The ZIDA Act: An overhaul of the investment policy regime and impetus for investment in Zimbabwe?
On 6 February 2020, the President of Zimbabwe signed into law the pdf Zimbabwe Investment Development Agency Act [Chapter 14:37] (ZIDA Act) (1.98 MB) . ZIDA Act deals with the promotion, entry, facilitation and protection of investment in Zimbabwe. The Act was introduced as part of the government’s efforts to streamline investment laws and create a business-friendly environment attractive to both local and foreign investors.
Boosting investment has been one of President Mnangagwa’s priorities with his ‘Zimbabwe is Open for Business’ mantra. Zimbabwe has been experiencing serious disinvestment (company closures) and attracting low investment due to economic challenges, policy uncertainty and political risks, among others. Does the ZIDA Act provide a necessary overhaul of the investment policy regime and a renewed impetus for investment in Zimbabwe?
The ZIDA Act contains provisions critical for investment approval, facilitation and protection. It establishes the Zimbabwe Investment Development Agency (the ‘Agency’), whose primary function is to facilitate entry, approval and implementation of investment projects, and coordinate investment programmes and strategies in Zimbabwe. The Agency is also entrusted with the establishment and regulation of special economic zones (SEZs). It shall provide investors with post-establishment services to support investment retention and expansion and monitor the operations of registered investment. The Agency shall have authority to cancel or suspend investment licences if obtained fraudulently or transferred to another person without the Agency’s approval. The licence may also be cancelled or suspended if the investor fails to implement the investment within a stipulated period or fails to comply with any conditions imposed on the issue of licence. The Agency shall also have the powers to visit and inspect/examine the premises and documents of licensed investors.
The ZIDA Act repeals the Zimbabwe Investment Authority Act [Chapter 14:30], Special Economic Zones Act [Chapter 14:34] and Joint Ventures Act [Chapter 22:22]. These legislations regulated investment and related issues in a fragmented fashion. Investment, SEZs and joint venture issues are now regulated in terms of the ZIDA Act.
The ZIDA Act establishes a One-Stop Investment Services Centre. The Centre shall be controlled and supervised by the Agency. It shall consist of representatives from several government ministries/departments involved in the process of registering a new business: Immigration; Revenue Authority; Tourism Authority; Reserve Bank; Environmental Management Agency; Companies Registration Office, National Social Security Authority; Energy Regulatory Authority; Ministry of Mines and Minerals; and Ministry of Labour and Local Authorities. Prior to the ZIDA Act, these ministries/departments conducted their investment-related duties separate from each other and in terms of distinct laws. These duties are now regulated in terms of the ZIDA Act.
The consolidation of investment laws into a single legislation fosters coherence and predictability in investment governance. Equally important, one-stop shop services quicken and ease investment approval process. Prospective investors need not visit various government departments (mostly located in different ministries/departments) in pursuit of approvals. Investments would be expedited if the government removes bureaucratic impediments to investment, introduces online applications, eases business permits and simplifies business personnel entry. The ZIDA Act does not provide for this. The government should also enhance transparency, improve capacity or efficiency and promote cooperation and coordination of all the government institutions or departments involved in the investment approval process. These aims need to be anchored in firm commitments to ensure that there are remedies when such commitments are breached.
The ZIDA Act applies to both foreign and domestic investments established in accordance with the laws of Zimbabwe. The Act allows investors to invest in any and all sectors of the economy. However, foreigners cannot invest in sectors reserved for locals unless their investments contribute to significant and sustainable employment creation in Zimbabwe, transfer skills and technology for the benefit of Zimbabweans, create sustainable value chains or meet other socially and economically desirable objectives. Foreign investors can have unrestricted foreign ownership in open sectors except in businesses involved in the extraction of diamonds and platinum, where 51% ownership is reserved for local investors.
