Investment climate in zimbabwe
Zimbabwe’s economy faces serious challenges due to external and policy shocks. Hyperinflation decimated the economy, particularly between 2005 to 2008. During the period the American dollar replaced the Zimbabwean dollar as the country’s main currency, a status most investors expect Zimbabwe to hold for some time. Growth has slowed sharply from the average 8% during 2009-12 to a projected growth of 0.4% in 2016 due to decline in commodity price, devaluation of neighbouring currencies, the major droughts and severe cash shortages. Policy inconsistency and failure to put in place investor friendly policies meant that the Zimbabwean economy would not receive the much needed Foreign Direct Investments. The above led to the collapse of the economy resulting in the country being isolated from the international community hence affecting the aid flows from development partners. In 2009, the country adopted a multicurrency regime (dollarization) that ushered in macroeconomic stability and positive economic growth during the period from 2009 to 2012. In 2015, Zimbabwe proposed a plan to clear arrears and resumes much needed financing from, International Financial Institutions during 2016. However, delays in implementing the plan and undertaking corrective fiscal reforms have contributed to the declining market confidence and sharp economic slowdown. According to the World Bank the Zimbabwe’s economy will grow by 3.8% in 2017 higher than rate of 1.7% in the 2017 National budget if the proposed plan is implemented. Zimbabwe still has enormous potential for sustained growth and poverty reduction given its generous endowment of natural resources, existing stock of public infrastructure and comparatively skilled human resources provided it deals with its political and economic issues that have led to the collapse of the economy. The country therefore requires urgent action to address governance issues, correct fiscal policies, re-stabilize the monetary system, and resolve arrears to international lenders which would allow for a resumption of development financing.
Why invest in Zimbabwe?
Zimbabwe still has enormous potential for exploitation given its generous endowment of natural resources, existing stock of public infrastructure and comparatively skilled human resources provided it addresses the political and economic issues that have negatively impacted the economy.
President Robert Mugabe leader of ZANU-PF has dominated the country’s political scene since independence from Britain in 1980. The government has been battling with a number of political, governance and economic issues that have led to the collapse of the economy.
The population census conducted by the Zimbabwe National Statistics Agency in 2012 showed that the population had almost doubled in three decades, from 7.5 million in 1982 to 13.1 million in 2012. The life expectancy at birth has increased from 57.4 to 67.4 for males and from 64.0 to 75.2 for females due to a number of coordinated socio-economic and health care. The Zimbabwe’s population is projected to grow from 13.1 million in 2012 to 19.3 million in 2032 in the medium scenario giving an average annual population growth rate of 2.0 percent during the projection period.
Zimbabwe’s urban population is projected to grow from 4.3 million in 2012 to 6.5 million in 2032 while its rural population is projected to grow from 8.8 million in 2012 to 13.7 million in 2032. However, the proportion of the population living in urban areas is projected to remain stagnant at 33 percent through-out the projection period.
Doing business in Zimbabwe
The highlights of World Bank score of doing business in Zimbabwe are summarised as follows;
|Topics||World Bank 2017 Rank||World Bank 2016 Rank||Change in Rank|
|Starting a Business||183||182||
|Dealing with Construction Permits||181||183||
|Protecting Minority Investors||102||97||-5|
|Trading across Borders||148||103||-45|
The government is in process of creating conducive environment for doing business.
Following the cash shortages experienced in Zimbabwe in recent months, the Reserve Bank of Zimbabwe (RBZ) has re-established some controls on current and capital account transactions. Zimbabwe’s central bank established a foreign exchange priority list to guide banks in the distribution of foreign currency towards competing demands. In addition, the RBZ revised downwards the maximum cash that clients can take outside the country from $5,000 to $1,000.
The Law of Arbitration in Zimbabwe is embodied in the Arbitration Act as well as the Arbitration (International Investments Disputes) Act. 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.
Key development challenges
The challenges facing Zimbabwe that have led to the collapse of the economy are many. These include long-term economic stagnation, high level of unemployment, inflation, food insecurity, poverty, HIV and Aids prevalence, limited provision of basic services, power outages, droughts and lack of clean water among others.
Zimbabwe ranked as number 154 least corrupt nation out of 175 countries and scored 22 points out of 100 on the 2016 Corruption Perceptions Index reported by Transparency International.
Visitors are advised to avoid areas where demonstrations may be held and to consider travel advice and local media information when travelling around the country. The country has a low threat from terrorism.
Unemployment and skilled labour
The country’s unemployment rate is among the highest in the world and was estimated at 95% in 2009.
Attitude to Foreign Direct Investment
The government of Zimbabwe recognizes the need for attracting greater FDI in order to improve the country’s competitiveness. This includes encouraging public-private partnerships to enhance technological development. The government also emphasizes the need to improve the investment climate by restoring the rule of law and sanctity of contracts. Following the implementation of economic reforms including liberalization of current account transactions, dollarization, and the adoption of cash budgeting in 2009, Zimbabwe saw a progressive increase in net FDI from USD 52 million in 2008 to USD 400 million in 2012.
Restrictions on Foreign investment
In 2007, the government passed the Indigenization and Economic Empowerment Act, which requires that indigenous Zimbabweans (black Zimbabweans) own at least 51 percent of all enterprises valued over USD 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. A foreign investor who wishes to establish a business in Zimbabwe must first obtain an investment license issued by the Zimbabwe Investment Authority (ZIA) and other operating permits from relevant government agencies. The investor must also satisfy the Indigenization and Economic Empowerment Act.
Intellectual Property (IP) Rights.
Zimbabwe applies international patent and trademark conventions. It is a member of the World Intellectual Property Organization. Generally, the government seeks to honor intellectual property ownership and rights, although the government lacks capacity to enforce compliance with the legal framework.
The natural resources include coal, chromium ore, asbestos, gold, nickel, copper, iron ore, vanadium, lithium, tin and the platinum group metals.
Information about investment climate has been summarized to include the following;
Sources of information