DOING BUSINESS IN ZIMBABWE
2018 EDITION
Chapter Reference Preface
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Facilitating Investments
6
Chapter 1 - Corporate Entities
8
Chapter 2 - Investment Framework Regulations
10
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Zimbabwe Investment Licencing
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Indigenisation & Economic Empowerment
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Exchange Control
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Special Economic Zones
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Taxation
Chapter 3 - Employment and Labour
18
Chapter 4 - Intellectual Property
20
Chapter 5 - Corporate Mergers and Acquisitions
22
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Competition
Chapter 6 - Banking and Finance
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Chapter 7 - Projects and Infrastructure •
Energy
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Public Private Partnerships (“PPPs”)
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Project Financing
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Chapter 8 - Mining
30
Chapter 9 - Oil and Gas
32
Chapter 10 - Real Estate
34
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Registration of Title
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Competency of Encumbrances
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Enforceability of Encumbrances
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Payments for Immovable Property
Chapter 11 - Agriculture
36
Chapter 12 - International Trade
38
Chapter 13 - Alternative Dispute Resolution
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DOING BUSINESS IN ZIMBABWE PREFACE
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PREFACE Manokore Attorneys is pleased to present its 2018 Doing Business in Zimbabwe Guide as part of an annual series dedicated to providing our clients, stakeholders and potential investors with a comprehensive insight into engaging in business transactions in Zimbabwe. Zimbabwe continues to present exciting investment opportunities for both the local and international business community. This Guide acts as a navigational tool premised on highlighting pertinent aspects of the investment climate, and business opportunities in Zimbabwe; as well as highlighting key economic sectors and regulatory aspects for consideration within the Zimbabwean investment framework. Last year, we highlighted three central themes which we believed were effecting Zimbabwe: reengagement,re-calibration, and re-capitalisation. Today, we are of the view that these central themes continue to impact Zimbabwe and the various changes our country is going through.
In 2018, there has been a significant shift in mind-set by the government and associated regulatory authorities in terms of both attracting business and facilitation of the ease of doing business in Zimbabwe. As a result we are observing a raft of ongoing policy and regulatory changes, all premised on attracting capital in order to operate in a diverse and vibrant economic environment abundant with opportunity. We are of the view that in continuing with this theme, Zimbabwe is on a path geared towards reengaging and re-calibrating the economy, ultimately resulting in tremendous positive outcomes in the medium to long term. Central to this is, in our view, collaboration with government departments on Public Private Partnerships, public procurements and investor promotion, which continues to be central to our philosophy as a firm in order to provide quality legal expertise and advice in business transactions in the country as well as in the region. With this Guide, our hope is that we can continue to play a vital role in ensuring that investors are able to navigate business transactions in Zimbabwe efficiently and in the most cost effective and prompt manner.
PREFACE | 5
DOING BUSINESS IN ZIMBABWE FACILITATING INVESTMENTS 6 | DOING BUSINESS IN ZIMBABWE
Facilitating Investments The Zimbabwe Investment Authority (ZIA) is a corporate body responsible for promoting and facilitating foreign direct investment and local investment. ZIA came about as a result of the merger of the Export Processing Zones Authority and the Zimbabwe Investment Centre.
tions, have increased investor appetite to do business in Zimbabwe.
Richard Mbaiwa, CEO of the Zimbabwe Investment Authority talks the authority’s role in facilitating ease if doing business in Zimbabwe and its role in creating an environment that will attract further investment.
Our advice to investors is that this is the right time to invest in Zimbabwe as Government is implementing a plethora of reform measures to increase the competitiveness of businesses across all sectors of the economy.
As the investment authority, you are the door that opens Zimbabwe to business. What are your key deliverables to ensure that Zimbabwe is open for business? As an investment authority, our key deliverables are to promote, facilitate, regulate and coordinate investments in all sectors of the economy, by both domestic and foreign investors. We also promote joint ventures between domestic and foreign investors, the state as well as private investors. We advise the government on investment policy and incentives while assisting with applications for investment licenses.
What role do you see ZIA playing in facilitating the ease of doing business in Zimbabwe in this new dispensation? In this new dispensation, particularly with reference to facilitating the ease of doing business, ZIA’s role would be advocacy within government to seek necessary approvals or urge the removal of obstacles to investment, image building to promote the country as an investment destination and investor servicing or facilitation to help solve problems faced by existing or potential investors. Targeting or investment generation by actively seeking out investors based on national development plans, or other criteria would also be part of our role.
How have the recent legislative changes affected the interest or extent of investment flow into Zimbabwe? Do you think there are any other imminent changes of which investors should be aware? The recent legislative changes, particularly to the indigenisation and economic empowerment regula-
In conclusion, what advice would you give prospective investors on doing business in the new Zimbabwe?
Some of the investment opportunities are finite, for example mineral claims. Those investors who continue waiting on the fences may have to pick up assets when they are pricey, particularly after elections. The private sector is developing and ready to partner with foreign companies. They should take advantage of the multi-sectoral investment opportunities in mining, agri-business, manufacturing, tourism, financial sector and health. The services industry is also beckoning to investors. Government is also in the process of amalgamating the arms of the State dealing with the State to create a truly ‘One Stop Shop’ in the form of Zimbabwe Investment and Development Authority. This exercise should be concluded by August and it will streamline company registration, investment licencing, tax registration, EIA mainstreaming, Special Economic Zones Licence, even privatisation and PPPs or Joint Ventures.
Initial Investment License Investment license valid for two (2) years Cost: $3,000 (three thousand United States Dollars)
Renewal of Initial Investment License Renewals of license are subject to granting of an extension of the initial license upon application by the Investor (application to be made at least three (3) months ahead of expiry of initial license) Cost: $1,000 (one thousand United States Dollars)
ZIA’s “One Stop Shop” is available for processing investment proposals – their set up includes: Registrar of Companies Zimbabwe Revenue Authority Ministry of Mines and Mining Development As well as other relevant government departments that one needs to obtain approvals or permits from.
FACILITATING INVESTMENTS | 7
2018 EDITION DOING BUSINESS IN ZIMBABWE CHAPTER 1
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Corporate Entities The Zimbabwean Companies Act [Chapter 24:03] governs the constitution, incorporation, registration, management, administration and winding up of companies in Zimbabwe. The types of available corporate entities include private companies limited by shares; private companies limited by guarantee; private unlimited companies and public limited companies. Investors have the option of registering their commercial presence in Zimbabwe in various forms including limited liability companies, Partnerships, Foreign Companies and Special Purpose Vehicles for joint ventures with the Government.
PRIVATE & PUBLIC COMPANIES These entities are limited by shares, and are the most common entity established by new businesses. A private company can have membership between 2 & 50 persons; whilst a public should have a minimum of 2 with no maximum. Private company restricts transfer of its shares by shareholders and cannot invite the public to subscribe for any shares or debentures - whereas public companies are publicly traded with their shares and debentures being open for transfer in the public domain.
PARTNERSHIPS Governed by a deed of partnership, this is a less controlled form of business vehicle, whose formation rules regarding the operations are goverened by commmon law. A partnership will be legally formed once essential common law requirements are met; (e.g. the right number of people agreeing to do business for a profit and to share losses is constituted). The applicable regulatory frameworks for partnerships will be dependent on the sector specific licensing requirements.
FOREIGN COMPANIES
SPECIAL PURPOSE VEHICLES (“SPV”s)
A company incorporated outside of Zimbabwe can establish a place of business within Zimbabwe and proceed to carry out its activities either as a branch or representative of a foreign company.
