Revitalising the economy and encouraging inward investment


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Objective Capital's Africa Resources Investment Congress 2011
Ironmongers' Hall, City of London
14-15 June 2011
Day 2: Focus on Zimbabwe
Speaker: Hon. Tapiwa Mashakada, MP - Republic of Zimbabwe

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Revitalising the economy and encouraging inward investment

  1. 1. AFRICA RESOURCESINVESTMENT CONGRESS Revitalising the economy & encouraging inward investment Hon. Tapiwa Mashakada – The Minister of Economic Planning and Investment Promotion, Republic of ZimbabweIRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY-WEDNESDAY, 14-15 JUN 1
  2. 2. ZIMBABWE INVESTMENT FOCUS DAY:2 15 JUNE 2011 “INVESTMENT OPPORTUNITIES AND DOING BUSINESS IN ZIMBABWE” Presentation by The Minister of Economic Planning and Investment Promotion, Hon T. Mashakada
  3. 3. Presentation outline3  Ministry’s Mandate  Zimbabwe in Brief  Why Invest in Zimbabwe and Overview of Opportunities by Sector  Taxation and Incentives  Doing Business Indicators  Reform Agenda; One-Stop-Shop Establishment and Objectives  Investment Process Under OSS  Way Forward
  4. 4. Ministry’s Mandate4  Design and coordinate investment polices and incentives to make Zimbabwe an attractive investment destination. Lead the process of developing and implementing an economic recovery strategy and plan. E.g Medium Term Plan Co-ordinate and lead the national economic development planning process, including the formulation of provincial plans and programmes. Co-ordinate the development of national priorities that inform the annual budgetary process and national programmes. Conduct macro-economic policy analysis and research on the performance of the economy and provide the necessary policy guidance to all the sectors. Monitor and evaluate the performance of economic sectors and in conjunction with relevant ministries, recommend appropriate policy intervention.
  5. 5. Zimbabwe in BriefStrategically Located at the Centre of Southern•Africa• Total Area: 390 757 square kilometers• Land : 386 670 square kilometers•  Water: 4 087 square kilometers Border Countries: Botswana, Mozambique,•South Africa, and Zambia• Capital City: Harare (Population 1.6 million)• Official Language: English•Climate: 12 - 13°C in winter and 24°C insummer.
  6. 6. People The country’s greatest asset is its people  Friendly  Well Educated (90% Literacy Rate)  Both Skilled and Semi-skilled labour easily available Population: +/- 12 million Annual population Growth: 1.1%
  7. 7. Why Invest in Zimbabwe7  Highly skilled and literate Workers  Centrally and strategically Located in the Southern African Region  Regional gateway (North-South Corridor)  Regional logistics hub supported by infrastructure such as railways, roads, power, telecoms.  Natural resources endowment  Diversified economy – manufacturing, services, agriculture, mining and tourism  Rejuvenated economy and domestic market  Use of multiple currencies thus minimizing exchange risks  Access to major regional markets; SADC/ COMESA
  8. 8. Investment Opportunities• Main sectors of the economy available for investment are:  Mining  Manufacturing  Tourism  Energy and Infrastructure Development  Agro-industries  Consumer facing industries  Increasing investment in these sectors is critical for achieving sustained economic growth and development  Specific Opportunities in the various sectors are as follows:
  9. 9. Manufacturing The Sector is currently operating at 40% of capacity and the objective is to achieve at least 60% by year end. There is need to retool and rehabilitate plant and equipment and to install new capacity. The sector involves production of industrial intermediate and capital goods, consumer goods and value addition of primary products.
