HomeReportsBureau of Economic and Business Affairs2023 Investment Climate Statements...Zimbabwe

# 					2023 Investment Climate Statements: Zimbabwe			

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													Executive Summary											

                -  Executive Summary 
                -  1. Openness To, and Restrictions Upon, Foreign Investment                    -  Policies Towards Foreign Direct Investment 
                  -  Limits on Foreign Control and Right to Private Ownership and Establishment 
                  -  Other Investment Policy Reviews 
                  -  Business Facilitation 
                  -  Outward Investment 
                -  2. Bilateral Investment and Taxation Treaties 
                -  3. Legal Regime                    -  Transparency of the Regulatory System 
                  -  International Regulatory Considerations 
                  -  Legal System and Judicial Independence 
                  -  Laws and Regulations on Foreign Direct Investment 
                  -  Competition and Antitrust Laws 
                  -  Expropriation and Compensation 
                  -  Dispute Settlement                      -  ICSID Convention and New York Convention 
                    -  Investor-State Dispute Settlement 
                  -  International Commercial Arbitration and Foreign Courts 
                  -  Bankruptcy Regulations 
                -  4. Industrial Policies                    -  Investment Incentives 
                  -  Foreign Trade Zones/Free Ports/Trade Facilitation 
                  -  Performance and Data Localization Requirements 
                -  5. Protection of Property Rights                    -  Real Property 
                  -  Intellectual Property Rights 
                -  6. Financial Sector                    -  Capital Markets and Portfolio Investment 
                  -  Money and Banking System 
                  -  Foreign Exchange and Remittances                      -  Foreign Exchange 
                    -  Remittance Policies 
                    -  Sovereign Wealth Funds 
                -  7. State-Owned Enterprises                    -  Privatization Program 
                -  8. Responsible Business Conduct                    -  Additional Resources 
                  -  Climate Issues 
                -  9. Corruption 
                -  10. Political and Security Environment 
                -  11. Labor Policies and Practices 
                -  12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs 
                -  13. Foreign Direct Investment Statistics 
                -  14. Contact for More Information 

## Executive Summary

Zimbabwe presents a challenging, and yet potentially rewarding, investment climate.  The country’s skilled labor, high literacy rate, mineral wealth, agricultural potential, bountiful wildlife, and natural landscapes present commercial opportunities for U.S. firms.  Sectors that currently attract the most investor interest include agriculture (tobacco in particular), mining, energy, and tourism.  Authorities estimate the economy grew by four percent in 2022 while the International Monetary Fund (IMF) estimates Zimbabwe’s economy grew by 3.5 percent in 2021.

The Government of Zimbabwe (GOZ) adopted an “open for business” policy in 2018 to encourage more foreign direct investment (FDI).  For example, the GOZ set an ambitious $12 billion target for the mining sector by the end of 2023 and is calling for increased investment in renewable energy.  Despite these pronouncements, the Zimbabwe government has not implemented enough investor-friendly policies to attract robust investment and corruption remains a major concern.  FDI into Zimbabwe remains below regional peers.

Debt also hinders Zimbabwe’s economic growth and development.  Zimbabwe owes over $14 billion ($6.3 billion of which is in arrears and penalties) to international financial institutions and bilateral creditors, equating to about 66 percent of the country’s GDP.  The country’s high external debt (public and private) limits its ability to access official development assistance at concessional rates.  Domestic banks do not offer financing for periods longer than two years, with most financing limited to 180 days or less.

To ease doing business, the government formed the Zimbabwe Investment and Development Agency (ZIDA) in 2020, intended as a one-stop-shop to promote and facilitate both domestic and foreign investment in Zimbabwe.  Zimbabwe’s incentives to attract FDI include tax breaks for new investment by foreign and domestic companies and making capital expenditures on new factories, machinery, and improvements fully tax deductible.  The government waives import taxes and surtaxes on capital equipment.  It has made gradual progress in improving the business environment by reducing regulatory costs, but policy inconsistency and weak institutions have continued to frustrate businesses.  Corruption remains rife and there is little protection of property rights, particularly with respect to agricultural land.  Historically, the government has committed to protect property rights but has also expropriated land without compensation.

The government in February 2023 reduced the proportion of foreign exchange that businesses surrender to the Reserve Bank of Zimbabwe (RBZ) at the interbank rate after selling goods and services in foreign currency on the domestic market from 20 percent of the receipts to 15 percent.  It also reduced the proportion that exporters must surrender from 40 percent of foreign currency earnings at the unfavorable interbank rate to 25 percent.

The 2020 Finance Act (No 2) amended the Indigenization Act to remove language designating diamonds and platinum as the only minerals subject to indigenization (requiring majority ownership by indigenous Zimbabweans), ending indigenization requirements in all sectors.  The government has issued statements to reassure investors that no minerals will be subject to indigenization, including diamonds and platinum.

The United States has targeted financial sanctions on 60 individuals and 39 entities from Zimbabwe.  The U.S. Government imposed these sanctions because of the actions and policies of certain members of the Government of Zimbabwe and other persons that undermine democratic institutions or processes in Zimbabwe, violate human rights, or facilitate corruption.  U.S. companies can do business with Zimbabwean individuals and companies not on the specially designated nationals (SDN) list.

