ZIMBABWE<br />ZIMBABWE RISING CONFERENCE 2010, THE MAY FAIR HOTEL LONDON 3-4 DECEMBER<br />DOING BUSINESS IN ZIMBABWE:  A ...
<ul><li> INTRODUCTION</li></ul>Zimbabwe has turned the tide. Zimbabwe is back.  The Global Political Agreement (GPA) signe...
The Social Cluster , which  focused on  the rehabilitation of social services (education, health, humanitarian crisis)
The Rights Cluster, which focused on Governance issues, especially legal and institutional reforms to democratize the country
The Infrastructure Cluster, which focused on the reconstruction development of infrastructure</li></ul>International Engag...
Indeed the Inclusive Government has been at work.  A lot of achievements were made in the various clusters. For example;<b...
<ul><li>There is no illusion in Zimbabwe regarding the fact that 3G and 4G is the future. This demonstrates that Zimbabwe ...
In terms of international engagement, several meetings were held in Brussels and the dialogue is on going  between Zimbabw...
In the Economic Cluster, food security was restored and macro-economic stability was achieved.  Now the economy is almost ...
To restore the productive capacities of key economic sectors, especially Agriculture, Mining, Manufacturing, Tourism, Serv...
To restore the Education and Health Sectors to their pre-2000 levels and improve the same
To increase domestic and foreign Investment and  Savings
To rehabilitate and develop infrastructure through PPPs
To increase volumes of exports through trade development
To reduce the Public Debt and link debt to development
To restore Zimbabwe’s bread basket status</li></ul>The MTP sets out National Priorities, which will assist development par...
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Zimbabwe Rising Conference London 2010 - Hon. Minister Tapiwa Mashakada: Doing Business in Zimbabwe - A critical assessment of the investment climate, opportunities, incentives and challenges for investors.

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Doing Business in Zimbabwe - A critical assessment of the investment climate, opportunities, incentives and challenges for investors.Zimbabwe Rising Conference 2010- Hon. Minister Tapiwa Mashakada: Doing Business in Zimbabwe - A critical assessment of the investment climate, opportunities, incentives and challenges for investors.

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Zimbabwe Rising Conference London 2010 - Hon. Minister Tapiwa Mashakada: Doing Business in Zimbabwe - A critical assessment of the investment climate, opportunities, incentives and challenges for investors.

  1. 1. ZIMBABWE<br />ZIMBABWE RISING CONFERENCE 2010, THE MAY FAIR HOTEL LONDON 3-4 DECEMBER<br />DOING BUSINESS IN ZIMBABWE: A CRITICAL ASSESSMENT OF THE INVESTMENT CLIMATE, OPPORTUNITIES, INCENTIVES and CHALLENGES FOR THE INVESTOR<br />BY HONOURABLE TAPIWA MASHAKADA, MP<br />MINISTER OF ECONOMIC PLANNING AND INVESTMENT PROMOTION<br />REPUBLIC OF ZIMBABWE. <br />EMAIL: mashakadat@parliament.gov.zw<br />
  2. 2. <ul><li> INTRODUCTION</li></ul>Zimbabwe has turned the tide. Zimbabwe is back. The Global Political Agreement (GPA) signed by MDC (T), ZANU (PF) and MDC in September 2008 soft-landed the political crisis. This created space for economic recovery. Beginning February 2009, the inclusive government immediately put into place a 100 Day Plan within the framework of the Short-Term Economic Recovery Program (STERP) which was launched in March 2009. In December 2009, STERP 2 was launched in order to provide a 3 year rolling macroeconomic framework. The Inclusive Government put into place a comprehensive Government Work Plan (GWP) for 2009 which focused on 4 key clusters:<br /><ul><li>The Economic Cluster, which focused on food security and the restoration of macroeconomic stability
  3. 3. The Social Cluster , which focused on the rehabilitation of social services (education, health, humanitarian crisis)
  4. 4. The Rights Cluster, which focused on Governance issues, especially legal and institutional reforms to democratize the country
  5. 5. The Infrastructure Cluster, which focused on the reconstruction development of infrastructure</li></ul>International Engagement, which focused on the initiation of dialogue between Zimbabwe, the EU and the USA on the need to normalize the frosty relations <br />
  6. 6. Indeed the Inclusive Government has been at work. A lot of achievements were made in the various clusters. For example;<br /><ul><li>Under the Rights Cluster, various Independent Commissions were established – Zimbabwe Electoral Commission, Zimbabwe Human Rights Commission, Zimbabwe Independent Media Commission etc. In addition Media reforms were introduced leading to the reintroduction of new daily newspapers. Reforms were done on the Electoral Act to align it with modern democratic electoral tenets. </li></ul>But more importantly, a new constitution making process was set in motion and is expected to be finalized in the second quarter of 2011. If adopted by the Referendum, the new Constitution will replace the Lancaster House Constitution of 1979.<br /><ul><li>Under the Social Cluster, progress was made in the reopening of schools and the re-engagement of teachers back into the public service. A program to print and supply textbooks to primary pupils and secondary students was initiated. The program is set to achieve a 1:1 pupil/student : textbook ratio.</li></ul>Under the Infrastructure Cluster, roads were repaired and potholes were filled on all major urban highways. Investments were done in Information Communication Technology (ICT) where the country is migrating to 3G mobile connectivity. In this regard an optic fibre laying project is underway to link Zimbabwe to the sea cable via the port of Beira in Mozambique. <br />
  7. 7. <ul><li>There is no illusion in Zimbabwe regarding the fact that 3G and 4G is the future. This demonstrates that Zimbabwe is now ready to join the Knowledge Economy. In addition, investors in the power sector have been identified. This will see Zimbabwe gaining an extra 2000MW from the rehabilitation of its hydro and thermal power stations. This will boost energy supplies into the various sectors of the economy.
