US embassy cable - 02HARARE1385


Identifier: 02HARARE1385
Wikileaks: View 02HARARE1385 at
Origin: Embassy Harare
Created: 2002-06-07 07:20:00
Classification: UNCLASSIFIED
Redacted: This cable was not redacted by Wikileaks.
This record is a partial extract of the original cable. The full text of the original cable is not available.

E.O. 12958: N/A 
REF:  STATE 88106 
A.   Zimbabwe's Investment Policies and Practices 
Government of Zimbabwe (GOZ) officials have generally 
recognized that foreign investment is needed to bring 
in necessary capital, technology and skills to create 
the jobs and opportunity that its available workforce 
desperately needs.  However, over the last three years 
the investment and operating climate in Zimbabwe has 
substantially worsened.  Potential investors need to 
assess carefully this tougher and more hostile 
environment, and to also factor in and plan for the 
government's goals for indigenization (black economic 
empowerment), privatization, and land 
reform/resettlement.  Food shortages, caused primarily 
by government policies and actions and exacerbated by a 
regional drought, are set to grow more severe and will 
effect all sectors of the economy and populace.  The 
recent trend of the isolation of Zimbabwe, in terms of 
bilateral relations and acceptable policies, will 
continue and will make doing business more difficult. 
The increasingly harsh and one-sided political 
environment, exacerbated by a severely declining 
economy, has contributed to great uncertainty about 
government policies affecting the country's near-term 
outlook and future.  Government rhetoric and actions 
over the past several years have caused substantial 
damage to Zimbabwe's image as a potential investment 
destination, and the absence of clear indications on 
what steps the government will take to halt and reverse 
the country's severe economic slide makes assessment 
and planning very difficult.  For example, in the 
latest Africa Competitiveness Report by the Davos, 
Switzerland-based World Economic Forum, Zimbabwe is 
ranked 23 out of 24 countries surveyed.  The main 
reasons for the low ranking are poor government 
policies vis--vis business and investment, political 
violence, price controls, asset seizure without 
compensation and other non-open market practices.  We 
urge potential or interested investors to contact the 
Economic/Commercial section of the Embassy for our 
assistance and latest information. 
In the first decade following Zimbabwe's independence 
in 1980, the GOZ was highly suspicious of western 
investors.  Investment proposals required a long and 
detailed evaluation process to determine whether they 
were a "good fit" with Zimbabwe's developmental needs. 
During this same period, Zimbabwe's economy was 
characterized by a very high level of central state 
planning and control, based on the Marxist model.  That 
situation improved after 1991, when the government 
embarked on a market opening effort and an Economic 
Structural Adjustment Program (ESAP) supported by the 
World Bank and the IMF.  In late 1992, the Zimbabwe 
Parliament promulgated the Investment Centre Act that 
provided a statutory basis for the Zimbabwe Investment 
Centre (ZIC), a one-stop shop ("mitigating the 
bureaucratic maze" in its own words), that is often the 
first port of call for all potential investors. 
Reviews of ZIC's utility and helpfulness by potential 
foreign investors are mixed, though generally positive, 
with the most common complaints being its opaqueness, 
slow speed and alleged occasional susceptibility to 
political influence. In 1995, government failure to 
meet targets for budget and civil service cuts and lack 
of progress in privatizing parastatals led the IMF to 
suspend funding for ESAP.  In 1996, the government 
announced a second plan, the Zimbabwe Program for 
Economic and Social Transformation (ZIMPREST), running 
through the year 2000, aimed at further liberalizing 
and opening the economy to free-market forces.  The 
results of this latest effort, which never received the 
support of the country's political leadership, have 
been very poor and far below expectations. 