 

 

(D) – Information suppressed to avoid disclosure of data of individual companies

							1. Openness To, and Restrictions Upon, Foreign Investment					

 

### Policies Towards Foreign Direct Investment

After reaching $745 million in 2018, Zimbabwe witnessed a significant decline in foreign direct investment (FDI).  According to data from the United Nations Conference on Trade and Development (UNCTAD), FDI inflows into Zimbabwe fell from $280 million in 2019 to $194 million in 2020 and further to $166 million in 2021.

To attract FDI and improve the country’s competitiveness, the government has encouraged public-private partnerships and emphasized the need to improve the investment climate by lowering the cost of doing business as well as restoring the rule of law and sanctity of contracts.  Implementation, however, has been limited.

The government amended in 2020 the Indigenization Act by removing diamonds and platinum from minerals subject to indigenization (requiring majority ownership by indigenous Zimbabweans), although the new legislation appeared to grant broad discretion to the GOZ to designate minerals as subject to indigenization in the future.  Subsequently, the GOZ reassured investors through a joint statement of the ministers for finance, mines and mining development, and industry and commerce in February 2021 that no minerals will be subject to indigenization, including diamonds and platinum.  To encourage investments in value addition facilities, Zimbabwe issued the Base Minerals Export Control (Unbeneficiated Base Mineral Ores) Order in January 2023 to limit the export of raw critical minerals such as lithium ore, nickel, and manganese.  There are, however, smaller sectors “reserved” for Zimbabweans (see below).

To improve the ease of doing business, the government enacted legislation that led to the formation of the Zimbabwe Investment and Development Agency (ZIDA) in 2020.  ZIDA replaced the Zimbabwe Investment Authority and serves as a one-stop-shop center in promoting and facilitating both domestic and foreign investment in Zimbabwe.

While the government has committed to prioritizing investment retention, there are still no mechanisms or formal structures to maintain ongoing dialogue with investors.

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

Foreign and domestic private entities have a right to establish and own business enterprises and engage in all forms of remunerative activity, but foreign ownership of businesses in certain reserved sectors is limited.  The GOZ did not make any significant changes in the past year.

Foreign investors are free to invest in most sectors without any restrictions as the government aims to bring in new technologies, value-add manufacturing, and generate employment.  According to the ZIDA Act, “foreign investors may invest in, and reinvest profits of such investments into, any and all sectors of the economy of Zimbabwe, and in the same form and under the same conditions as defined for Zimbabweans under the applicable laws and regulations of Zimbabwe.”  The government, however, reserves certain sectors for Zimbabweans such as passenger buses, taxis and car hire services, employment agencies, grain milling, bakeries, advertising, dairy processing, and estate agencies.

Zimbabwe screens FDI through the ZIDA in liaison with relevant line ministries to confirm compliance with the country’s laws.

According to the country’s laws, U.S. investors are not especially disadvantaged or singled out by any of the ownership or control mechanisms relative to other foreign investors.  In its investment guidelines, the government states its commitment to non-discrimination between foreign and domestic investors and amongst foreign investors.

### Other Investment Policy Reviews

The government has not undergone any third-party investment reviews (IPRs) over the past four years.  In a 2019 review, Global Witness recommended reform of Zimbabwe’s diamond sector through publication of all diamond mining contracts, shareholdings, and their ultimate beneficial owners; production of timely annual reports, including audited accounts detailing revenues raised and all payments to the Treasury and all transfers to private shareholders. https://www.globalwitness.org/en/blog/time-zimbabwes-opaque-diamond-sector/

The Zimbabwe Environmental Lawyers Association (ZELA) published in October 2021 and March 2022 reports focused on the investment climate around the extractives sector.  Though the reports view the extractives sector through the lens of People’s Republic of China (PRC) engagement, the information on laws, regulations, and gaps in legislation and enforcement remain relevant for all interested investors.

The Handbook of Zimbabwe-China Economic Relations: http://www.zela.org/download/the-handbook-of-zimbabwe-china-economic-relations/

Zimbabwe Open for Business: Progress Check on Implementation: http://www.zela.org/download/zimbabwe-is-open-for-business-a-progress-check-on-implementation/

### Business Facilitation

Policy inconsistency, administrative delays and costs, and corruption hinder business facilitation.  Zimbabwe does not have a fully online business registration process, though one can begin the process and conduct a name search online via the ZimConnect web portal.  The government created the Zimbabwe Investment Development Agency (ZIDA, https://www.zidainvest.com/) which replaced the Zimbabwe Investment Authority (ZIA), the Special Economic Zones Authority, and the Joint Venture Unit to oversee the licensing and implementation of investment projects in the country.  The Agency has established a one-stop investment services center (OSISC) which houses several agencies that play a role in the licensing, establishment, and implementation of investment projects including the Zimbabwe Revenue Authority (ZIMRA), Environmental Management Agency (EMA), Reserve Bank of Zimbabwe (RBZ), National Social Security Authority (NSSA), Zimbabwe Energy Regulatory Authority (ZERA), Zimbabwe Tourism Authority, the State Enterprises Restructuring Agency, and specialized investment units within relevant line ministries.  Although the business registration process currently takes 27 days, investors can shorten the period to two days if they go through ZIDA.

### Outward Investment

Zimbabwe does not promote or incentivize outward investment due to the country’s tight foreign exchange reserves.  Although the government does not restrict domestic investors from investing abroad, any outward investment requires approval by the RBZ’s Exchange Control Department.  Firms interested in outward investment would face difficulty accessing the limited foreign currency at the more favorable official exchange rate.