This is the normally preferred vehicle for investors participating in Public Private Partnerships (“PPPs”) in this market.
Such company would be required to make an application to the Minister of Justice and Legal Affairs. Once a foreign company obtains authority by way of a certificate from the Minister, it would then register this branch with the Registrar of Companies.
In joint venture projects involving the Government and private sector entities, SPVs are normally used to achieve the purpose of the project. These enitites are often registered as private companies with the Government as a co-shareholder.
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Investment THIS IS A HEADLINE Framework Chapter 11 Regulations Zimbabwe Investment Licencing
2018 EDITION DOING BUSINESS Q5 2018 IN ZIMBABWE Summary 2 CHAPTER
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Foreign investment is licensed by the Zimbabwe Investment Authority under the Zimbabwe Investment Authority Act [Chapter 14:30] (“the ZIA Act”). Foreigners wishing to set up business operations in Zimbabwe are required to obtain an investment license which will accord the investor protection of the laws of Zimbabwe. In addition, the incentives in terms of the ZIA Act and the Special Economic Zones Act (canvassed later) can only be granted to licensed investors. The ZIA license will further enable the foreign investor to acquire investor residence permits (for investments over a US$100,000 threshold), to enable repatriation of income, obtaining duty rebates on capital, equipment, export and import tariff dispensations.
Foreign investment is licensed by the Zimbabwe Investment Authority under the Zimbabwe Investment Authority Act.
INVESTMENT FRAMEWORK REGULATIONS | 11
Indigenisation and Economic Empowerment With effect from 14 March 2018, the Indigenisation and Economic Empowerment Act [Chapter 14:33] was amended significantly. The provisions of the Act shall no longer apply to any business other than businesses in the ‘’designated extractive sectors’’ and the ‘’Reserved Sectors’’ of the economy. Accordingly, any person is permitted to freely invest in, form, operate, and acquire ownership or control of any businesses not in the sectors specified above.
SECTORS RESERVED FOR DOMESTIC INVESTORS
DESIGNATED EXTRACTIVE SECTORS
In terms of the amendments to the Indigenisation Regula-
The provisions of the Act will no longer apply to any busi-
tions and its new framework, under Finance Act (No.1) of
ness with the exception of those businesses involved in the
2018 (“the Finance Act”), the following sectors are deemed
diamond and platinum extractive sectors (‘’designated ex-
to be reserved against foreign investors:
tractive businesses’’);
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Transportation – passenger buses, taxis and car hire services;
fifty one percent of the shareholding in a designated ex-
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Retail and wholesale trade;
tractive business shall be held by an appropriate designated
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Barber shops, hairdressing and beauty salons;
entity, being either the Zimbabwe Mining Development Cor-
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Employment Agencies;
poration; the Zimbabwe Consolidated Diamond Company
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Estate Agencies;
(or any entities incorporated by these entities) as well as the
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Valet Services;
National Indigenisation and Economic Empowerment Fund
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Grain milling;
(“NIEEB”). Community share ownership schemes and em-
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Bakeries;
ployee share ownership schemes may form a part of the fifty
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Tobacco grading and packaging;
one percent indigenous shareholding;
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Advertising Agencies;
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Provision of local arts and crafts and their marketing
In the instance of designated extractive businesses, compa-
and distribution;
nies operating within these sectors may apply for a dispen-
Artisanal mining.
sation to the appropriate Minister to be appointed who may
•
grant the business permission ‘’to comply with the Act within Agriculture has been removed as reserved sector from the
such period as the Minister may prescribe’’ or ‘’to achieve
list.
compliance through the use of credits within such period as the Minister may prescribe’’.
The provisions of the ZIA Act relating to the “reserved sectors” shall be amended in order to effect these changes and make the Reserved Sector List consistent with the Indigenisation Frameworks. Every business that is owned by a non-Zimbabwean citizen which commenced operating in the reserved sector prior to 1 January 2018 may continue to operate provided that it is registered with the National Indigenisation and Economic Empowerment Unit by 1 July 2018, and it is registered with the Zimbabwe Revenue Authority and maintains and operates a local bank account. A person seeking to operate in the Reserved Sector after 1 January 2018, and who is not a Zimbabwean citizen may do so upon application to the National Indigenisation and Economic Empowerment Unit and obtaining permission from the Minister. The application must demonstrate that the business shall create significant and sustained employment creation, there shall be a transfer of skills and technology, creation of sustainable value chain and any other demonstrable social and economic desirable objectives. 12 | DOING BUSINESS IN ZIMBABWE
The provisions of the Act will no longer apply to any business with the exception of those businesses involved in the diamond and platinum extractive sectors.
Exchange Control The Exchange Control framework in Zimbabwe is governed by: • The Exchange Control Act [Chapter 22:05] (“the Exchange Control Act”); • The Foreign Exchange Guidelines; • The External Loans and Exchange Control Review Committee Guidelines; and • The Reserve Bank Directives. Applications in the following categories require prior exchange control approval from the External Loans and Exchange Control Review Committee (“ELECRC”) who are responsible for, inter alia, considering and making decisions on all applications relating to the inflow and outflow of funds
Equity acquisition by foreign investors in unlisted local companies is limited to forty (40) percent for existing projects, for which Exchange control approval is required.
Where foreign investors want to participate on the Zimbabwe Stock Exchange (“ZSE”) in addition to
Disinvestment proceeds arising from any investments post 1993 which can only be remitted after exchange control approval has been granted. Investors may remit offshore any capital plus appreciation, as well as dividends in full as and when they accrue.
Exchange Control generally considers up to (49%) forty-nine percent equity participation in existing companies by foreign investors, which threshold is in line with ZIA and ZSE policies aimed at promoting growth of investment in new operations rather than in existing ones.
Exchange Control approval is not required for remittance of dividends to foreign shareholders in the company. However, notification by the authorised dealer (banking institution) is required. On investment in listed companies, investment proceeds qualify for one hundred (100) percent remit-ability rights, subject to deduction of the relevant withholding tax. Any amounts arising from capital appreciation and capital gains made on disposal of investments will be freely remmitable subject to the deduction of capital gains tax.
compliance with the ZIA Act.
Authorised Dealers can process external loans and trade credits of up to (twenty million United States Dollars) $20,000,000.00 without prior approval by the ELECRC. All applications for external loans in excess of the stipulated threshold must be submitted to the Reserve Bank of Zimbabwe (the “RBZ”) for approval. Approved loans shall be for financing export oriented projects, and no external borrowing shall be approved by ELECRC and Exchange Control to finance non-productive activities.
INVESTMENT FRAMEWORK REGULATIONS | 13
The following are the current Exchange Control policies pertaining to investments in Zimbabwe:
Service Agreements between Related and Unrelated Companies
Provisions have been put in place to guard against Illicit Financial Flows (“IFF�s) through payments arising from service agreements between related and unrelated companies, indicating that the aggregate of service payments by local companies to all related and unrelated companies shall not exceed three 3%(three percent) of audited gross annual revenue. Exchange Control shall also conduct onsite and ex-post validation of the companies involved in such arrangements.
Investments on the ZSE
The Single Investor Limit has been increased from then 10% (ten percent) to now 15% (fifteen percent) on the Zimbabwe Stock Exchange. For the promotion of portfolio investments by foreign investors on the Zimbabwe Stock Exchange, a single investor is now permitted to acquire up to 15% (fifteen percent) of listed shares per counter. In order to align the Exchange Control threshold of 40% (fourth percent) to the Indigenisation and Economic Empowerment regulations, foreign investors can now acquire listed shares on the Zimbabwe Stock Exchange up to
Review of Pricing of External Loans
%( fourth nine percent) per counter.
