New investment regulations in Zimbabwe
24 November 2023
Colleagues at Alliott Global Alliance law firm member Muvingi & Mugadza Legal Practitioners in Harare, offer an overview of the new investment regulations in Zimbabwe.
The facilitation of investment and any matters related to investment in Zimbabwe are generally governed by the Zimbabwe Investment and Development Agency [Chapter 14:38]. Zimbabwe Investment and Development Agency (‘the Agency’) which was established by the Act is responsible for facilitating, promoting, implementing, and regulating investment in Zimbabwe. With the aim of providing certainty in law and supplement the regulations regarding investments, two key regulatory frameworks were passed namely Statutory Instrument 227 of 2023 [Zimbabwe Investment and Development Agency (General Investments) Regulations, 2023] and Statutory Instrument 226 of 2023 [Zimbabwe Investment and Development Agency (Special Economic Zones) Regulation, 2023]. This article will focus on general investments in Zimbabwe and the changes brought forth by the Statutory Instrument 227 of 2023 gazetted on the 14th of November 2023.
General Investment Licence
Firstly, it is important to take note that the Statutory Instrument 226 of 2023 provides for definition of general investment licence and registered investor which were previously not defined in the Act or any regulations relating to the Act. Previously, the Act only defined an investor not a registered investor. It did not provide whether the investor was registered by the Agency or not.
The Statutory Instrument has brought about embracement of technology as applications for registration and licensing of investors shall be done electronically. Further the One Stop Investment Services Centre facilitate registration of intellectual property rights with the Chief Registrar of Intellectual Property. Previously this provision was not incorporated or dealt with under the Act or its regulations.
The inclusion of the detailed process for application for general investment licences is provides an essential guidance to investors. Factors considered when considering the application are also provided for. The Statutory Instrument also provided the timeframe of two (2) years validity which is renewable if the conditions for the licence are met.
Application Fees for General
(a) Applications for Investment Licence by foreign investor US$500
(b) Application by local investor Equivalent of US$500
(c) Issuance of an Investment Licence upon approval Foreign investor US$4 500
(d) Local investor Equivalent of US$4 500
(e) Application Renewal of Investment licence US$3 000
(f) Application for Alteration or Amendment of an investment licence US$3 000
Twelve (12) Months Implementation Period
The regulatory framework added an important provision that the investor holding a general investment licence should implement his/her project within twelve (12) months of issuance of the licence. This prevents persons who benefit from the benefits proffered to only to registered investors. The purpose of the investment licences is for the benefit of Zimbabwe and its people therefore licence holders not implementing their projects should be stripped of the licences. The position is the Statutory Instrument of implementation within 12 months by the investor is an accepted position since in the Act there is no fixed stipulated period when one had to implement his/her project.
Amendment of General Investment Licence
In the statutory instrument there is a new provision with regards to amendments to general investment licences, corrections, and replacements. The section provides for the process done for an investment licence to be reviewed when determining whether to amend or issue a new licence depending on the information provided by the investor. This provides a better understanding with regards to amendments of licences as opposed to the position in Act whereby the Act it was not provided how amendments are done. It also provides a provision for replacement of licence which was previously not provide for in the Act hence investors have knowledge of what is required when one loses his/her licence.
Renewal of General Investment Licence
Renewals of licences is a provision available in the Act, but the Statutory Instrument provides a much-needed supplement to the Act. In the Act, it was provided that a licensed investor could apply for a renewal before expiry of the licence, but no timeframe was provided as to how long before it expires. Section 10 of the Statutory Instrument 227 of 2023 provides that the application for renewal should be done three months prior to the expiry of the licence.
Further it supplements that if the licence expires, the investor can apply for a renewal within three months after expiry of the licence if the renewal fee has been paid. An investor who has failed to meet the above-mentioned condition can still apply for an investment licence, however the only difference is that the application will be de novo. Once the renewal process is complete the investor is proffered a licence within thirty days. Although it is good that the investor can apply for renewal after expiry, the regulations should limit the circumstances when one can apply after expiry of the investment licence.
Project Assessment (Annual Returns)
Another key provision incorporated in the Statutory Instrument is section 11 which deals with annual returns submitted to the Agency. The submission of annual returns to the Agency can assist the Agency to assess investment performance of an investor. This helps the Agency regulate and promote investment. This keeps the investor in check and committed to the investment because the investor knows that the annual returns can determine if his/her licence can be terminated. Further in section 12 of the Statutory Instrument, it is mandatory to keep records relating to accounting books or invoices, staff list and their details, tax clearance certificates, social security registration, and environmental management information. This information is key when the Agency assesses whether the investor is not fraudulent and complies with investment regulations of Zimbabwe.
Investment Grievance Procedure
The Investment Grievance Response Mechanism tool is an essential addition which assists in resolving disputes or grievances. In the Act, disputes are provided to be resolved through arbitration hence prior to arbitration parties can seek remedial action through the Agency. The investors can only invest if the economic environment is viable for such investment hence State’s actions may hinder the investor’s rights or guarantees. Therefore, the Agency has a duty to ensure that the investors rights are not adversely affected. The Agency must notify the investor of the remedial action taken by the Ministry or public entity or convene a meeting between the parties and make recommendations.
The issue with the recommendation is what legal effect does the recommendations have in the instance that no remedial action is taken. Further, the issue that remains a question is whether there is actual separation and check balances to ensure that the Agency and State are not in cohorts against a certain investor when recommendations are made. A Ministry is basically the State therefore, one may wonder if the State or Ministry can successfully perform remedial action to rectify its actions that risk the rights of the investor.
The Statutory Instrument brought much welcome additions to the provisions of the Act, to protect the investments of the investors both local and foreign investors. The regulations generally emphasised on timeframes when processes should be completed licence is valid. There is also emphasis on the processes for applications, amendments, or renewals. The Statutory Instrument generally is a positive direction in the protection of investors rights and, promotion and regulation of investment in Zimbabwe. In the instance that the State, the Agency, and the public harnesses the regulations and strictly adheres to its provisions, this will be a successful supplement to the provisions of the Zimbabwe Investment and Development Agency Act.
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Muvingi & Mugadza Legal Practitioners, AGA's law firm representative in Zimbabwe, is a distinguished law firm whose expertise and practice has continued to expand and evolve over the years to meet its clients’ requirements. Formed in 1982 the experienced and specialised legal practitioners at the firm offer the full range of legal services and are committed to delivering them in line with the firm values, those being, integrity, excellence, respect and innovation.