							2. Bilateral Investment and Taxation Treaties					

Zimbabwe has negotiated investment treaties with 32 countries, but it has ratified only 17 including those with the Netherlands, Kuwait, Denmark, China, Germany, Russia, South Africa, and Switzerland. Despite these agreements, the government has failed to protect investments undertaken by nationals from these countries, particularly regarding 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. Some claimants protected by investment treaties have pursued arbitration through the International Centre for Settlement of Investment Disputes. For example, in 2015, a Swiss-German family won a landmark US$196 million judgment at the International Center for Settlement of Investment Disputes in compensation for expropriated land but has received only partial payment.

Zimbabwe is a member of the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA), and it is a signatory to the SADC and COMESA trade protocols establishing free trade areas (FTA) with the aim of growing into a customs union. Zimbabwe is also a member of the African Continental Free Trade Area (AfCFTA) which came into force on January 1, 2021, with the aim of creating a single continental market and paving the way for the establishment of a customs union.

The United States does not have a bilateral taxation and/or investment treaty with Zimbabwe. The United States has 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 discuss 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 officially encourages competition within the private sector and seeks to improve the ease of doing business, but the bureaucracy within regulatory agencies lacks transparency and corruption is prevalent. Investors complain of policy inconsistency and unpredictability. Moreover, Zimbabwe does not have a centralized online location where key regulatory actions are published, and investors must contact ZIDA.

The government at times uses statutory instruments and temporary presidential powers to alter legislation impacting economic policy. These powers have limited duration – the government must pass legislation within six months for presidential powers to become permanent. These measures, which can appear without warning, often surprise businesses and lack implementation details, leading firms to delay major business decisions until gaining clarity. For example, the government unexpectedly prohibited the use of foreign currencies for domestic transactions in June 2019 but lifted the ban in March 2020, amid the COVID-19 pandemic and growing economic pressure. The government has made changes to the share of foreign currency earnings exporters must surrender to the central bank without warning or stakeholder consultations. The standard legislative process, on the other hand, provides opportunities for public review and comment before the final passage of new laws. The development of regulations follows a standard process and includes a period for public review and comment. National regulations are the most relevant for foreign businesses.

The government, through the environmental management agency (EMA), promotes mandatory companies’ environmental, social, and governance (ESG) disclosure, especially in mining projects to ensure the sustainable management of natural resources and protection of the environment. EMA claims its processes, activities, outputs, and impacts are publicly available on its website and subject to public scrutiny. In practice, ESG disclosures are not always thoroughly completed for mining sector projects.

Zimbabwe adopted the International Financial Reporting Standards in 1993. Public companies must prepare financial statements at the end of the financial year and lodge them with the Business Register so they become accessible to the public.

According to the Department of State’s 2022 Fiscal Transparency Report, there is a notable lack of transparency regarding debts of state-owned enterprises and the extraction of natural resources. Information on public finances is generally unreliable, as actual revenues and expenditures have deviated significantly from the enacted budgets. Information on some debt obligations is publicly available, but not information on contingent debt.

### 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 a signatory to the SADC and COMESA trade protocols establishing free trade areas (FTA) with the aim of growing into a customs union. Zimbabwe is also a member of the African Continental Free Trade Area (AfCFTA) which came into force on January 1, 2021, with the aim of creating a single continental market and paving the way for the establishment of 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 it intends to implement.

### Legal System and Judicial Independence

According to the country’s Roman-Dutch 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, in 2019, established four commercial courts at the magistrate level. The government also trained 55 magistrates in the same year. Administration of justice in commercial cases that do not touch on political interests is still generally impartial, but for politicized cases government interference in the court system has hindered the delivery of impartial justice. A lack of judicial independence, including at the highest levels, remains a concern. Regulations or enforcement actions are appealable and are adjudicated in the national court system.

### Laws and Regulations on Foreign Direct Investment

Foreign investors are free to invest in most sectors, including mining, without any restrictions. A 2020 government amendment to the Indigenization and Economic Empowerment Act removed the requirement for majority indigenous Zimbabwean ownership to attain its goal to bring in new technologies, generate employment, and promote value-added manufacturing. In certain sectors, such as primary agriculture, transport services, and retail and wholesale trade and distribution, foreign investors may not own more than 35 percent equity.

The ZIDA (https://www.zidainvest.com/), which now acts as a one-stop shop for investors, promotes and facilitates both local and foreign direct investment.

### Competition and Antitrust Laws

The government officially encourages competition within the private sector according to 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. The Act provides for transparent norms and procedures. Although the decision of the Commission is final, any aggrieved party can appeal the decision to the Administrative Court.

### Expropriation and Compensation

In 2000, the government began to seize privately-owned agricultural land and transfer ownership to government officials and other regime supporters. In April 2000, the government amended the constitution to grant the state’s right to assert eminent domain, 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, those owned by black indigenous farmers, 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 farmers, retaining the right to withdraw the lease at any time for any reason. These leases, however, are not readily transferable, and banks do not accept them as collateral for borrowing and investment purposes. The government continues to seize commercial farms without compensating titleholders, who have no recourse to the courts. The seizures continue to raise serious questions about respect for property rights and the rule of law in Zimbabwe.

