AFRICA RESOURCESINVESTMENT CONGRESS

IRONMONGERS’ HALL, CITY OF LONDON ● TUESDAY-WEDNESDAY, 14-15 JUN 2011

www.ObjectiveCapitalConferences.com 1

Revitalising the economy & encouraging inward investment Hon. Tapiwa Mashakada – The Minister of Economic Planning and Investment Promotion, Republic of Zimbabwe

ZIMBABWE INVESTMENT FOCUS DAY: 15 JUNE 2011

“INVESTMENT OPPORTUNITIES AND DOING BUSINESS IN ZIMBABWE”

Presentation by

The Minister of Economic Planning and Investment Promotion, Hon T.

Mashakadaministereconomicplanning@yahoo.com

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Presentation outline3

Ministry’s Mandate Zimbabwe in Brief Why Invest in Zimbabwe and Overview

of Opportunities by Sector Taxation and Incentives Doing Business Indicators Reform Agenda; One-Stop-Shop

Establishment and Objectives Investment Process Under OSS Way Forward

Ministry’s Mandate4

Design and coordinate investment polices and incentives to

make Zimbabwe an attractive investment destination.Lead the process of developing and implementing an economic recovery strategy and plan. E.g Medium Term PlanCo-ordinate and lead the national economic development planning process, including the formulation of provincial plans and programmes.Co-ordinate the development of national priorities that inform the annual budgetary process and national programmes.Conduct macro-economic policy analysis and research on the performance of the economy and provide the necessary policy guidance to all the sectors.Monitor and evaluate the performance of economic sectors and in conjunction with relevant ministries, recommend appropriate policy intervention.

Zimbabwe in Brief

•Strategically Located at the Centre of Southern Africa

•Total Area: 390 757 square kilometers

•Land : 386 670 square kilometers

• Water: 4 087 square kilometers

• Border Countries: Botswana, Mozambique, South Africa, and Zambia

•Capital City: Harare (Population 1.6 million)

•Official Language: English

•Climate: 12 - 13°C in winter and 24°C in summer.

 

People

The country’s greatest asset is its people Friendly Well Educated (90% Literacy Rate) Both Skilled and Semi-skilled labour easily

available

Population: +/- 12 million

Annual population Growth: 1.1%

Why Invest in Zimbabwe

Highly skilled and literate Workers Centrally and strategically Located in the Southern

African Region Regional gateway (North-South Corridor) Regional logistics hub supported by infrastructure

such as railways, roads, power, telecoms. Natural resources endowment Diversified economy – manufacturing, services,

agriculture, mining and tourism Rejuvenated economy and domestic market Use of multiple currencies thus minimizing exchange

risks Access to major regional markets; SADC/ COMESA

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Investment Opportunities

• Main sectors of the economy available for investment are:

Mining Manufacturing Tourism Energy and Infrastructure Development Agro-industries Consumer facing industries

Increasing investment in these sectors is critical for achieving sustained economic growth and development

Specific Opportunities in the various sectors are as follows:

Manufacturing

The Sector is currently operating at 40% of capacity and the objective is to achieve at least 60% by year end.

There is need to retool and rehabilitate plant and equipment and to install new capacity.

The sector involves production of industrial intermediate and capital goods, consumer goods and value addition of primary products.

Manufacturing

Major sub-sectors include: The key thrust is on value addition Textiles: Cotton ginning, spinning, weaving,

finishing textiles and knitting products Clothing & Footwear: Wearing apparels and

footwear Chemicals: Fertilizers, insecticides, pests, paints,

varnishes, soaps, detergents, inks, glues, polishes, pharmaceuticals, industrial chemicals, petroleum products, rubber and plastic products

Wood & Furniture: Saw milling, wooden products, furniture and fixtures

Metal & Metal products: Machinery and equipment, radio and communication equipment

Information Communication Technology: Information processing, computer assembly, solar technology and consumer electronics

Tourism

Zimbabwe is a destination of unrivalled tourism attractions.

