Zimbabwe was ranked 158 out of 181 countries, one of the worst performers in Southern Africa, considered for ease of doing business by the World Bank Group’s Doing Business 2009 report.
It was rankled 133 out of 134 countries considered in the World Economic Forum’s Global Competitiveness Index for 2008-2009.
It was second from the bottom out of 68 regions and countries surveyed in the Vancouver-based Fraser Institutes 2007-2008 Annual Survey of Mining Companies on the attractiveness of government mining policies.
This was how the country was viewed shortly before the formation of an inclusive government which has been running the country since February 2009.
Full cable:
Viewing cable 09HARARE42, 2009 INVESTMENT CLIMATE STATEMENT – ZIMBABWE
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|
Reference ID |
Created |
Released |
Classification |
Origin |
VZCZCXRO7761
RR RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #0042/01 0151455
ZNR UUUUU ZZH
R 151455Z JAN 09
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 3928
RUCPCIM/CIMS NTDB WASHDC
RUCPDOC/USDOC WASHDC
INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 2157
RUEHAR/AMEMBASSY ACCRA 2551
RUEHDS/AMEMBASSY ADDIS ABABA 2673
RUEHRL/AMEMBASSY BERLIN 1166
RUEHBY/AMEMBASSY CANBERRA 1942
RUEHDK/AMEMBASSY DAKAR 2297
RUEHKM/AMEMBASSY KAMPALA 2722
RUEHNR/AMEMBASSY NAIROBI 5150
RUZEHAA/CDR USEUCOM INTEL VAIHINGEN GE
RUEAIIA/CIA WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RHEFDIA/DIA WASHDC
RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/JOINT STAFF WASHDC
RHEHAAA/NSC WASHDC
RUEHGV/USMISSION GENEVA 1833
UNCLAS SECTION 01 OF 11 HARARE 000042
AF/S FOR B. WALCH
ADDIS ABABA FOR USAU
ADDIS ABABA FOR ACSS
COMMERCE FOR ROBERT TELCHIN
TREASURY FOR D. PETERS AND T.RAND
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN
STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN
STATE PASS TO EB/IFD/OIA
STATE PASS TO USTR
SIPDIS
E.O.12958: N/A
TAGS: EINV EFIN ETRD ELAB KTDB PGOV USTR OPIC ZI
SUBJECT: 2009 INVESTMENT CLIMATE STATEMENT – ZIMBABWE
REF: 08 STATE 123907
¶1. The Government of Zimbabwe’s corruption and mismanagement have
severely crippled the local economy making it unlikely to attract or
absorb significant foreign direct investment in 2009. GDP has
declined by roughly 50 percent in the past eight years, the largest
peacetime drop ever recorded. The Economist Intelligence Unit
estimates that it contracted 12.8 percent in 2008. Year on year
inflation was officially estimated to be 231 million percent in July
2008, the highest in the world. Unofficial inflation assessments
conducted by independent economists estimate annual inflation to be
in the hundreds of billions, if not quadrillions, but the local
currency inflation figures are less relevant as dollarization of the
economy becomes widespread. Government policies have seriously
eroded the rule of law and put private property rights at grave
risk. In the absence of comprehensive reforms, prospects for
foreign direct investment, along with the country’s economic
outlook, are bound to remain dismal.
¶2. The World Bank Group’s “Doing Business 2009” report ranked
Zimbabwe 158 out of 181 countries considered for ease of doing
business, and one of the worst performers in southern Africa.
Further illustrative of the abysmal investment climate, Zimbabwe was
ranked 133 out of 134 countries considered in the World Economic
Forum’s Global Competitiveness Index for 2008-2009. In addition,
Zimbabwe was second from the bottom out of 68 regions and countries
surveyed in the Vancouver-based Fraser Institutes 2007-2008 Annual
Survey of Mining Companies on the attractiveness of government
mining policies.
——————————
Openness to Foreign Investment
——————————
¶3. The government’s command and control tendencies and its
intervention in many sectors make Zimbabwe generally unwelcoming to
foreign direct investment, particularly from Western countries.