In 2017, the government announced its intention to compensate farmers who lost their land and made small partial payments to the most vulnerable claimants. In July 2020, the government and white commercial farmers, represented by the Commercial Farmers Union (CFU), who lost land to the land reform program signed a US$3.5 billion Global Compensation Deed (GCD) Agreement for improvements made by commercial farmers on the farms. The government promised to pay a 50 percent deposit within 12 months of signing the agreement and 25 percent of the remainder in each subsequent year so that it makes full payment over five years. As of July 2021, the GOZ paid a token US$1 million towards compensating former commercial farmers. As of April 2023, the government and the CFU are renegotiating the repayment terms of the GCD. Farmers covered by bilateral investment agreements can apply to get their seized land back, but this has not yet been tested successfully.

### 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 several bilateral investment agreements with several countries (see above) in which international arbitration of investment disputes is recognized. 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 (UNCITRAL). However, this has not occurred in practice.

### International Commercial Arbitration and Foreign Courts

Domestic legislation on arbitration is modeled after the United Nations Commission on International Trade Law (UNCITRAL) model law, with minor modifications. This law covers both domestic and international arbitration. 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.

### Bankruptcy Regulations

In the event of insolvency or bankruptcy, Zimbabwe applies the Insolvency Act. All creditors have equal rights against an insolvent estate. Zimbabwe does not criminalize bankruptcy unless it is the result of fraud, but the government blacklists a person declared bankrupt from undertaking any new business.

							4. Industrial Policies					

### Investment Incentives

Government incentives to foreign investors depend on the form of investment, the sector, and whether the GOZ awards the investment national project status. For investment in industrial parks and tourism development zones, investors are exempt from paying tax for the first five years, after which they will pay tax at the rate of 25 percent (the normal tax rate is 35 percent). For build, own, operate, and transfer (BOOT) and build, operate, and transfer (BOT) joint ventures, investors are exempt from paying taxes for the first five years after which they will pay tax at the rate of 15 percent. Investors in the mining sector who export 50 percent of output benefit from a reduced corporation tax of 20 percent and are exempt from import duties on capital goods while losses are carried forward indefinitely for mining operations. Moreover, the government generally allows for duty exemptions in the importation of raw materials used in the manufacture of goods for export. In addition to these incentives, investments with national project status such as those in the renewable energy sector are allowed to borrow on local capital markets where they enjoy incentives including tax exemption on interest.

The GOZ encourages investment in renewable energy by waiving payment of duty on importation of solar equipment including batteries and panels.

### Foreign Trade Zones/Free Ports/Trade Facilitation

Zimbabwe has approximately 183 companies operating in Export Processing Zones (EPZs). 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. The government generally requires foreign capital comprise most of the investment in an EPZ-designated company and requires the company to export at least 80 percent of output. The latter requirement has constrained foreign investment in the zones. ZIDA took over the regulation of EPZs and the Special Economic Zones in 2020. To date, however, activity in special economic zones has been limited despite the incentives.

The ZIDA act provides incentives to investors licensed under the special economic zones (SEZ) including a special initial allowance (tax deductible expense that allows taxpayers to write off the cost of an asset over time) of 50 percent of cost from first year and 25 percent in the subsequent two years, exemption from non-residents withholding tax on fees for services not locally available, exemption from non-residents’ tax on royalties, and exemption from capital gains tax.

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.

### Performance and Data Localization Requirements

In 2019, the government approved the Zimbabwe local content strategy to promote local value addition and linkages through utilization of domestic resources. According to the strategy, the country aims to increase local content levels in prioritized sectors such as mining, agro-processing, and infrastructural development from 25 to approximately 80 percent by 2023. The government has found it difficult to implement this strategy.

There are no general performance requirements for businesses located outside Export Processing and Special Economic 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.

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 (e.g., PRC, 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.

							5. Protection of Property Rights					

### Real Property

The government enforces property rights in residential and commercial properties in urban areas. This is not the case with agricultural land, as discussed above. Mortgages and liens do exist for urban properties, but liquidity constraints have led to a fall in the number of mortgage loans. The recording of mortgages is generally reliable. The government retains ownership of all agricultural land with 99-year leases guaranteeing use. These leases remain too weak and untradable to serve as collateral for bank loans.

### Intellectual Property Rights

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

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

Zimbabwe is not included in the United States Trade Representative (USTR) Special 301 Report or Notorious Markets List.

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 has two stock exchanges: one in Harare, and one in Victoria Falls. The Zimbabwe Stock Exchange (ZSE) in Harare currently has 46 publicly listed companies with a total market capitalization of $3.6 billion as of March 31, 2023. Nine companies have listed on the Victoria Falls Stock Exchange (VFEX) with a market capitalization of US$1 billion as of March 31, 2023. Stock and money markets are open to foreign portfolio investment. Foreign investors can take up to a maximum of 49 percent of any locally listed company with any single investor limited to a maximum of 15 percent of the outstanding shares. Regarding the money market, foreign investors may buy up to 100 percent of the primary issues of bonds and stocks and there is no limit on the level of individual participation.

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 insurance companies and pension funds invest between 25 and 35 percent of their portfolios in prescribed government bonds. Zimbabwe’s high inflation has greatly eroded the value of domestic debt instruments and resulted in negative real interest rates on government bonds.

