bank reported that Zimbabwe had made substantial improvements in streamlining procedures for starting a business, dealing with construction permits, registering property, getting credit and resolving insolvency.[15]

Figure 2: Zimbabwe’s ranking on the World Bank’s Doing Business Index (2017-2020)[16]

Year	Ease of Doing Business Index Score	Ranking out of 190 countries
2020	54.50	140
2019	50.44	155
2018	48.47	159
2017	47.10	161

As of 2022, Zimbabwe now has a One Stop Investment Services Center (OSISC) under the Zimbabwe Investment and Development Agency (ZIDA) through the Zimbabwe Investment Development Agency Act [Chapter 14:37][17] of 2020. The OSISC, which was set up in 2010 but operationalized in August 2016, brings together all key institutions that are involved in the processing and approval of investment proposals and legal and regulatory requirements pertaining to all investments. The key institutions include the ZIDA, the Immigration Department, Zimbabwe Revenue Authority (ZIMRA), Special Economic Zones Authority, Companies Registry Office, Local Government, the Reserve Bank of Zimbabwe (RBZ), Ministry of Mines, Ministry of Labour, Zimbabwe Energy Regulatory Authority (ZERA), National Social Security Authority (NSSA), Zimbabwe Tourism Authority (ZTA) and the Environmental Management Authority (EMA). The OSISC thus facilitate quicker, faster and more efficient handling of investments approvals whilst also enabling convenient inter-agency cooperation in compliance screening, scrutiny and expedited approval of investments, which reduces the cost of doing business in the country.

In law and in principle, there is clarity, predictability and certainty in the protection of investments in Zimbabwe, whilst the ZIDA Act espouses the principles of non-discrimination and Most-Favoured Nation, which allows for equal, equitable and fair treatment of all investors. Specifically, Section 6 of the ZIDA Act protects investors against denial of justices and cases whereby there are substantial procedural delays and changes in the terms and conditions stated in their investment licences. Another merit embodied in the ZIDA Act is the guarantees—expressed under Section 17 of the Act—against possibilities of nationalisation and expropriation of their properties without compensation. The law states that in the event of nationalisation and/or expropriation, property claims should be executed in accordance with due process of the law and adequate compensation should be made promptly. In addition to the ZIDA Act, the Constitution of Zimbabwe under Section 71(3) also provides that the acquisition or deprivation of property is subject to compensation, and such acquisition has to follow stipulated procedures, requirements and processes. Related to this provision is the Government’s decision to compensate all farmers who lost their farmlands through the Fast Track Land Reform Programme (FTLRP) of 2000.[18] Through FTLRP, blacks compulsorily acquired land from white owners in order to redress imbalances in land ownership through equitable land redistribution in the country, and more than 10 million hectares of land ended up being transferred to between 170,000 and 220,000 households in the form of small-scale (A1) and medium-scale (A2) farms.[19] If the Government dutifully and punctually fulfils its commitment, it may go a long way in building investors’ trust and confidence in Zimbabwe as an investment destination.

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Investments in Zimbabwe are also legally protected by the ZIDA Act’s provision relating to dispute settlement under Part VIII of the Act, which provides for domestic arbitration, international arbitration and any other dispute settlement mechanisms espoused in any treaties or agreements that Zimbabwe and the FDI-originating country of the aggrieved party. To this effect, the Government of Zimbabwe has made commitments to respect the existing sacrosanct Bilateral Investment Promotion and Protection Agreements (BIPPAs) whilst correcting previously violated BIPPAs.[20] BIPPAs provide for state parties to protect the rights of investors and obligate them to protect such from expropriation whilst allowing aggrieved investors to seek redress in international courts. Zimbabwe has signed and ratified 12 BIPPAs with different countries. To date, 20 more BIPPAs have been signed but are awaiting ratification, and over 20 BIPPAs are currently under negotiation with countries from Africa, Europe, Asia and Latin America.[21] Over and above existing BIPPAs and property rights provisions enshrined under Section 71(2) of the Constitution, the protection of investments in Zimbabwe is legally guaranteed as the country is a signatory to the following five treaties:

