The new Government of Zimbabwe (GoZ) under President Munangagwa’s administration is determined to attract private investment as a vehicle for advancing economic recovery. It recognises the key role of investment in advancing economic growth and development, modern technology and know-how, and creating jobs. Munangagwa became the President of Zimbabwe in November 2017 after Robert Mugabe resigned under pressure from the military. One of his main and immediate objectives is economic revival of the country. In his inauguration speech, he highlighted that ‘our economic policy will be predicated on our agriculture which is the mainstay, and on creating conditions for an investment-led economic recovery that puts premium on job creation. Key choices will have to be made to attract foreign direct investment to tackle levels of unemployment.’

It is in this context that the GoZ launched its investment policy statement – Investment Guidelines and Opportunities in Zimbabwe (Investment Guidelines) on 18 January 2018.[2] The Investment Guidelines outline the country’s investment policy strategy; and showcase investment opportunities available in the economy including, among others, agriculture, mining, manufacturing, tourism, information communication and technology (ICT), and infrastructure development. The Guidelines were issued as part of government efforts to address domestic challenges facing the country (poor economic growth, company closures, cash crisis, high levels of unemployment etc). It is argued that the GoZ is preparing a new trade policy.

Summary of the Investment Guidelines

The Investment Guidelines affirm the GoZ’s commitment to build an economy founded on sound investment principles and international best practices (such as non-discrimination, effective protection of property, transparency, high standards of governance etc). The GoZ pledges to comply with its legal obligations under bilateral, regional and international agreements. In recent years, the GoZ has flagrantly violated its legal obligations under bilateral investment treaties (expropriated land without compensation) and regional agreements (such as the SADC Trade Protocol). The GoZ promises to compensate farmers for sustained losses during the land reform programme. Further, the GoZ commits itself to modernise and align its legal framework for investment with international standards within six months. Equally important, the government indicates its intention to amend the Indigenisation and Economic Empowerment Act by confining the 51/49 percent threshold to diamond and platinum sectors only.

Another aspect of investment promotion that is highlighted in the Investment Guidelines is the establishment of special economic zones (SEZs). SEZs are aimed at attracting investments, increasing exports, and promoting value addition and beneficiation by offering special incentives to qualifying investments. Also relevant to investment promotion is the GoZ’s aim to strengthen the institutional framework for investment, and reduce the bureaucratic procedures for investment entry and establishment.

Current investment climate in Zimbabwe

The current Zimbabwean investment climate is reported to be unfavourable for business.[3] Zimbabwe’s investment environment is characterised by lack of rule of law, weak protection of property (agricultural land) rights, corruption, bad governance, uncertain investment and related policies and shortages of foreign currency. This business environment deters investors from choosing Zimbabwe as an investment destination. Despite this, GoZ offers several incentives to investors including tax breaks, full deduction of tax on capital expenditure, as well as rebates on import taxes and surtaxes waivers on capital equipment.

The investment policy set out in the Investment Guidelines, along with Zimbabwe’s endowment of tradable natural resources, skilled human capital and the multicurrency system (under which the US dollar dominates) aims to place Zimbabwe as an attractive destination for foreign direct investment (FDI). However, we argue that attracting FDI does not mean the actual realisation of the benefits of investment (job creation, economic development, advancement of technology and know-how). FDI-related benefits are not automatically achieved by the host economy. Rather, the host economy still needs to adopt complementary domestic policies that maximise domestic and foreign investment linkages, deliver high quality jobs, and support sustainable economic growth and development. That is, the GoZ must ensure that it attracts FDI that matches and supports its development agenda.

The Investment Guidelines can contribute to the restoration of business confidence and create predictability within the investment community. However, it is important to note that mere publication or adoption of investment policy is not enough – despite its soundness. Implementation of the investment policy is key. We therefore urge the GoZ to expedite the implementation of the purported investment policy since economic recovery is urgently needed in Zimbabwe.

[1] President Munangagwa’s inauguration speech in full: http://www.chronicle.co.zw/president-mnangagwas-inauguration-speech-in-full/.

[2] Available at https://www.tralac.org/documents/resources/by-country/zimbabwe/1498-investment-guidelines-and-opportunities-in-zimbabwe-january-2018/file.html

[3] See 2016 Investment Climate Statements: Zimbabwe, available at https://www.state.gov/e/eb/rls/othr/ics/2016/af/254261.htm