HomeReportsBureau of Economic and Business Affairs2017 Investment Climate Statements...Zimbabwe

# 					2017 Investment Climate Statements: Zimbabwe			

 In this section										/

													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment   
                -  2. Bilateral Investment Agreements and Taxation Treaties   
                -  3. Legal Regime   
                -  4. Industrial Policies   
                -  5. Protection of Property Rights   
                -  6. Financial Sector   
                -  7. State-Owned Enterprises   
                -  8. Responsible Business Conduct   
                -  9. Corruption   
                -  10. Political and Security Environment   
                -  11. Labor Policies and Practices   
                -  12. OPIC and Other Investment Insurance Programs   
                -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                -  14. Contact for More Information   

## Executive Summary

While the government of Zimbabwe has implemented a number of measures since 2009 designed to attract foreign direct investment (FDI), many of its macroeconomic policies, such as the indigenization and economic empowerment laws, are significant deterrents. The country’s commitment to the use of the multicurrency monetary regime, under which the U.S. dollar dominates most transactions, restored some business confidence in the country up to November 2016, but the introduction of a surrogate currency (the bond note) used only for domestic transactions, has reintroduced uncertainties in the economy. The country is currently experiencing a binding liquidity constraint as the U.S. dollar disappears from circulation making it difficult for companies to meet their foreign obligations.

Zimbabwe’s incentives to attract FDI include tax breaks for new investment by foreign and domestic companies and allowing capital expenditures on new factories, machinery, and improvements to be fully tax deductible. The government also waives import taxes and surtaxes on capital equipment. The government has been working to improve the business environment by trying to reduce costs measured by the World Bank’s Ease of Doing Business index, although the pace of introducing such reforms is extremely slow.

In spite of these developments, the country still needs to implement a comprehensive economic reform program designed to address the debt burden and attract foreign financial inflows and capitalization at competitive rates. In addition, corruption is rife and there is little protection of property rights, particularly with respect to agricultural land. The government routinely expropriates land without compensation. Moreover, the inconsistent application of “indigenization” regulations, which set minimum ownership levels by black Zimbabweans of enterprises valued over $500,000 at 51 percent in most economic sectors, continues to discourage investment.

Zimbabwe’s arrears in payments to international financial institutions and poor macroeconomic policies complicate the situation by limiting the country’s ability to access official development assistance at concessional rates. Additionally, the country’s banks do not offer financing for periods longer than two years, with most financing available for 180 days or less. As a result of these negative factors, Zimbabwe generally ranks poorly in global comparisons of economic competitiveness.

*Table 1*

							1. Openness To, and Restrictions Upon, Foreign Investment					

**Policies Towards Foreign Direct Investment**

The government’s policies are nominally designed to attract greater FDI in order to improve the country’s competitiveness, though it does not fully support the policies in practice. While the government appears to encourage public-private partnerships in order to enhance technological development and the need to improve the investment climate by restoring the rule of law and sanctity of contracts, the statements and actions of many senior government officials undermine Zimbabwe’s ability to attract FDI and ultimately undermine investor confidence.

Zimbabwe has an Indigenization and Economic Empowerment law that limits the amount of shares owned by foreigners in an organization to 49 percent with a requirement for the remaining 51 percent to be owned by indigenous blacks.

The Zimbabwe Investment Authority (ZIA) promotes and facilitates 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 approximately 90 days.

**Limits on Foreign Control and Right to Private Ownership and Establishment**

While there is a right for foreign and domestic private entities to establish and own business enterprises and engage in all forms of remunerative activity, foreign ownership of businesses is limited to 49 percent (or less in certain sectors), as outlined above.

In 2007, the government passed the Indigenization and Economic Empowerment Act, which requires that “indigenous Zimbabweans” (i.e. black Zimbabweans) own at least 51 percent of all enterprises valued over $500,000.