The country respects the IMF’s Article VIII and refrains from restrictions on payments and transfers for current international transactions provided there is sufficient foreign exchange to finance the transactions. Depending on foreign currency availability, foreign companies with investments in Zimbabwe can borrow locally on market terms.

Although credit is allocated on market terms and foreigners are allowed to borrow on the local market, lack of foreign exchange constrains the financial sector from extending credit to the private sector.

### Money and Banking System

Three major international commercial banks and several regional and domestic banks operate in Zimbabwe, but they have reduced their branch network substantially in line with declining business opportunities. The central bank (Reserve Bank of Zimbabwe (RBZ)) asserts the banking sector is generally stable despite a harsh operating environment characterized by high credit risk, high inflation, and foreign exchange constraints. Most Zimbabwean correspondent banking relationships are in jeopardy or have already been severed due to international bank efforts to reduce risk (de-risking) connected to the high penalties for non-compliance with prudential anti-money laundering/counter-terrorism finance (AML/CFT) guidelines in developed countries. In March 2022, the Financial Action Task Force (FATF) removed Zimbabwe from the “grey list” in response to “significant progress in improving its AML/CFT regime” and Zimbabwe is no longer subject to the FATF’s increased monitoring process.

As of December 31, 2022, the banking sector had 19 operating institutions, comprising 14 commercial banks, four building societies, and one savings bank. According to the RBZ, as of December 2022, all banking institutions complied with the prescribed minimum core capital requirements. The central bank believes the financial sector’s capital position is adequate to absorb unexpected shocks as well as ensure business continuity. The level of non-performing loans rose from 0.94 percent in December 2021 to 1.58 percent by December 2022. The RBZ reports the total loans-to-deposits ratio rose from 48.3 percent in December 2021 to 55.7 percent in December 2022, with foreign currency-denominated loans accounting for 78.2 percent of total banking sector loans.

### Foreign Exchange and Remittances

#### Foreign Exchange

The RBZ converts 25 percent of foreign currency earned from exports into local currency at the interbank rate while exporters retain the other 75 percent in foreign exchange. The authorities change these levels periodically without notice depending on the severity of the foreign exchange constraint. Additionally, businesses selling domestically in foreign currency must surrender 15 percent of the receipts to the central bank in exchange for local currency at the interbank rate.

Weak investment inflows and poor export growth have resulted in a perennial shortage of foreign exchange. Consequently, investors cannot freely convert funds associated with any form of investment into foreign currency. Although the situation improved after authorities adopted an auction system and an interbank market to allocate foreign exchange, businesses still rely on the parallel market for foreign exchange to make external payments as the supply of foreign exchange always falls short of demand. The GOZ claims to have cleared by December 2022 the allotments backlog stretching over six months. However, companies awarded foreign exchange through the auction have faced months-long delays in receiving allocations.

As of March 20, 2023, the interbank and auction rates are close to 32 percent stronger than the parallel market rate.

#### Remittance Policies

Foreigners can remit capital appreciation, dividend income, and after-tax profits provided the foreign exchange is available. Firms may find difficulty in accessing foreign exchange at the auction rate.

#### Sovereign Wealth Funds

The government set aside $1 million toward administrative costs related to establishing a Sovereign Wealth Fund (SWF) in its 2016 budget. Although the government proposed to capitalize the SWF through a charge of up to 25 percent on royalty collections on mineral sales, as well as through a special dividend on the sale of diamond, gas, granite, and other minerals, it has not done so. e.

							7. State-Owned Enterprises					

Zimbabwe has 107 state-owned enterprises (SOEs), defined as companies wholly owned by the state. A list of the SOEs appears here. Many SOEs support vital infrastructure including energy, mining, and agribusiness. Competition within the sectors where SOEs operate tends to be limited. However, the 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 seeking profits. SOEs should have independent boards, but in some instances, such as 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 are subject to the same taxes and same value-added tax rebate policies as private sector companies. SOEs face several challenges that include persistent power outages, mismanagement, lack of maintenance, inadequate investment, a lack of liquidity and access to credit, and debt overhangs. As a result, SOEs have performed poorly. Few SOEs produce publicly available financial data and even fewer provide audited financial data. SOE poor management and lack of profitability have imposed significant costs on the rest of the economy.

### Privatization Program

Although the government committed itself to privatize most SOEs in the 1990s, it only successfully privatized two parastatals. In 2018, the government announced it would privatize 48 SOEs. So far, it has only targeted five in the telecommunications, postal services, and financial sectors for immediate reform, but the privatizations have not yet concluded. The government encourages foreign investors to take advantage of the privatization program to invest in the country, but inter-SOE debts of nearly $1 billion pose challenges for privatization plans. According to the government’s investment guidelines, it is still working out the process under which it will dispose its shareholding to the private sector. The 2020 Zimbabwe Investment and Development Act states public private partnerships (PPPs) require public expressions of interest where appropriate but notes a contracting authority may choose not to require public bids when it has already identified a proposed project with an identified counterparty and disclosed this fact.

							8. Responsible Business Conduct					

Awareness of standards for responsible business conduct (RBC) is mainly driven by the private sector through the Standards Association of Zimbabwe.

The Zimbabwean government has not instituted or proposed requirements for businesses to conduct due diligence or reporting regarding human rights or other responsible business conduct issues. It has also not taken any measures to encourage RBC and it does not consider RBC policies or practices in procurement decisions.

