SUPPLEMENT NO. 2 OF THE JANUARY 2009
MONETARY POLICY STATEMENT
BY
DR. G. GONO
GOVERNOR
RESERVE BANK OF ZIMBABWE
JANUARY 2009
THE ROLE OF PROPERTY RIGHTS IN
INVESTMENT PROMOTION

INTRODUCTION
The performance of any economy relies upon investment in the various
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sectors of the country. In developing countries, including Zimbabwe,
investment opportunities are mainly in the primary industries, particularly
the extractive industry (mining) and agriculture.
One of the main drivers of investment is a sound and clear policy on
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property rights. Respect of property rights attracts and promotes private
sector investment which is the engine for economic growth.

In order to attract investment, Zimbabwe should continue to uphold the
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sanctity of property rights. Both domestic and foreign investors find comfort
in internationally acclaimed property rights. This brings about confidence
in the country’s policies and security to investment.
PROPERTY RIGHTS DEFINITION
A property right is an exclusive authority possessed by an owner of property
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to consume, sell, rent, mortgage, transfer and exchange their property.
In recognition of this, Governments make constitutional provisions that
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seek to enhance investor confidence.
In making investment decisions, investors seek confirmation that they would
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be rewarded for investing in a particular asset, and also want guarantee of
security over their investment.
Property rights should be clearly defined and enforced. A compensation
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clause should always be embedded in the property rights.
Importantly, Government should not inappropriately nationalize or
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expropriate investments. Nationalization should only be done for public
purposes, under due process of law, on a non-discriminatory basis and
against prompt, adequate and effective compensation.

PROPERTY RIGHTS IN ZIMBABWE
Land Tenure System Prior to Independence
The purpose of the Land Apportionment Act of 1930 was to formalize the
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separation by law, of land between the native population and the white
settlers. This was after deliberations and recommendations of the Morris
Carter Land Commission of 1925. The Land Apportionment Act provided
for restricted rights of the Africans to land ownership, to designated Native
Purchase Areas.
Under this Act, the fertile high rainfall areas became large scale privately
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owned white settler farms.
Figure 1 below shows the distribution of land in 1931 among the different
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categories.
Figure 1: Land Distribution
In subsequent years, a number of instruments were put in place to enforce
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certain agricultural practices. The Native Land Husbandry Act of 1951
was meant to enforce destocking and conservation practices on black held
land.

The Rukuni and Eicher 1994 Land Report found that the Native Reserves and
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Special Native Reserves were combined and renamed Tribal Trust Lands,
where land was vested in Board of Trustees for exclusive use by Blacks.
This was done under the auspices of Tribal Trust Lands Act of 1967.
Land ownership under the Tribal Trust Lands Act did not confer property
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rights to the indigenous population, which was largely settled in unfertile
and low rainfall areas.
In July 2000, the Government embarked on the Fast Track Land Reform
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Programme (FTLRP) in order to correct the historical social imbalances.
Under this program, instead of title deeds, resettled farmers are given
property rights through issuance of 99 year leases.
After the Fast Track Land Reform Programme, the land ownership
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by indigenous population increased to levels commensurate with the
demographic composition of the country.
Figure 2: Land Ownership Patterns after FTLRP
Category
Area (Million Hectares)
as at 31 July 2003
%
A1
4.2

A2
2.2

Old Resettlement Area
3.7

Communal Area
16.4

Large Scale Commercial
2.6

Small Scale Commercial
1.4

National Parks & Urban
6.0

State Land
0.3

*Other
2.8

Grand Total
39.6

Source: Utete Report (2003)
Currently, there is limited investment in agriculture because some of the
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beneficiaries of the land reform have no legal claim to the land. In order to
address this short coming, the issuance of transferable 99 year leases should
be expedited.

In this respect, there is need to capacitate and resource the Ministries of
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Lands, Resettlement, Agriculture and other responsible institutions.
Mining
In Zimbabwe, all mineral rights are vested in the State. These rights are
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immediately transferred to private holders upon registration of a claim.
Once these rights are transferred, it is up to the holder to commence mining
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operations, dispose of the claims or just hold onto the rights indefinitely.
The current Mines and Minerals Act has no specific provision for titleholders
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to inform or seek permission from the Government or Ministry of Mines to
dispose of claims.
In order to ensure that the country remains competitive for foreign direct
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investment, there is need to have clear and unambiguous legislation which
gives investors a basis to plan and make concrete decisions and commitments
on their future investments in Zimbabwe.
Mines and Minerals Act (Amended)
While it is a noble idea to ensure that the indigenous people benefit from the
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exploitation of minerals, this should be done in a manner which should not
retard growth of the sector.
Considering the capital intensive nature and risk involved in mining
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development, there is need to review the proposed minimum shareholding
to be reserved for the Government and/or indigenous investors.
Other consideration such as investment in infrastructural development and
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social responsibilities should also come into play in determining the equity
levels.