In the natural resources sectors such as mining, the government restricts foreign ownership to 49 percent with the remainder reserved to indigenous Zimbabweans or the government. In the non-resource sectors, the government grants waivers based on achievements of certain initiatives such as technology transfer, creation of employment, and value addition. 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 government reserves certain sectors such as passenger busses, taxis and car hire services, employment agencies, grain milling, bakeries, advertising, dairy processing and estate agencies for Zimbabweans.

The country screens FDI through the Zimbabwe Investment Authority (ZIA) in liaison with relevant line ministries to confirm compliance with the country’s investment and indigenization regulations. Once an investor meets the criteria, ZIA issues the company or entity with an investment certificate.

**Other Investment Policy Reviews**

In the past three years, the government has not conducted an investment policy review through the Organization for Economic Cooperation and Development (OECD), the World Trade Organization (WTO) or the United Nations Conference on Trade and Development (UNCTAD).

**Business Facilitation**

Zimbabwe does not have an online registration process. 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.

**Outward Investment**

Zimbabwe does not promote or incentivize outward investment because of tight liquidity constraints.

							2. Bilateral Investment Agreements and Taxation Treaties					

The United States does not have a bilateral taxation and/or investment treaty with Zimbabwe.

Zimbabwe has investment treaties with 17 countries but ratified only seven of these treaties (with the Netherlands, Denmark, Germany, South Korea, South Africa, Botswana, and Switzerland). Three other investment agreements with Russia, India, and Iran are awaiting ratification before they go into effect. In spite of these agreements, the government has failed to protect investments undertaken by nationals from these countries, particularly with regard to land. In 2009, for example, an army officer seized a farm belonging to a German national but the government did not intervene, despite its assurance that Zimbabwe would honor all obligations and commitments to international investors.

The United States does have a Trade and Investment Framework Agreement (TIFA) with the Common Market for Eastern and Southern Africa (COMESA), of which Zimbabwe is a member. This TIFA provides a mechanism to talk about disputes, although the protection offered by the TIFA is much more limited than protection typically provided by a bilateral investment treaty.

							3. Legal Regime					

**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.

**Dispute Settlement**

*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.

**Bankruptcy Regulations**

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.

							4. Industrial Policies					

**Investment Incentives**

There are a number of incentives depending on the form of investment and the sectors. For investment designed to develop industrial parks and investment in tourism development zones and joint ventures in the form of the build, own, operate and transfer (BOOT) and build operate and transfer (BOT), the investors are not required to pay tax in the first five years after which they will pay tax at the rate of 25 percent compared to the normal tax rate of 35 percent. For joint ventures in the form of the build, own, operate and transfer (BOOT) and build operate and transfer (BOT), investors are not required to pay tax for the first five years after which they will pay tax at the rate of 15 percent per annum. Investors within the mining sector exporting 50 percent of output will have reduced corporate tax of 20 percent and receive import duty exemption on imported capital goods.

**Foreign Trade Zones/Free Ports/Trade Facilitation**

The government promulgated legislation creating Export Processing Zones (EPZs) in 1996. Zimbabwe now has approximately 183 EPZ-designated companies. Benefits include a five-year tax holiday, duty-free importation of raw materials and capital equipment for use in the EPZ, and no tax liability from capital gains arising from the sale of property forming part of the investment in EPZs. Since January 2004, the government has generally required that foreign capital comprise a majority of the investment. The requirement on EPZ-designated companies to export at least 80 percent of output has constrained foreign investment in the zones. The merger between the Zimbabwe Investment Centre and the Zimbabwe Export Processing Zones Authority, which began in 2006, has been completed and the new institution—ZIA—now serves as a one-stop shop for both local and foreign investors. Zimbabwe is currently in the process of amending the Zimbabwe Investment Authority Act to include Special Economic Zones. However, to date, activities in special economic zones overall have not been meaningful.

**Performance and Data Localization Requirements**

The government mandates local employment except for specialized skills that are in short supply locally. There are no general performance requirements for businesses located outside Export Processing Zones. Government policy, however, encourages investment in enterprises that contribute to rural development, job creation, exports, the addition of domestic value to primary products, use of local materials, and the transfer of appropriate technologies.