The private sector developed the National Corporate Governance Code of Zimbabwe (ZimCode), which is a framework designed to guide Zimbabwean companies on RBC. The Confederation of Zimbabwe Industries (CZI), an industrial advocacy group, has a standing committee on business ethics and standards that 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. Firms that demonstrate corporate social responsibility do not automatically garner favorable treatment from consumers, employees, or the government.

The U.S Department of Labor’s (DOL) report https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods published in September 2022 reports that children work in Zimbabwe’s sugarcane, gold, tobacco industries. The DOL’s reporthttps://www.dol.gov/agencies/ilab/resources/reports/child-labor/zimbabwe found children in Zimbabwe engage in the worst forms of child labor, including in mining, agriculture, and tobacco production. Law enforcement agencies lack resources to enforce child labor laws. The COVID-19 crisis severely limited the government’s ability to combat the worst forms of child labor. The country’s continuing economic decline likely increased the vulnerability of children working in informal labor sectors, including those that harbor the worst forms of child labor, to support family incomes. of children working in informal labor sectors, including those that harbor the worst forms of child labor, to support family incomes.

The government regularly thwarts union efforts to demonstrate with violence and excessive force and harasses labor leaders. Police and state intelligence services regularly attend and monitor trade union activities, sometimes preventing unions from holding meetings with their members and carrying out organizational activities. Although unions are not required by law to notify police of public gatherings, police require such notification in practice. Those unions engaging in strikes deemed illegal risk fines and imprisonment.

The government ordered in March 2021 the eviction of 13,000 members of the Chilonga community in the southeastern part of the country, but eventually backed down after a court ruled in favor of a temporary relief. Although the Chilonga villagers appealed the eviction citing unconstitutionality of sections of the Communal Land Act the government used in its eviction order, the High Court ruled in favor of the government but recommended a review of the Act.

The Zimbabwean government has expressed its intention to implement the Extractive Industries Transparency Initiative (EITI) principles to strengthen accountability, good governance, and transparency in the mining sector, but it has yet to launch an EITI program. A domestic initiative called the Zimbabwe Mining Revenue Transparency Initiative (ZMRTI) has produced limited results.

Although Zimbabwe has a high usage of private security companies by the government or industry, it is not signatory to the Montreux Document on Private Military and Security Companies.

U.S. Customs and Border Patrol issued a withhold release order on Zimbabwean rough diamonds from Marange in 2019 after an investigation concluded that forced labor contributed to the mining activity. Widespread artisanal and small-scale gold mining presents a threat to the environment, and informal miners have little-to-no safety and labor protections.

### Additional Resources

Department of StateCountry Reports on Human Rights Practices (https://www.state.gov/reports-bureau-of-democracy-human-rights-and-labor/country-reports-on-human-rights-practices/)Trafficking in Persons Report (https://www.state.gov/trafficking-in-persons-report/)Guidance on Implementing the “UN Guiding Principles” for Transactions Linked to Foreign Government End-Users for Products or Services with Surveillance Capabilities (https://www.state.gov/key-topics-bureau-of-democracy-human-rights-and-labor/due-diligence-guidance/)U.S. National Contact Point for the OECD Guidelines for Multinational Enterprises (https://www.state.gov/u-s-national-contact-point-for-the-oecd-guidelines-for-multinational-enterprises/)Xinjiang Supply Chain Business Advisory (https://www.state.gov/xinjiang-supply-chain-business-advisory/)

Department of the TreasuryOFAC Recent Actions (https://home.treasury.gov/policy-issues/financial-sanctions/recent-actions)

Department of LaborFindings on the Worst Forms of Child Labor Report (https://www.dol.gov/agencies/ilab/resources/reports/child-labor/findings )List of Goods Produced by Child Labor or Forced Labor (https://www.dol.gov/agencies/ilab/reports/child-labor/list-of-goods)Sweat & Toil: Child Labor, Forced Labor, and Human Trafficking Around the World (https://www.dol.gov/general/apps/ilab)Comply Chain (https://www.dol.gov/ilab/complychain/)

### Climate Issues

Zimbabwe developed a national climate policy in 2017 which provides an overarching framework that gives the country basic principles and guidance under which climate change response strategy will be implemented. The government has stated its intention to reduce emissions of sectoral greenhouse gasses without specifying action plans to achieve these objectives. The policy does not specify any regulatory incentives towards achievement of set objectives.

The GOZ, through the Procurement and Regulatory Authority of Zimbabwe, introduced in 2023 a framework that compels businesses to make environmental, social, and governance issues an integral part of their business strategy. The framework aims to ensure transparency, fairness, honesty, and competition as required by the Zimbabwean Constitution.

							9. Corruption					

Endemic corruption presents a serious challenge to businesses operating in Zimbabwe. Zimbabwe’s scores on governance, transparency, and corruption perception indices are well below the regional average. U.S. firms have identified corruption as an obstacle to FDI, with many corruption allegations stemming from opaque procurement processes.

While anti-corruption laws exist and extend to family members of officials and political parties, the government tends to engage in selective enforcement. As a result, Transparency International ranked Zimbabwe 157 out of 180 countries and territories surveyed in 2022 with respect to perceptions of corruption.

