Zimbabwe’s legal framework for investments has evolved significantly in recent years. Today, the country offers a more streamlined system that safeguards both domestic and foreign investors. This guide explores the key aspects of investment laws in Zimbabwe, focusing on its regulatory framework, licensing requirements, incentives, and essential considerations for prospective investors.
Understanding Zimbabwe’s Legal and Regulatory Framework
Zimbabwe’s investment environment centers around the Zimbabwe Investment and Development Agency Act [Chapter 14:38] (ZIDA Act), which came into effect on February 7, 2020. The ZIDA Act replaced multiple older laws, including the Zimbabwe Investment Authority Act, the Special Economic Zones Act, and the Joint Ventures Act. By consolidating these statutes, the ZIDA Act introduced clearer and more robust provisions for anyone looking to invest in Zimbabwe.
Zimbabwe Investment and Development Agency (ZIDA)
ZIDA acts as the primary authority for investment regulation, operating as a One Stop Investment Services Centre (OSISC). It streamlines processes related to business setup and investment facilitation. Other key institutions include:
- Reserve Bank of Zimbabwe (RBZ): Oversees exchange control and foreign investment in existing entities.
- Securities and Exchange Commission of Zimbabwe (SECZim): Regulates capital market activities, including securities exchanges and market participants.
These bodies coordinate to maintain a balanced regulatory landscape that promotes growth while protecting investor interests.
Types of Investments and Licensing
Under the ZIDA Act, an “investor” can be an individual or a company making—or planning to make—investments in Zimbabwe. This definition includes both domestic and foreign investors.
1. Greenfield Investments
Greenfield investments involve creating an entirely new business entity in Zimbabwe. Common registration options include limited liability companies, private business companies, or cooperatives—all governed by the Companies and Other Business Entities Act [Chapter 24:31]. ZIDA’s one-stop service center makes the registration process much quicker and less bureaucratic than before.
2. Brownfield Investments
Brownfield investments entail acquiring interests in existing Zimbabwean businesses. This category often involves mergers, acquisitions, rights issues, cross-border investments, and other forms of ownership restructuring. Foreign investors pursuing brownfield ventures must secure approvals from the RBZ’s Exchange Control Division. Applications go through Authorized Dealers (typically banks), which forward them to the RBZ for final approval.
Obtaining an Investment License
Although obtaining a ZIDA investment license is not mandatory for all sectors, it provides notable benefits and legal safeguards for foreign investors.
Application Process
- Submit the completed application form and required documents to ZIDA.
- Within 14 days, the CEO refers the application to the Investment Committee or requests additional information from the applicant.
- The Investment Committee reviews the application within another 14 days and sends recommendations to the Board.
- The Board then has 21 days to decide on the application.
Special Economic Zones (SEZs)
Investments in SEZs need a separate SEZ License, either applied for online or in person at ZIDA’s offices. The processing time is typically up to five days if the application is complete. SEZs offer targeted incentives, particularly for export-oriented activities.
Key Investment Considerations and Required Approvals
During the review process, ZIDA evaluates elements such as skills transfer, job creation, local raw material use, foreign currency inflows, environmental impact, and compliance with Zimbabwean regulations.
1. Exchange Control Approval
All foreign currency transactions—lending, borrowing, and any remittances outside Zimbabwe—must have exchange control clearance from the RBZ. For brownfield deals, foreign investors acquiring shares in local companies must also secure this approval.
2. Sector-Specific Approval
Zimbabwe generally allows foreign participation in most industries. However, certain sectors (e.g., primary production of food crops, passenger transportation, retail trade, barber shops, hair salons, and others) are reserved for local Zimbabweans. Foreign investors seeking to enter these reserved sectors must obtain explicit consent from ZIDA and the relevant minister responsible for Indigenisation.
Investment Protection Provisions
The ZIDA Act aligns with international best practices in safeguarding foreign investments. Three notable protections include:
1. Non-Discrimination (National Treatment and MFN)
Zimbabwe grants foreign investors the same treatment as domestic investors (National Treatment) and ensures they are not treated worse than investors from any other nation (Most Favored Nation). However, these provisions do not extend to advantages Zimbabwe accords due to membership in customs unions or trade blocs.
2. Protection Against Expropriation
Zimbabwe can only expropriate investments for valid public purposes, and must follow due legal process while avoiding discrimination. In such cases, the government must provide prompt, adequate, and effective compensation based on fair market value before the expropriation date becomes public knowledge.
3. Transfer of Funds
Foreign investors can freely transfer funds—capital, profits, dividends, royalties—in and out of Zimbabwe in a convertible currency. Such transfers are subject to applicable tax obligations and adherence to legal requirements in cases like bankruptcy or criminal offenses.
Tax Regime and Incentives
Zimbabwe applies a source-based tax system. Income derived from within Zimbabwe is taxable unless specifically exempted. The standard corporate income tax rate is 25.75%, which includes an AIDS levy.
Special Tax Rates and Incentives
- Licensed Exporters: Investors with a ZIDA license exporting 100% of their goods or services pay a reduced 25% corporate tax rate for the first five years of operation.
- Manufacturers Exporting 50% or More: Eligible manufacturers enjoy a 20% tax rate.
- Mining: Special mining lease holders pay 15%, while standard mining entities pay 25%.
- Infrastructure Projects (BOOT/BOT): A 0% tax rate applies for the first five years, followed by a 15% rate for the next five.
- Special Economic Zones (SEZs): Investors in SEZs gain additional fiscal and non-fiscal perks, tailored to encourage export-oriented businesses.
Evolving Indigenisation Policies
Zimbabwe’s indigenisation laws have changed considerably. The previous requirement that foreign-owned companies transfer 51% equity to indigenous Zimbabweans has been scrapped for most sectors. Now, foreign investors may own 100% of a private entity, subject to exchange control approvals. Public companies listed on the Zimbabwe Stock Exchange (ZSE) still limit total foreign shareholding to 40%, with individual foreign investors capped at 15%.
Dispute Resolution
Investment disputes under the ZIDA Act fall under Zimbabwean law. Section 38 of the Act allows parties to resolve disputes via domestic or agreed-upon international arbitration. Investors protected by Bilateral Investment Treaties (BITs) must register these agreements with ZIDA. The Most Favored Nation (MFN) and National Treatment (NT) principles in the Act do not apply to dispute resolution procedures, a departure from some international norms.
Conclusion
Zimbabwe’s investment laws have transformed substantially, making the country a more appealing destination for both local and foreign investors. By centralizing key services under ZIDA and enacting strong legal protections, Zimbabwe underscores its commitment to fostering an investment climate that balances national interests with robust investor safeguards.
Although certain sectors remain reserved, overall reforms favor foreign participation. Potential investors should pay close attention to exchange control rules, sectoral restrictions, and licensing requirements. Collaborating closely with ZIDA and other regulatory bodies will help ensure legal compliance and unlock the various tax and economic benefits available under Zimbabwe’s modernized investment regime.