In order to encourage long term external borrowings for productive purposes, the pricing structure for external loans has been aligned with the domestic interest rates ranging from 6% -10% ( six to ten percent) per annum. However, tobacco financing, shareholder loans and notional vendor finance shall remain the same as per the following existing external borrowing which is 5% (five percent) per annum. Approved loans shall be for financing export oriented projects and no external borrowing shall be approved by the Exchange Control Authority to finance non-productive activities.
Profit Sharing Arrangements for selected sectors
In order to rejuvenate the productive sectors of the economy which are facing challenges in accessing sustainable financing to increase productivity, foreign investors are now permitted to inject capital with the view of participating in the risk and return of the company. It should, however, be noted that the funds to be provided under these profit sharing models are not equity nor debt funds. Such arrangements would require prior Exchange Control approval.
Collateral Registry
The Movable Property Security Interests Act [Chapter 14:35] was gazetted in July 2017 paving the way for establishment of the Collateral Registry. Numerous preparatory activities have been successfully undertaken including the drafting of Movable Property Security Interests Regulations. It is anticipated that the Regulations shall be gazetted during the half of 2018 and the Collateral Registry will be operational by 30 June 2018. The new costs of registering movable security will be listed in the Movable Property Security Interests Regulations. The benefits of a Collateral Registry is that all movable security will be registered with the RBZ, therefore reducing registration costs of security such as Notarial Covering Bonds which are currently very expensive to register at the Deeds Registry Office.
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Special Economic Zones The end of 2016 saw the heralding in of the much anticipated Special Economic Zones Act [Chapter 14:34], (hereinafter referred to as ‘’the SEZ Act’’). Having been implemented in multiple jurisdictions across the continent, Special Economic Zones (SEZs) are geographically demarcated or sector focused areas that have a unique set of preferential laws, policies and regulations differing from the host country. The purpose of SEZs is to catalyse industrialisation, innovation and competitiveness. This is done through various incentives and special dispensations within the framework of the SEZ legislation. The SEZ Act provides for the constitution of the SEZ Board and the SEZ Authority. In terms of the SEZ Act, the appointed Board is responsible for controlling and managing the operations of the SEZ Authority. However, the SEZ Authority which shall be responsible for the actual licensing, approval of project applications and implementation has not yet been constituted. The Customs and Excise (Special Economic Zones) (Rebate) Regulations were gazetted in 2017 and mainly outline that a rebate of duty on certain conditions shall be granted on a case by case basis on any raw materials, intermediate products, equipment and machinery where such goods are imported for use solely in a SEZ. This was followed by the circulation of Draft Special Economic Zones Regulations which address the regulation and administration of activities within the SEZ, as well as providing a general regulatory framework for the operation and licensing of SEZs in Zimbabwe. However, the Regulations are currently at draft stage, and are still to undergo a comprehensive stakeholder consultative process before they can be finalised and passed into a legal instrument.
In terms of the SEZ Act, the key considerations for SEZ status are as follows: •
• •
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•
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The extent to which the proposed investment will lead to the creation of employment opportunities and the development of human resources; and The degree of export orientation or import substitution of the project; and The impact of the proposed investment is likely to have on the environment and, where necessary, the measures proposed to deal with any adverse environmental consequences; and; The extent to which the proposed investment will result in the transfer of technology and managerial and other skills; and The extent to which the proposed investment will establish linkages within the domestic economy; and The extent of value addition and beneficiation of local raw materials; and the extent to which the proposed investment will promote industrialisation of the domestic economy; and Any other considerations that the Authority considers appropriate.
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Taxation The National Budget Statement for 2018 by the Minister of Finance and Economic Development, titled “Towards a New Economic Order” and dated 7 December 2017 (“the National Budget 2018”) at Chapter 12 (Revenue Measures) indicated certain changes that were going to be made to the collective revenue legislation in terms of the Finance Act. The Finance Act, which was promulgated in March 2018, formalised the indications in the 2018 National Budget by making several amendments in respect of taxation in Zimbabwe.
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A new business is required to be registered with the Zimbabwe Revenue Authority (“ZIMRA”) within thirty (30) days of incorporation. All companies are required to appoint a public officer of the company within one (1) month of the establishment of such office or place of business, who must be approved by the Commissioner General, and is answerable for all company tax matters.
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Corporates are subject to corporate income tax at a rate of 25.75% ( twenty five point seven five percent) on their taxable income. Corporate Income Tax is payable by both private and public companies as well as private business corporations.
3
Every employer is obliged to register for Pay As You Earn (“PAYE”) within fourteen (14) days of becoming an employer. A non-resident employer is required to appoint a resident representative to secure registration.
4
Any entity whose annual taxable turnover exceeds (or is likely to exceed) US$60,000.00 (sixty thousand United States Dollars) per annum is obliged to register for Value Added Tax (“VAT”) as an operator, not later than thirty (30) days after becoming so eligible.
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An important tax development in the Finance Act, is the amnesty which has been afforded to taxpayers who are liable for arrear taxes. The tax amnesty provisions, which are contained in Part VII of the Finance Act, provide for amnesty from prosecution and from paying interest and penalties on outstanding taxes accrued prior to 1 December 2017 for taxpayers who come forward and settle their principal obligations within the period between 1 January 2018 and 30 June 2018. The amnesty covers all outstanding taxes and duties, whether already on the ZIMRA system or not, and those applying are required to make full disclosure and obligations must be settled by 30 June 2018. The repeal of certain provisions which imposed interest on penalties levied for unpaid taxes which were not paid by the due date is another important and welcome development in the Finance Act. The Finance Act repeals interest on penalties for various income tax heads effective 1 February 2009. The most notable are as follows: The repeal of interest on the penalty for failure to comply by a public officer; The repeal of interest on the penalty to withhold tax on contract with government/quasi – government entity; The repeal of interest on the penalty for failure to pay PAYE; The repeal of interest on the penalty for failure to pay non – resident tax on fees or remittances or royalties; Repeal of interest on the penalty for certain other industry specific taxes. In terms of the Income Tax Act [Chapter 23:06] (“the Income Tax Act”), interest on the portion of a loan which is in excess of the prescribed debt to equity ratio of three (3) to one (1) is disallowed as a deduction. In terms of the Finance Act, effective 1 January 2018, debts locally contracted with third parties are excluded from the prescribed ratio of three (3) to one (1), giving businesses tax relief in term of interest from loans from local financial institutions. Furthermore, the definition of “equity” has been clarified as “issued and paid up share capital, unappropriated profits, reserves, realized reserves and interest free loans from shareholders.” In 2016, the RBZ introduced the Export and Foreign Remittance scheme, in terms of which companies and individuals who received remittances from abroad would receive a percentage bonus amount on receipts channelled through authorised dealers in terms of the Exchange Control Act. Previously, income received as part of this incentive was included in the taxable income of a taxpayer. The Finance Act has altered this position by making an incentive received as part of the scheme exempt from income tax.
The Finance Act also makes provision for certain industry specific changes to the tax regime in Zimbabwe.
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A new business is required to be registered with the Zimbabwe Revenue Authority within thirty (30) days of incorporation.