In 2005, the government enacted an Anti-Corruption Act that established a government-appointed Zimbabwe Anti-Corruption Commission (ZACC), the structure of which has evolved over time. The 2013 constitution established ZACC’s status as an independent commission. Following the end of Robert Mugabe’s rule in November 2017, the government appointed a new ZACC chaired by a former High Court Judge and granted it new powers. President Mnangagwa also established a special unit within his office to deal with corruption cases. While ZACC has in recent years investigated and arrested some high-level officials, it does not have prosecutorial authority. Many high-ranking individuals are released after their initial arrest (in what is known as “Catch and Release”). The National Prosecuting Authority of Zimbabwe is responsible for prosecuting cases and referring all cases to the specialized anticorruption courts. The government has a track record of prosecuting individuals selectively, focusing on those who have fallen out of favor with the ruling party and ignoring transgressions by members of the favored elite. Accusations of corruption seldom result in formal charges and convictions. Zimbabwe does not provide any special protections to NGOs investigating corruption in the public sector. Journalists reporting on high-level corruption and opposition members have suffered from arbitrary arrests and lengthy detentions.

While Zimbabwe does not have laws that guard against conflict of interest with respect to the conduct of private companies, existing rules on both the Zimbabwe Stock Exchange and the Victoria Stock Exchange compel listed companies to adhere to minimum disclosure requirements through annual reports. Regarding SOEs, the government has specified laws that require managers and directors to declare their financial interests, although these may not be followed in practice. After the 2020 launch of the National Anti-Corruption Strategy, ZACC conducted a campaign in 2022 that resulted in multiple public and private officials signing integrity pledges.

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

Resources to Report Corruption

Contact at the government agency or agencies that are responsible for combating corruption:

Zimbabwe Anti-Corruption Commission (ZACC)172 Herbert Chitepo Avenue,Harare.+263 (242) 369602; +263 71 952 9483reports@zacc.co.zw

Contact at a “watchdog” organization:

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

							10. Political and Security Environment					

Political parties, labor organizations, and civil society groups encounter state-sponsored intimidation and repression from government security forces and Zimbabwe African National Union – Patriotic Front (ZANU-PF) – linked activists. Disagreements between and within political parties occasionally result in violence targeting political party supporters. Political tensions and civil unrest persist since the end of Robert Mugabe’s rule in November 2017. On August 1, 2018, the army fired upon people demonstrating against the delay in announcing official presidential election results, killing six civilians. In response to January 2019 demonstrations against rising fuel prices, security forces killed 17, raped 16, injured hundreds, and arrested more than 800 people over the course of several weeks. The crackdown targeted members of the main opposition party, civil society groups, and labor leaders.

President Mnangagwa’s government has arrested and detained journalists, several senior opposition officials, and trade union activists for organizing demonstrations against corruption and allegedly violating bail conditions. Police also arrested three women members of the opposition party, MDC Alliance (now Citizens Coalition for Change (CCC)), including a member of parliament for violating lockdown measures when they demonstrated against corruption and food shortages during the first of several lockdowns imposed on the country to fight COVID-19. They were subsequently abducted from police custody and tortured by alleged security agents. Since then, the government has occasionally arrested and detained the three leaders when they have spoken out against the government. Political tensions also prevailed during the March 2022 by-elections campaigns. Leading up to the by-election, ZANU-PF-affiliated youths allegedly killed a CCC rally attendee and injured 22 others in Kwekwe. CCC also reported attacks targeted at its activists and supporters in 2023 and continued use of lawfare to target opposition and civil society actors. With general elections in 2023, Zimbabwe’s political tensions will likely rise in the pre-election and immediate post-election period.

Political uncertainty remains high. Violent crime, such as assault, smash and grabs, and home invasion, is common. Armed robberies perpetrated by serving members of the army and police have increased. Local police lack the resources to respond effectively to serious criminal incidents. Incidents of violence have typically not targeted investment projects.

							11. Labor Policies and Practices					

Decades of political and economic crises have led to the emigration of many of Zimbabwe’s skilled and well-educated citizens, especially in the fragile healthcare sector. Formal sector employment has fallen significantly. Anecdotal evidence shows widespread youth unemployment as the country continues to produce graduates without a matching growth in employment opportunities. According to the most recent Labor Force Survey, Zimbabwe’s unemployment rate stood at 16.4 percent in 2019. The informal sector is estimated at over 85 percent of the workforce. Most informal workers worked in agriculture, trading, or mining. An estimated 500,000 people worked in small-scale or artisanal mining, according to the Zimbabwe Economic Policy Analysis and Research Unit, an independent think tank. The government strongly 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 to obtain work and residence permits. Normally, the maximum contract period for a foreign national is three years with a possible extension to five years for individuals with highly specialized skills.

According to the IMF, Zimbabwe has the second largest informal economy (as a share of GDP) in the world, after Bolivia, with 60.6 percent contribution to the country’s GDP. Official data from the Zimbabwe National Statistical Agency (ZimStat) shows women accounted for 43 percent of the people involved in the informal sector in 2019. A 2018 ILO survey claimed women comprised up to 65 percent of the informal economy.

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 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. Labor laws differentiate between layoffs and severance with the former falling under retrenchment where the retrenchment law must apply. The law does not accept unfair dismissal or layoffs of employees. The 2015 amendments to the act only permit terminations of contracts to be 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.