Furthermore, the erosion of the rule of law and sanctity of
contracts has had a chilling effect on business and on foreign
direct investment. Nonetheless, a few U.S. multinationals maintain
subsidiaries in the country, largely holdovers from better years a
decade and more ago. Many others sell their products through
certified dealers.
¶4. The government’s priority sectors for foreign investment are
manufacturing, mining and infrastructure development for tourism.
In these sectors foreign investors have been permitted to own up to
100 percent of the business enterprise, although in 2008 the
government introduced an Indigenization Act that mandates, over
time, 51 percent indigenous ownership of businesses. It also
introduced an Amendment to the Mines and Minerals Act that has
onerous indigenization requirements (see below).
¶5. The government reserves several sectors for local investors.
Under current laws, foreign investors wishing to participate in
these sectors may only do so by entering into joint venture
arrangements with local partners. The foreign investors are
restricted from owning more than 35 percent of the operation. The
following industries face these restrictions:
Agriculture/Forestry
— Primary production of food and cash crops
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— Primary horticulture
— Game, wildlife ranching and livestock
— Forestry
— Fishing and fish farming
— Poultry farming
— Grain milling
— Sugar refining
Transportation
— Road haulage
— Passenger bus, taxis and car hire services of any kind
— Tourist Transportation
— Rail operations
Retail/wholesale trade, including distribution
Barber shops, hairdressing and beauty salons
Commercial photography
Employment agencies
Estate agencies
Valet services
Manufacturing, marketing and distribution of armaments
Water provision for domestic and industrial purposes
Bakery and confectionary
Tobacco packaging and grading post auction
Cigarette manufacturing
¶6. Foreign investors wishing to start a new project in Zimbabwe
must first register with and be approved by the Zimbabwe Investment
Authority, which then issues Investment Certificates. This is the
first port of call for any investor wishing to invest in Zimbabwe.
¶7. All private firms are required to incorporate and register with
the Registrar of Companies within the framework of their investment
certificate or exchange control approval. Foreign investment in
existing companies requires Reserve Bank of Zimbabwe approval.
Applications are submitted to the Bank’s Exchange Control Department
through the investor’s commercial bank or merchant bank or other
authorized dealer. Foreign investors with valid investment
certificates may acquire real estate.
¶8. In the mid-1990s, the government identified privatization of
Zimbabwe’s parastatal companies as a priority, but only two
state-owned enterprises have been successfully privatized since
then. The parastatals’ operational inefficiencies, weak balance
sheet positions, a huge debt overhang, and the current political
impasse make it unlikely that privatization will go forward in the
near term.
¶9. Commensurate with its anti-West stance in recent years, the
government began to encourage economic ties with Asian countries,
particularly China, as a means of arresting further economic decline
and combating what it casts as neo-colonialism. Under this “Look
East” policy, selected Asian investors have been offered access to
reserved sectors, sometimes at the expense of local or established
foreign investors. Despite the official emphasis placed on these
ties and a few high profile project announcements, Asian investment
is dwarfed by te remaining investment from South Africa and theU.K.
——————————–
Converson and Transfer Policies
——————————-
HARARE 00000042 003 OF 011
¶10. For the past several years, Zimbabwe has experienced an acute
foreign currency deficit that has caused crippling shortages of
fuel, electric power and other imported goods and components,
defaults on public and private sector debt service payments, and a
sharp decline in industrial, agricultural, and mining operations
Foreign currency is highly difficult to obtain through licit
channels due to the Reserve Bank of Zimbabwe’s exchange controls,
the country’s poor export performance, and the lack of balance of
payments support. The Foreign Exchange Control Act regulates
currency conversions and transfers. It does not prohibit foreign
investors from moving assets between Zimbabwean and foreign
accounts, but lack of foreign exchange and constraints of the
foreign exchange regime impede the remittance of investment returns.
Some local businesses have credibly charged that the government has
raided their foreign currency accounts to meet certain foreign
obligations falling due.