Although there are no discriminatory import or export policies affecting foreign firms, the government’s approval criteria heavily favor export-oriented projects. Import duties and related taxes range as high as 110 percent. Export Processing Zone-designated companies must export at least 80 percent of output.

Government participation is required for new investments in strategic industries such as energy, public water provision, and railways. The terms of government participation are determined on a case-by-case basis during license approval. The few foreign investors (for example, from China, Russia, and Iran) in reserved strategic industries have either purchased existing companies or have supplied equipment and spares on credit.

The government does not require foreign IT providers to turn over source code and/or provide access to surveillance. Only banks are required to maintain all their data in the country through the escrow agreement.

The government encourages foreign investors to make maximum use of Zimbabwean management and technical personnel, and any investment proposal that involves the employment of foreigners must present a strong case in order to obtain work and residence permits. Normally, the maximum contract period for a foreigner is three years but with possible extension to five years for individuals with highly specialized skills.

							5. Protection of Property Rights					

**Real Property**

The government enforces interests in residential and commercial properties in cities although this is not the case with agricultural land. Mortgages and liens do exist for urban properties although liquidity constraints have led to a fall in the number of mortgage loans. According to the World Bank’s 2015 Doing Business Report, Zimbabwe is ranked 94 out of 189 countries in terms of registering property. The recording of mortgages is generally reliable. With regard to agricultural land, the government provides and protects use rights of indigenous people and it is currently in the process of developing new 99-year leases that will guarantee use, with the government retaining ownership of all agricultural land.

**Intellectual Property Rights**

Zimbabwe applies international patent and trademark conventions, and it is a member of the World Intellectual Property Organization. Generally, the government seeks to honor intellectual property ownership and rights, although a lack of expertise and manpower and rampant corruption limit its ability to enforce these obligations. Pirating of videos, music, and computer software is common.

It does not appear that the government enacted new IP related laws or regulations over the past year. The country does not publish information on the seizures of counterfeit goods.

For additional information about treaty obligations and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

Zimbabwe is not listed in the notorious market report. For additional information about national laws and points of contact at local IP offices, please see WIPO’s country profiles at http://www.wipo.int/directory/en/ .

							6. Financial Sector					

**Capital Markets and Portfolio Investment**

Zimbabwe’s stock market currently has 58 publicly-listed companies, but just 17 of them account for over 80 percent of total market capitalization, which stood at $3.8 billion on February 28, 2017. In September 1996, the government opened the stock and money markets to limited foreign portfolio investment. Since then, a maximum of 49 percent of any locally-listed company can be foreign-owned in line with the indigenization policy framework, with any single investor allowed to acquire up to 15 percent of the outstanding shares.

There is a 1.48 percent withholding tax on the sale of marketable securities, while the tax on purchasing stands at 1.73 percent. Totaling 3.21 percent, the rates are comparable with the average of 3.5 percent for the region. As a way of raising funds for the state, the government mandated that insurance companies and pension funds invest between 25 and 35 percent of their portfolios in prescribed government bonds. Zimbabwe’s hyperinflation, which came to an end with the 2009 dollarization, wiped out the value of domestic debt instruments, and the government has only recently restarted issuing Treasury Bills.

**Money and Banking System**

Three major international commercial banks and a number of regional and domestic banks operate in Zimbabwe, with a total of over 200 branches. The central bank (Reserve Bank of Zimbabwe (RBZ)) believes that the banking sector is generally stable in spite of a harsh operating environment characterized by high credit risk and liquidity constraints. As most international banks reduce risk (de-risking) in the face of high penalties for non-compliance with prudential guidelines in developed countries, most Zimbabwean correspondent banking relationships are in jeopardy. As of December 31, 2016, the sector had 18 operating institutions, comprising 13 commercial banks, four building societies and one savings bank. According to the RBZ, as of December 2016, all operating banking institutions complied with the prescribed minimum core capital requirements. The level of non-performing loans improved somewhat from 10.87 percent in December 2015 to 7.9 percent by December 2016 largely due to a general improvement in credit management and the selling of qualifying bad assets to the Zimbabwe Asset Management Company, set up to cleanse banks’ balance sheets through acquisition and restructuring of non-performing loans.