  10. 10. ManufacturingMajor sub-sectors include: The key thrust is on value addition Textiles: Cotton ginning, spinning, weaving, finishing textiles and knitting products Clothing & Footwear: Wearing apparels and footwear Chemicals: Fertilizers, insecticides, pests, paints, varnishes, soaps, detergents, inks, glues, polishes, pharmaceuticals, industrial chemicals, petroleum products, rubber and plastic products Wood & Furniture: Saw milling, wooden products, furniture and fixtures Metal & Metal products: Machinery and equipment, radio and communication equipment Information Communication Technology: Information processing, computer assembly, solar technology and consumer electronics
  11. 11. TourismZimbabwe is a destination ofunrivalled tourism attractions.Over 2 million people used tovisit the country annually. Zimbabwe is ranked second inthe SADC region in terms oftourist arrivals.The tourism sector used tocontribute 6% of GDP, 2.2% offormal employment and 10% offoreign exchange earnings.
  12. 12. Major Tourist Attractions National Parks Victoria FallsVictoria FallsGreat ZimbabweMana PoolsGonarezhou NationalParkEastern HighlandsMatoposKariba DamChinhoyi CavesHwange National Park Kariba Dam Great Zimbabwe
  13. 13. Investment Opportunities in thetourism sector Trans-frontier Conservation Urban Areas (accommodation,Areas/Parks (e.g. Great restaurants, transport and touringLimpopo Trans-frontier Park) services and conference facilities)Tourism Development Zones  Eco-tourism (conservation of(areas with high tourism the environment, partnershipspotential where investors with the local communities.)enjoy various tax incentives)Hunting safaris and touroperations (a rich and variedgame species including the BigFive )
  14. 14. Mining The sector requires US$6bn in  Zimbabwe has the secondnext 5 years for capitalisation largest deposits of platinum inThe sector has immense the world.opportunities for investment as Black granite, which is rankedthe country is endowed with a as the best dimension (buildingvast range of mineral resources. stone) stone in the world.Mineral resources include gold, Coal, Coal-bed Methane.base metals (e.g. nickel, copper,  Diamonds.zinc and lead) and industrialminerals (limestone, phosphates,clay, dolomites).
  15. 15. Mining Investment Opportunities Resuscitation of existing minesProspecting and establishingnew mines for various mineralsincluding gold, coal, diamond,granite and platinum.Quarrying and value additionof dimension stones such as blackgranite.Beneficiation of minerals e.g.cutting and polishing ofdiamonds, jewellarymanufacturing and tilemanufacturing.
  16. 16. Indigenization and Empowerment16  The New indigenization and empowerment regulations have been misunderstood or deliberately vulgarized in some circles  Government’s position of the 51% local ownership is very clear.  The law gives investors the initiative to develop compliance plans  Government will not nationalize or expropriate private assets  Essar deal provides good lessons on investing in frontier markets  Government learned its lesson on the land reform process, and we are not going to repeat the same  The focus is on broad based empowerment, to ensure that the majority of Zimbabweans are integrated into mainstream economy  Investors have not fully explored other options such as community trusts, corporate social responsibility, employee share ownership, management stake and others
  17. 17. AgricultureThe Sector is the Backbone of the Zimbabwean economy with backward andforward linkages with the major sectors of manufacturing, tourism, mining andservice sectors. Opportunities Include the following: Private equity in agricultural institutions, mechanization and farm technology•Primary production of Value addition in the agriculture sector, for instance,food and cash crops, -meat processing,horticulture, -fruit juice manufacturing,livestock, -export of horticulture and floriculture, -processing of cotton lint,Poultry farming, -sugar millingfishing and fish farming -timber processing.-game, wild life ranching,
  18. 18. Infrastructure and Energy After years of continuous economic decline there has been a serious deterioration in the state of infrastructure in Zimbabwe. Government recognizes the need for private sector participation in financing and development of infrastructure. Government acknowledges the important role of the private sector in financing infrastructure development. The private sector is therefore welcome to participate in the development and provision of infrastructure on a public private partnership (PPP) basis.