¶11. Exporters may retain 85 percent of their foreign currency
account balance for their own use within 30 days while 15 percent
must be sold to the Reserve Bank at the highly disadvantageous
inter-bank exchange rate rather than the market-determined parallel
rate. Uncertainties associated with retention requirements and
retention period, which have been adjusted frequently and without
notice, constrain business planning and operations. The retention
requirement and unfavorable exchange rate act as an effective tax on
exports.
¶12. The Foreign Exchange Control Act extends to prospective outward
investment as well as dividend remittances. Traditionally, the
government has discouraged investment by Zimbabweans outside the
country, and relatively few Zimbabwean firms made such investments.
——————————
Expropriation and Compensation
——————————
¶13. Despite provisions in Zimbabwe’s constitution that prohibit the
acquisition of private property without compensation, the government
has sanctioned seizures of privately owned agricultural land without
compensation since 2001. Many of the farms seized were subsequently
transferred to government officials and other regime supporters.
The government in April 2000 amended the constitution to authorize
the compulsory acquisition of privately owned commercial farms 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,
ruling party supporters, and members of the security forces have
continued to disrupt production on commercial farms, including those
owned by foreign investors and covered by Bilateral Investment
Promotion and Protection Agreements (BIPPA).
¶14. In November 2006, the government issued the first batch of
99-year leases to 125 farmers. These leases, however, are not
readily transferable as the government retains the right to strip
the lease at any time.
¶15. The government’s program to seize commercial farms without
either the intention or the funds to compensate the titleholders,
who have no recourse to the courts, has raised serious questions
about respect for property rights and the rule of law in Zimbabwe.
HARARE 00000042 004 OF 011
Accordingly, Zimbabwe was ranked 113 out of 181 countries considered
with respect to the country’s ability to protect investment under
the World Bank Group’s “Doing Business 2009” Report.
¶16. President Mugabe and other politicians have in the past
threatened to target the mining and manufacturing sectors for
similarly forced indigenization. In 2008, the government amended
the Mines and Minerals Act outlining indigenization requirements for
minerals. For strategic energy minerals (coal, methane, uranium),
the legislation would require mining companies engaged in their
extraction or exploitation to transfer ownership to the state of 51
percent of the shares; 25 percent would be non-contributory (i.e.
without compensation). For precious metals/precious stones, 25
percent of the shares must be transferred to the state without
compensation and the other 26 percent are required to be owned by
the state or by indigenous Zimbabweans.
¶17. In March 2008, the government enacted the Indigenization and
Economic Empowerment Bill that mandates, over time, 51 percent
indigenous ownership of business.
——————
Dispute Settlement
——————
¶18. The government has 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.
¶19. In the event of an investment dispute, the Government of
Zimbabwe agrees, in theory, to submit the matter for settlement by
arbitration according to the rules and procedures promulgated by the
United Nations Commission on International Trade Law (UNCITRAL),
once the investor has exhausted the administrative and judicial
remedies available locally. On the other hand, Constitutional
Amendment 17, enacted in 2005, removed the right of landowners whose
land has been acquired by the government to challenge the
acquisition in court.
¶20. A group of Dutch farmers whose farms were seized under the land
reform program took their case to the International Centre for the
Settlement of Investment Disputes (ICSID) in April 2005, demanding
that the Zimbabwe Government honor the Bilateral Investment
Promotion and Protection Agreement (BIPPA) between the Netherlands
and Zimbabwe. The case was heard by a tribunal in Paris in
November, 2007, and the tribunal issued a verdict in 2007 that was
favorable to the farmers. The Zimbabwe Government acknowledged that
the farmers had been deprived of their land without payment of
compensation but disputed the over US$30 million in damages claimed
by the farmers. A decision on the amount of damages has not yet
been reached.
¶21. In a related case, a three-judge panel of the Southern African
Development Community (SADC) Tribunal in Windhoek, Namibia, ruled
that Zimbabwe’s violent land reform exercise discriminated against a
group of white farmers who filed an application challenging the
seizure of their farms. The Tribunal ruled that the government was
in breach of the SADC treaty with regards to discrimination.
