VZCZCXRO8787
PP RUEHBZ RUEHDU RUEHJO RUEHMR RUEHRN
DE RUEHSB #1481/01 3531300
ZNR UUUUU ZZH
P 191300Z DEC 06
FM AMEMBASSY HARARE
TO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY PRIORITY
RUEHC/SECSTATE WASHDC PRIORITY 0931
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHUJA/AMEMBASSY ABUJA 1404
RUEHAR/AMEMBASSY ACCRA 1259
RUEHDS/AMEMBASSY ADDIS ABABA 1408
RUEHBY/AMEMBASSY CANBERRA 0669
RUEHDK/AMEMBASSY DAKAR 1034
RUEHKM/AMEMBASSY KAMPALA 1462
RUEHNR/AMEMBASSY NAIROBI 3855
RUEHFR/AMEMBASSY PARIS 1231
RUEHRO/AMEMBASSY ROME 1884
RUEHBS/USEU BRUSSELS
RUEHGV/USMISSION GENEVA 0610
RHEHAAA/NSC WASHDC
RUCNDT/USMISSION USUN NEW YORK 1624
RUEKJCS/JOINT STAFF WASHDC
RUEHC/DEPT OF LABOR WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEFDIA/DIA WASHDC//DHO-7//
RUCPDOC/DEPT OF COMMERCE WASHDC
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK//DOOC/ECMO/CC/DAO/DOB/DOI//
RUEPGBA/CDR USEUCOM INTEL VAIHINGEN GE//ECJ23-CH/ECJ5M//

UNCLAS SECTION 01 OF 12 HARARE 001481 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
AF/S FOR S. HILL 
NSC FOR SENIOR AFRICA DIRECTOR B. PITTMAN 
STATE PASS TO USAID FOR M. COPSON AND E.LOKEN 
TREASURY FOR J. RALYEA AND T.RAND 
COMMERCE FOR BECKY ERKUL 
ADDIS ABABA FOR USAU 
ADDIS ABABA FOR ACSS 
 
E.O. 12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB PGOV
SUBJECT: ZIMBABWE 2007 INVESTMENT CLIMATE STATEMENT 
 
REF: STATE 178303 
 
¶1. (U)  The Government of Zimbabwe's mis-governance has 
severely crippled the local economy, making it unlikely to 
attract or absorb significant foreign direct investment in 
¶2007.  Investment prospects are bound to remain dismal due to 
the country's unstable economic and political environment. 
Government policies have eroded rule-of-law and put private 
property rights at grave risk. 
 
¶2. (U)  Foreign investors will find few if any sectors 
appealing at this time.  The World Bank and International 
Finance Corporation's &Doing Business in 20078 survey 
ranked Zimbabwe 153 out of 175 countries considered and one 
of the worst in southern Africa.  Further illustrative of the 
abysmal investment climate, Zimbabwe for the second year in a 
row was last out of 64 regions and countries surveyed in the 
Vancouver-based Fraser Institutes 2005-2006 report on mineral 
policy investor friendliness.  Moreover, its last-place score 
was the lowest in the survey,s history. 
 
------------------------------ 
Openness to Foreign Investment 
------------------------------ 
 
¶3. (U)  The government's intervention in many sectors makes 
Zimbabwe generally unwelcoming to foreign investment, 
particularly from Western countries.  Nonetheless, a few U.S. 
multinationals maintain subsidiaries in the country, largely 
holdovers from better years a decade ago.  Many others sell 
their products through certified dealers. 
 
¶4. (U)  The government's priority sectors for foreign 
investment are manufacturing, mining and infrastructure 
development for tourism.  In these sectors foreign investors 
are free to take up 100 percent ownership.  The government in 
2006 discussed new mining legislation that would require 
foreign investors to cede a 51 percent share in foreign-owned 
mines to the government, 25 percent of which would be 
non-contributory.  The legislation, however, was not formally 
proposed and, while the government appears determined to 
seize some share, it may be back away from the 51 percent 
marker.  In the services sector foreign investors are allowed 
to take a maximum 70 percent share holding. 
 