A1.   Openness to Foreign Investment 
In May 1989, the GOZ published guidelines for foreign 
investors in "The Promotion of Investment: Policy and 
Regulations."  This document, updated in September 
1991, is commonly called the "Investment Code" and has 
two dominant themes: it recognizes that foreign capital 
has played an important role in Zimbabwe's development, 
but it stresses that Zimbabweans should participate 
more fully in the country's economy.  Accordingly, it 
notes that the GOZ prefers majority Zimbabwean 
participation in new investment projects and specifies 
that the degree of local ownership will be a prime 
criterion in the evaluation of investment proposals. 
The GOZ will consider majority or even 100 percent 
foreign ownership in high-priority projects, but will 
encourage arrangements for the eventual transfer of 
majority ownership to Zimbabwean interests.  It is GOZ 
policy to take part in new investments by entering into 
joint ventures with private or domestic investors in 
strategic and basic infrastructure projects.  However, 
given the government's cumulative deficit and resultant 
capital shortage, this type of activity is moribund at 
present.  Outside of these areas, official GOZ 
participation will not be the general rule.  Regarding 
privatization of Zimbabwe's parastatal companies, 
progress has been very slow in the decade since it was 
identified as a priority, with only about six 
organizations out of the 57 earmarked making the 
transition.  Arguments about the allowable extent of 
foreign investment, retention amount for 
indigenization, pricing and means of offering have yet 
to be clearly or transparently resolved. 
Other criteria for evaluation of proposed new 
investments are: 
- Socio-economic benefits for rural areas 
- Transfer of technology and training opportunities for 
- Generation of substantial employment opportunities 
- Balance of payment benefits through production of new 
- Access to scarce managerial resources and to foreign 
- Intensive use of local raw materials and processed 
- Use of labor-intensive technology easily adaptable to 
Zimbabwe's needs 
- Substantial research and development expenditures 
In June 1994, the GOZ gazetted an amendment to its 
investment regulations that listed specific sectors of 
the economy, industries, and business categories that 
are "reserved for domestic investors."  (This latter 
designation includes foreigners who have been granted 
residency status.) 
In agriculture and forestry, the following sectors are 
A) Primary production of food and cash crops 
B) Primary horticulture 
C) Game, wildlife ranching and livestock development 
D) Forestry 
E) Fishing and fish farming 
F) Poultry farming 
In transportation, the following sectors are reserved: 
A) Road haulage 
B) Passenger bus, taxis and car hire service of any 
C) Tourist transportation (excluding airlines) 
Other reserved businesses and industries are: 
A) Retail/wholesale trade, including distribution of 
locally produced goods 
B) Barber shops, hairdressing and beauty salons 
C) Commercial photography 
D) Employment agencies 
E) Estate agencies 
F) Valet services 
G) Armaments manufacture, marketing, and distribution 
H) Public water provision for domestic and industrial 
I) Railways operations 
J) Grain mill products 
K) Bakery products 
L) Sugar products 
M) Tobacco packaging and grading (post-auction) 
N) Tobacco products 
Not all proposals for investment must be submitted to 
ZIC.  One hundred percent locally-owned investments can 
be registered with the Registrar of Companies without 
going through ZIC.  ZIC approval is required only when 
there is foreign participation, including: 
- Any proposal to establish a new business or project 
- Proposals to expand an existing business that have a 
foreign exchange component 
- Any proposal to acquire the whole or any portion of a 
Zimbabwean business by the purchase of assets (this 
requires exchange control approval). 
The ZIC is authorized to approve proposals involving 
any foreign investor in any business field.  After 
approval of a project, if foreign staffing or 
management is desired, the Ministry of Home Affairs 
through the department of immigration is responsible 
for the issuance of work permits for expatriate staff. 
