The events which commenced 14 November 2018, triggered a ‘new dispensation’ for Zimbabwe, the old government was replaced by a new government and after thirty seven years a new President. The new government has been consistently saying ‘Zimbabwe is open for business’!
To any investor who might be keen to invest, Zimbabwe might be open for business but what does it take for one invest in Zimbabwe. This article summarises a general investor who is not in any partnership with the Government or who is keen to operate in a special economic zone.
The starting point is to identify a structure that helps the investor to operate a business. In Zimbabwe there are basically five structures that can operate a business and these are a company, a partnership, a trust, a private business corporation and a one man business. What is recommended as an ideal
investment vehicle is a limited liability company incorporated in terms of the Companies Act [24:03].
Once the company is incorporated the next stage involves compliance with other key regulators. The first regulator is the Zimbabwean Investment Authority (ZIA), which is responsible for foreign investments. Any person who wishes to obtain the approval of the ZIA to invest in Zimbabwe or anyone who wishes his or her business activity to be approved by ZIA as a foreign investment must obtain such an Investment Licence, failing which the shareholding by such person in the Zimbabwean company will be treated as domestic with attendant Exchange Control and tax consequences. The other key regulators are the Zimbabwe Revenue Authority (tax), The Reserve Bank of Zimbabwe (Exchange Control), Environmental Management Agency (environmental issues), and the Parent Ministry where the investor needs to invest (for licenses and government policy papers). These can be dealt with in a separate article.
Finance matters, currently Zimbabwe is using the multi-currency system and external loans are controlled in terms of the External Loan Coordinating Committee (ELCC). It is generally advisable to seek the ELCC approval in respect of all foreign loans. Dividends, the Government guarantees the repatriation of hundred percent (100%) of the original capital investment in the case of disinvestment. Up to hundred percent (100%) of dividends from net after tax profit may be remitted. Investors who become permanent residents may not remit their dividends without prior approval of the Exchange Control Authorities. Hence the need to obtain an Investment Licence from ZIA.
Those investors bringing in funds through registered commercial banks may repatriate their income and sale proceeds, but the following withholding taxes will be levied on individuals: ten percent (10%) on dividends from companies listed on the Zimbabwe Stock Exchange; fifteen percent (15%) on dividends from non-listed companies, ten (10%) withholding tax on sale of listed marketable securities (Note that a different rate may apply where there is a Double Taxation Agreement (DTA) between Zimbabwe and the Investor’s country of origin).
Taxation and taxes, a company operating in Zimbabwe must be registered and obtain a Business Partner Number from the Zimbabwe Revenue Authority (ZIMRA). There are various taxes that are paid by a Zimbabwean company these include, corporate tax, pay as you earn, value added tax and royalties (for mining companies). The new government has stated that it will not enforce this law but as things stand the law still stands until it is repealed by an Act of Parliament. Indigenization law provides that in Zimbabwe every existing (private or listed) non indigenous business must
sell, donate or dispose a controlling interest of not less than 51% of the shares or interests therein to indigenous Zimbabweans. This is in terms of the Indigenisation and Economic Empowerment (General) Regulations Statutory Instrument 21 of 2010 (as amended) are regulations created from the Parent Act, the Indigenisation and Economic Empowerment Act [Chapter 14:33].
In employing personnel there is no restriction on employing locals, employment issues are provided for in terms of the Labour Act [Chapter 28:01]. Restrictions are however placed on foreigners and the Immigration Regulations, prohibit a foreigner from entering Zimbabwe and engaging in an occupation unless he or she is in possession of a valid employment permit. The Competition Act [Chapter 14:28] restricts a company from getting into a monopoly or from engaging in unfair trading practices. Zimbabwe has environmental or health and safety regulations in place and these are found in the Environmental Management Act [Chapter 20:27] and the Regulations made in terms of that Act. These provisions of this Act take precedent over all other pieces of legislation.
The above is a summary of some of the key issues that an investor will encounter but before investing it is advisable for the investor to get a proper legal opinion which takes into account the Investor’s circumstances.
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