Over 2 million people used to visit the country annually.

Zimbabwe is ranked second in the SADC region in terms of tourist arrivals.

The tourism sector used to contribute 6% of GDP, 2.2% of formal employment and 10% of foreign exchange earnings.

Major Tourist Attractions

Victoria FallsGreat ZimbabweMana PoolsGonarezhou National ParkEastern HighlandsMatoposKariba DamChinhoyi CavesHwange National Park

National Parks

Victoria Falls

Kariba Dam

Great Zimbabwe

Investment Opportunities in the tourism sector

Trans-frontier Conservation Areas/Parks (e.g. Great Limpopo Trans-frontier Park) Tourism Development Zones (areas with high tourism potential where investors enjoy various tax incentives) Hunting safaris and tour operations (a rich and varied game species including the Big Five )

Urban Areas (accommodation, restaurants, transport and touring services and conference facilities) Eco-tourism (conservation of the environment, partnerships with the local

communities.)

Mining

The sector requires US$6bn in next 5 years for capitalisationThe sector has immense opportunities for investment as the country is endowed with a vast range of mineral resources.Mineral resources include gold, base metals (e.g. nickel, copper, zinc and lead) and industrial minerals (limestone, phosphates, clay, dolomites).

Zimbabwe has the second largest deposits of platinum in the world.Black granite, which is ranked as the best dimension (building stone) stone in the world.Coal, Coal-bed Methane. Diamonds.

Mining Investment OpportunitiesResuscitation of existing minesProspecting and establishing new mines for various minerals including gold, coal, diamond, granite and platinum. Quarrying and value addition of dimension stones such as black granite.Beneficiation of minerals e.g. cutting and polishing of diamonds, jewellary manufacturing and tile manufacturing.

Indigenization and Empowerment The New indigenization and empowerment regulations have been

misunderstood or deliberately vulgarized in some circles Government’s position of the 51% local ownership is very clear. The law gives investors the initiative to develop compliance plans Government will not nationalize or expropriate private assets Essar deal provides good lessons on investing in frontier markets Government learned its lesson on the land reform process, and we

are not going to repeat the same The focus is on broad based empowerment, to ensure that the

majority of Zimbabweans are integrated into mainstream economy

Investors have not fully explored other options such as community trusts, corporate social responsibility, employee share ownership, management stake and others

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Agriculture

•Primary production offood and cash crops, horticulture, livestock,Poultry farming,fishing and fish farming-game, wild life ranching,

The Sector is the Backbone of the Zimbabwean economy with backward and forward linkages with the major sectors of manufacturing, tourism, mining and service sectors. Opportunities Include the following:Private equity in agricultural institutions, mechanization and farm technology

Value addition in the agriculture sector, for instance, -meat processing, -fruit juice manufacturing, -export of horticulture and floriculture, -processing of cotton lint, -sugar milling -timber processing.

Infrastructure and Energy

After years of continuous economic decline there has been a serious deterioration in the state of infrastructure in Zimbabwe.

Government recognizes the need for private sector participation in financing and development of infrastructure.

Government acknowledges the important role of the private sector in financing infrastructure development.

The private sector is therefore welcome to participate in the development and provision of infrastructure on a public private partnership (PPP) basis.

Major Infrastructure Sub-Sectors Energy (electricity, gas, bio fuels and

renewable energy) Transport (roads, bridges, railways and

airports) Communications Urban water and sewage reticulation Agriculture infrastructure including dams and

irrigation schemes. Industrial parks and factory shells. Housing and Office buildings Health Facilities Education Facilities Sporting Facilities

Infrastructure Investment Opportunities

• Some of the urgent infrastructure projects that need investment include the following:• Transport:

Zimbabwe is strategically located in the Southern African Zimbabwe is strategically located in the Southern African region to act as a transport hub for both goods and region to act as a transport hub for both goods and passengers.passengers.

