Transparency of the Regulatory System
The government’s official policy is to encourage competition within the private sector, but the bureaucracy within regulatory agencies lacks transparency, and corruption within the regulatory system is believed to be rampant.
The government introduces import taxes arbitrarily to support certain inefficient producers who continue to lobby for protection against more competitive imports. In late 2012, the Ministry of Finance announced a 25 percent surtax on selected imported products including soaps, meat products, beverages, dairy products, and cooking oil starting January 1, 2013 as well as other import taxes on beer, cigarettes, and chickens brought in from outside the Southern African Development Community (SADC) and the Common Market for Eastern and Southern African regions (COMESA). In 2016, the government, through the Ministry of Industry and Commerce, introduced statutory instrument (SI) 64 which bans importation of a number of products manufactured locally.
International Regulatory Considerations
Zimbabwe is a member of the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA) and it is signatory to the SADC and COMESA trade protocols establishing free trade areas (FTA) with the aim of growing into a customs union. Although the country is also a member of the World Trade Organization (WTO), it normally notifies only SADC and COMESA of measures that it intends to implement.
Legal System and Judicial Independence
According to law, Zimbabwe has an independent judicial system whose decisions are binding on the other branches of government. The country has commercial law but does not have specialized commercial courts. Administration of justice in commercial cases that lack political overtones is still generally impartial. Regulations or enforcement actions are appealable and are adjudicated in the national court system.
Laws and Regulations on Foreign Direct Investment
As noted above, in 2007, the government introduced the Indigenization and Economic Empowerment Act requires that “indigenous Zimbabweans” (black Zimbabweans) own at least 51 percent of all enterprises valued over $500,000. In certain sectors, such as primary agriculture, transport services, and retail and wholesale trade including distribution, foreign investors may not own more than 35 percent equity.
The Zimbabwe Investment Authority (ZIA) is the country’s investment promotion body set up to facilitate both foreign direct investment and local investment. ZIA’s website is http://www.investzim.com/ . The country encourages companies to register with ZIA and the process currently takes 90 days.
Competition and Anti-Trust Laws
The government’s official policy is to encourage competition within the private sector with the enactment of the Zimbabwe Competition Act. The Act provided for the formation of the Tariff and Competition Commission charged with investigating restrictive practices, mergers, and monopolies in the country. The Competition and Tariff Commission (CTC) is an autonomous statutory body established in 2001 with the dual mandate of implementing and enforcing Zimbabwe’s competition policy and law and executing the country’s trade tariffs policy.
Expropriation and Compensation
Despite provisions in Zimbabwe’s previous constitution that prohibit the acquisition of private property without compensation, in 2000 the government began to sanction uncompensated seizures of privately owned agricultural land, serially amending the constitution to grant the government increasingly broad authorities to do so after the fact. The authorities subsequently transferred many of the farms seized to government officials and other regime supporters. In April 2000, the government amended the constitution to authorize the compulsory acquisition of privately owned commercial farms with compensation limited to the improvements made on the land. In September 2005, the government amended the constitution again to transfer ownership of all expropriated land to the government. Since the passage of this amendment, top government officials, supporters of President Mugabe’s Zimbabwe African National Union – Patriotic Front (ZANU-PF) party, and members of the security forces have continued to disrupt production on commercial farms, including those owned by foreign investors and those covered by bilateral investment agreements. Similarly, government officials have sought to impose politically-connected individuals as indigenous partners on privately and foreign-owned wildlife conservancies.
In 2006, the government began to issue 99-year leases for land seized from commercial farms. These leases, however, are not readily transferable. The government retains the right to withdraw the lease at any time for any reason. The government’s program to seize commercial farms without compensating the titleholders, who have no recourse to the courts, has raised serious questions about respect for property rights and the rule of law in Zimbabwe. As a result, Zimbabwe ranked 87 out of 189 countries considered with respect to the country’s ability to protect minority investors in the World Bank’s 2015 Doing Business report.
President Mugabe and other politicians have in the past threatened to target the mining and manufacturing sectors for similar forced indigenization. In 2008, the government amended the Mines and Minerals Act, outlining indigenization requirements for mining. For strategic energy minerals (coal, methane, uranium), the legislation required mining companies engaged in extraction or exploitation to transfer ownership to the state of 51 percent of the shares; 25 percent would be without compensation. The 2008 legislation directs a transfer of 25 percent of the shares in precious metals and precious stones to the state without compensation and a further 26 percent to the state or to indigenous Zimbabweans. The government is still deliberating amendments to the Mines and Minerals Act, which may include a “use it or lose it” provision for unexploited mining concessions and new “indigenous” ownership requirements in the sector in line with the Indigenization Act. In addition, the government intends to amend the provisions of the Precious Stones Trade Act relevant to diamonds to enforce, among other things, 100 percent government ownership of all alluvial diamonds in the ground, immediate separation of diamond mining and marketing activities, and the promotion of value addition through the prohibition of exports of unpolished diamonds.
ICSID Convention and New York Convention
Zimbabwe acceded to the 1965 Convention on the Settlement of Investment Disputes between States and Nationals of Other States and to the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards in 1994. However, the government does not always accept binding international arbitration of investment disputes between foreign investors and the state.
Investor-State Dispute Settlement
The government is signatory to a number of bilateral investment agreements with a number of countries (see above) in which international arbitration of investment disputes is recognized. As noted above, Zimbabwe does not have a Bilateral Investment Treaty or Free Trade Agreement with an investment chapter with the United States.
Local courts recognize and enforce foreign arbitral awards issued against the government, but there is a history of extrajudicial action against foreign investors. For example, senior politicians declined to support enforcement of a 2008 SADC Tribunal decision ordering Zimbabwe to return expropriated commercial farms to the original owners. Once an investor has exhausted the administrative and judicial remedies available locally, the government of Zimbabwe agrees, in theory, to submit matters for settlement by arbitration according to the rules and procedures promulgated by the United Nations Commission on International Trade Law. However, this has not occurred in practice.
International Commercial Arbitration and Foreign Courts
Zimbabwe is a member of the International Center for Settlement of Investment Disputes, but in practice local courts have not recognized foreign arbitration since the Fast Track Land Reform program in the early 2000s when commercial farmers lost much of their property.
In the event of insolvency or bankruptcy, Zimbabwe applies the Insolvency Act. All creditors have equal rights against an insolvent estate. In terms of resolving insolvency, Zimbabwe ranks 145 out of 190 economies in the World Bank’s 2016 Doing Business Report.