  19. 19. Major Infrastructure Sub-Sectors Energy (electricity, gas, bio fuels and renewable energy) Transport (roads, bridges, railways and airports) Communications Urban water and sewage reticulation Agriculture infrastructure including dams and irrigation schemes. Industrial parks and factory shells. Housing and Office buildings Health Facilities Education Facilities Sporting Facilities
  20. 20. Infrastructure Investment Opportunities• Some of the urgent infrastructure projects that need investment include the following: • Transport:  Zimbabwe is strategically located in the Southern African region to act as a transport hub for both goods and passengers.  Scope exists for private sector investors to participate in the development of transport infrastructure such as development and upgrading of roads, bridges, railways and airport facilities.  Major projects include dualisation of the Beitbridge-Harare-Chirundu and Beitbridge-Bulawayo-Victoria Falls Roads.  Upgrading the national railway infrastructure and putting up a new railway line between Harare and Chitungwiza.  Upgrading of Kariba and Victoria Falls Airports  Air Zimbabwe; strategic partner  National Railways; rolling stock
  21. 21. Water There is scope to harness water for enhanced agricultural production, as well as clean water for domestic use. This provides opportunities for the construction of dams and other water bodies for irrigation. Kunzvi dam, a few km outside Harare is one project where Government is seeking a partner to complete the dam and also establish a horticultural park. It is hoped the dam will also augment City of Harare’s water supply. Other water projects include Tokwe Mukorsi dam, Gwayi-Shangani dams, Mtshabezi water pipeline, and Zambezi-Bulawayo water pipeline Urban water and sewage reticulation in the major cities and towns need to be upgraded, thus offering opportunities for partnering with the relevant Local Authorities in the provision of these essential services.
  22. 22. Energy Electricity deficit in Southern Africa provides scope for establishment of new hydro and thermal power generating plants; transmission and distribution of electricity.  Energy development projects include thermal power projects in Hwange and Gokwe North, Kariba hydro extension. Availability of large deposits of coal-bed methane gas in Lupane holds the promise of a cheap and relatively clean source of power. There is also potential for developing bio-fuel plants and to exploit solar energy.
  23. 23. Electricity Production23 Power Capacity Available 2011 2012 2013 2014 2015 station Installed Kariba 750 650 750 750 1000 1050 1050 Hwange 920 547 780 920 1200 1520 1520 Harare 100 - - 40 60 100 100 Bulawayo 90 - 40 60 80 90 90 Munyati 100 40 40 60 80 90 90 Total 1960 1237 1610 1830 2420 2860 2860
  24. 24. Communications Postal and telecommunication services are currently dominated by the public sector. The only private participation is in the form of two private cellular phone operators and some private couriers. Going forward the government has pronounced its intention to open up space for more private sector participation in the provision of communication services including ICTs. ICT Backborne; huge opportunities for investors
  25. 25. Construction & Real Estate Development of factory shells, industrial and technology parks  To assist in lessening the initial capital cost outlay for the small – medium scale industries.  To provide industrialists with readily available factory accommodation so that they can concentrate their effort on securing plant and working capital.  Development of residential housing schemes. The country has housing backlogs in major towns and cities.  Construction of Office Blocks.
  26. 26. Social Services Infrastructure Health: - Establishment of private health facilities such as hospitals, dental clinics and other specialist services. Education: - Establishment of private educational facilities such as schools, colleges and universities. Sports: - Development of state of the art sporting facilities such as golf courses and stadia, which also supports tourism.