  8. 8. In terms of international engagement, several meetings were held in Brussels and the dialogue is on going between Zimbabwe and the European Union.
  9. 9. In the Economic Cluster, food security was restored and macro-economic stability was achieved. Now the economy is almost on the verge of double digit growth. </li></ul>THE MEDIUM TERM PLAN (2011-2015)<br />In the medium term, the Government of Zimbabwe is coming up with a national economic development strategy – The Medium Term Plan (MTP). The MTP seeks to achieve inter alia the following key objectives-<br /><ul><li>To achieve sustainable economic growth
  10. 10. To restore the productive capacities of key economic sectors, especially Agriculture, Mining, Manufacturing, Tourism, Services.</li></li></ul><li><ul><li>To reduce poverty through the pursuit of Millenium Development Goals (MDGs)
  11. 11. To restore the Education and Health Sectors to their pre-2000 levels and improve the same
  12. 12. To increase domestic and foreign Investment and Savings
  13. 13. To rehabilitate and develop infrastructure through PPPs
  14. 14. To increase volumes of exports through trade development
  15. 15. To reduce the Public Debt and link debt to development
  16. 16. To restore Zimbabwe’s bread basket status</li></ul>The MTP sets out National Priorities, which will assist development partners to choose areas of support within the context of a clear economic development framework that is based on evidence-based research. <br />This is all happening notwithstanding the absence of Foreign Direct Investment (FDI) and significant Lines of Credit.<br /><ul><li>INVESTING IN ZIMBABWE</li></ul>In terms of Doing Business, the World Bank Report (2011) ranked Zimbabwe number 157 out of 183. However, The rankings did not look at the overall macroeconomic picture, but simply looked at administrative and institutional red-tape in regard to the ease of setting up a new business and getting all the necessary permits.<br />
  17. 17. Suffice is to say that the Government of Zimbabwe is already addressing the administrative bottlenecks in order to ensure that company registration is simplified, investment licences and permits are issued expeditiously through the establishment of a One-Stop-Shop Investment Centre.<br />Otherwise, Zimbabwe offers plenty of investment opportunities for Investors. Below, we give some of the key favourable conditions -<br /><ul><li>STABLE MACROECONOMIC ENVIRONMENT</li></ul>After a decade of unprecedented economic meltdown that was finally broken in February 2009, Zimbabwe now stands among the league of stable African economies. Annual Inflation has been tamed to below 4% (2010) while GDP growth is forecast to reach 9% in 2011.<br />TABLE1: REAL GDP GROWTH AND SECTORAL PERFORMANCE<br />Source: Ministry of Finance, GoZ<br />
  18. 18. Zimbabwe’s Economic Performance in 2010 surpassed the average growth rate of Sub-Saharan African countries. <br />TABLE 2: COMPARATIVE GROWTH RATES<br />Source: Ministry of Finance, GoZ<br />I n terms of revenue performance, the country has improved its annual cash flows to nearly US$2.5 billion in 2010 up from US$1 billion in 2009. The country’s total GDP is USD 6 billion. However, this figure is now believed to be grossly understated in view of the fact that about 75% of the economy is informal. In terms of the structure of the economy, the country heavily depends on imports. The value of Imports increased from US$3.2 billion in 2009 to US$3.6 billion in 2010.<br />
  19. 19. TABLE 3: REVENUE PERFORMANCE IN 2009<br />Notes<br /><ul><li>GROWING MINING SECTOR</li></ul>One of the fastest growing sectors is Mining. Zimbabwe boasts of rich mineral resources. <br />Our Diamonds reserves are estimated to be 35% of the global reserves while our Platinum is estimated at 25% of world reserves. Other Minerals are Gold, Manganese, Lithium, Coal, Chrome, Copper, Iron Ore, Cobalt, Tin etc <br />
  20. 20. TABLE 4: SELECTED MINERALS’ CONTRIBUTIONS TO EXPORTS, OCTOBER 2010<br />In order to register long-term recovery, the Mining Sector requires about USD5billion(estimate) in the next 5 years. This capital should come through FDI.<br /><ul><li>MANUFACTURING SECTOR: POISED FOR RECOVERY </li></ul>ZIMBABWE has got a fairly robust manufacturing sector that was developed during the UDI under Import Substitution Industrialization. However , capacity utilization dropped to 10% by the end of 2008 as a result of economic difficulties . Because of the Short Term Emergency Recovery Programme (STERP), capacity utilization has improved to 43% in 2010. However, full recovery in the manufacturing sector is still constrained by the following factors:-<br /><ul><li>Lack of Foreign Direct Investment (FDI);