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DOING BUSINESS IN ZIMBABWE CHAPTER Q5 20183
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Employment and Labour Zimbabwe labour laws are aimed at safeguarding employees from arbitrary or unfair treatment and to ensure fair contracting between employers and employees. Zimbabwe has a well-regulated labour land scape. The primary enactments are the Labour Act [Chapter 28:01] (“the Labour Act”), which was amended on 26th August, 2015; and the Labour (National Employment Code of Conduct) Regulations, 2006 (“the NEC Regulations”) made thereunder. The Labour Act also allows for enactment of sector-specific working standards through registered Collective Bargaining Agreements (“CBAs”) whose provisions are negotiated by Employment Councils and/or Trade Unions and Employer organisations. Some of the labour issues covered under these CBAs pertain to: minimum and maximum hours of work, minimum wages/salaries, payment for overtime and payment for gratuity at termintion of employment. Foreign employees can work in Zimbabwe subject to obtaining permits in terms of the Immigration Act [Chapter 4:02]. As stated above, many of the labour issues which pertain to employees are covered under a sector-specific CBA. However, there are some over-arching provisions of the Labour Act which must be complied with at all times, and include provisions pertaining to vacation leave, maternity leave and termination of an employee’s contract of employment.
Any employer and employee disputes are referred to conciliation through the Ministry of Labour officials who, after the new amendment to the Labour Act, now have the power to make a decision which is then registered with a Labour Court which has the constitutional mandate to deal with all labour or employment issues. If the employer and employee fall under a registered National Employment Council (“NEC”) for that sector, then their dispute is referred to that particular NEC for determination. This is a departure from the previous position prior to the Labour Amendment Act 5/2015, wherein the labour officer (or NEC official) did not have the powers to make any determination, such that any dispute not resolved by the parties themselves was referred to compulsory Arbitration. The Labour Act also regulates the transfer of businesses as going concerns and asserts the rights of employees on the transfer of undertaking. Upon the transfer of a business, an employee shall, unless otherwise lawfully terminated, be deemed to be transferred to the transferee of the undertaking on terms and conditions which are no less favourable than those which applied immediately before the transfer, and the continuity of employment of such employees shall be deemed not to have been interrupted.
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DOING BUSINESS IN ZIMBABWE CHAPTER 4 20 | DOING BUSINESS IN ZIMBABWE
Intellectual Property Intellectual Property is regulated and protected in terms of several intellectual property laws in Zimbabwe, the main ones being: • the Copyright and Neighbouring Rights Act [Chapter 26:06] (“the Copyright Act”), • the Patent Act [Chapter 26:03] (“the Patents Act”), • the Plant Breeders Rights Act [Chapter 18:16] (“the Plant Breeders Act”), and • the Trade Marks Act [Chapter 26:04] (“the Trade Marks Act”). Zimbabwe is a member of several conventions pertaining to the protection of intellectual property rights, namely the Berne Convention for the Protection of Literacy and Artistic Works, the Paris Convention for the Protection of Industrial Property, the World Intellectual Property Organisation (“WIPO”), the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”) and The Madrid Protocol. Zimbabwe passed resolutions approving the draft Trademarks (Madrid Protocol) Regulations in early 2017, which aims to streamline the procedure where a trademark registered in countries which are party to the Madrid Protocol are automatically deemed to be legally effective in the other member countries. The rationale is to mitigate and circumvent often costly and bureaucratic trademark registration processes and to avoid duplication of process. For the purpose of the Trademarks (Madrid Protocol) Regulations, the Trade Marks Regulations, 2005; and the Trade Marks Act apply, to the extent applicable and with all necessary modifications, to any holder of an international registration designating Zimbabwe, and to any applicant of an international application originating from Zimbabwe.
Marks are protected for a duration of ten (10) years (renewable from time to time) in terms of the Trade Marks Act. A patent that is registered with the Registrar of Patents in terms of the Patents Act is protected for a period of twenty (20) years in Zimbabwe. Zimbabwe is also member of the African Regional Industrial Property Organisation (“ARIPO”), which has the authority to grant patents in Zimbabwe as well as several of its regional neighbours, which ultimately has the effect of the patent being protected in each of the territories. By virtue of being a member of ARIPO, where an application is filed in one member state, such application has the same effect as filing it in the other member states. Member states also have the advantage of economies of scale which also provide for the ease of access of the national resources between them, whilst at the same time protecting their sovereignty. The Copyright Act makes provision for protection of literary works, musical works, artistic works, audio-visual works, sound recordings, broadcasts, programme-carrying signals and published editions. Protection is granted to the creator of such works for a period of generally fifty (50) years whose start date is dependent upon the relevant category. This protection entails control of use by the public over the work created by the creator. Protection of foreign works in this regard is provided for by virtue of Zimbabwe being a member of the Berne Convention, granting protection to foreign nationals’ copyrights who are also members of the Convention.
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Corporate Mergers and Acquisitions
THIS IS A HEADLINE
Mergers and acquisitions have become a growing trend in the Zimbabwean economy, with sectors such as manufacturing, agro-processing, technology, mining and energy being of particular interest to investors. The main regulatory considerations of importance in respect of corporate mergers and acquisition in Zimbabwe are investment licencing, requisite regulatory approvals, Exchange Control considerations, Taxation and notification to the Competition and Tariffs Commission of Zimbabwe (“CTC”).
Competition
2018 EDITION DOING BUSINESS IN ZIMBABWE CHAPTER 5
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Competition is regulated by the Competition Act [Chapter 14:28] (the “Competition Act”) and the CTC. The CTC is an autonomous body empowered in terms of the Competition Act and is the only agency authorized to investigate and approve a merger. The Competition Act prohibits restrictive practices and unfair business practices which are sanctioned by fines and/or imprisonment. A “merger” in terms of the Competition Act includes horizontal mergers and vertical mergers. Therefore transactions (such as pure conglomerate mergers) in which there is no horizontal or vertical relationship between the parties are not notifiable.
The same would apply in respect of the establishment of a ‘green field’ or new enterprise practice. However, parties who do pursue a joint venture (including co-operative joint ventures) notify the joint venture as a merger if the financial thresholds are met. Similarly, where a party acquires a controlling interested in an existing joint venture, the transaction will fall within the ‘merger’ definition elements.
regulates mergers and acquisitions are required under the Competition Act to apply to the CTC for the final authorisation of the merger. The provision of the de minimus rule in the Competition Act effectively exempts small and medium-sized enterprises from its application, and prohibits those restrictive practices that restrict competition to a material degree.
All mergers that fall within a prescribed threshold, based on the combined annual turnover or assets in Zimbabwe of the merging parties, must notify the CTC for examination “within thirty days of (a) the conclusion of the merger agreement between the merging parties, or (b) the acquisition by any one of the parties to that merger of a controlling interest in another”. At present the threshold is US$1,200,000.00 (one million two hundred thousand United States Dollars).
The CTC is an autonomous body that does not refer any of its competition decisions to any other authority in Zimbabwe, and orders made by the Commission against any anti-competitive practices can be lodged with the High Court of Zimbabwe for registration as an order of the High Court to enable it to have the effect of a civil judgement of the High Court. Appeals against any decision of the CTC are made to the Administrative Court. To date, there are yet to be appeals against a decision of the CTC.
The Competition Act does not provide a minimum shareholding or define how a “controlling interest” can be achieved by other means. ‘Control’ is, therefore, based on de facto control such as special rights given to certain shareholders, veto powers, the power to appoint board members, or the exercise of a minority shareholding in the context of a highly fragmented shareholding structure. An acquisition of a minority shareholding may, therefore, lead to a de facto controlling interest in terms of the Competition Act.