Mining Licences
Property rights in the mining sector are covered under the following titles:
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Special grants are mining licences for energy minerals including coal,

mineral oils and natural gas.
Exclusive Prospecting Orders (EPOs) cover all minerals with specific

limitations for prospecting area according to the mineral being
sought.
Certificates of Registration of Claims are issued to individuals and

companies for mining gold, chrome and tantalite.
Mining leases enable individuals and companies to manage their

claims under one roof, while Special Mining Leases are available
to foreigners intending to venture into mining for the purpose of
exporting.
In order to attract and promote investment in the mining sector, there is
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need to respect existing claims whilst at the same time ensuring that claims
are not held for speculative purposes.
In this regard, the terms and conditions of existing special grants, mining
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leases and exclusive prospecting orders as well as their utilization should
be considered.
Failure to invest in the exploitation of minerals should necessarily result
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in the withdrawal or transfer of the claim to other prospective investors.
Property rights in this respect are guaranteed as long as holders of the claims
undertake visible investment.
Manufacturing
Manufacturing is an important economic activity in Zimbabwe with
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significant contribution to GDP, foreign exchange earnings and employment.

It is diversified and well integrated with the rest of the economy, exhibiting
particularly strong linkages with agriculture, mining, construction and
commerce.
The sector is dominated by both heavy and light industries located in the
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major cities and towns in the country. In addition, there are also small to
medium enterprises operating as cottage industries.
It is important to note that most of the heavy and light industries operate
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from premises leased from institutional investors such as pension funds and
insurance companies, who have title to the land and buildings.
In order to promote and attract investment in the manufacturing sector,
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there is need to guarantee the security of leased properties to allow for reinvestment and re-tooling in the sector.
Bilateral Investment Promotion and Protection Agreements
(BIPPAs)
The Government has signed BIPPAs with a number of countries which aim
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to ensure that the sacrosanct nature of private property and property rights
is observed across all sectors of the economy, in conformity with the best
standards and international agreements.
Given the centrality on protection of investment capital in economic growth,
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the Government should champion the respect for BIPPAs and other strategic
agreements with regional and international business partners in order to
promote further investment.
INTERNATIONAL CONVENTIONS
Zimbabwe is a signatory to various international treaties and conventions
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which the country should adhere to in order to promote investment. This
helps to portray the country as a safe and attractive investment destination.
The Conventions which Zimbabwe is signatory to include the following;

Multilateral Investment Guarantee Agency (MIGA)
As a member of the World Bank, the country signed and acceded to the
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World Bank’s Multilateral Investment Guarantee Agency (MIGA). The
MIGA is an insurance guarantee scheme available to World Bank member
countries investing in the territory of another member country of the World
Bank.
International Centre for the Settlement of Investment Disputes
(ICSID)
Zimbabwe signed and acceded to the Convention establishing the
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International Centre for the Settlement of Investment Disputes (ICSID) to
enable foreign investors have access to international arbitration over and
above domestic law courts. This gives the investor recourse to international
arbitration should they be unhappy with Zimbabwean judicial system.
OTHER COUNTRY EXPERIENCES
China
In China, not only the public properties are under the protection by law, but
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also private properties have been gradually recognized and protected by law
due to the swift growth of private properties during the development of the
socialist market economy.
The protection of private properties in China has been a significant contributor
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and indicator to the country’s decade of accelerated and sustained economic
growth.

Germany
The German Government adheres to a policy of national treatment, which
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considers property owned by foreigners as fully protected under German
law. There is no discrimination against foreign investment and foreign
acquisition, ownership, control or disposal of property or equity interests,
with airline ownership being an exception.
German law provides that private property can be expropriated for public
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purposes, only in a non-discriminatory manner and in accordance with
established principles of constitutional and international law.
There is due process and transparency of purpose, enabling investors and
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lenders to expropriated entities to receive prompt, adequate and effective
compensation.
Such an investor friendly environment has significantly contributed to the
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growth of the German economy.
Tanzania
The Government of Tanzania committed itself to promoting investment and
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devised strategies to uphold the sanctity of property rights. At the domestic
level, contractual and property rights are protected under the legal system.
In accordance with the Constitution of Tanzania, every person has a right
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to own private property and receive protection for property that has been
lawfully acquired.
The Constitution prohibits the expropriation or acquisition, for the purpose
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of nationalization or for any other purpose, of private property lawfully
acquired.
In addition, the Government of Tanzania reviews all legislations whose
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provisions contradict its policy of economic liberalization and national
investment.

At the international level, Tanzania is also a member of regional and
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international agencies such as MIGA and ICSID whose purpose is to
consolidate investment guarantees and boost investor confidence.
Malawi
Malawi is also a signatory of the ICSID and MIGA. Malawian law also
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provides for security of foreign investment, which includes compensation
to property damaged through civil strife and/or political unrest.
In addition, Malawi has bilateral investment protection and promotion
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agreements with a number of countries including Malaysia, Republic of
China and Mauritius.
CONCLUSION
The establishment of property rights and the subsequent enforcement of
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these rights is key to attracting investment, promoting economic growth and
development, as well as improving the living standards of people.
It is against this background that the Government of Zimbabwe should
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honour the provisions of all existing BIPPAs which have been signed with
other countries.
Zimbabwe, being a signatory to various international treaties and conventions
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like MIGA, ICSID and the United Nations Convention on International Trade
Law, should continue to observe compliance with such arrangements.
Furthermore, the judiciary system should be further resourced adequately to
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ensure speedy resolution of investment disputes.
The upholding of property rights leads to increased investments by the
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private sector both domestic and foreign. The private sector is the engine
of economic growth in various countries as it results in the development of
the economy.

Pursuant to this, the Government also benefits from a broader tax base that
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provides more funds for investment in social sectors (health and education),
ultimately leading to the improvement in the standard of living of people in
both rural and urban areas in Zimbabwe.
Thank You.
DR. G. GONO
GOVERNOR
RESERVE BANK OF ZIMBABWE
JANUARY 2009