Both initial and renewal issuance of work permits has, 
at times, proved problematic for foreign companies and 
ZIC's address and contact numbers are: 
Zimbabwe Investment Centre 
Investment House 
109 Rotten Row 
P.O. Box 5950 
Telephone: 757931/4 
Fax: (263) (4) 757937 
A2.   Right to private ownership and establishment 
The GOZ, under President Mugabe's leadership, has a 
strong, residual desire to control as much of the 
economy as it can and only grudgingly implemented key 
areas of reform, and recently we are seeing a reversal 
of such reform.  Privatization of state-owned 
companies, liberalization of foreign exchange policies, 
removal of price controls from food, staples and energy 
are areas where progress has been sub-optimal or 
negative.  The local ownership requirement and the 
large areas of the economy where foreign investment is 
not allowed are other hindrances to business 
establishment and free cross-border capital and equity 
A3.   Protection of Intellectual Property Rights 
Since independence, Zimbabwe has applied international 
patent and trademark conventions.  It is a member of 
the World Intellectual Property Organization. 
Generally, the GOZ seeks to honor intellectual property 
ownership and rights, although there are serious doubts 
about its ability to enforce these obligations.  The 
Embassy is not aware of any grievances over such 
issues, although pirating of videocassettes and 
computer software is common.  Remittances for 
royalties, technical services and management fees have 
been suspended by many companies with overseas ties, 
due to the severe hard currency shortage experienced in 
Zimbabwe since year end 1999. 
A4.   Performance Requirements/Incentives 
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 GOZ waives import tax and surtax on 
capital equipment.   Other incentives for investors 
-    Investment allowance of 15 percent in the year of 
purchase of industrial and commercial buildings, staff 
housing and articles, implements and machinery 
-    Investment allowance of 50 percent in the year of 
purchase for training, buildings and equipment 
-    Twenty-five 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 entitle the holder 
to specific incentive packages to be negotiated with 
the Ministry of Mines. 
Import duties (the reduction of which had been under 
discussion with both the IMF and the World Bank) and 
related taxes range up to more than 100 percent since 
their temporary hike following the Zimbabwe dollar's 
devaluation in 1999.  The GOZ also has provided for the 
refund of sales taxes (15 percent) for capital goods 
purchased in Zimbabwe and intended for use in priority 
projects or investment in growth points. 
Any investment proposal that involves the employment of 
expatriates must present a strong case for doing so in 
order to obtain a work and residence permit.  Normally, 
the maximum contract period for an expatriate is three 
years, but this will be extended to five years for 
expatriates with highly specialized skills. 
Expatriates who have prior permission from the Reserve 
Bank's exchange control department will be permitted to 
remit one-third of their salaries. 
There are no general performance requirements. 
Official policy, however, especially welcomes 
investment in enterprises that contribute to rural 
development, job creation, exports, use of local 
materials, and transfer of appropriate technology. 
There are no discriminatory import or export policies 
affecting foreign firms, although as noted earlier, the 
GOZ's approval criteria are heavily weighted toward 
export-oriented projects, especially from foreign 
Joint ventures are very strongly encouraged.  While 
official policy supports "the maximum Zimbabwean 
participation" in any new investment project, no 
specific requirements for local participation have been 
defined.  However, experience has shown that 30 percent 
local participation is a widely accepted benchmark 
minimum.  Foreign investors are expected to provide for 
domestic equity participation at or prior to startup, 
and can expect to be approached early on by a wide 
range of potential partners, with some government 
officials desiring shares at no cost.  Companies are 
expected to make maximum use of Zimbabwean managerial 
and technical personnel.  Subject to Reserve Bank 
approval, foreign companies are allowed to provide 
capital equipment as an equity contribution to a joint 
The Government of Zimbabwe's policy calls for 
Government participation in new investments in 
"strategic" industries such as energy and mining.  The 
terms of government participation will be determined on 
a case-by-case basis.  However, the government's lack 
of funds (the cause of the dearth of new major 
investment projects), means that this policy has not 
been tested in practice for some time. 