Although the government’s first reaction was to refuse to recognize
the ruling, it has since softened its position. It subsequently
recommended that 341 white farmers be allowed to continue farming
HARARE 00000042 005 OF 011
throughout the country.
¶22. Government efforts to influence and intimidate the judiciary
since the late 1990s have raised serious concerns about investors
receiving a fair hearing in local courts. In addition, the
government and ruling elite have ignored numerous adverse judgments,
and senior officials have reiterated publicly that court orders that
are not politically acceptable to the ruling party will not be
honored. Administrations of justice in those commercial cases that
lack political overtones are still generally impartial. As the
government’s budget constraint deepens, however, court resources
have dwindled and dockets have become backlogged. A less costly
dispute settlement route, which can be incorporated in contracts
between companies, is alternative dispute resolution.
—————————————
Performance Requirements and Incentives
—————————————
¶23. Several tax breaks are available for new investment by foreign
and domestic companies. Capital expenditures on new factories,
machinery, and improvements are fully deductible and the government
waives import tax and surtax on capital equipment. Other incentives
for investors include:
-Investment allowance of 15 percent in the year of purchase of
industrial and commercial buildings, staff housing and articles,
implements, and machinery;
-25 percent special initial allowance on cost of industrial
buildings and commercial buildings and machinery in growth point
areas is granted as a rebate for the first four years;
-Special mining lease provisions entitling the holder to specific
incentive packages to be negotiated with the Ministry of Mines;
-Refund of value added tax (15 percent) for capital goods purchased
in Zimbabwe and intended for use in priority projects or investment
in growth points.
¶24. There are no general performance requirements outside of Export
Processing Zones. Government policy, however, encourages investment
in enterprises that contribute to rural development, job creation,
exports, use of local materials, and transfer of appropriate
technologies.
¶25. There are no discriminatory import or export policies affecting
foreign firms, although the government’s approval criteria are
heavily skewed toward export-oriented projects. Import duties and
related taxes range as high as 110 percent. Export Processing Zone
designated companies must export at least 80 percent of output.
¶26. Government participation is required in new investments in
strategic industries, such as energy, public water provision,
railways, and armaments. The terms of government participation are
determined on a case-by-case basis during license approval. The few
foreign investors (for example from China and Iran) in reserved
strategic industries have either purchased existing companies or
have supplied equipment and spares on credit.
¶27. Foreign investors are expected to make maximum use of
Zimbabwean management and technical personnel, and any investment
proposal that involves the employment of expatriates must present a
strong case for doing so in order to obtain work and residence
permits. Normally, the maximum contract period for an expatriate is
HARARE 00000042 006 OF 011
three years, but this will be extended to five years for individuals
with highly specialized skills. Expatriates who have prior
permission from the Reserve Bank’s exchange control department are
permitted to remit one-third of their salaries.
——————————————–
Right to Private Ownership and Establishment
——————————————–
¶28. Although Zimbabwean law guarantees the right to private
ownership, this right is increasingly not respected in practice. As
noted above, the government has in recent years seized thousands of
private farms and conservancies, including ones belonging to
Americans and other foreign investors, without due process or
compensation. Most of these property owners held Zimbabwe
Investment Authority investment certificates and purchased their
land after independence in 1980. Despite repeated U.S. protests,
the government has not addressed the expropriation of U.S. citizen
property.
—————————–
Protection of Property Rights
—————————–
¶29. The government’s demonstrated desire to expand its control of
the economy puts many investments, particularly in real property, at
risk. The government’s 2005 Operation Restore Order resulted in
more than 700,000 persons losing their homes, their means of
livelihood, or both, according to UN estimates. Many of these
properties had proper titles and licenses. Although Operation
Restore Order officially ended in 2005, the government continued to
evict smaller numbers of people from their homes and businesses,
primarily in and around Harare, in 2006 and 2007. In addition to
the thousands of agricultural properties seized under land reform
during the past eight years, in late 2005, the government for the
first time authorized the seizure of non-agricultural land for the
purpose of constructing residential stands in a Harare suburb.