¶5. (U)  The government reserves several sectors for local 
investors.  Foreign investors wishing to participate in these 
sectors may only do so by entering into joint venture 
arrangements with local partners.  The foreign partners may 
take a maximum 35 percent shareholding.  The following 
industries are reserved for Zimbabwean citizens: 
 
Agriculture/Forestry 
     a) Primary production of food and cash crops 
     b) Primary horticulture 
     c) Game, wildlife ranching and livestock 
     d) Forestry 
     e) Fishing and fish farming 
     f) Poultry farming 
Transportation 
 
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     a) Road haulage 
     b) Passenger bus, taxis and car hire services of any kind 
     c) Tourist Transportation 
-- Retail/wholesale trade, including distribution 
-- Barber shops, hairdressing and beauty salons 
-- Commercial photography 
-- Employment agencies 
-- Estate agencies 
-- Valet services 
-- Manufacturing, marketing and distribution of armaments 
-- Water provision for domestic and industrial purposes 
-- Rail operations 
-- Grain milling 
-- Bakery and confectionary 
-- Sugar refining 
-- Tobacco packaging and grading post auction 
-- Cigarette manufacturing 
 
¶6. (U)  Foreign investors wishing to start a new project in 
Zimbabwe must first register with and be approved by the 
Zimbabwe Investment Authority, which then issues 
Investment Certificates.  This is the first port of call for 
any investor wishing to invest in Zimbabwe. 
 
¶7. (U)  All private firms are required to incorporate and 
register with the Registrar of Companies within the framework 
of their investment certificate or exchange control approval. 
Foreign investment in existing companies requires Reserve 
Bank approval.  Applications are submitted to the Bank's 
Exchange Control Department through the investor's commercial 
bank or merchant bank or other authorized dealer.  Foreign 
investors with valid investment certificates may acquire real 
estate. 
 
¶8. (U)  In the mid-1990s, the government identified 
privatization of Zimbabwe's parastatal companies as a 
priority, but only two state-owned enterprises have been 
successfully privatized since then.  The parastatals' 
operational inefficiencies, weak balance sheet positions 
and huge debt overhang make it unlikely that privatization 
will go forward in 2007. 
 
¶9. (U)  Commensurate with its anti-West stance in recent 
years, the government has begun to encourage economic ties 
with Asian countries, particularly China, as a means of 
arresting further economic decline and combating what it 
casts as neo-colonialism.  Under this &Look East8 policy, 
selected Asian investors have been offered access to reserved 
sectors, sometimes at the expense of local or established 
foreign investors.  Despite the official emphasis placed on 
these ties and a few high profile announced projects, Asian 
investment overall remains limited, especially compared to 
the presence of remaining investors from South Africa, the 
U.K, and U.S. 
 
-------------------------------- 
Conversion and Transfer Policies 
-------------------------------- 
 
¶10. (U)   For the past several years, Zimbabwe has 
 
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experienced an acute foreign currency shortage that, among 
other things, has caused crippling shortages of fuel and 
other imported 
goods and components, defaults on public and private sector 
debt service payments, and a sharp decline in industrial, 
agricultural, and mining operations.  Foreign currency is 
highly difficult to obtain due to the Reserve Bank of 
Zimbabwe's restrictive exchange controls, the country's 
declining ability to generate exports, and the lack of 
balance of payments support.  The Foreign Exchange Control 
Act regulates currency conversions and transfers.  It does 
not prohibit foreign investors from moving assets between 
Zimbabwean and foreign accounts, but foreign exchange 
shortages and constraints of the foreign exchange regime 
impede the 
remittance of investment returns.  Some local businesses have 
credibly charged that the government has raided their foreign 
currency accounts to repay past-due IMF debts. 
 
¶11. (U)  (still fact checking:) As of July 31 2007, exporters 
may retain 67.5 percent of their foreign currency account 
balance for their own use indefinitely, while 22.5 percent 
must be liquidated to the Reserve Bank at the interbank 
exchange rate fixed at Z$250:US$ as of July 31 2006; 10% is 
allocated to a fuel and energy stabilization fund.  However, 
uncertainties associated with retention requirements and 
retention periods, which have been adjusted frequently and 
without notice, constrain business planning and operations. 
 
¶12. (U)  The Foreign Exchange Control Act extends to 
prospective outward investment as well as dividend 
remittances.  Traditionally, the government has discouraged 
investment by Zimbabweans outside the country, and relatively 
few Zimbabwean firms have made such investments. 
 
------------------------------ 
Expropriation and Compensation 
------------------------------ 
 
¶13. (U)  Despite provisions in Zimbabwe's constitution that 
prohibit the acquisition of private property without 
compensation, the government has sanctioned seizures of 
privately owned agricultural land without compensation since 
¶2001.  The government in April 2000 amended the constitution 
to authorize the compulsory acquisition of privately owned 
commercial farms with compensation limited to the 
improvements made on the land.  In September 2005, the 
government amended the constitution again to transfer 
ownership of all expropriated land to the government.  Since 
the passage of this amendment, top government officials, 
ruling 
party supporters, and members of the security forces have 
continued to disrupt production on commercial farms, 
including those owned by foreign investors. 
 