At the urging of western donors, the IMF and the World 
Bank, the GOZ promulgated legislation establishing 
export processing zones (EPZ's) and appointed an EPZ 
authority in 1996.  However, a trade performance 
statute requires eligible companies to export at least 
80 percent of output, a requirement that has limited 
foreign investment in the new zones.  Other benefits 
include a five-year tax holiday, duty-free importation 
of raw materials, no tax liability from capital gains 
arising from the sale of property forming part of the 
investment in designated processing zones, and duty- 
free importation of capital equipment for use in the 
The newly-formed Revenue Authority (combining the 
formerly separate Departments of Customs, Excise and 
the Tax Bureau) continues to charge designated 
companies duties on exempted inputs and equipment.  The 
EPZ authority approved over 15 projects in 2001. 
However, the economic slowdown, high inflation and 
interest rates, and the very uncertain outlook have 
slowed or halted movement on startup and completion. 
In the original legislation, the provisions of the 
Labor Relations Act (LRA) would not apply within the 
zones.  Due to strong advocacy from the labor movement, 
the Ministry of Public Service, Labor and Social 
Welfare has entered into discussions with the Ministry 
of Justice to amend the act so that the LRA indeed 
would apply. 
A5.   Transparency of the Regulatory System 
GOZ official policy is to encourage competition within 
the private sector, and the government is concerned 
about an "over-concentration" of market clout among 
only a few companies in several industries.  At 
present, many bureaucratic functions in this still 
heavily controlled economy are less than fully 
transparent and can by no means be considered 
streamlined.  Corruption within the regulatory system 
is increasingly worrisome. However, GOZ regulators 
generally perform their functions forthrightly, though 
slippage can be expected to increase. 
A6:   Corruption 
According to anecdotal evidence and a survey conducted 
by Transparency International-Zimbabwe, corruption, 
already at high and chronic levels, is increasing 
within government.  Many companies and the police do 
not have appropriate tools or skills for investigating 
and checking corruption, though the legislative and 
criminal law framework exists (for example, acceptance 
of bribes is a criminal offense).  Several U.S. firms 
have protested problems involving major government 
tenders and the lack of transparency in the government 
tender board's management of the cases.  Tenders in the 
telecommunications, power, defense and aviation sectors 
have been particularly notorious.  Cases involving high 
or prominent ruling party or government officials 
usually do not reach court, regardless of the magnitude 
or egregiousness of the offense. 
In the second quarter of 2000, Parliament adopted a 
constitutional amendment that provides for the creation 
of an anti-corruption commission, however, to date it 
has not been funded or staffed.  The Zimbabwe Republic 
Police have historically been generally well 
disciplined, but do not give the stamping out of 
corruption any special priority.  Recent instances of 
massive corruption show that in many government 
entities, especially the parastatals, corrupt practices 
are widespread.  The government's electioneering 
tactics over the last two years as well as the seizure 
and theft from commercial farms has caused a widespread 
dissolution of respect for the rule of law, and this 
trend looks set to continue in the near term.  Unless 
such practices are aggressively checked, Zimbabwe's 
investment and business climate will suffer further 
serious damage. 
A7.   Labor 
As noted elsewhere in this report, there is a growing 
shortage of professional, technical and service skills 
in the workforce, caused primarily by emigration 
brought about by declining living standards and the 
mutually reinforcing political and economic crises. 
This is despite the fact that Zimbabwe still has one of 
the best-educated labor forces in Africa.  Shrinkage of 
the economy in recent years, and the commercial farm 
invasions in the same period have caused formal sector 
employment to drop fairly precipitously.  With at least 
300,000 secondary school graduates or dropouts entering 
the job market every year, the unemployment rate has 
been steadily rising, and now stands at a minimum of 65 
or 70 percent.  The reduced business activity, 
declining profitability of companies and surplus labor 
have caused wage increases to lag behind inflation.  As 
a consequence, disposable incomes and standards of 
living have fallen for the majority of the formally 
employed.  Increasingly severe food shortages will 
effect all Zimbabweans, and urban wage earners will 
face special challenges in securing adequate food 
The country's HIV/AIDS epidemic (over one in four adult 
Zimbabweans are HIV positive) also is taking a heavy 
toll on the workforce, with the worst effects of the 
disease still to come.  For example, the AIDS mortality 
rate is currently estimated at over 2000 deaths/week, 
or 100,000 per year, and will climb sharply in coming 
years.  Some businesses are trying to mitigate the 
impact through workplace HIV/AIDS prevention 
initiatives, but such actions will not cause a change 
in the near-term impacts of the epidemic. 
