ZIMRA

ZIA

ZIMBABWE

1 POLICY, PLANS AND PRIORITIES

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 INVESTMENT PROMOTION

2.1 2.1 Institutions

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.

1
 Royalties
Zimbabwe
EPZA
Mining Sector
&Stock
Rental
Exchange
Investment
Incentives
Authority Act 2006
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 Investment and Export Incentives

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

2
 BOT and Sector
Allowable
Customs
Tourism BOOT
Duties
deductions
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 apply
Duty 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%

3
 EPZAct
Export
ZIA
EPZAIncentives
market
(2006)
search Incentive
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 EPZs, Freeports and other Special

Economic Zones

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

4
 Guidelines
Review
Growth
Income
Manufacturing
of
Point
Taxthe
onAreas
Investment
Incentives
Exports
Import and Export
Act
(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:

Allowances
For 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 Tax
For 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 Tax Incentives

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 International Trade & Export

Promotion

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

5
 Duty FreeRebates
Customs and Excise
Duty
Importation
Schemes
 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.

6
 Zimbabwe
Export
Commercial
Inward Drawback
Processing
Vehicle
Scheme and Trade
Rebate
Economic
Revival Facility
(ZETREF)
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 Other Issues

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

7
 Reserved Sectors
Definition
Generally
Foreign equal
of Foreign
Investment
Company
Treatment
shareholding
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 ACCESS AND ADMISSION OF

FOREIGN INVESTORS

3.1 Foreign Investment & Capital

Mobility

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 5 th 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

8
 Companiesoflisted
Indigenisation
Definition andon
Economic
“Indigenous”
the ZSE
Empowerment Act
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 5 th 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:

9
 Important
Financial
Approval
ZIA application
Sector
Factors
Requirement
for Investment
Approval

 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 Foreign Investment Establishment,

Registering and Licensing
Processes
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;

10
 Types forms
Investment
Company
Other of Business
License
for
Registration
investing
Enterprises
 The extent to which local raw materials will be utilised;
 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 b e 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:

11
 Restrictions
Tax
Tourism
registration
Sector
for
Mining Sector
Zimbabwean
residents only
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

12
 Work Permit
Banking
Medical
Transport
Business
Employment
Sector
Sector
Visitor
andand
Telecommuni-
Residence Permits
cations
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 Foreign Employment & Residence

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.

13
 NSSA Laws
Labour
Minimum Wagesand
Social Security
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 Foreign Investor Access to Land

and Property Rights

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 FOREIGN INVESTMENT
OPERATIONS

4.1 Employment

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.

14
 IntendedTax
Discussion
Income changes
on in
Labour
the Income
LawTax
Reform
Law
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 Business Taxation

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.”

15
 Different Income
Corporate IncomeTax
Rates
Tax
“Taxation of Net Gains from the Disposal of Business and Other Assets
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%

16
 Capital Allowances
Taxation
Losses of Joint
Branches
Ventures
Export Manufacturing Company 20%
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 costs

Farm Improvements 50% of costs
Articles, Implements etc 50% of costs
Passenger Motor Vehicles
(Maximum of $300 000) 50% of costs
All 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 Branch
Until 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.

17
 Consumer
Taxation
PAYE
VAT
Labour
Wage
Physical
Registration
Negotiations
System
Health
Planning
of &
Partnerships
Safety
and
Protection
Taxes
Collective
Regulations
Bargaining

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 Environment, Physical Planning,

Health & Safety, Consumer
Protection
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

18
 COMESA
Competition Policy
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 Competition Policy & Law

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,

19
 Legislation:
Remittance
Foreign
Local andExchange
Currency
Foreign
of
Controls & Profits
Dividends
Accounts
Loans
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 Monetary Policy, Foreign Exchange

and Foreign Investors

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)

20
 Constitution of
Zimbabwe
 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 Public Procurement

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 Intellectual Property

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 Investment Protection and Dispute

Settlement
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

21
 International
Regional Integration
Agreements for
Groups
Policy
Investment
Protection
that fulfils certain specific conditions as listed in section 16 (1). If such exceptional
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 International Agreements and

Obligations – Trade and other
Agreements, BITs, DTTs

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 SADC RELATED ISSUES

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.

22
 Double Taxation
Bilateral Investment
Treaties
Agreements

Bilateral Investment Treaties with Zimbabwe as of 1 June 2009

Partner Country Date of signature Date of Entry
into force
1 Austria 10-Nov-00 -
2 Belgium and 01-Jul-03 -
Luxembourg
3 Botswana 30-Jun-03 -
4 China 21-May-96 01-Mar-98
5 Croatia 18-Feb-00 -
6 Czech Republic 13-Sep-99 -
7 Denmark 25-Oct-96 02-Feb-99
8 Egypt 02-Jun-99 -
9 France 04-May-01 -
10 Germany 29-Sep-95 14-Apr-00
11 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-98
22 Portugal 05-May-94 -
23 Serbia 19-Sep-96 22-Jul-97
24 Singapore 01-Sep-00 -
25 South Africa 27-Nov-09 11 May 10
26 Sweden 06-Oct-97 -
27 Switzerland 15-Aug-96 09-Feb-01
28 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 2009

Partner Country Type of Agreement Date of Signature
1 Bulgaria Income and Capital 12-Oct-88
2 Canada Income and Capital 16-Apr-92
3 France Income and Capital 15-Dec-93
4 Germany Income and Capital 22-Apr-88
5 Malaysia Income and Capital 28-Apr-94
6 Mauritius Income and Capital 06-Mar-92
7 Netherlands Income and Capital 18-May-89
8 Norway Income and Capital 09-Mar-89
9 Poland Income and Capital 09-Jul-93
10 Serbia Income and Capital 19-Oct-96
11 South Africa Income and Capital 10-Jun-65
12 Sweden Income and Capital 10-Mar-89
13 Switzerland Income and Capital 30-May-61
14 United Kingdom Income and Capital 19-Oct-82

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