Doing business in Zimbabwe

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.

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Viewing cable 09HARARE42, 2009 INVESTMENT CLIMATE STATEMENT – ZIMBABWE

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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

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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

——————————-

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¶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.

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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

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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

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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.

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¶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

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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

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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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