Collective bargaining agreements apply to all workers in an industry, not just union members. Collective bargaining takes place at the enterprise and industry levels. At the enterprise level, work councils negotiate collective agreements, which become binding if approved by 50 percent of the workers in the bargaining unit. Industry-level bargaining takes place within the framework of National Employment Councils. Unions representing at least 50 percent of the workers may bargain with the authorization of the Minister of Public Service and Labor. The law encourages the creation of employee-controlled workers’ committees in enterprises where less than 50 percent of workers are unionized. Workers’ committees exist in parallel with trade unions. Their role is to negotiate shop floor grievances, while that of the trade unions is to negotiate industry-level grievances, notably wages. The minister and the registrar have broad powers to take over the direction of a workers’ committee if they believe it is mismanaged. Trade unions regarded the existence of such a parallel body as an arrangement that allows employers to undermine the role of unions.

Employers in all sectors rely heavily on temporary or contract workers to avoid having to pay severance costs and follow other onerous termination procedures. The Labor Amendment Act of 2015, however, requires employment councils to limit the number of times employers can renew short-term contracts. The government does not waive labor laws to attract or retain investment, except in the case of SEZs.

The law provides for the right of private sector workers to form and join unions, conduct legal strikes, and bargain collectively. Public sector workers may not form or join trade unions but may form associations that bargain collectively and strike. The law prohibits anti-union discrimination, provides that the labor court handle discrimination complaints, and may direct reinstatement of workers fired due to such discrimination. However, the government does not evenly respect workers’ rights to form or join unions, strike, and bargain collectively.

Parliament enacted a bill establishing the Tripartite Negotiating Forum (TNF) in 2019 to formalize dialogue efforts among government, labor leaders, and employers to discuss social and economic policy and address demands. However, the forum has made limited progress since its establishment. The Zimbabwe Congress of Trade Unions (ZCTU) stated the TNF done little to address workers’ demands for wage increases and labor law reform, and the government showed little progress in supporting workers’ protections, fairness, and peaceful resolution of labor disputes.

The country has a labor dispute resolution process that starts at the company level through disciplinary 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. Labor inspections are conducted regularly, but face challenges due to a lack of inspectors and resources for inspections.

The government continues to harass labor unions and their leaders. Police and state intelligence services regularly attend and monitored trade union activities and sometimes prevented unions from holding meetings with their members and carrying out organizational activities. Although unions are not required by law to notify police of public gatherings, police require such notification in practice. Those unions engaging in strikes deemed illegal risk fines and imprisonment.

Strikes were commonly met with police brutality, force, and dismissals during the period under review, yet did not pose a direct risk to foreign investment. The government enacted punishment and retaliatory action against teachers who participated in continued strikes regarding the right to a living wage.

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. At the 108th session of the ILO’s International Labor Conference in June 2019, the Committee on the Application of Standards noted concern regarding the government’s failure to implement specific recommendations of the 2010 Commission of Inquiry, which found the government responsible for serious violations of fundamental rights by its security forces, including a clear pattern of intimidation that included arrests, detentions, violence, and torture against union and opposition members. The Committee also noted persisting allegations of violations of the rights of the freedom of assembly of workers’ organizations. The Committee urged the government to accept a direct contacts mission of the ILO to assess progress before the next conference. The government ultimately agreed to accept a direct contacts mission, originally scheduled for May 2020 but postponed to April 2022 due to the COVID-19 pandemic. The results have not been publicly shared.

In 2020 the Office of the U.S. Trade Representative initiated a review of Zimbabwe’s eligibility for trade preferences under the Generalized System of Preferences (GSP) due to concerns of worker rights related to a lack of freedom of association, including the rights of independent trade unions to organize and bargain collectively, and government crackdown on labor activists. As the GSP program is on a congressional hold, the review has not yet concluded.

The Health Service Amendment Act came into force on January 4.  Passed in response to a significant exodus of health workers as a result of mismanagement of the health care sector, the act deems health care an essential service, criminalizes collective job action over 72 hours or for more than 72 hours in any given 14-day period, and requires a 48-hour notification of collective job action (ref A).  Violators face a fine of approximately $60, imprisonment of up to six months, or both.  Labor leaders and healthcare associations publicly condemned the law as a violation of international workers’ rights and noted it could further accelerate brain drain.

							12. U.S. International Development Finance Corporation (DFC), and Other Investment Insurance or Development Finance Programs					

The U.S. government and Zimbabwe concluded with OPIC (now DFC) an Investment Incentive Agreement in April 1999, which permits DFC to conduct transactions in Zimbabwe. The agreement entered into force in March 2021. DFC has a few loan portfolio guarantees (LPG) with local banks in Zimbabwe. The agency has not initiated a new project since 2015. The LPG stimulates credit and increases access to finance for Zimbabwean micro and small-to-medium enterprises (MSMEs) in the agricultural sector as well as youth and women-owned enterprises in every sector. To date, supported banks have disbursed more than 700 loans worth nearly $6 million to MSMEs in Zimbabwe with 90 percent going to new borrowers who are traditionally excluded due to lack of collateral and perceived high risk. DFC support for Zimbabwe projects is currently limited.

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 limited in Zimbabwe. Finance and export promotion programs, as well as investment insurance offered through international financial institutions, remain limited due largely to Zimbabwe’s mounting multilateral and bilateral debt arrears.

							13. Foreign Direct Investment Statistics