As part of the Government's broader efforts to simplifying the process of doing business and creating a pro-business environment in Zimbabwe, a new law called the Zimbabwe Investment Development Agency Act [Chapter 14:37] (hereinafter referred to as ZIDA Act) was enacted in February 2020 and has the sole purpose of dealing with the law with regards to investment. It deals in particular with the promotion, entry, facilitation and protection of investment in Zimbabwe. The Act repeals the Acts of Parliament that contained investment laws, these are the Zimbabwe Investment Authority Act [Chapter 14:30], the Joint Ventures Act [Chapter 22:22] and the Special Economic Zones Act [Chapter 14:34]. Provisions of the repealed entities, which used to deal with investors separately, will be incorporated under one roof in ZIDA, and this will lessen the burden on investors and make it much easier for them to register their businesses and start operations. ZIDA is meant to facilitate investment in Zimbabwe in all areas of investment, be it a special economic zone or otherwise.
The Act has also established the "one stop investment center, which is also termed as the one stop shop for the sole purpose of expediting investment process and to do away with the long tiresome procedures that were afforded by both Zimbabwe Investment Authority (ZIA) and Special Economic Zone Authority (SEZA). ZIDA Act also provides for the non-discrimination of investors in line with the Constitution of Zimbabwe and protection against the expropriation of investment. It is envisaged that the new Agency, because of the favorable conditions it offers, will result in the attraction of more foreign direct investment, thus positively impacting economic growth and development in general.
THE LAW IN GENERAL
ZIDA is established in terms of section 3 of the Act, which is a body corporate capable of suing and being sued in its own name and performing all acts that it may be mandated to do in accordance with the Act. The Act sets up the agency which is going to spearhead how the country will deal with both local and foreign investors.
The ZIDA Act applies to both foreign and domestic investments established in accordance with the laws of Zimbabwe. The Act allows investors to invest in any and all sectors of the economy. However, in terms of the Indigenization and Economic Empowerment Act, foreigners cannot invest in sectors that are reserved for locals unless their investments contribute to a significant and sustainable employment creation in Zimbabwe, transfer skills and technology for the benefit of Zimbabweans, create sustainable value chains or meet other socially and economically desirable objectives.
FUNCTIONS OF THE AGENCY
Section 4 of the Act lists the functions of the Agency and these include, the promotion, planning and implementation of investment strategies for the purpose of encouraging investment by domestic and foreign investors. It is also the function of the agency, among other things to promote the decentralization of investment activities, to implement and coordinate investment programmers and investment promotion related activities, to facilitate entry and implementation of investment projects, to assist investors in all appropriate investment-related support that may be required and to work with Government and interested stakeholders in using modern communications methods to promote Zimbabwe as an attractive investment destination, etc.
ONE STOP INVESTMENT CENTRE
The Act introduced, among other things the One Stop Investment Centre. The establishment of the centre is one of the greatest achievements by the country. It serves investors from the undue hardships of having to approach various governmental institutions in the investment process. It saves time, money and makes the whole process predictable. The one stop investment centre also referred to as the one stop shop has various desks, within the same building for the full and final facilitation of any type of investment. The Agency has a one-stop shop investment centre which has representatives of entities that play a role in the licensing, establishment and the operationalization of investments, these include the desk for Public Private Partnerships, desk for Special Economic Zones, desk for Revenue Authority (ZIMRA), desk for Immigration, desk for Environmental Management Agency (EMA), among others.
APPLICATIONS FOR INVESTMENT LICENCES AND PERIOD OF VALIDITY OF THE LICENCES.
Any investor who wishes to obtain the approval of the Agency for her or his existing or projected investment in any area of investment shall make an application to the Agency for investment licenses. The application shall be accompanied by the prescribed fee and such documents as the Agency may require.
An investment licence other than that for investing in a Special Economic Zone shall be valid for a period fixed by the Agency from the date of issue. The period of the licence is at the discretion of the Agency, however all licences for investment in Special Economic Zones are valid for a fixed period of 10 years. The Act also prohibits the transfer, cession, assign an investment licence to any other person without the approval of the Agency.