United Nations Commission on International Trade Law (UNCITRAL)
International Convention on Settlement of Investment Disputes (ICSID)
Multilateral Investment Guarantee Agency (MIGA)
Overseas Private Investment Corporation (OPIC)
New York Convention on the Enforcement of Foreign Arbitral Awards

As for domestic dispute settlement remedies and litigation relating to investments, Zimbabwe introduced the High Court (Commercial Division) Rules in 2020 as Statutory Instrument 123 of 2020,[22] which are meant to apply to all commercial disputes that may arise due to formation of businesses, contractual liabilities, enforcement of arbitral awards, intellectual property, competition law cases, et cetera. These assist in strengthening the dispute settlement regimes and give wide legal options to investors whilst ensuring faster, fair, more consistent and more efficient resolution of commercial disputes.

There are special preferences and competitive incentives extended to investments in targeted Special Economic Zones (SEZs) in Zimbabwe. Zimbabwe has a total of five designated SEZs,[23] namely Victoria Falls SEZ, Harare-Sunway City SEZ, Bulawayo SEZ, Beitbridge SEZ and Mutare-Fernhill SEZ, all of which have various cross-sector investment opportunities that include construction, tourism, financial services, ICT services, industrial parks, logistical hubs, manufacturing and textiles, agro-processing, power generation, minerals and precious metals beneficiation, engineering, energy generation and plantation agriculture. For all investments channelled into these SEZs, the Government offers incentives in the form of zero-rated income tax for the first five years and a corporate tax rate of 15% applying thereafter; special initial allowance of 50% of cost from year one and 25% in the subsequent two years; a 15% flat tax rate for all specialized expatriate staff; exemption from non-resident withholding tax on royalties, dividends and fees on services that are not locally available; as well as 100% rebate on customs duty for all imported equipment, machinery and raw materials.[24] Investments into SEZs are welcome as long as they are export-oriented, advance import substitution, promote industrialization, transfer skills and technology, create jobs and promote value addition and beneficiation of local raw materials, which are desirable objectives of Zimbabwe’s investment policy thrust. Public private partnerships (PPPs) are welcome in Zimbabwe within and outside the SEZs, and these are regulated by the ZIDA Act.

In terms of foreign participation and local content requirements, foreign investors in Zimbabwe have unrestricted ownership requirements in all sectors except for businesses in the diamond and platinum extraction industry, where the Government reserves 51 percent ownership to local shareholders consistent with Section 3 of the Indigenization and Economic Empowerment Act [Chapter 14:33] of 2008 as amended in 2021.[25] The same Act (under the First Schedule) also prohibit foreigners from establishing businesses in what are specified as “reserved sectors of the economy” as these are exclusively reserved for Zimbabwean citizens. These reserved sectors include transport (passenger buses, taxi and car hire services), hair salons, retailing, wholesaling, estate agencies, advertising agencies, grain milling, bakeries, tobacco grading and packaging, and artisanal mining. Foreign investments in these reserved sectors are only permissible where firms would substantially fund local production.

Investment Opportunities in Zimbabwe

Agriculture Sector

Manufacturing Sector

Tourism Sector

Finance, Capital Markets and Investment Opportunities in other Service Sectors

Integration of Zimbabwe into the Regional and Global Economy

Conclusion

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[1] See https://www.worldometers.info/world-population/zimbabwe-population/#:~:text=Zimbabwe%202020%20population%20is%20estimated,of%20the%20total%20world%20population.

[2] Ibid.

[3] See https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1036657/Zimbabwe_economic_factsheet_2021.pdf ; https://www.imf.org/en/Countries/ZWE#countrydata; and https://reliefweb.int/sites/reliefweb.int/files/resources/UNCT_ZW_CommonCountryAnalysis_2021Final_0.pdf