¶30. Since independence, Zimbabwe has applied international patent
and trademark conventions. It is a member of the World Intellectual
Property Organization. Generally, the government seeks to honor
intellectual property ownership and rights, although there are
serious doubts about its ability to enforce these obligations due to
a lack of expertise and manpower. We are not aware of any
grievances over such issues, but pirating of videos and computer
software is common. Most videos and computer software sold on the
local market, for example, are pirated goods.
¶31. The judiciary generally upholds the sanctity of contracts
between private companies. However, in the case of contracts
involving the government or politically influential individuals,
judgments sometimes appear biased in favor of the latter.
————————————-
Transparency of the Regulatory System
————————————-
¶32. The government’s officially stated policy is to encourage
competition within the private sector. That said, bureaucratic
functions in this increasingly controlled economy lack transparency,
and corruption within the regulatory system is increasingly
worrisome.
HARARE 00000042 007 OF 011
¶33. Companies, for example, are not allowed to increase the price
of monitored goods without government approval. In June 2007,
Minister of Industry and International Trade Obert Mpofu went a step
further and introduced Operation Reduce Prices, a campaign to lower
prices on all goods and services by half or more. While the measure
temporarily slowed the rate of inflation, it wreaked havoc with the
supply chain and accelerated the pace of economic contraction in
Zimbabwe. Over the following months, police arrested and fined more
than 5,000 business executives and store managers for violating the
price reduction decree. Moreover, the responsible Ministry
implemented the decree in a selective fashion and also failed to
process price increase requests in a timely and transparent way.
¶34. In August 2006, the Reserve Bank redenominated the
inflation-ridden currency, slashing three zeros from its value. As
part of the redenomination regulations, the public and business were
allowed to convert only set amounts at financial institutions.
Police extended this prohibition to the general cash-carrying
public, although there was no regulatory or legal basis for limiting
the amount of cash one carried. On August 1, 2008, the Reserve Bank
again redenominated the currency, lopping off 10 zeros. Coins that
had been taken out of circulation in 2003 were reintroduced at face
value, which only served to further complicate the monetary
environment.
——————————————— —–
Efficient Capital Markets and Portfolio Investment
——————————————— —–
¶35. Zimbabwe’s stock market has 83 publicly-listed companies.
Overall, trading is thin and volatile, and the public stock of many
smaller companies is closely held. In September 1996, the
government opened the stock and money markets to limited foreign
portfolio investment. Since then, a maximum of 40 percent of any
locally listed company can be foreign-owned with any single investor
allowed to acquire up to 10 percent of the outstanding shares.
Investment on the Zimbabwe Stock Exchange (ZSE) surged in real terms
in 2007 and most of 2008 as domestic investors sought a hedge
against hyperinflation; risk-seeking foreign investors were drawn to
Zimbabwe by a combination of undervalued assets and the expectation
of political change in the short-to-medium term. Furthermore,
foreign investors recognized that most companies registered on the
ZSE were already compliant with the onerous indigenization
requirements under discussion. The introduction of stringent
trading conditions on November 17, 2008 which required all trades
to be backed by a leter of confirmation from bank chief executive
offcers confirming the availability of funds, burstthe speculative
bubble. Since November 20, there has been no trading activity on the
exchange.
¶36. In 2005, the government introduced a five percent withholding
tax on the sale of marketable securities. It also required
short-term insurance companies, long-term insurance companies, and
pension funds to invest 25 percent, 30 percent and 35 percent,
respectively, of their portfolios in prescribed government bonds.
These requirements essentially tax portfolios at the required
investment rates, since the real interest rate, with hyperinflation,
is lower than -99.99 percent. The Reserve Bank, for example,
introduced a one-year insurance and pension industry bond on
November 14, 2008 for sale to pension funds as a mechanism to raise
cheap capital; it pays 450 percent interest.