According to the central bank, the total deposits (excluding interbank deposits), rose from $5.7 billion in December 2015 to $6.5 billion by December 2016. Demand deposits accounted for 54.6 percent of the total while time deposits accounted for 26.9 percent.

The central bank received a $200 million injection from the African Export Import Bank (Afrexim Bank) to revitalize Zimbabwe’s inter-bank lending market which started operating on March 23, 2015 (see above).

**Foreign Exchange and Remittances**

*Foreign Exchange*

Until the end of 2008, Zimbabwe’s exchange-rate policies made it difficult for firms to obtain foreign currency, and this, in turn, resulted in shortages of fuel, electric power, and other imported goods. Other consequences included defaults on public- and private-sector debt and a sharp decline in industrial, agricultural, and mining operations. In 2009, the government lifted exchange controls and demonetized the Zimbabwe dollar. The RBZ now permits bank accounts and transactions in the following currencies: Euro, Botswana pula, South African rand, British pound, U.S. dollar, Chinese yuan, Australian dollar, Indian rupee, and Japanese yen, with most business conducted in U.S. dollars. Zimbabwe’s export performance is rising but at a slower pace than imports. The government’s arrears on over $10 billion in external debt block the country’s access to multilateral financing. These conditions severely constrain external financing for the economy which has resulted in rising external payments arrears for necessary imports.

*Remittance Policies*

In line with recommendations from the Southern African Development Community (SADC) and the IMF, the government revised the Foreign Exchange Control Act, which regulated currency conversions and transfers before the withdrawal of the Zimbabwe dollar. With these changes and the liberalization of most current account transactions, exporters retain 100 percent of their foreign currency receipts for their own use until the second quarter of 2016. Since then, the RBZ retains 50 percent of all export proceeds to be shared among competing foreign payments needs based on a priority list. In spite of this, foreigners can remit capital appreciation, dividend income and after tax profits provided the foreign exchange is available.

Zimbabwe is a member of the Eastern and Southern Africa Anti-Money Laundering Group (ESAAMLG). The country still awaits the results of the 2014 Financial Action Task Force (FATF) assessment of Zimbabwe’s compliance with the international standards on money laundering and terrorism financing, and the authorities believe that the results will be positive.

**Sovereign Wealth Funds**

Zimbabwe does not have a sovereign wealth fund (SWF). The government set aside US$1 million toward administrative costs related to the setting up of the Sovereign Wealth Fund in its 2016 Budget. The government proposes to capitalize the SWF through a charge of up to 25% on royalty collections on mineral sales, as well as on a special dividend on the sale of diamond, gas, granite and other minerals.

							7. State-Owned Enterprises					

Zimbabwe has 76 state-owned enterprises (SOEs), defined as companies wholly-owned by the state, but there is no published list of these entities. Many SOEs support vital infrastructure, including energy, mining, and agribusiness, for example. As a result, competition within the sectors where SOEs operate tends to be limited. However, the government of Zimbabwe (GOZ) invites private investors to participate in infrastructure projects through public-private partnerships (PPPs). Most SOEs have public function mandates, although in more recent years, they perform hybrid activities of satisfying their public functions while making profits. SOEs should have independent boards but in some instances such as the recent case of the Zimbabwe Mining Development Corporation (ZMDC), the government allows the entities to function without boards.

Zimbabwe does not appear to subscribe to the Organization for Economic Cooperation and Development (OECD) guidelines on corporate governance of SOEs. SOEs operate under the same taxes and same value added tax rebate policies as private sector companies. The SOEs face a number of challenges that include persistent power outages, mismanagement, lack of maintenance, inadequate investment, a lack of liquidity and access to credit, and debt burdens. As a result, the SOEs have performed poorly in recent years. Few SOEs produce publicly available financial data and ever fewer audited financial data. This has imposed significant costs on the rest of the economy.