The GOZ largely adheres to International Labor 
Organization conventions protecting worker rights.  The 
1985 Labor Relations Act sets strict standards for 
occupational health and safety, but enforcement is 
fairly lax and not consistent throughout the industrial 
sectors.  In addition, the GOZ sets a maximum workweek 
and minimum wage.  The workweek averages 40 hours, but 
can go as high as 60.  The law mandates a 24-hour rest 
period each week.  Although minimum wages are 
ostensibly set by the government along sectoral lines, 
in practice there is currently no common policy.  Due 
to the hyper-inflationary situation, each sector 
negotiates wages that it can afford to pay.  Some 
workers are also provided allowances and expenses for 
food, transportation, and housing.  As already noted, 
wage increases have lagged considerably behind the rate 
of inflation (currently exceeding 100%), causing a 
serious drop in disposable income and purchasing power. 
One of the most sobering labor developments concerns 
the displacement of commercial farm workers.  Due to 
the disruptions on commercial farms, there are 
currently over 300,000 displaced agricultural workers 
in Zimbabwe.  In addition to having no work and no 
income, many of these laborers - and their families - 
now have no home.  The ripple affect of this 
displacement on the economy will continue to be felt 
for years, as will the accompanying loss in 
agricultural production. 
Labor relations have become particularly fractious 
between labor and government in Zimbabwe since 1997, as 
economic conditions in the country have deteriorated. 
They are less so between labor and management.  Workers 
negotiate wages and other benefits with employers 
during the annual collective bargaining season, which 
runs from approximately May to July each year.  A 
National Employment Council (NEC) in each industry, 
comprising representatives from labor, business, and 
government, is the vehicle through which the collective 
bargaining takes place.  In addition, the Zimbabwe 
Congress of Trade Unions (ZCTU), the country's umbrella 
labor organization, consisting of 35 member unions and 
approximately 270,000 members, is the traditional 
advocate for workers to both business and government. 
Through both the NEC and the ZCTU, workers in all 
sectors have demanded repeated salary increases in 2001 
and 2002 to compensate for the high inflation and 
increased cost of living, in some cases striking until 
their demands were addressed.  In almost all 
industries, employers have approved more than one 
salary hike per year in response to the inflation rate. 
Although the GOZ still maintains an historically 
paternalistic attitude toward labor, reserving the 
right to intervene in issues of concern in the 
workplace, the high profile and politicization of the 
ZCTU in recent years has forced government to attempt 
to claw back a greater deal of control over workers. 
Both before and since the recent presidential 
elections, the government has threatened the ZCTU with 
elimination, and has taken steps to marginalize the 
traditional unions and also the formal labor dispute 
resolution mechanism.  Notably, in 2000, "war vet" 
groups - using tactics similar to those adopted in the 
farm invasions - invaded a limited number of factories 
and workplaces, usually claiming to represent the 
interests of terminated or disciplined workers. 
Employing intimidation, violence and sometimes 
kidnapping the efforts, directed mainly at mostly white 
management, were in most cases thinly veiled extortion 
Since that time, the GOZ has capitalized on the 
"successes" of the war vets in their labor-problem- 
solving role by creating the Zimbabwe Federation of 
Trade Unions (ZFTU), as an alternative umbrella 
organization that is challenging the ZCTU's historic 
control over organized labor.  Deemed by no one outside 
of government or the government-controlled media as a 
legitimate labor organization, the ZFTU is still being 
promoted by the GOZ as the true, indigenous and 
nationalist umbrella labor organ.  The GOZ has 
repeatedly backed attempts by the ZFTU to persuade 
workers - often utilizing threats, coercion, 
harassment, and outright force - to shift their 
allegiance and their union dues from the ZCTU to the 
ZFTU.  At the time of this report the struggle for 
primacy between the two organizations goes on, although 
the ZCTU still remains the "official" and 
internationally recognized voice of organized labor in 
A8.   Efficient Capital Markets and Portfolio 
Zimbabwe's stock market (about 65 companies listed) is 
small, trading is quite thin, and the public stock 
float of many of the smaller companies is closely held. 