Scope exists for private sector investors to participate in Scope exists for private sector investors to participate in the development of transport infrastructure such as the development of transport infrastructure such as development and upgrading of roads, bridges, railways development and upgrading of roads, bridges, railways and airport facilities. and airport facilities.

Major projects include dualisation of the Beitbridge-Harare-Chirundu and Beitbridge-Bulawayo-Victoria Falls Roads.

Upgrading the national railway infrastructure and putting up a new railway line between Harare and Chitungwiza.

Upgrading of Kariba and Victoria Falls Airports Air Zimbabwe; strategic partner National Railways; rolling stock

Water

There is scope to harness water for enhanced There is scope to harness water for enhanced agricultural production, as well as clean water for agricultural production, as well as clean water for domestic use.domestic use.

This provides opportunities for the construction of dams This provides opportunities for the construction of dams and other water bodies for irrigation. Kunzvi dam, a few and other water bodies for irrigation. Kunzvi dam, a few km outside Harare is one project where Government is km outside Harare is one project where Government is seeking a partner to complete the dam and also seeking a partner to complete the dam and also establish a horticultural park. It is hoped the dam will establish a horticultural park. It is hoped the dam will also augment City of Harare’s water supply. also augment City of Harare’s water supply.

Other water projects include Tokwe Mukorsi dam, Gwayi-Shangani dams, Mtshabezi water pipeline, and Zambezi-Bulawayo water pipeline

Urban water and sewage reticulation in the major cities Urban water and sewage reticulation in the major cities and towns need to be upgraded, thus offering and towns need to be upgraded, thus offering opportunities for partnering with the relevant Local opportunities for partnering with the relevant Local Authorities in the provision of these essential services.Authorities in the provision of these essential services.

Energy Electricity deficit in Southern Africa

provides scope for establishment of new hydro and thermal power generating plants; transmission and distribution of electricity. Energy development projects include

thermal power projects in Hwange and Gokwe North, Kariba hydro extension.

Availability of large deposits of coal-bed methane gas in Lupane holds the promise of a cheap and relatively clean source of power.

There is also potential for developing bio-fuel plants and to exploit solar energy.

Electricity Production

Power station

Capacity Installed

Available

2011 2012 2013 2014 2015

Kariba 750 650 750 750 1000 1050 1050

Hwange 920 547 780 920 1200 1520 1520

Harare 100 - - 40 60 100 100

Bulawayo

90 - 40 60 80 90 90

Munyati 100 40 40 60 80 90 90

Total 1960 1237 1610 1830 2420 2860 2860

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Communications

Postal and telecommunication services are currently dominated by the public sector.

The only private participation is in the form of two private cellular phone operators and some private couriers.

Going forward the government has pronounced its intention to open up space for more private sector participation in the provision of communication services including ICTs.

ICT Backborne; huge opportunities for investors

Construction & Real Estate

Development of factory shells, Development of factory shells, industrial and technology industrial and technology parksparks TTo assist in lessening the o assist in lessening the

initial capital cost outlay for initial capital cost outlay for the small – medium scale the small – medium scale industries. industries.

To provide industrialistTo provide industrialistss with readily available factory with readily available factory accommodation accommodation so that they so that they cancan concentrate their effort concentrate their effort on securing plant and on securing plant and working capital.working capital.

Development of residential Development of residential housing schemes. The housing schemes. The country has housing country has housing backlogs in major towns and backlogs in major towns and cities.cities.

Construction of Office Construction of Office Blocks.Blocks.

Social Services Infrastructure Health: - Establishment of private health

facilities such as hospitals, dental clinics and other specialist services.

Education: - Establishment of private educational facilities such as schools, colleges and universities.

Sports: - Development of state of the art sporting facilities such as golf courses and stadia, which also supports tourism.

