Source: Incentives crucial to Zida success | The Herald February 20, 2020
Lovemore Chikova Development Matrix
Last week we looked at some areas which formed the basis of the newly-established Zimbabwe Investment Development Agency (ZIDA), basing on the provisions of the attendant Act.
The ZIDA Act was signed into law by President Mnangagwa nearly two weeks ago, and provides for the opening up of space for investors to easily do business in Zimbabwe.
The Act repeals the Zimbabwe Investment Authority Act, the Special Economic Zones Act and the Joint Ventures Act.
These organisations were responsible for dealing with investors, but their efforts were not synchronised, resulting in the duplication of duties.
ZIDA brings the work done by these institutions under one roof and establishes a one-stop investment services centre that will solely be responsible for dealing with investors.
Other organisations that are responsible for issuing various licences to investors, including relevant Government ministries, will have desks at the ZIDA offices.
The advantage is that investors will be served under one roof, cutting on the time which they had to move around from one office to another submitting their papers for the various operating licences.
The establishment of ZIDA should be viewed in light of the broad reform agenda being undertaken by the New Dispensation meant to open up the economy for a huge leap forward.
The new investment agency enhances the ease of doing business and underlines President Mnangagwa’s thrust that “Zimbabwe is open for business”.
ZIDA cuts on bureaucracy and corruption when it comes to the handling of investors by setting rules and regulations that are clear to everyone, which can easily be referred to when they appear to be breached.
By establishing ZIDA, Zimbabwe is positioning itself for an influx of investors, who are always attracted by destinations that have clear policies governing investments.
This week, we have another look at what the ZIDA Act offers prospective investors.
Incentives are one of the most important considerations by investors since they determine if it is worth to commit their capital to a particular destination.
In fact, one of the most debated areas when it comes to attracting foreign direct investment has been around incentives.
It was a widely held view by investors that there were no clear incentives offered in Zimbabwe and in some cases, organisations dealing with investments issued conflicting statements on the issue.
As pointed out above, there were too many organisations dealing with investors to such an extent that each entity offered different incentives from the other.
For instance, investors coming for special economic zones would get a totally different package from those in joint ventures and other areas of investment.
All this is expected to end with the establishment of ZIDA, whose Act is clear on how incentives will be set and how they will be applied.
According to the ZIDA Act, guidelines for incentives for investments will be published by the minister responsible for Finance.
These guidelines will mention: (a) general incentives that may be applicable to licensed investors, whether foreign or domestic
(b) special incentives that may be applicable to specific categories of licensed investors such as primary producers, exporters, and investors involved in value-addition and import-substitution projects, whether foreign or domestic; and
(c) any other incentives and conditions that may be applicable to investors, whether foreign or domestic; and in so doing, ZIDA may specify different incentives for domestic and foreign licensed investors.
ZIDA is tasked with the responsibility of ensuring that reasonable steps that are necessary are taken to publish the incentives.
Special Economic Zones
Following the repealing of the Special Economic Zones Act by the ZIDA Act, the new investment agency will now be responsible for overseeing investments coming into those economic zones.
ZIDA is empowered to declare any area or premises as a Special Economic Zone, and the area shall be defined in a notice in the Government Gazette, according to the ZIDA Act.
The new investment agency is empowered to “amend, add to or abolish any Special Economic Zone”.
According to the ZIDA Act, when dealing with an application for an investment licence in the Special Economic Zone, the investment agency will consider the 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.
ZIDA will also consider the extent to which skills and technology will be transferred for the benefit of Zimbabwe and its people and the extent to which the proposed investment will lead to the creation of employment opportunities and the development of human resources.
The other consideration will be the extent of value addition and beneficiation of local raw materials, the value of the convertible foreign currency transferred to Zimbabwe in connection with the project and the impact the proposed investment is likely to have on the environment and, where necessary, the measures proposed to deal with any adverse environmental consequences.
ZIDA will also consider the impact the investment is likely to have on existing industries in the economy, the extent to which the proposed investment will establish linkages within the domestic economy and the possibility of transfer of technology.
Those wishing to develop an area as a special economic zone where licensed investors can operate from will have to lodge applications with ZIDA.
The ZIDA Act provides that any investor wishing to operate in the country will have to apply for an investment licence, with the investment agency’s chief executive mandated to approve or reject the application without delay.
All other investment licences will be valid for a period fixed by ZIDA, while the licence for investment in a Special Economic Zone will be valid for a 10-year period.
There will be room for investors to renew their licences, but this should be done before they expire.
Perhaps to avoid cases of corruption and favouritism, ZIDA will be compelled to maintain a register of all investment licences that will be open to inspection by the members of the public.
The register will also be posted on a website to enable members of the public to access it without any hindrances.
The ZIDA Act empowers the investment agency to visit any premises to inspect licences and examine, make copies of or take extracts from any financial statements, books or other documents related to the investment.
Investment licences can be cancelled or suspended by ZIDA after establishment that the investor failed to abide by conditions imposed on the issuance of the licence.
The ZIDA Act specifies that the licence can also be cancelled if the investor obtained it on the basis of fraud or a misrepresentation of a material nature or any false or misleading statement.
It can be cancelled if the investor assigns, cedes or otherwise transfers the licence to another person without the prior approval of the investment agency or the investor fails, without reasonable explanation, to implement the approved activity described in the licence within the period stipulated or any extension.
Before the suspension or cancellation of the licence, the investor will be accorded an opportunity to show cause why the action should not be taken.
Public Private Partnerships (PPPs)
ZIDA will be responsible for handling public private partnerships, which previously fell under the Joint Venture Unit, whose Joint Venture Act was repealed by the ZIDA Act.
A new entity, the Public Private Partnership Unit, will be formed under ZIDA to replace the Joint Venture Unit, with various responsibilities to the investors.
The responsibilities will include considering project proposals submitted to the Unit and assessing if they are affordable to the contracting authority or if they provide value for money.
The Unit will also provide for the optimum transfer of technical, operational and financial risks to parties in the partnership.
It will also assess if the partnership is competitive and make recommendations through the chief executive officer on such proposals to Cabinet.
The Unit will develop best practice guidelines in relation to all aspects of PPPs and formulate suggested policy in relation to PPPs for adoption by Government.
It will be mandated with developing awareness of PPPs in Zimbabwe as a vehicle for economic development and delivery of public services and through the chief executive officer make recommendations on project proposals submitted by contracting authorities to Cabinet.
The ZIDA Act specifies that any dispute that may arise with regard to any investment within its scope will be governed by and construed in accordance with the laws of Zimbabwe.
For foreign investors, the dispute can also be submitted to the dispute settlement mechanisms provided for in any treaty or agreements on the promotion and protection of investments between Zimbabwe and the country from which the foreign investor originates.
Investors protected by Bilateral Investment Protection and Promotion Agreements who were operating before the enactment of the ZIDA Act will be required to register their investment with the new investment agency.
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