Following the 2012 Tripartite Peer Review under the United Nations Conference on Trade and Development (“UNCTAD”), the government has promulgated a National Competition Policy (the “NCP”) which aims to facilitate necessary reforms in Zimbabwe’s competition law in order to align it with regional and global standards. One element of the NCP is to reduce the time it takes the CTC to review mergers and acquisitions from 90 (ninety) to 60 (sixty) days. The NCP also undergirds the so-called ‘domestication’ of the broader regional Common Market for Eastern and Southern Africa (“COMESA”) competition rules as well as the country’s bilateral agreements. For example, Zimbabwe recently entered into a Memorandum of Understanding with the Chinese government, designed to enhance cooperation on competition and consumer protection issues between Zimbabwe’s CTC and the People’s Republic of China’s Ministry of Commerce.
With regards to merger notifications, the CTC also pays particular attention to public interest considerations when evaluating proposed mergers. The Competition Act applies to all economic activities within or having an effect within Zimbabwe, but indicates that it must not be applied as to limit any right acquired under specific intellectual property rights unless such right is used for the purpose of enhancing or maintaining prices or as any other restrictive practices. The merger control provisions of the Competition Act override any powers given to any sector regulator in considering and approving mergers and acquisitions. Accordingly, any sector regulator that
As Zimbabwe is a member of the COMESA, the NCP recognizes that there is a need to harmonize domestic and regional COMESA merger control regimes.
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Banking and Finance THIS IS A HEADLINE
2018 EDITION DOING BUSINESS IN ZIMBABWE CHAPTER 6
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Zimbabwe’s financial institutions are governed by the Banking Act [Chapter 24:20] (the “Banking Act”) and the Microfinance Act [Chapter 24:29] (the “Microfinance Act”), and are under the purview of the RBZ. The Banking Act has since been amended to tighten banking supervision, monitoring and control whilst at the same time diluting individual or bank holding shareholder influence on banks. Part of the amendments prohibit individuals or body corporates from holding more than 25% (twenty-five percent) of voting shares in banks or in their holding companies. The latest restrictions or conditions relating to shareholding or bank holding entities seek to curtail risks associated with owner managed banks or institutions which have, in the past, resulted in the abuse of depositors’ funds. The amended Banking Act also prohibits the acquisition of a banking institution or controlling company or the voting rights of a banking institution or controlling company which acquisition exceeds 5% (five percent) or more of the total share capital or voting rights of their respective members.
Participants of the Zimbabwean banking sector:
Commercial Banks Merchant Banks Building Societies Micro-Finance Institutions Development Finance Institutions
Furthermore, the amendments seek to attach liability on directors of financial institutions for carrying on the banking business recklessly, negligently, or in any other illegal manner. A director found to not be in compliance with the above provisions may face imprisonment for a minimum period of 10 (ten) years. In summation, the amendments to the Banking Act seek to strengthen corporate governance systems in the financial sector. Notwithstanding the fact that all the Banks in the country are fully capitalised across the sector, the banking sector is experiencing underlying physical United States Dollars cash shortages on the back of high demand for cash by the banking public. However, the RBZ is now promoting the use of plastic money resulting in significant use of same, and a corresponding decline in the demand for physical cash. Furthermore, as a mechanism of hedging the challenges posed by the lack of the United States Dollar, the RBZ through the Reserve Bank Amendment Act 1 of 2017, introduced Bond notes and Coins as legal tender in Zimbabwe. This Amendment Act alters Section 44B of the Reserve Bank
Act [Chapter 22:25] and creates a Bond note (surrogate currency) that is at par value with the United States Dollar. With regards to Micro–finance Institutions, the RBZ in collaboration with the Ministry of Finance and Economic Development are working on a Microfinance Amendment Bill. The Bill seeks to address, amongst other issues, provision for perpetual licences for deposit-taking microfinance institutions (subject to cancellation in the event of breach of the law, in the same manner as other banking institutions); extension of the tenure of the licence for credit-only microfinance institutions from the current 1 (one) year to 5 (five) years; an enhancing corporate governance systems and risk management practices within the microfinance sector. With regards to foreign payments, the RBZ has since implemented a foreign payments remittance priority list for use by Banking Institutions when remitting offshore payments.
BANKING AND FINANCE | 25
Projects and Infrastructure
2018 EDITION DOING BUSINESS IN ZIMBABWE CHAPTER 7
26 | DOING BUSINESS IN ZIMBABWE
Zimbabwe’s national blueprint the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZIMASSET) recognises the central role that renewable energy plays in meeting the country’s energy deficit. This view is further expounded in the National Energy Policy; the National Energy Policy Implementation Strategy; the National Renewable Energy Policy (NREP); the Independent Power Producers framework and the Renewable Energy Feed in Tariff (REFIT). These policies all work together for the promotion of renewable energy projects. The current legislative framework that is in place allows for Independent Power Producers (IPPs). It also allows for private sector players to be involved in the generation, supply and distribution of electricity. The Zimbabwe Electricity Transmission (ZETDC) is the national distributor of electricity, while the Zimbabwe Electricity Supply Authority (ZESA) is the national supplier of electricity.
The general conditions for granting of national project status are as following:
This facility is extended to both private and public sector projects in order to incentivize investments and promote infrastructure development; The project should be part of the overall government priorities and included in National Planning Documents such as ZIMASSET; Should have express approval from the respective line Ministries and also contribute to their overall objectives; Should be at an advanced stage of development including the following: • Detailed feasibility studies; • Communities from prospective financiers of the project. Should have complied with regulatory requirements such as EIA an locala uthority by laws where necessary;
Should clearly demonstrate the economic and social returns; and
Should be valued at no less than US $50,000,000.00 (fifty million United States Dollars.)
It is key to note that the market is currently structured in a Single-Buyer model due to the lack of competition in the distribution of power. ZETDC has therefore become the single buyer responsible for purchasing power and selling to all customers as well as exporting power. The market is also undergoing a transition where it is in the initial stages of moving towards a fully competitive market where there is competition in generation, distribution and supply of electricity and the regulator is operating entirely independently as it moves away from the previous state enterprise monopoly, where these activities of ZESA were monitored by the Ministry. The main piece of legislation for electricity production, transmission and distribution in Zimbabwe is the Electricity Act [Chapter 13:19] (the “Electricity Act”). This act was promulgated in 2002, and is complemented by the Electricity (Licencing) Regulations of 2008 and the Electricity (Levies) Regulations of 2011. The Electricity Act is the overarching legislation which provides for the licencing and regulation of the generation, transmission, distribution and supply of electricity in Zimbabwe. The Energy Regu-
latory Authority Act [Chapter 13:23] (the “Energy Act”) was enacted to amend the Electricity Act and the Petroleum Act [Chapter 13:22] in so far as they referred to the Electricity Regulatory Commission and the Petroleum Regulatory Commission. The Energy Act makes provisions for the functions and management of the Zimbabwe Energy Regulatory Authority (ZERA). The legal framework allows for licencing of Independent Power Producers to generate, supply and distribute electricity.
Incentives for Renewable Energy Projects The National Project Status (NPS) is granted to Government funded projects with a national impact. The projects are deemed national through the massive size of capital (both financial and plant and equipment) that would be needed for that type of investment and exempted from duty payments and other tax payments requirements. The granting of national project status is on a project by project basis, and the incentives extended therein are highly dependent on the negotiated conditions of the national project status between the government and the applicant.