  21. 21. Competition from cheap imports;
  22. 22. Electricity outage;
  23. 23. De-Industrialisation; and
  24. 24. Lack of Credit Lines.</li></ul>The Manufacturing Sector requires Lines of Credit estimated at USD10 billion in the next 5 years in order to increase capacity utilization to 90%.<br />
  25. 25. <ul><li>BOOMING TOURISM SECTOR</li></ul>Tourism is one of the fastest growing sectors of the Zimbabwean economy. In order to attract huge investments in Tourism, the Government of Zimbabwe has declared the whole geographical mass of Zimbabwe, a Tourism Development Zone. But more significantly, Zimbabwe has launched its new Tourism Brand. The Victoria Falls remains the most attractive international tourist destination <br />TABLE 5: TOURISM – CONTRIBUTION TO GDP (USD)<br />
  26. 26. <ul><li>OUR HUMAN CAPITAL</li></ul>Our highly skilled human resources remain the most important incentive for investors as this lowers training costs. Human CAPITAL is a critical factor for investment and<br /> Zimbabwe still has got a reputable and skilled human resource base, that is arguably second to none in Sub-Saharan Africa. Government has come up with a Migration Management, Diaspora and Development Policy in order to promote and coordinate the return of our Citizens in the diaspora whose number is estimated at above 3 million. <br /><ul><li>LEGAL AND INSTITUTIONAL REFORMS</li></ul>As intimated earlier on, Government is working on legal and institutional reforms to improve the ease of Doing Business. Investment facilitation is a key goal pursued by the Government of Zimbabwe. In this regard, Cabinet approved the establishment of a One-Stop-Shop Investment Centre. This entails the transformation of the present Zimbabwe Investment Authority (ZIA) into a One-Stop-Shop with the sole mandate to expedite the issuance of approvals, investor licences and permits within 5 working days as opposed to the current 96 days. The physical structure to support the One-Stop-Shop concept has been completed and is ready for official launch on the 13th December, 2010 at the Harare International Conference Centre. The One-Stop-Shop Investment Centre will house, under one roof, the following key departments:<br /><ul><li>Investment Facilitation and AfterCare Services
  27. 27. Immigration
  28. 28. Zimbabwe Revenue Authority
  29. 29. Registrar of Companies
  30. 30. Ministry of Industry and Commerce
  31. 31. Ministry of Youth Development, Indigenization and Economic Empowerment
  32. 32. Ministry of Labour and Social Welfare
  33. 33. Environmental Management Agency (EMA)
  34. 34. Attorney General
  35. 35. Ministry of Local Government
  36. 36. Ministry of Transport, Communications and Infrastructural Development
  37. 37. Ministry of Mines
  38. 38. Ministry of Small and Medium Enterprises</li></li></ul><li><ul><li> INVESTMENT INCENTIVES</li></ul>Zimbabwe offers good Tax Incentives to investors. Tax incentives are fiscal measures that are used to attract local or foreign investment capital to certain economic activities or particular areas in a country. These tax incentives are administered by the Zimbabwe Revenue Authority (ZIMRA). Tax Incentives are administered by the Ministry of Finance while other Non- Tax incentives are administered by the Ministry of Industry and Commerce and the Zimbabwe Investment Authority (ZIA). Incentives for domestic and foreign investors are generally meant to achieve the following goals:-<br /><ul><li>Income generation;
  39. 39. Export promotion;
  40. 40. Employment creation and skills transfer;
  41. 41. Small business development;
  42. 42. Industrial development; and
  43. 43. Revenue inflows</li></ul>Zimbabwe offers a number of Tax and Customs incentives in the form of<br /><ul><li>Tax holidays;
  44. 44. Reduced tax rates; and
  45. 45. Accelerated depreciation.</li></ul>These incentives vary depending on sector, type of activity and geographical location of investment.<br />
  46. 46. Tourism<br /><ul><li>5 year tax break; and
  47. 47. 25% tax after the 5 year tax break.</li></ul>Manufacturing<br /><ul><li>5 year tax break; and
  48. 48. Output tax at a special rate of 20% for export levels of 50% or more.</li></ul>Export Processing Zones<br /><ul><li>Holders of an investment license enjoy a tax holiday for the first 5 years; and
  49. 49. Taxed at a special rate of 25% after the fisrt 5 years.</li></ul>BOOT and BOT arrangement<br /><ul><li>Enjoys tax holiday for first 5 years; and