**Privatization Program**

Since the start of the privatization program of its 76 state-owned enterprises (SOEs) in the 1990s, the government has only successfully privatized two parastatals. The government established a ministry responsible for state-owned enterprises in 2009 but disbanded it in 2013. Inter-SOE debts of nearly $1 billion pose challenges for privatization plans because they further weaken the entities’ balance sheets. In addition, lack of political will and the enterprises’ operational inefficiencies make it unlikely that privatization will accelerate in the near term.

							8. Responsible Business Conduct					

Following dollarization in 2009, there has been increased awareness of standards for responsible business conduct (RBC), driven by the private sector through the Standards Association of Zimbabwe. The private sector developed the National Corporate Governance Code of Zimbabwe (ZimCode), which is a framework designed to guide Zimbabwean companies on RBC. An industrial advocacy group, the Confederation of Zimbabwe Industries, has a standing committee on business ethics and standards which drives ethical conduct within the Zimbabwean private sector. The organization has developed its own charter according to OECD guidelines, highlighting good corporate governance and ethical behavior. The Zimbabwean government has not taken any measures to encourage RBC and it does not take RBC policies or practices into its procurement decisions.

Firms that demonstrate corporate social responsibility do not automatically garner favorable treatment from consumers, employees, and government. With regard to indigenization, foreign companies receive formal indigenization credits of up to 31 percent for conducting CSR determined by the extent to which the activity achieves the government’s socio-economic objectives.

Although the Zimbabwean government has considered implementing the World Bank’s Extractive Industries Transparency Initiative (EITI) principles in order to strengthen accountability, good governance, and transparency in the mining sector, it has yet to launch an EITI program. However, the government has stated its intention to adopt a domestic initiative called the Zimbabwe Mining Revenue Transparency Initiative (ZMRTI) but it has made little progress in implementing the initiative.

							9. Corruption					

In 2005, the government enacted an Anti-Corruption Act that established a government-appointed Anti-Corruption Commission (ACC) to investigate corruption. However, the ACC did not include any members from civil society or the private sector. The government of national unity (GNU) enhanced the institutional capacity of the ACC with members appointed from civil society and the private sector. However, when the ACC’s term of office expired, the new ACC did not include civil society and private sector representatives. The government prosecutes individuals selectively, focusing on those who have fallen out of favor with ZANU-PF and ignoring transgressions by members of the favored elite. Accusations of corruption are used as a political tool but seldom result in formal charges and convictions.

While laws to combat corruption exist, enforcement of the laws is weak as the law enforcement agencies lack the political will and resources to do their job effectively. As a result, Transparency International ranked Zimbabwe 154 out of 176 countries and territories surveyed in 2016 for its corruption perceptions index.

Existing rules on the Zimbabwe Stock Exchange compel listed companies to comply, through annual reports, with minimum disclosure requirements.

The government also created a policy to improve accountability in the use of state resources through the introduction of the Public Finance Management Act in March 2010. In spite of this, corruption is still endemic, especially within the diamond sector where production and export figures are largely unreliable. In this respect, the government has introduced a Diamond Policy that focuses on ensuring the 100 percent government ownership of all alluvial diamonds in the ground and the involvement of the Zimbabwe Revenue Authority (ZIMRA) in the entire value chain of diamond production.

While Zimbabwe signed the United Nations Convention against Corruption on February 20, 2004 and ratified the treaty on February 20, 2007, it is not party to the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

*Resources to Report Corruption*

Transparency International Zimbabwe96 Central AvenueP O Box CY 434, CausewayHarare, Zimbabwe+263 4 793 246/7tiz@tizim.org; info@tizim.org

							10. Political and Security Environment					

Political parties and civil-society groups that oppose ZANU-PF and President Mugabe routinely encounter state-sponsored intimidation and repression from government security forces and ZANU-PF-linked activists. This environment persisted even during the period of the coalition government when the main opposition parties, the Movement for Democratic Change-Tsvangirai (MDC-T) and the Movement for Democratic Change-Ncube (MDC-N), joined ZANU-PF in an Inclusive Government from February 2009 to June 2013. Individuals and companies out of favor with ZANU-PF routinely suffer harassment and bureaucratic obstacles in their business dealings.