  27. 27. Taxation in Zimbabwe Corporate Tax Rate 30% Aids Levy (on tax payable) 3% Capital Gains Tax 20% Shareholders’ Tax on Dividends  Listed Shares 15%  Unlisted Shares 20%
  28. 28. Investment Incentives Growth Point Areas Taxed At • New Manufacturing Projects 10% • New Infrastructure Projects 15%  For first five years BOOT and BOT Arrangements • First Five Years 0% • Next Five Years 15% • Third Five years 20% • Thereafter 30%
  29. 29. Investment IncentivesContinued Taxable income from a manufacturing or processing company, which exports 50% or more of its products - 20% Taxable income of holder of special mining lease – 25% Taxable income of company or trust derived from mining operations – 15%
  30. 30. Special Economic Zones30  To be reintroduced in the Amended Zimbabwe Investment Authority Act and to include:  0% income tax for first 5 years  15% thereafter  Exemption from capital gains tax  Exemption from non resident taxes  Duty free importations  Sales tax on goods and services refundable
  31. 31. Guidelines for Investing in Zimbabwe Immigration Requirements/Work Permits There are no minimum and maximum investment thresholds but investors wishing to take up residence in Zimbabwe should invest at least:  US$300 000 for a sole venture.  US100 000 for a joint venture with a local investor.  Investors investing at least US$1 million qualify for automatic permanent residence. All business activities undertaken by foreign investors have to be approved by the Zimbabwe Investment Authority as foreign investment.
  32. 32. Guidelines for Investing in Zimbabwe Exchange Control IssuesIn order to remove restrictions on business transactions,government has deregulated restrictive exchange controls anddelegated export administration and payment authority to banks.Individuals and companies are now free to pay for goods andservices offshore as well as service external debts without priorapproval of the Exchange Control Authorities.Applications on income related transactions such as dividends,profits and capital repatriation no longer require ExchangeControl approval as was the case before.Consistent with the use of multiple currencies and the needto enhance exports, corporates and individuals can nowoperate Foreign Currency Accounts (FCAs) with indefiniteretention of FCA balances as opposed to the previoussituation where they faced a 21 day liquidationrequirement.
  33. 33. Reform Agenda33  One Stop Shop Investment Centre  Launched 13/12/10  Strategy where relevant government agencies and authorities responsible for issuing licenses and permits to investors are brought together in a coordinated and streamlined manner to provide prompt, efficient and transparent services to investors.  Should be viewed as part of the process of consolidating macroeconomic recovery, which includes other measures being taken by Government to improve the investment environment, eg BIPPAs.  Physically under one roof at ZIA  To deliver efficient service to investors within clearly stipulated time-frames (5 day rule).
  34. 34. Objectives of One-Stop-Shop34  To simplify and shorten procedures and guidelines for issuance of business approvals, permits and authorizations, thereby removing bottlenecks faced by investors in establishing and running businesses.  To address administrative bottlenecks  To reduce time and high cost of doing business  To eliminate dealing with multiple agencies  To eliminate use of discretion and lack of transparency in granting approvals, licenses and permits.  To improve on quality of service delivery  5 working days
  35. 35. Features of OSS35  ZIA coordinates and provides frontline services under the OSS Centre.  The OSS covers investments into all sectors of the economy  Mandatory registration for all foreign investors to facilitate investor/FDI tracking and after-care  The selected agencies for the OSS physicaly present at ZIA  A client charter to set standards and service targets including approval time-frames.  All guidelines and procedures simplified and will be put on the ZIA website  All participating agencies to review, re-engineer and streamline their procedures  All Agencies to work towards establishing an on-line approval system which is interconnected.  Establishment of Investor Tracking System (ITS)
  36. 36. Investment Process Under OSS36 New investor ZIA Investor Facilitation Unit ZIA Investor Registration Certificate (IRC)Company Registrar (Certificate Others of Incorporation) EMA, Mining, Immigration ZIMRA Local Authority Department (register for Utilities, Indig (Residence VAT, PAYE, And Empowerment and income tax), Work Permits) Customs Clearance .
  37. 37. Way Forward37  Crafting of supportive legal framework through amendment of ZIA Act and other legislation is under way.  Investor Tracking System being put in place to enable efficient and effective follow-up and after-care of licensed investments.  Government working on a number of reforms to ensure that there is rule of law and respect of property rights in the country  SADC roadmap designed to ensure free and fair elections  Election date to depend on completion of constitution making process