POWERS OF THE AGENCY
The Agency has the power to ensure compliance with any conditions subject to which any investment licence was issued. The Agency is empowered to visit and inspect any premises having any connection with the investment or proposed investment referred to in the licence, and may examine, make copies of or take extracts from any financial statements, books or other documents having any such connection. The agency is also empowered to suspend, cancel any investment licence where the licensed investor is found to have obtained the licence on the basis of fraud or a misrepresentation of a material nature or any false or misleading statement, or where the investor assigns, cedes or otherwise transfers the licence to another person without the prior approval of the Agency, or fails without reasonable explanation to implement the approved activity described in the licence within the period stipulated or any extension thereof, fails to comply with any conditions imposed on the issue of the licence.
The ZIDA Act allows investors to expatriate profits in freely convertible currency. This is very important. However, the government of Zimbabwe may temporarily restrict such transfers in the event of balance of payment or external financial difficulties.
Legal protection of investments and access to remedies when rights are violated are fundamental to investors. The ZIDA Act guarantees all investors equal access to law and protection against denial of justice in criminal, civil and administrative proceedings, breaches of due (judicial and administrative) process, and targeted gender, racial or religious discrimination.
SPECIAL ECONOMIC ZONES
The Agency may, in accordance with section 31 of the Act, by notice in the Gazette, declare any area or premises to be a special economic zone, the geographical area of which shall be defined in the notice. Applications for investment in special economic zones go through a serious process of scrutiny because the Act has set various considerations for investment in the SEZs. The Agency consider the following
- degree of export orientation or import substitution of the project; and
- the extent to which the proposed investment will promote industrialisation of the domestic economy; and
- the extent to which skills and technology will be transferred for the benefit of Zimbabwe and its people
- the extent to which the proposed investment will lead to the creation of employment opportunities and the development of human resources;
- the extent of value addition and beneficiation of local raw materials; and
- The value of the convertible foreign currency transferred to Zimbabwe in connection with the project etc.
GUARANTEE AGAINST EXPROPRIATION
The ZIDA Act also prohibits expropriation of investments except for a public purpose, in accordance with due process of law, in a non-discriminatory manner and on payment of prompt, adequate and effective compensation. Such compensation shall be equivalent to the fair market value prior to expropriation. The Act afford the affected investor shall have a right, under the law of Zimbabwe, to prompt review, by a judicial or other independent authority, of its case and of the valuation of its investment in accordance with the principles set out in the Act. However it is of great importance to note that the aggrieved investor has no right under the Act to challenge the expropriation itself, the Act gives a right to challenge the valuation of investment only.
PUBLIC PRIVATE PARTNERSHIP
The Act introduces what are called Public Private Partnership (Hereinafter referred to as PPP). A PPP, means an agreement between a contracting authority, which is usually a state institution and a counterparty which is usually a private entity. The repealed Joint Venture Act which used to address these types of partnership has been repealed and these types of partnerships are provided for in the ZIDA Act as Private Public Partnerships. The PPP Unit established in terms of section 34 of the Act is mandated to consider and assess the proposals submitted to it by parties to a PPP, to see whether it conforms to the requirements of the Act. There are various types of PPP Agreements that are provided for in part 111 of the 4th schedule of the Act.
THE LAW APPLICABLE IN THE RESOLUTION OF DISPUTES
The act also provides for a dispute settlement system between investors in which parties are free to either go for domestic arbitration in terms of the Arbitration Act [chapter7:15] or international arbitration if there has been a prior agreement between the parties. In terms of section 38(3) of the act, any investment that was protected under a Bilateral Investment Agreement before the commencement of this act are required to register with the Agency such an investment within a period of one year from the effective date. Foreign investors may submit their disputes against Zimbabwe to a dispute settlement mechanism under an investment treaty between Zimbabwe and their home country. This is possible provided the foreign investments established in Zimbabwe prior to the ZIDA Act is are registered with the Agency no later than 12 months after the ZIDA Act became effective – 6 February 2020.
In conclusion, ZIDA Act has brought various positive changes in investment law in an attempt to attract foreign direct investment. The changes include the introduction of the One Stop Investment Services Centre, protection of investors against discrimination, the provision of guarantees against expropriation and the various dispute resolution mechanisms.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.