Within the ruling ZANU-PF party, tensions over succession are increasingly carried out in public and the battle over who will succeed President Mugabe will continue to intensify. Though Zimbabweans are increasingly frustrated with the President Mugabe government’s mismanagement of the economy and political repression, neither the opposition nor political activists have articulated convincingly a feasible way forward. In 2013, Zimbabwe passed a new constitution and held seriously flawed national elections. The next presidential, parliamentary, and local elections will take place in July or August 2018, if the government adheres to constitutional framework. Political violence and human rights abuses persist in Zimbabwe, though at lower levels than in 2008. However, with increased factionalism in both the ruling and opposition parties, intra-party violence is rising. Recent discussions among Zimbabwe’s main opposition party leaders have prompted speculation about a possible coalition challenge to ZANU-PF in 2018 elections, although there is no agreement on which candidate would lead such a ticket.

Despite the perceived widespread dissatisfaction with government policy, there have not been large-scale demonstrations since the July 2013 general elections. Disagreements between and within political parties occasionally resulted in violence targeting political party members. In December 2013, customers broke the windows at a bank branch which had run out of funds to distribute to depositors. Such violence is sporadic, but will increase as elections draw close.

							11. Labor Policies and Practices					

Zimbabwe’s interconnected economic and political crises from 1998 through 2008 prompted many of the country’s most skilled and well-educated citizens to emigrate, leading to widespread labor shortages for managerial and technical jobs. At the same time, the decade-long severe contraction of the economy caused formal sector employment to drop significantly. The Zimbabwe Statistical Agency (Zimstat) began to compile meaningful employment statistics in 2010. According to these figures, Zimbabwe’s non-farm employment rose from 721,000 in December 2011 to 802,000 in June 2012 (the latest date for which official data are available). Anecdotal evidence shows widespread youth unemployment as the country continues to churn out graduates without any meaningful employment growth. As a result, most end up joining the informal sector estimated at over 90 percent of the workforce.

Although the country’s HIV/AIDS epidemic had previously taken a heavier toll on the workforce, in 2014, 15 percent of adults were living with HIV/AIDS.

The government encourages foreign investors to make maximum use of Zimbabwean management and technical personnel.

The country’s labor laws make it very difficult for employers to adjust employment in response to an economic downturn except in the Special Economic Zones (SEZs) where labor laws do not apply. Outside the SEZs the employer must engage the employees and their representatives and agree to adopt measures to avoid retrenchment. If the measures fail, the employer can retrench and pay an all-inclusive package of one month salary for each two years of service or the pro rata share thereof.

The labor laws differentiate between layoffs and firing for cause, with the former falling under retrenchment where the retrenchment law must apply. The law does not accept dismissal or layoffs of employees without full retrenchment packages in place. The 2015 amendments to the act only permit termination of contract in terms of a registered code of conduct, expiry of a contract of fixed term duration or mutual agreement. There is no unemployment insurance or other safety net programs for workers laid off for economic reasons.

Employers in any sector tend to use temporary or contract workers because it is easy to lay them off as there is no need to follow termination procedures. Employers typically negotiate contracts ranging from 3 months to one year, renewed as necessary. The Labor Amendment Act of 2015, however, now requires employment councils to put a limit on the number of times employers can renew short term contracts.

The government does not waive labor laws in order to attract or retain investment, except in the case of special economic zones if and when the law is passed to establish such zones.

Labor unions affiliated to the Zimbabwe Congress of Trade Unions (ZCTU) are independent of the government and those affiliated to the Zimbabwe Federation of Trade Unions (ZFTU) and the Zimbabwe Industrial Revolution Workers Federation support the government.