PROJECTS AND INFRASTRUCTURE | 27
Renewable energy projects may enjoy Prescribed Asset Status (PAS). PAS is given in terms of the Insurance Act [Chapter 24:07], which provides that pension funds and insurance funds have to invest 30% (thirty percent) of their capital in Prescribed Assets. In practice, the Ministry of Energy and Power Development would recommend renewable energy projects on case to case basis to the Ministry of Finance and Economic Development for according PAS.
and 2014. Critical documents that were prepared which would anchor the future road towards PPPs in Zimbabwe included the Public-Private Partnership Policy, 2013; Public Private Partnership: Legislative Review for Zimbabwe, 2013; and the Institutional Framework, Public-Private Partnership, 2013. These documents formed the basis upon which PPPs would be structured, culminating in the enactment of the Joint Ventures Act [Chapter 22:22] (the “JV Act”) on 27th May 2016.
The NREP is currently in draft form and is due to be approved during the course of the year 2018. The draft NREP provides that renewable energy projects will be provided concessions in licensing fee and enjoy relaxations in other licensing requirements.
Investors who invest in these types of projects enjoy Government support in the form of exemptions from Tax that may be granted including, without limitation, VAT exemption or zero-rating and an exemption against any withholding tax in relation to the repatriation of the Revenues, or any dividends or distributions to be made to lenders. The parties may also be granted the right to open and maintain foreign bank accounts in Zimbabwe and/or outside of Zimbabwe.
Public Private Partnerships (“PPPs”) The idea to utilise PPPs (known as “Joint Ventures” in the Zimbabwean context) for infrastructural development in Zimbabwe was mooted as far back as 1998. The recognition of PPPs’ critical role in the provision of public infrastructure and services by the Government culminated in the development of a framework laying a foundation for PPP investment in the country. This was the PPP Guidelines of 2004 (the “PPP Policy”). The PPP Policy was meant to galvanise private sector investor interest and see a boom in infrastructure development. It did not achieve the desired effect at the time partly due the fact that there was no specific legislation enacted for PPPs. The success or otherwise of PPPs is closely linked to the establishment and/or strengthening of appropriate institutional arrangements at all stages of the PPP project cycle. In 2009, the Inclusive Government was formed. It took a more serious stance to adopt PPPs as a way of delivering on its public mandate. It formulated a Short-Term Emergency Recovery Programme (STERP). STERP was reconfirmed under the Three Year Macroeconomic Policy and Budget Framework (STERP II), which envisaged the use of PPPs in the upgrading of road capacity, new construction works and maintenance. Pursuant to implementing these policies, there were some noticeable progress toward the operationalising of PPP between 2010 28 | DOING BUSINESS IN ZIMBABWE
Project Financing An intricate web of public and private interests, project finance is financing of long-term infrastructure projects. It is typically based upon a non-recourse financial structure consisting of both debt and equity. The underlying asset is the project itself and the projected cash flow generated by it is used to repay the financiers. Although it is a secured lending structure, it involves intricately balancing risk allocation amongst the parties.
The government is looking to rehabilitate most of the existing infrastructure. Contractors and/or investors under the Act may enter into the following types of arrangements with the government or a statutory entity on commercially agreed terms: • Build Operate Transfer (“BOT”); • Build Own Operate Transfer (“BOOT”); • Build Transfer Operate (“BTO”); • Lease Arrangement, and/or • Concessions, among others.
Typical risk encountered with respect to project financing:
POLITICAL
CONSTRUCTION
OFFTAKE
CURRENCY
OPERATIONAL
Governments have historically provided Sovereign Guarantees as part of the risk mitigation. The purpose of a Sovereign Guarantee is therefore to assure the lenders that the government will undertake to engage in acts of omission and commission in the interest of the Project and assume all the obligations of the project company, in the event of default of its duties as primary obligor. Fundamentally, it is a financial guarantee that is issued by a government as opposed to a private financial institution. In Zimbabwe, Sovereign Guarantees are issued in terms of the sections 20 and 21 of the Public Debt Management Act [Chapter 20:21]. Binding the Government through a Sovereign Guarantee is perceived by lenders as reducing the risk profile of a project because of the Government’s ability to control certain political and economic risks through its policies. They are therefore willing to lend at lower rates, which has a positive impact
DISPUTE RESOLUTION
REPAYMENT
on the cost of completing the project. The obligations created by a Sovereign Guarantee are inextricably linked to the financial obligations undertaken by the project company. There has, however, been a general trend for lenders to use alternative instruments to securitise their investments in the absence of a Sovereign Guarantee, including: • Letters of Credit, • Letters of Support, • Put Call Option Agreement (“PCOA”), • Partial Risk Guarantees (“PRG”), and • Credit insurance or guarantees offered by various DFIs. Alternatives to Sovereign Guarantees are likely to be commonplace in the Zimbabwean projects and infrastructure space in the near future and facilitate the ease of financing much needed infrastructure projects. PROJECTS AND INFRASTRUCTURE | 29
DOING BUSINESS IN ZIMBABWE CHAPTER 8 30 | DOING BUSINESS IN ZIMBABWE
Mining Zimbabwe is a mineral-rich country, endowed with a wide range of mineral resources. The Mines and Minerals Act [Chapter 21:05] (“the Mining Act”) governs the mining sector, and is regulated by: • the Ministry of Mines; • the Minerals Marketing Corporation of Zimbabwe (“MMCZ”) (which is the body responsible for marketing all the country’s minerals and metal products except gold and silver which are sold through the RBZ).
•
In terms of Section (2) of the Act, all minerals are vested in the President, and in order to acquire mineral rights one therefore needs to make an application to the Mining Commissioner of the relevant mining district.
The Minerals and Exploration and Marketing Corporation Bill H.B 11-2015 has not yet been promulgated into law to date. However, if passed, it shall have the effect of repealing the Minerals and Marketing Corporation of Zimbabwe Act (and therefore re-establishing the MMCZ) and providing the creation of the Minerals Exploration and Marketing Corporation
Mining companies enjoy a number of incentives, including: • special flat income tax rates of fifteen percent (15%) as compared to the standard rate of twenty five percent (25.75%); • on liquidation gold proceeds are liquidated at market rates; • royalties which are not deductible for income tax purposes are calculated at a percentage of the gross fair market value of minerals produced; • all expenditure on exploration, development and operating incurred wholly and exclusively for mining operations is allowed as a deduction in full; • there is no restriction on carry-over of tax losses - these can be carried forward for an indefinite period; • special initial allowance on capital equipment is allowed at a rate of one hundred percent (100%); • taxable income of a holder of a special mining lease is taxed at a special rate of fifteen percent (15%); • a mining claim holder confers on the holder the exclusive right to mine the mineral resource for which the claim was registered and to prospect for other minerals on the claim;
ordinary claims are up to twenty five hectares, whilst special claims are between 26 -150 hectares.
The Mining (General Amendment) Regulations, 2016 (No.19) reduced mining license fees, including custom milling license fees, special fees as well as export permit fees, mining leases and Prospecting licenses for select minerals, including diamonds and platinum.