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¶37. Zimbabwe’s mounting economic problems have driven foreign
direct investment (FDI) inflows from US$103 million in 2005 to US$40
million in 2006 before rising slightly to US$69 million in 2007,
according to the World Investment Report compiled by the United
Nations Conference on Trade and Development (UNCTAD).
¶38. Once relatively robust by regional standards, Zimbabwe’s
financial sector has contracted greatly in recent years as business
and demand for sophisticated transactions evaporates. Two major
international commercial banks and a number of regional and domestic
banks operate with over 200 branches total. Following the
well-publicized failure of a number of financial institutions in
2003, primarily due to fraud and inept management, Reserve Bank
regulations have been tightened greatly. Nonetheless, financial
institutions have an uncertain future due to ever-dwindling demand
for credit from business clients and inconsistent policies on
interest rates, statutory reserves, and exchange rates. Moreover,
as the economy dollarizes, demand for local currency denominated
accounts is falling, further impairing local banks.
——————
Political Violence
——————
¶39. The opposition and civil society groups operate in an
environment of intimidation and repression. Human rights
organizations reported that physical and psychological torture
perpetrated by security agents and government supporters increased
in the period between the March 2008 elections and the June 2008
presidential run-off. Individuals and companies out of favor with
the government or regarded by the government as aligned with the
opposition, routinely suffer harassment and bureaucratic obstacles
in their business dealings. Indicatively, the government has closed
three independent newspapers, and has denied numerous
telecommunications licenses for apparently political reasons. On
occasion, domestic businesspeople out of favor with the government
have been incarcerated for allegedly engaging in illegal business
practices such as externalization of currency.
¶40. Despite rising dissatisfaction with government policy, there
have been no large-scale demonstrations, although sporadic cases of
looting by soldiers and small-scale demonstrations have occurred.
———-
Corruption
———-
¶41. There is widespread corruption in government. Implementation of
the government’s ongoing redistribution of expropriated commercial
farms has substantially favored the ruling party elite and continues
to lack transparency. Top ruling party officials and business
people supporting the ruling party have received priority in
distribution of the country’s resources, including priority access
to limited foreign exchange, agricultural inputs, machinery and
fuel.
¶42. In 2005 the government enacted an Anti-Corruption Act that
established a government-appointed Anti-Corruption Commission to
investigate corruption; however, it includes no members from civil
society or the private sector. The Ministry of State Enterprises,
Anti-Monopolies, and Anti-Corruption was also established to oversee
HARARE 00000042 009 OF 011
and coordinate the government’s efforts to combat corruption;
however, government officials and police lack sufficient political
backing at senior levels of the government to effectively
investigate cases. The government prosecutes individuals
selectively, focusing on those who have fallen out of favor with the
ruling party and ignoring transgressions by members of the favored
elite.
——————————-
Bilateral Investment Agreements
——————————-
¶43. The U.S. has no bilateral investment or trade treaty with
Zimbabwe. Zimbabwe has Bilateral Investment Protection and
Promotion Agreements (BIPPA) with 17 countries; only four of these
treaties (with the Netherlands, Denmark, Germany and Switzerland)
have been ratified.
——————————————–
OPIC and Other Investment Insurance Programs
——————————————–
¶44. The U.S. Government and Zimbabwe concluded an OPIC agreement in
April 1999. Zimbabwe acceded to the World Bank’s Multilateral
Investment Guarantee Agency (MIGA) in September 1989. Support by
the Export-Import Bank of the U.S. is not available to Zimbabwe.
Many other major donor countries have also suspended their trade
finance and export promotion programs, as well as investment
insurance, due largely to Zimbabwe’s mounting multilateral and
bilateral arrears and deteriorating investment climate.
—–
Labor
—–
¶45. Zimbabwe’s interconnected economic and political crises have
prompted many of the country’s most skilled and well educated
citizens to emigrate, leading to widespread labor shortages for
managerial and technical jobs. At the same time, the severe
contraction of the economy in recent years has caused formal sector
employment to drop significantly. The best available surveys place
formal sector unemployment as high as 80 percent. Independent
analysts estimate that only about 700,000 people, or roughly 7
percent of Zimbabwe’s population, are employed in the formal sector.