Collective bargaining takes place through a National Employment Council (NEC) in each industry, comprising representatives from labor, business, and government. The agreements apply to the entire sector regardless of whether or not all employees are members to the council, except for managerial employees.

The country has a labor dispute resolution process that starts at company level through disciplinary committees or grievance committees. If the issue is not resolved at this level, the aggrieved party can appeal to either the employment council or the Labor Court depending on the industrial agreement. Other redress is through the Ministry of Public Service Labor and Social Welfare in which labor officers settle disputes for industries without employment councils. From the Labor Court an aggrieved party can appeal to the Supreme Court.

The ZCTU called for a demonstration on August 8, 2015 to protest against massive job losses as a result of the Supreme Court decision allowing employers to terminate contracts of employment on three-month notice under the common law. The police banned the activity and riot police camped at ZCTU offices for a week, preventing workers from gathering and accessing union offices. Following the ZCTU appeal to the High Court on August 22, 2015, the demonstration went ahead.

Labor inspection is very minimal and there is discrimination in practice. The government continues to harass labor unions and their leaders. In December 2012, for example, the police arrested two ZCTU officials for allegedly holding an unsanctioned protest march to celebrate Human Rights Day in the city of Bulawayo, even though the police had sanctioned it beforehand. Under Zimbabwe labor law, the government can intervene in ZCTU’s internal affairs if it determines that the leadership is misusing funds.

The government enacted some amendments to the labor act in 2015 to compel employers who dismissed workers from July 2015 as a result of the Supreme Court judgment to pay retroactive compensation. While employers are unhappy with the provision, trade unions are somewhat pleased with the decision. But the compensation is limited to one month salary for each two years of service or a share thereof.

The government is a member of the International Labor Organization (ILO) and has ratified conventions protecting worker rights. The country has been subject to ILO supervisory mechanisms for practices that limit workers’ rights to freely associate, organize, and hold labor union meetings.

							12. OPIC and Other Investment Insurance Programs					

The U.S. government and Zimbabwe concluded an OPIC agreement in April 1999 which permits OPIC to conduct transactions in Zimbabwe. Zimbabwe acceded to the World Bank’s Multilateral Investment Guarantee Agency in September 1989. Support from the Export-Import Bank of the United States is not available in Zimbabwe. Finance and export promotion programs, as well as investment insurance offered through the international financial institutions, remain limited due largely to Zimbabwe’s mounting multilateral and bilateral debt arrears and deteriorating investment climate.

							13. Foreign Direct Investment and Foreign Portfolio Investment Statistics					

*Table 2: Key Macroeconomic Data, U.S. FDI in Host Country/Economy*

*Zimbabwe National Statistical Agency

(D) Data suppressed to avoid disclosure of data of individual companies

*Table 3: Sources and Destination of FDI*

Data not available.

*Table 4: Sources of Portfolio Investment*

Data not available

							14. Contact for More Information					

Joseph MuzuluEconomic SpecialistU.S. Embassy Harare, 172 H. Chitepo Avenue, Harare+263 4 250593muzuluj@state.gov

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### On This Page

                    -  Executive Summary 
                    -  1. Openness To, and Restrictions Upon, Foreign Investment   
                    -  2. Bilateral Investment Agreements and Taxation Treaties   
                    -  3. Legal Regime   
                    -  4. Industrial Policies   
                    -  5. Protection of Property Rights   
                    -  6. Financial Sector   
                    -  7. State-Owned Enterprises   
                    -  8. Responsible Business Conduct   
                    -  9. Corruption   
                    -  10. Political and Security Environment   
                    -  11. Labor Policies and Practices   
                    -  12. OPIC and Other Investment Insurance Programs   
                    -  13. Foreign Direct Investment and Foreign Portfolio Investment Statistics   
                    -  14. Contact for More Information   

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#### The Lessons of 1989: Freedom and Our Future