MINING LICENSES AVAILABLE IN ZIMBABWE A special/normal prospecting licence
Exclusive Prospecting Orders
A mining lease
A special mining lease
A special grant
MINING | 31
DOING BUSINESS IN ZIMBABWE CHAPTER 9 32 | DOING BUSINESS IN ZIMBABWE
Oil and Gas Exploration and exploitation of oil and natural gas has attracted increased interest in Zimbabwe, despite the prospects of the resources being deemed minimal in the past. The increasing energy demand in Zimbabwe as well as in the region has presented exciting and new prospects on the energy frontier. According to the Zimbabwe Investment Authority (ZIA), Zimbabwe has a vast natural resource endowment which is awaiting the deployment of capital towards full exploitation. With an excess of over 30 billion tonnes of known high quality coal reserves, particularly in the north western region of the country, coal is Zimbabwe’s prime energy source. Exploration and exploitation of Coal-Bed Methane (CBM) in particular, is especially a prime investment opportunity. It is estimated that the Hwange/ Lupane basins have over 800 million cubic metres of CBM per square kilometre, totalling to about 765 billion cubic metres of sulphur free CBM.
according to Zimbabwe’s National Energy Policy of 2012, such resources are heavily under-explored and hence its true potential is yet to be discovered. If proven, this could result in untrammelled capital investment and economic growth for the country. To accelerate this sector, the Zimbabwean Cabinet has approved various investment models for CBM exploration and extraction, including Joint Venture/ Public Partnerships, Special BOT arrangements and Private Sector, as well as various investment incentives in the form of tax holidays, National Project Status (which provides for exemptions on import duty and other taxes), exemption from payment of withholding tax, guaranteed dividend payment and repatriation, cost reflective tariffs and other incentives provided under the Mines and Minerals Act. Although a number of Special Grants have been issued for hydro-carbons, this still remains a heavily uncharted investment space in Zimbabwe.
Despite the fact that Zimbabwe is endowed with a variety of renewable and fossil energy sources, OIL AND GAS | 33
Enforceability Encumbranc
Real Estate Registration of Title The registration process provides an efficient system and affords security of title to land and rights in land. It buttresses the right to property as entrenched in the current constitution. The dependable cadastral system in place is intrinsically linked to the deeds registry system. The inviolability of property rights, and the speed and transparency of registration of these rights has been a key focus for the government’s current programme on improving the ease of doing business in Zimbabwe. The Deeds Registry Offices in Harare and Bulawayo are fairly efficient in ensuring that all deeds lodged are processed and registered within 7 (seven) days. The Deeds Registries operate under the auspices of the national government’s Ministry of Justice and Legal Affairs.
Competency of Encumbrances
2018 EDITION DOING BUSINESS IN ZIMBABWE CHAPTER 10
34 | DOING BUSINESS IN ZIMBABWE
The encumbrances that may be registered against title to land are Bonds, Notarial Deeds of Hypothecation, Long leases, Servitudes and Caveats. The registration of any of these encumbrances, save for caveats - would constitute a real right in the land and is therefore security against the land owner in favour of the person/entity holding the real right. Encumbrances such as mortgage bonds and/or real rights are endorsed on the title deeds, and once a person or entity becomes the registered owner in the deeds registry, the information is updated with the owner’s details and is accessible to the public.
y of ces
Registration of Title
Payments for Immovable Property Competency of Encumbrances
Enforceability of Encumbrances
Transfer of rights cannot therefore take place without the consent of the holder of a real right in the land. There is no restriction on the ownership of land by foreign persons - nor is there a restriction on the registration of encumbrances on land by foreign persons. This means the system of registration of encumbrances may be used as the security underpinning a debt (or similar transaction) wherein one party wishes to hold collateral security which they can easily liquidate in the event of non-performance by the owner of the land.
Enforceability of Encumbrances Where a lender wishes to enforce security, they will by law have to obtain a court judgment against the borrower to proceed to a sale in execution of the immovable property. Where a mortgage bond is registered in its favour, a lender can apply for an order of special execution against the property to proceed with a sale in execution of the immovable property, and will not have to firstly execute against the movables of the borrower.
Payments for Immovable Property All payments for immovable property sales must be settled locally, and not offshore. Applications for retention of sale proceeds will be considered on a case-by-case by the exchange control department
of the RBZ. Such applications are required to include: All immovable property that is acquired using external financial resources must be registered with the exchange control department in order to facilitate remittance of disinvestment proceeds by the Purchaser. The information to be submitted in support of the registration is a copy of the agreement of sale; proof of payment of Capital Gains Tax due to the Zimbabwe Revenue Authority; and documentary evidence confirming receipt of initial purchase price in the country. Upon registration, the owner of the property will be permitted to freely remit the sale proceeds to their nominated destination. Rental income from residential properties, may be remitted offshore in cases where the property owner resides outside the country. Where a local resident owns property offshore, income from rentals of any such property must be repatriated to Zimbabwe. On emigration, a person selling immovable property would be required to make an application to the exchange control department, through the authorised dealer, for repatriation of funds. Such an application should be accompanied by a copy of the sale agreement and a copy of the Capital Gains Tax clearance certificate.
REAL ESTATE | 35
THIS IS A HEADLINE
DOING BUSINESS IN ZIMBABWE CHAPTER 11 36 | DOING BUSINESS IN ZIMBABWE
Agriculture Agriculture is historically viewed as the backbone of Zimbabwe’s economy. There are vast investment opportunities in agriculture in Zimbabwe, including crop production, mechanisation, horticulture and agro-processing. Investment in agriculture is heavily supported by the Government, given that agriculture and food security have been designated a priority sector in Government’s efforts to turn around the economy and to sustain food security. Fiscal incentives in agriculture include: • special deductions over and above the normal deductions; • farming inputs are zero rated for VAT purposes; and • importation of agricultural equipment as duty-free. A major concern for investors is the risk of expropriation of agricultural land. To a greater extent, expropriation as an investment risk has been curbed by the Government’s recent policy position, which has called for the restoration of confidence in the agricultural sector. The targeted policy has triggered a shift in the provision of 99-year leases by the Ministry of Lands, Agriculture and Rural Reset-
tlement. Where previously white commercial farmers were afforded 5-year leases over agricultural land, as opposed to 99-year leases for their black counterparts, 99-year leases are now available to all existing A2 commercial farmers, without racial bias. Advantages of these 99-year leases include: provision of a 99-year guarantee of land ownership if the farmer continues to meet the terms and conditions of the lease agreement; • It can be used as collateral for borrowing from financial institutions; • It can be registered at the Deeds Registry; and • It is subject to the country’s laws of inheritance. Entities wishing to invest in the agricultural sector without necessarily obtaining title can also enter into Joint Venture arrangements and Management Agreements. The latter arrangements will also attract benefits from the aforementioned investment licences issued by the ZIA.
AGRICULTURE | 37
DOING BUSINESS IN ZIMBABWE CHAPTER 12 38 | DOING BUSINESS IN ZIMBABWE
International Trade Zimbabwe’s National Trade Policy is the key guideline on the principles by which Zimbabwe stands regarding trade facilitation and regional integration. The policy is designed to direct Zimbabwe to export led industrialisation which will be further achieved on the guidelines of the Industrial Development Policy. Zimbabwe is strategically located in the centre of the Southern African region, well positioned to be the investment hub of Southern Africa. It has access to world markets as facilitated by a number of Bilateral Trade Agreements, as well as its membership in the Southern African Development Community (“SADC”), Common Market for Eastern and Southern Africa (“COMESA”), African Caribbean and Pacific nations (“ACP”), and World Trade Organisations (“WTO”). Zimbabwe has also signed the Tripartite Free Trade Agreement (“T-FTA”). As part of the adoption and implementation of the landmark Trade Facilitation Agreement (TFA) of the WTO, the government has put in place the Trade Facilitation Roadmap from 2018 to 2022. The aim of the policy is to simplify, harmonise and modernise export and import processes. The government has also put in place systems to ensure that the time spent at border posts is reduced as a priority in order to facilitate trade.