The ZIDA Act allows investors to expatriate profits in freely convertible currency. However, the government of Zimbabwe may temporarily restrict such transfers in the event of balance of payment or external financial difficulties. The expatriation of profits in hard currency is a major problem in countries such as Nigeria and Angola.
Legal protection of investments and access to remedies when rights are violated are fundamental to investors. The ZIDA Act guarantees all investors equal access to law and protection against denial of justice in criminal, civil and administrative proceedings, breaches of due (judicial and administrative) process, and targeted gender, racial or religious discrimination.
The ZIDA Act also prohibits expropriation of investments ‘except for a public purpose, in accordance with due process of law, in a non-discriminatory manner and on payment of prompt, adequate and effective compensation’. Such compensation shall be equivalent to the fair market value prior to expropriation.
Transparency (full disclosure) of investment-related laws, policies and regulations encourages investments. Investors need to know policies, rules and regulations or any changes that affect their investments. Under the ZIDA Act, the government guarantees to publish – subject to national security, confidentiality or public interests – all laws, regulations, procedures, administrative rulings, policies and adjudicatory decisions that affect or pertain to investment or investors. Going beyond their publication, the government should ensure that the implementation and enforcement of these rules are clear and transparent to all investors.
Investment disputes under the ZIDA Act shall be resolved in terms of Zimbabwe’s Arbitration Act [Chapter 7:15] (No. 6 of 1996), or any other international arbitration referred to by mutual agreement of the parties. Foreign investors may submit their disputes against Zimbabwe to a dispute settlement mechanism under an investment treaty between Zimbabwe and their home country. This is possible provided the foreign investments established in Zimbabwe prior to the ZIDA Act is are registered with the Agency no later than 12 months after the ZIDA Act became effective – 6 February 2020. Foreign investments established after the ZIDA Act must be registered with the Agency no later than 90 days after the ZIDA Act’s entry into force, to benefit from bilateral investment treaty (BIT) protection. Failure to register these investments within specified periods shall be deemed to have waived the protection under the investment treaty in question, and the result is that any dispute in relation thereto can be settled through a domestic court or domestic arbitration. We discuss the dispute resolution mechanism under ZIDA and its implications for foreign investors and investments in another blog.
It is important to note that Zimbabwe needs responsible and productive investment that will promote sustainable development, create jobs, improve living standards, transfer technology and know-how, enhance Zimbabwe’s productive capacity and spur domestic investment through creation of local supplier linkages. The country needs investments in strategic connectivity infrastructure (ports, transport corridors, etc.) and competitive industries (including services) for the country to participate in and benefit from the interconnected global economy.
The ZIDA Act is an important but not the only step to attract foreign investment in Zimbabwe. Businesses will not invest in Zimbabwe solely because of the promulgation of the ZIDA Act. The government needs to address the overall investment governance framework, and restore business confidence in Zimbabwe. It should tackle economic and political challenges like currency or cash crisis, access to finance, costs of doing business, corruption, respect of rule of law, protect property rights, remove unnecessary administrative burdens to investment, and address a combination of factors contributing to the deterioration of the investment climate in Zimbabwe. The government of Zimbabwe needs to understand the expectations of the investors (beyond traditional motivations) and today’s business models then develop its investment policy environment accordingly.
 Investors licensed to operate in SEZs in terms of section 32 of the ZIDA Act.
 Proceedings under the repealed legislations which commenced before the promulgation of the ZIDA Act shall be completed in accordance with those laws as if they were still in force. Licences approved under the repealed Act shall continue until the term of such licence has expired.
 Transport (passenger buses, taxis and car hire services), retail and wholesale trade, barbershops and saloons, advertising, employment and estate agencies, valet services, grain milling, bakeries, tobacco grading and packaging, artisanal mining, as well as provision of local arts and craft, marketing and distribution.
 Section 3A and First Schedule of the Indigenisation and Economic Empowerment Act (as amended).
 Section 3 of the Indigenisation and Economic Empowerment Act (as amended).
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