Taxation in Zimbabwe

Corporate Tax Rate 30%Aids Levy (on tax payable) 3% Capital Gains Tax 20%Shareholders’ Tax on Dividends

Listed Shares 15% Unlisted Shares 20%

Investment Incentives

Growth Point Areas Taxed At• New Manufacturing Projects 10%• New Infrastructure Projects 15% For first five years

BOOT and BOT Arrangements• First Five Years 0%• Next Five Years 15%• Third Five years 20%• Thereafter 30%

Investment Incentives Continued Taxable income from a manufacturing or

processing company, which exports 50% or more of its products - 20%

Taxable income of holder of special mining lease – 25%

Taxable income of company or trust derived from mining operations – 15%

Special Economic Zones

To be reintroduced in the Amended Zimbabwe Investment Authority Act and to include:

0% income tax for first 5 years 15% thereafter Exemption from capital gains tax Exemption from non resident taxes Duty free importations Sales tax on goods and services refundable

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Guidelines for Investing in Zimbabwe

Immigration Requirements/Work Permits There are no minimum and maximum investment

thresholds but investors wishing to take up residence in Zimbabwe should invest at least: US$300 000 for a sole venture. US100 000 for a joint venture with a local

investor. Investors investing at least US$1 million qualify

for automatic permanent residence. All business activities undertaken by foreign investors have to be approved by the Zimbabwe Investment Authority as foreign investment.

Guidelines for Investing in Zimbabwe

Exchange Control Issues In order to remove restrictions on business transactions, government has deregulated restrictive exchange controls and delegated export administration and payment authority to banks.Individuals and companies are now free to pay for goods and services offshore as well as service external debts without prior approval of the Exchange Control Authorities.Applications on income related transactions such as dividends, profits and capital repatriation no longer require Exchange Control approval as was the case before. Consistent with the use of multiple currencies and the need to enhance exports, corporates and individuals can now operate Foreign Currency Accounts (FCAs) with indefinite retention of FCA balances as opposed to the previous situation where they faced a 21 day liquidation requirement.

Reform Agenda33

One Stop Shop Investment Centre Launched 13/12/10 Strategy where relevant government agencies and authorities

responsible for issuing licenses and permits to investors are brought together in a coordinated and streamlined manner to provide prompt, efficient and transparent services to investors.

Should be viewed as part of the process of consolidating macroeconomic recovery, which includes other measures being taken by Government to improve the investment environment, eg BIPPAs.

Physically under one roof at ZIA To deliver efficient service to investors within clearly stipulated

time-frames (5 day rule).

Objectives of One-Stop-Shop

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To simplify and shorten procedures and guidelines for issuance of business approvals, permits and authorizations, thereby removing bottlenecks faced by investors in establishing and running businesses.

To address administrative bottlenecks To reduce time and high cost of doing business To eliminate dealing with multiple agencies To eliminate use of discretion and lack of

transparency in granting approvals, licenses and permits.

To improve on quality of service delivery 5 working days

Features of OSS35

ZIA coordinates and provides frontline services under the OSS Centre.

The OSS covers investments into all sectors of the economy Mandatory registration for all foreign investors to facilitate

investor/FDI tracking and after-care The selected agencies for the OSS physicaly present at ZIA A client charter to set standards and service targets

including approval time-frames. All guidelines and procedures simplified and will be put on

the ZIA website All participating agencies to review, re-engineer and

streamline their procedures All Agencies to work towards establishing an on-line

approval system which is interconnected. Establishment of Investor Tracking System (ITS)

Investment Process Under OSS

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New investor

ZIA Investor Facilitation Unit

ZIA Investor Registration

Certificate (IRC)

Company Registrar (Certificate

of Incorporation) Immigration Department (Residence

and Work Permits)

ZIMRA(register for VAT, PAYE, income tax),

Customs Clearance

Others EMA, Mining, Local Authority Utilities, Indig And Empowerment

.

Way Forward37

Crafting of supportive legal framework through amendment of ZIA Act and other legislation is under way.

Investor Tracking System being put in place to enable efficient and effective follow-up and after-care of licensed investments.

Government working on a number of reforms to ensure that there is rule of law and respect of property rights in the country

SADC roadmap designed to ensure free and fair elections

Election date to depend on completion of constitution making process