As noted above, foreign investors are encouraged to hire local
nationals.
¶46. The country’s HIV/AIDS epidemic is also taking a heavy toll on
the workforce. However, with substantial support from the U.S.
Government and other donors, Zimbabwe has instituted policies that
have contributed to reducing the adult infection rate from 22.1
percent in 2003 to 15.6 percent in 2007.
¶47. The government is a signatory to International Labor
Organization (ILO) conventions protecting worker rights, although
the world body has designated Zimbabwe as a “notorious country” for
its continued attempts to limit workers’ right to organize and hold
labor union meetings. The 1985 Labor Relations Act set strict
standards for occupational health and safety, but enforcement is
fairly lax and inconsistent across the industrial sectors.
¶48. In light of the hyperinflationary environment, employers and
HARARE 00000042 010 OF 011
workers have agreed to negotiate wages and other benefits on a
quarterly and monthly rather than annual basis. Collective
bargaining takes place through a National Employment Council (NEC)
in each industry, comprising representatives from labor, business,
and government. In addition, the Zimbabwe Congress of Trade Unions
(ZCTU), the country’s umbrella labor organization, advocates for
workers’ rights.
¶49. A Tripartite Negotiating Forum (TNF) was established in 2001
for labor, business, and government to tackle macro-social issues.
However, these talks have been fitful and unproductive since their
inception. A continuing impasse for the TFN is disagreement between
business and labor over indexing wages to the poverty datum line
(PDL), which calculates the minimum required for a family of five to
pay basic expenses. Independent economists estimate that roughly 80
percent of Zimbabwe’s population lives below the PDL.
¶50. The government continued its harassment of the ZCTU and its
leadership. In May 2008 and prior to the presidential run-off in
June, police arrested ZCTU leaders for “spreading falsehoods
prejudicial to the state”. Under Zimbabwe labor law, the government
can intervene in ZCTU’s internal affairs if it determines that the
leadership is not acting in the workers’ interest. The government
has threatened to eliminate the ZCTU, and has taken steps to
marginalize the traditional unions and the formal labor dispute
resolution mechanism. To undercut the strength of ZCTU, the
government created an alternative umbrella organization, the
Zimbabwe Federation of Trade Unions (ZFTU). However, outside of
government, the ZFTU is not regarded as a legitimate labor
organization. The ZCTU remains the voice of labor in Zimbabwe and
the country’s official and internationally recognized labor
organization.
——————————
Foreign-Trade Zones/Free Ports
——————————
¶51. The government promulgated legislation creating Export
Processing Zones (EPZs) in 1996. Zimbabwe now has 183
EPZ-designated companies. 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. Since
January 2004 the government has generally required that foreign
capital comprise a majority of the investment. The requirement on
EPZ-designated companies to export at least 80 percent of output has
constrained foreign investment in the zones. The merger between the
Zimbabwe Investment Centre and the Zimbabwe Export Processing Zones
Authority which began in 2006, has been completed and the new
institution – the Zimbabwe Investment Authority, now serves as a
one-stop shop for both local and foreign investors.
————————————
Foreign Direct Investment Statistics
————————————
¶52. Zimbabwe Net Investment Flows 1998-2007 (US$ million) 1998
1999 2000 2001 2002 2003 2004 2005 2006 2007
Direct Investment
436 50 16 0 23 4 9 103 40 69
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Portfolio Investment
11 21 -1 -68 -2 4 2
Source: IMF, UNCTAD, Ministry of Finance
———
Resources
———
¶53. Zimbabwe Investment Authority
Investment House
109 Rotten Row
P.O. Box 5950
Harare
Telephone: (263) (4) 757 931/4
Fax: (263) (4) 773 843
www.zia.co.zw
Zimbabwe Tourism Authority
www.zimbabwetourism.co.zw
State Enterprise Restructuring Agency
www.sera.co.zw
Zimtrade
www.zimtrade.co.zw
Zimbabwe International Trade Fair
www.zitf.co.zw
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