Foreign direct investment (FDI) in Zimbabwe

FDI in Figures

FDI flows to Zimbabwe are far below the country's potential due to the recession the country experienced in 2019 following the passage of Cyclone Idai and drought caused by El Niño, and the economic and health crisis triggered by the Covid-19 pandemic. According to the UNCTAD's 2022 World Investment Report, FDI inflows ammounted to USD 166 million in 2021, a significant decline compared to the pre-crisis period (USD 745 million in 2018). In the same year, the total stock of FDI reached USD 6 billion. The end of Robert Mugabe reign brings hopes of reforms that should stimulate the investment. FDI is mainly directed towards the mining sector (diamonds, gold, nickel, platinum), infrastructure, the wood industry, health care, water and sanitation, financial services, tourism, manufacturing and agriculture. China is the first investor in Zimbabwe. Russia, Iran and India are also important investors in the country.

The government seeks to attract FDI and has implemented the Zimbabwe Investment Authority (ZIA), which is the country's investment promotion body set up to promote and facilitate both foreign direct investment. In recent years, Zimbabwe has made it easier to obtain building permits, obtaining loans and resolving insolvency. However, the unpredictability of the government’s economic policies and the unstable political and economic climate in recent years has undermined foreign investment. The country has a very rich natural potential (second largest reserve of platinum and chrome; diamonds, coal, gold, platinum, copper, nickel, tin) and an adequate infrastructure (except for recurrent power cuts), which represent genuine assets to foreign investors. Nevertheless, the government reserves certain part of the economy to national investors and refuses to privatise some firms. Additionally, the country has a program of naturalisation through investment (CBI). The "law of indigenisation" (applied in certain sectors) requires foreign investor to concede 51% of their capital to native Zimbabweans. In addition, in late 2013 a law was passed which forbids foreigners from owning small business in Zimbabwe. Foreign investors have been dominating the local mergers and acquisitions scene, with 73% of all approved mergers since June 2017 concluded by foreign parties. Some of the biggest M&A deals in recent years were a merger between Linde AG and Praxair incorporation, as well as the acquisition of 49% shareholdings in Niculata Investments Limited by Vilmorin Singapore (Pvt) Limited, in 2018.

What to consider if you invest in Zimbabwe

Strong Points

Zimbabwe's strong points in terms of attracting FDI include:

- abundant mineral resources (platinum, gold, diamond, nickel);
- agricultural wealth (maize, tobacco, cotton);
- potential for tourism development;
- membership of the Southern African Development Community (SADC);
- normalisation of relations with the international community.

Weak Points

The factors hindering foreign investment in Zimbabwe include:

- economic and financial situation hit by a long period of hyperinflation;
- shortage of cash;
- under-investment in infrastructures (especially energy infrastructure);
- precarious food and health situation: the majority of the population depends on international aid;
- AIDS prevalence rate among the highest in Africa and in the world.

Government Measures to Motivate or Restrict FDI

While the government of Zimbabwe has implemented since 2009 a number of measures designed to attract foreign direct investment (FDI), many of its macroeconomic policies, such as the indigenization and economic empowerment laws, acted as significant deterrents. Following recent political changes, the new government amended indigenization, or local ownership laws, to reduce the restriction to only the diamond and platinum sectors; other sectors are now open to unrestricted foreign ownership. Moreover the government has announced its commitment to improving transparency and removing corruption.

Zimbabwe’s incentives to attract FDI include 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. Tax inventives may be obtain in certain sectors such as pharmaceuticals, energy, construction, agriculture and mining. To learn more about inventives for investment, please visit Zimra website.

Bilateral investment conventions signed by Zimbabwe

Zimbabwe has signed 32 bilateral agreements. For more details, please see the UNCTAD website.