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 is prevalent. Investors have also complained of policy inconsistency and unpredictability.
The government has introduced import taxes arbitrarily to support certain inefficient producers who 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 banned importation of a number of products manufactured locally. In 2017, the government replaced SI 64 with SI 122, which removed some products from requiring import licenses on importation. In October 2018, the government repealed SI 122 altogether to allow local companies and individuals with free funds to import commodities and stock up and stave off shortages of basic commodities.
In the last year, the government has stated its commitment to ensuring that laws, regulations and policies pertaining to investment are enacted after proper notice and consultation and are available publicly in a prompt and transparent manner.
According to the Department of State’s 2018 Fiscal Transparency Report, public budget documents do not provide a full picture of government expenditures, and there is a notable lack of transparency regarding state-owned enterprises and the extraction of natural resources.
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 Zimbabwe’s law and constitution, Zimbabwe has an independent judicial system whose decisions are binding on the other branches of government. The country has written commercial law and it has expressed its intention to set up specialized commercial courts in 2019. 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 USD 500,000, but now amended to apply only to the diamonds and platinum sectors. 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) promotes and facilitates both foreign direct investment and local investment. ZIA facilitates and processes investment applications for approval. ZIA’s website is http://www.investzim.com/. The government has announced plans for a more powerful, streamlined entity (a “one-stop shop”) – the Zimbabwe Investment Development Authority (ZIDA).
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 prohibited the acquisition of private property without compensation, in 2000 the government began to allow the 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 the ruling 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 or acceptable as collateral that would allow for borrowing and investment. 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 95 out of 190 countries considered with respect to the country’s ability to protect minority investors in the World Bank’s 2018 Doing Business report.
Zimbabwe’s new government has announced its intention to compensate farmers who lost their land. Negotiations between the government and farmers’ groups are ongoing.
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
As noted above, 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.
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 102 out of 190 economies in the World Bank’s 2017 Doing Business Report.