Constraints and potential solutions to Foreign Direct Investment (FDI)

1. Zimbabwe: Foreign Direct
Investment (FDI) Promotion

2. The Problem: Constraints to Foreign Direct Investment (FDI)
While the government of Zimbabwe has implemented several measures since 2009
designed to attract foreign direct investment (FDI), many of its macroeconomic
policies, such as the indigenization and economic empowerment laws, are
significant deterrents. The country still needs to implement a comprehensive
economic reform program designed to address the debt burden and attract foreign
financial inflows at concessionary rates. Zimbabwe’s arrears in payments to
international financial institutions and high external debt overhang complicate the
situation by limiting the country’s ability to access official development assistance
(ODA) at concessional rates.
• https://www.state.gov/e/eb/rls/othr/ics/2016/af/254261.htm

3. Obstacles to Unlocking Financial Opportunities in Zimbabwe
• Attitude toward FDI
The government encourages public-private partnerships to enhance technological
development, while also emphasizing the need to improve the investment climate
by restoring the rule of law and sanctity of contracts. The statements and actions of
many senior government officials, however, are inconsistent with the desire to
attract FDI and undermine investor confidence.
• Investment Policy Reviews
In the past three years, the government has not conducted an investment policy
review through the Organization for Economic Cooperation and Development
(OECD), the World Trade Organization (WTO) or the United Nations Conference on
Trade and Development (UNCTAD).

4. • Laws on FDI
The Indigenization and Economic Empowerment Act requires that "indigenous
Zimbabweans" (black Zimbabweans) own at least 51 percent of all enterprises valued over
$500,000. In certain sectors, such as primary agriculture, transport services, and retail and
wholesale trade including distribution, foreign investors may not own more than 35
percent equity. Application of the Indigenization Act is inconsistent with the need for FDI,
resulting in many questions regarding compliance with the Act.
• Business Registration
Zimbabwe does not have an online registration process. The country encourages
companies to register with ZIA and the process currently takes as long as 90 days.
• Screening of FDI
A foreign investor wishing to establish a business in Zimbabwe requires an investment
license issued by the Zimbabwe Investment Authority (ZIA) as defined by the ZIA Act and
must obtain operating permits from relevant government agencies.

5. • Legal System and Foreign Courts
As government revenue declined, court resources have dwindled and dockets have
become backlogged. Local courts lack funding and other resources necessary to
hear cases in a timely manner and therefore most international investment disputes
take years to resolve.

6. Potential Investment Promotion Solutions
• Zimbabwe has several incentives designed to attract FDI, including tax breaks for new
investment by foreign and domestic companies and allowing capital expenditures on
new factories, machinery, and improvements to be fully tax deductible. The government
also waives import taxes and surtaxes on capital equipment. However, more should be
done to incentivise and facilitate FDI.
• A one-stop-investor-shop should be in operation in Zimbabwe where investors can
contact one organisation which facilitates all the required paperwork and licences. All
the services provided should also be available virtually via a web portal or application so
that investors all over the world have access to it and have information about the
thriving economic sectors within Zimbabwe. This will save investors time and money and
will also cut out the frustrations involved with regards to paperwork and the red tape
surrounding foreign investments.
• https://www.state.gov/e/eb/rls/othr/ics/2016/af/254261.htm

7. At the one-stop-investor-shop in Zimbabwe, investors should be able to
lodge queries in the following manner:

8. The “virtual,” web based 1-stop-shop should allow
investors to:
 Get online information, forms, links, connections to research/reports and advice
 Have access to a potential new “walk-in” office/centre for in-person support in
addition to the ICT platform/service offering.
 One of the key aspects of this offering is the provision of on-line “linkages”
between the investment centre and several other Government
departments/agencies which are involved in the investment processing value
chain.

9. The proposed web-based Co-ordination and Information
System has two core functions:
1. Ensure that investment facilitation is coordinated on a case-by-case basis.
o Allow all stakeholders to log investment applications or requests, from no matter what
source they originate, onto a coordinated system.
o For smaller investment that is not catalytic in nature, the stakeholder who received the
request must log this on the system for monitoring and evaluation, and will themselves
assume the role of lead facilitator.
o All stakeholders undertaking investment promotion and facilitation activities must be
able access this system, and any notifications or feedback can be sent to all stakeholders
via a mail facility. This will ensure that all stakeholders are kept up-to-date and are
involved in the entire cycle of investment promotion.
o Different levels of access must be assigned to stakeholders depending on their
importance in the provincial investment promotion and facilitation arena.

10. 2. Provide a web-based information portal which will provide a comprehensive,
speedy, accurate and reliable database of information, data and research to all
stakeholders.
o Coordination with all stakeholders to ensure that all the relevant information and
data required to facilitate investment is included, and constantly maintained.
o This system be must be categorised to ensure that it is easy to navigate. In
addition, all information captured from investment requests logged onto the
system will be used to develop a continued investment profile for the province.
o This will provide a one-stop portal where any stakeholder can access the system,
extract the information relevant to their specific investment request, as well as
include any new information or research.

11. The services that should be provided by Zimbabwe’s One-Stop-
Investor-Shop can be seen in the flow diagram below:

12. References
Bereau of Economic and Business Affairs; Investment Climate
Statements, 2016
https://www.state.gov/e/eb/rls/othr/ics/2016/af/254261.htm

13. Thank you for peer reviewing my work.
Have a great day ahead!!