In September 1996, the GOZ 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 a single investor 
acquiring a maximum of 10 percent of the shares on 
offer.  Foreign participation in the bond market is 
restricted to the primary market and only 35 percent of 
invested capital may be placed in bonds.  The major 
opportunity for foreign investors is in the equity 
market.  New portfolio investment in Zimbabwe has been 
very limited in recent quarters as the country's macro- 
economic outlook and fundamentals continue to decline. 
Zimbabwe's financial sector is, relative to the 
business base and in comparison to all its neighbors 
but for South Africa, quite large and well developed. 
An impressive variety of financial instruments are 
traded, though thinly, including debentures, private 
sector bonds, bankers acceptances, treasury bills, 
municipal and utility bonds.  Two major international 
commercial banks and a number of regional and domestic 
banks operate with over 200 branches total.  The 
merchant banks are quite sophisticated and agile.  The 
well-publicized failure of a number of financial 
institutions, primarily due to fraud and inept 
management, has raised concern over the oversight 
capability of the Reserve Bank and the financial 
soundness of a number of the smaller players.  The 
government's action to peg the exchange rate of the 
Zimbabwe dollar in January 1999 (halting devaluation) 
and the introduction of price controls on many basic 
goods has raised concern about a return to the 
centrally controlled economy of the 1980s.  Revised 
banking regulations have been criticized for reducing 
the independence of the central bank in carrying out 
its monetary policies.  While the RBZ is a major force 
in setting interest rates (through reserve 
requirements, T-Bill issuance and the discount rate), 
rates up until 2001 had been primarily market driven. 
In addition, a parallel market for hard currency at non- 
official rates has become established.  There have been 
no instances of hostile takeovers within the financial 
sector.  One sign of Zimbabwe's perilous economic state 
is a very low savings base, now estimated at only 6 
percent of GDP, down from 9 percent last year.  This 
implies very poor domestic investment in the future, 
and deserves to be noted. 
A9.   Conversion Transfer Policies 
Zimbabwe is currently experiencing an acute hard 
currency shortage that is more than two years old and, 
among other things has caused fuel shortages, default 
on sovereign debt, shortages of imported goods and 
components, and a sharp decline in industrial, 
agricultural and mining operations. 
In 1991 under the ESAP program, the GOZ began to 
liberalize dividend remittability above the prior 25 
percent cap.  Advantage was given first to new, 
post-independence investors and especially to those 
with an export orientation.  On January 1, 1994, the 
GOZ raised the rate of repatriation for pre-1979 
investments from a maximum of 25 to 50 percent of 
after-tax profits.  As of January 1, 1995, all foreign 
investors in Zimbabwe may remit up to 100 percent of 
their after-tax profits. 
Blocked remittances, and/or pre-May 1993 profits that 
could not be sent overseas, were held in below market 
rate interest bearing accounts or government 
securities.  Previously, these funds could be 
reinvested in projects as long as they were matched by 
an inflow of foreign currency (on a one-to-one basis). 
Profits from these new investments could be remitted at 
a rate of 100 percent. In September 1995, the Reserve 
Bank of Zimbabwe (RBZ) announced and followed-up on 
plans to remove restrictions on the repatriation of 
blocked funds and dividends, and most such funds were 
released over a three-year period. 
An initial foreign capital investment made after 
September 1, 1979 may be fully repatriated, less any 
income transferred, without restriction.  The corporate 
profits tax rate for both foreign and domestic 
companies is 37.5 percent.  The GOZ allows a variety of 
deductions for depreciation, training, research, and 
investment in growth points. 