Zimbabwe is strategically located in the centre of the Southern Afwrican region, well positioned to be the investment hub of Southern Africa.
INTERNATIONAL TRADE | 39
THIS IS A HEADLINE
DOING BUSINESS IN ZIMBABWE CHAPTER 13
40 | DOING BUSINESS IN ZIMBABWE
Alternative Dispute Resolution Alternative Dispute Resolution (“ADR”) may be described as a range of procedures that serve as an alternative to litigation through the courts for resolution of disputes. It generally involves the intercession and assistance of a neutral third party and is used when parties are trying to avoid public proceedings in a court of law. Conciliation, mediation and arbitration are three basic forms of ADR that have been developed. Arbitration should be resorted to when other ADR mechanisms have failed because Arbitral Awards are binding in nature. The Arbitration Act [Chapter 7:15] (“the Arbitration Act”) is the model law on arbitration used for labour (where applicable) and commercial disputes in Zimbabwe. The advantages of ADR include: • speedy resolution; • confidentiality of the process; • parties can select the Arbitrator based on qualifications and/or expertise; • parties have greater control over the process; and • is less costly than traditional litigation in some instances.
Enforcement of Foreign Arbitral Awards and Judgements Zimbabwe has ratified the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (“the Convention”), which requires courts of contracting states to give effect to private agreements to arbitrate and to recognise and enforce arbitration awards made in the contracting countries. Under the Convention, an arbitration award issued in any other contracting state can generally be freely enforced in any other contracting state (save that some contracting states may elect to enforce only awards from other contracting states –the “reciprocity” reservation). The Civil Matters (Mutual Assistance) Act [Chapter 8:02] allows for the registration of a foreign judgement in Zimbabwe - provided the judgement was handed down in a designated country.
ALTERNATIVE DISPUTE RESOLUTION | 41
GLOSSARY ACP
African Caribbean and Pacific nations
ADR
Alternative Dispute Resolution
ARBITRATION ACT
Arbitration Act [Chapter 7:15]
ARIPO
African Regional Industrial Property Organisation
BANKING ACT
Banking Act [Chapter 24:20]
BITs
Bilateral Investment Treaties
BOT
Build Operate Transfer
BOOT
Build Own Operate Transfer
BTO
Build Transfer Operate
CBAs
Collective Bargaining Agreements
CBM
Coal-Bed Methane
CBA
Collective Bargaining Agreements
COMESA
Common Market for Eastern and Southern Africa
COMPETITION ACT
Competition Act [Chapter 14:28]
CONVENTION
Convention on the Recognition and Enforcement of Foreign Arbitral Awards
COPYRIGHT ACT
Copyright and Neighbouring Rights Act [Chapter 26:06]
CTC
Competition and Tariffs Commission of Zimbabwe
DTAs
Double-Taxation Agreement
ELECTRICITY ACT
Electricity Act [Chapter 13:19]
ENERGY ACT
Energy Regulatory Authority Act [Chapter 13:23]
EXCHANGE CONTROL ACT
Exchange Control Act [Chapter 22:05]
FINANCE ACT
Finance Act (No.1) of 2018
IMMIGRATION ACT
Immigration Act [Chapter 4:02]
INCOME TAX ACT
Income Tax Act [Chapter 23:06]
INDIGENISATION ACT
Indigenisation Act [Chapter 14:33]
IFFs
Illicit Financial Flows
IPPs
Independent Power Producers
IRIs
Investment Related Instruments
LABOUR ACT
Labour Act [Chapter 28:01]
MEMC
Minerals Exploration and Marketing Corporation
MICROFINANCE ACT
Microfinance Act [Chapter 24:29]
MINING ACT
Mines and Minerals Act [Chapter 21:05]
MINING BILL
Mines and Minerals Amendment Bill of 2015
MMCZ
Minerals Marketing Corporation of Zimbabwe
42 | DOING BUSINESS IN ZIMBABWE
NATIONAL BUDGET 2018
The National Budget Statement for 2018 by the Minister of Finance and Economic Development, titled “Towards a New Economic Order”
NIEEB
National Indigenisation and Economic Empowerment Fund
NCP
National Competition Policy
NEC
National Employment Council
NEC REGULATIONS
Labour (National Employment Code of Conduct) Regulations, 2006
NPS
National Project Status
NREP
National Renewable Energy Policy
OFAC
Office of Foreign Assets Control
PAS
Prescribed Asset Status
PATENTS ACT
Patent Act [Chapter 26:03]
PAYE
Pay As You Earn tax
PCOA
Put Call Option Agreement
PLANT BREEDERS ACT
Plant Breeders Rights Act [Chapter 18:16]
PPPs
Public Private Partnerships
PPP Policy
Public Private Partnership Guidelines of 2004
PRG
Partial Risk Guarantees
RBZ
Reserve Bank of Zimbabwe
REFIT
Renewable Energy Feed in Tariff
SADC
Southern African Development Community
SEZ ACT
Special Economic Zones Act [Chapter 14:34]
SPVs
Special Purpose Vehicles
STERP
Short-Term Emergency Recovery Programme
STERP II
Three Year Macroeconomic Policy and Budget Framework
TFA
Trade Facilitation Agreement
T-FTA
Tripartite Free Trade Agreement
TIPs
Zimbabwe’s Treaties with Investment Provisions
TRADE MARKS ACT
Trade Marks Act [Chapter 26:04]
TRIPS
WTO Agreement on Trade-Related Aspects of Intellectual Property Rights
UNCTAD
United Nations Conference on Trade and Development
VAT
Value Added Tax
WIPO
World Intellectual Property Organisation
WTO
World Trade Organisations
ZERA
Zimbabwe Energy Regulatory Authority
ZESA
Zimbabwe Electricity Supply Authority
ZETDC
Zimbabwe Electricity Transmission
ZIA
Zimbabwe Investment Authority
ZIA ACT
Zimbabwe Investment Authority Act [Chapter 14:30] GLOSSARY | 43
OUR TEAM
Lloyd Manokore
Managing Partner E: lmanokore@manokore.com
Reena Thaker
Associate E: rthaker@manokore.com
Farai Nyabereka
Senior Associate E: fnyabereka@manokore.com
Haruperi Mumbengegwi
Associate E: hmumbengegwi@manokore.com
MANOKORE ATTORNEYS Manokore Attorneys is a dynamic commercial law firm, with its core focus on corporate and financial transactions. Our experience equips us to advise on a multitude of complex corporate transactions for various local and international clients. Our culture is further shaped by the diverse corporate clientele and extensive international exposure of lawyers who embrace international best practice for corporate structures and corporate advisory services. Our execution is a combination of local developed competence as well as regular collaboration with international firms. These strategic affiliations give us access to extensive skills and capacity to advise on both international and regional transactions.
44 | DOING BUSINESS IN ZIMBABWE
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T: +263 (242) 746 787 / +263 (242) 746 749 T: +263 86 7710 2557 / 86 7711 5611
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Disclaimer: The information contained in this Guide is reflective of the position as at the date of publication and may be subject to change. 45 Manokore Attorneys does not take liability for any losses incurred by reliance placed on the information contained therein.