  50. 50. Taxed at 15% for the second 5 years.</li></ul>Industrial Park Developers<br /><ul><li>Enjoys tax holiday for first 5 years;
  51. 51. Thereafter taxed at a rate of 25%</li></ul>Public-Private-Partnerships (PPPs)<br />Public Private Partnerships are encouraged on investments in key infrastructure such as:<br /><ul><li>Energy (generation and transmission)
  52. 52. ICT
  53. 53. Water
  54. 54. Roads (road, rail, air)
  55. 55. Construction
  56. 56. Renewable Energy</li></li></ul><li><ul><li> CHALLENGES
  57. 57. External Arrears</li></ul>Zimbabwe’s total debt (public and publicly guaranteed) stands at US$6.4 billion which is about 103% of GDP. Out of that, US$4.8 billion are arrears owed to some of the following creditors:-<br /><ul><li>Multilateral Financial Institutions* US$ 2,177 billion
  58. 58. Paris Club US$0,386 billion
  59. 59. Non- Paris Club US$0,072 billion</li></ul>*IMF, World Bank, AfDB/ADF, International Fund for Agricultural Development (IFAD), European Investment Bank (EIB) , BADEA, NDF, PTA<br /><ul><li>International Engagement</li></ul>Europe is sulking. It appears there is a general wait and see attitude when it comes to Investment and extension of Lines of Credit. In our view, there can never come a perfectly absolute “right” time. Investments should be done on an incremental basis.<br /><ul><li>Sovereign Risk</li></ul>The country’s sovereign risk is exacerbated by the media. Whilst a deficit still remains in regard to the full implementation of the Global Political Agreement, it is encouraging to note that observance of the rule of law has generally improved compared to pre-GPA period. The international community should help Zimbabwe overcome the negative perceptions which are an albatross around its neck. The best way to do this is to encourage business people, government delegations and tourists to visit Zimbabwe and get first- hand experience rather than entirely depend on the media. <br /><ul><li>Looming Elections in 2011</li></ul>The talk of general elections in 2011 may also negatively impact on investment. However, elections come and go. A serious investor would necessarily weigh his/her options.<br />
  60. 60. <ul><li>Indigenization Law</li></ul>In 2007, Parliament of Zimbabwe passed the Indigenization and Economic Empowerment Act whose effect is to ensure the broad participation of indigenous Zimbabweans in the economy. The says that government shall endeavour to ensure that at least 51% equity of Foreign Investment is in local hands, provided the investment is valued at USD500 000 and above. <br />There has been a lot of unnecessary confusion about the intention and import of this piece of legislation. To begin with, there is need to remove ambiguity. The law does not expropriate private shares or assets. The 51% equity will be have to be funded by the indigenous partner, failure which the foreign investor , with the approval of the Minister, may go it alone. In other words, the foreign investor will not cede equity. Furthermore, sectoral committees have been set up to recommend to the Minister, indigenization thresholds applicable in each sector as well as ensure that investors already operating are given a time frame within which to comply with the law.<br />Empirical evidence suggests that the implementation of the indigenization law is very progressive and flexible. For instance, ESSAR GROUP acquired 53% of Government stake in the steel-making giant, ZISCO STEEL in October 2010, despite the indigenization law. ESSAR GROUP is a Mauritian registered Indian Company. In cases, the Minister of Youth Development, Indigenization and Economic Empowerment has granted 100% EXEMPTION in respect of certain investors depending on the circumstances. <br />
  61. 61. <ul><li> CONCLUSION</li></ul>Zimbabwe is strategically located in SADC and COMESA to be the gateway for investments in the region. Its climate is superb. Zimbabwe is rich in natural resources and human capital. Investors are most welcome. However, in the extractive industries, Zimbabwe is keen to see to it that there is VALUE ADDITION and PRODUCT BENEFICIATION.<br />Since the consummation of the Global Political Agreement, the Government of Zimbabwe has hosted many business delegations, that include, among others:<br /><ul><li>Chinese Delegation
  62. 62. Japanese Delegation
  63. 63. Swedish Delegation
  64. 64. South Korean Delegation
  65. 65. Indian Delegation
  66. 66. Antwerp Diamond Dealers’ Delegation
  67. 67. South African Business Delegation</li></ul>Clearly the message sent is that Investors are keen to invest in Zimbabwe. <br />END<br />

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