Despite making the Zimbabwe dollar convertible for 
current account purposes, the GOZ still strictly 
controls capital outflows.  These controls extend to 
prospective outward investment, as well as to dividend 
remittances.  Relatively few Zimbabwean firms have made 
investments outside the country, and most of these are 
in neighboring nations.  Traditionally, however, 
investment by Zimbabweans outside their country has 
been something of a sore point with the GOZ, which 
suspects that they may actually represent disinvestment 
from Zimbabwe or capital flight, rather than true 
foreign investment.  A case in point are a number of 
textile manufacturers who relocated to Botswana a few 
years ago in order to take advantage of that country's 
easy access to imports and foreign exchange for the 
purpose of exporting back into Zimbabwe. 
A10.   Expropriation and Compensation 
Zimbabwe's constitution prohibits the acquisition of 
private property, agricultural land excepted, without 
compensation, and the GOZ has repeatedly stressed that 
it is committed to maintaining the legal protection of 
private property.  Recent rhetoric and actions by the 
president and top cabinet members, including the 
government's sanctioning of land invasions by "war 
veterans," and the previous Parliament's approval in 
April 2000 of Constitutional Amendment No. 16 
authorizing the compulsory acquisition of privately 
owned commercial farms with compensation limited to the 
improvements made on the land, calls into question the 
government's respect for property rights. 
Additionally, over the last year a number of statements 
have been made by the President and government 
officials that indicate that the mining sector may next 
be targeted for greater indigenization.  What 
parameters and compensation standards will be followed 
if this objective is acted upon remain to be seen. 
While land reform and distribution is recognized as a 
necessary step to create long-term stability and 
enhanced economic participation by citizens in 
Zimbabwe, the current program fails in targeting these 
goals.  In too many instances prime properties are 
going to ruling party cadres, and the resettled peasant 
population lacks the skills and resources to utilize 
the land they have been dropped upon.  Transparency and 
an orderly strategy to maintain production have been 
grossly lacking.  The government's program to acquire 
land (of large mainly white-owned commercial farms) and 
resettle it whether or not it has the funds to 
compensate the owners has raised serious questions 
about respect for property rights and the rule of law, 
and the future viability of this core economic sector. 
Besides the fate of the country's largest export 
producing sector, Zimbabwe's food self-reliance is also 
under threat from the government's actions. 
A11.   Dispute Settlement 
In the event of any investment dispute, the Government 
of Zimbabwe will agree 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.  We are not aware of any 
investors who have resorted to this option. 
To increase investor confidence, the GOZ 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.  Zimbabwe's 
judiciary has a well-deserved reputation for fairness 
and independence, though recent government actions 
intimidating the judiciary and new appointments to the 
bench raise concerns in this area. 
A12.   Political Violence 
Since the Government's loss in a February 2000 
constitutional referendum, ruling party supporters 
sanctioned and supported by the Government have 
systematically attacked members of the opposition 
Movement for Democratic Change (MDC) and anyone 
suspected of supporting them.  In the months preceding 
the June 2000 parliamentary elections and the March 
2002 presidential election, the political violence 
intensified and ruling party supporters, including 
liberation war veterans and government-trained militia, 
perpetrated widespread abuses and killed more than 150 
War veterans and other ruling party faithful continue 
to occupy most of the country's commercial farms and 
brutalize and intimidate white farmers and their black 
workforce.  Demonstrations and violent unrest, 
committed by both sides, continue to occur periodically 
in high-density suburbs and peri-urban areas. 
Continued economic decline, including looming serious 
food shortages, may very well translate into further 
violence and protests in urban centers, as was 
sporadically seen in 1998 and 2000 when government- 
controlled consumer prices were sharply increased. 
During the first few years of independence, ethnic- 
based strife between the two major political parties 
(ZANU and ZAPU) resulted in the deaths and arrests of 
thousands of Ndebeles in the western regions of the 
country with much of the violence in Matabeleland 
carried out by the North Korean-trained "fifth brigade" 
in a so-called purging exercise known as the 
"Gukurahundi".  The 1987 unity accord that merged the 
two parties put an end to that period of violence. 
With little prospect of a political solution to the 
ongoing economic crisis, it is not possible to predict 
when the situation may stabilize. 
B.    Bilateral Investment Agreements 
Zimbabwe currently has bilateral investment agreements 
in force with Germany, the United Kingdom, Portugal, 
Switzerland, Malaysia, Mozambique, China and is 
negotiating (albeit slowly) bilateral investment 
treaties with Italy and the Netherlands.  However, 
commercial farms covered under some of the foregoing 
treaties remain listed for acquisition under current 
legislation, thereby denying the owner benefits such as 
free use and full, market compensation that are covered 
in the treaty.  A bilateral investment treaty with the 
United States is not in effect. 
C.   OPIC and Other Investment Insurance Programs 
The GOZ and the U.S. government concluded an updated 
OPIC agreement in April 1999.  Zimbabwe acceded to the 
World Bank's multilateral investment guarantee agency 
(MIGA) in September 1989.  Many major donor countries 
have suspended their trade finance and export promotion 
programs, as well as investment coverage, due largely 
to mounting arrears caused by Zimbabwe's recent 
difficulty in meeting its foreign debt obligations in a 
timely manner. 
D.   Foreign direct investment value 
Foreign investment has played a crucial role in 
Zimbabwe's development.  At the end of the 1970's, 
foreigners owned an estimated 70-80 percent of the 
listed corporate sector.  Today, offshore ownership of 
shares on the Zimbabwe Stock Exchange has fallen to 
approximately 25 percent (about 5 percent individuals, 
the remainder institutional or corporate).  However, 
from independence in 1980 until the introduction of the 
precursor of the structural adjustment program in 1990, 
new foreign investment amounted to only about U.S. $27 
million.  A survey conducted in the late 1980's by the 
Confederation of Zimbabwe Industries (CZI) indicated 
that 25 percent of industrial concerns have some 
foreign ownership.  Because these include many of 
Zimbabwe's largest companies, they still account for 40- 
50 percent of industrial output.  Estimates of the 
value of overall foreign investment run as high as U.S. 
$5 billion (replacement cost).  Foreign direct 
investment in the last three years has all but dried 
up, as the government's focus on political objectives 
at substantial cost to the economy continue and a 
return to better policies and practices seems no 
Major Foreign Investors 
The vast majority of foreign investment predates 
independence and is held by British and South African 
interests.  The largest investors are Anglo-American 
(SA), Lonrho (UK), and, until recently, BHP 
(Australia), which together dominate the mining and 
lumber industries and have large interests in 
manufacturing, agriculture (primarily tobacco, coffee, 
tea and sugar), and retailing.  During the 1980's the 
GOZ bought interests in a number of foreign-owned 
firms, in some cases buying them out completely -- but 
always on a willing buyer/willing seller basis.  Many 
foreign-owned firms, especially South African, 
localized their Zimbabwean subsidiaries through 
management buy-outs.  The creation of the Southern 
African Development Community (SADC) with a specific 
mandate to promote economic integration in the region 
and to facilitate flows of trade and investment is 
still a work in progress.  The U.S. government, through 
the U.S./SADC forum is strongly committed to working to 
improve the viability of SADC. 
There are about 40 U.S. companies operating in 
Zimbabwe, with estimated assets of more than U.S. $250 
million (historical basis).  Some of the familiar brand 
or company names include IBM; Coca-Cola; H.J. Heinz; 
Colgate; NCR; 3M; Caterpillar; Compaq Computer, and 
Cargill.  U.S. firms play a major role in the tobacco 
processing industry and are major players in the 
distribution of retail petroleum products (Mobil and 

Latest source of this page is cablebrowser-2, released 2011-10-04