¶14. (U)  The President and other politicians have in the past 
threatened to target the mining and manufacturing sectors for 
similarly forced indigenization.  The government's program 
to seize commercial farms without either the intention or the 
funds to compensate the titleholders, and without recourse to 
 
HARARE 00001481  004 OF 012 
 
 
the courts, has raised serious questions about respect for 
property rights and the rule of law in Zimbabwe.  In November 
2006, the government issued the first batch of 99-year leases 
to 125 farmers.  These leases, however, are not readily 
transferable. 
 
------------------ 
Dispute Settlement 
------------------ 
 
¶15. (U)  In the event of an investment dispute (excepting the 
current land reform program), the Government of Zimbabwe 
agrees in theory 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.  This 
option so far appears to be untested by investors.  A group 
of Dutch farmers whose farms were seized under the land 
reform program has taken the case to the International Centre 
for the Settlement of Investment Disputes (CISID), demanding 
that the Zimbabwe Government honor the Bilateral Investment 
Promotion and Protection Agreement (BIPPA) between the 
Netherlands and Zimbabwe.  The case is scheduled to come 
before a tribunal of arbitrators in December 2006.  There are 
nine countries with which Zimbabwe has BIPPA agreements: 
France, Mauritius, Belgium, Sweden, Holland, Denmark, Norway, 
Italy and Germany. 
 
¶16. (U)  The government has 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. 
 
¶17. (U)  Government efforts to influence and intimidate the 
judiciary since the late 1990s have raised serious concerns. 
The government and ruling elite have ignored numerous adverse 
judgments, and senior officials have reiterated publicly that 
court orders that are not 
politically acceptable to the ruling party will not be 
honored.  Administration of justice in commercial cases that 
lack political overtones are generally impartial.  As the 
government's budget constraints deepen, however, court 
resources have dwindled and dockets have become backlogged. 
A less costly dispute settlement route, which can be 
incorporated in contracts between companies, is alternative 
dispute resolution. 
 
--------------------------------------- 
Performance Requirements and Incentives 
--------------------------------------- 
 
¶18. (U)  (still fact checking the following with PWC): 
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 government waives import tax and surtax on capital 
equipment.  Other incentives for investors include: 
 
 
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-- 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; 
-- 25 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 entitling the holder to 
specific incentive packages to be negotiated with the 
Ministry of Mines; 
-- Refund of sales taxes (15 percent) for capital goods 
purchased in Zimbabwe and intended for use in priority 
projects or investment in growth points. 
 
¶19. (U)  There are no general performance requirements 
outside of Export Processing Zones.  Government policy, 
however, encourages investment in enterprises that contribute 
to rural development, job creation, exports, use of local 
materials, and transfer of appropriate technologies. 
 
¶20. (U)  There are no discriminatory import or export 
policies affecting foreign firms, although the government's 
approval criteria are heavily weighted toward export-oriented 
projects.  Import duties and related taxes range as high as 
110 percent.  Export Processing Zone designated companies 
must export at least 80 percent of output. 
 
¶21. (U)  While official policy supports "the maximum 
Zimbabwean participation" in any new investment project, no 
specific requirements for local participation have been 
defined 
outside the 35 percent foreign share cap in sectors reserved 
for local investment.  Nevertheless, experience has shown 
that 30 percent local participation is a widely 
accepted benchmark minimum. 
 
¶22. (U)  Government participation is required in new 
investments in strategic industries, 
such as energy, public water provision, railways, and 
armaments.  The terms of government participation are 
determined on a case-by-case basis during license approval. 
The few 
foreign investors (for example from China and Iran) in 
reserved strategic industries have either purchased existing 
companies or have supplied equipment and spares on credit. 
 
¶23. (U)  Foreign investors are expected to make maximum use 
of Zimbabwean management and technical personnel, and 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.  (still fact checking:) Expatriates who 
have prior permission from the Reserve Bank's exchange 
control department are permitted to remit one-third of their 
salaries. 
 
-------------------------------------------- 
 
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Right to Private Ownership and Establishment 
-------------------------------------------- 
 
¶24. (U)  Although Zimbabwean law guarantees the right to 
private ownership, this right is increasingly not respected 
in practice.  The government, as noted above, has seized a 
number of farms and conservancies belonging to Americans and 
other foreign investors in 
recent years without due process or compensation.  Most of 
these property owners held 
Zimbabwe Investment Center approval certificates and 
purchased their land after independence 
in 1980.  Despite repeated U.S. protests, the government has 
not addressed these expropriations. 
 
¶25. (U)  In each of the last three years, President Mugabe 
has reiterated the government's intention to enact a broad 
indigenization law, and there remains a lingering threat that 
the government could expropriate non-agricultural property 
belonging to foreign firms for 
the purpose of transferring ownership to black Zimbabweans. 
 
----------------------------- 
Protection of Property Rights 
----------------------------- 
 
¶26. (U)  The government's demonstrated desire to expand its 
control of the economy puts many investments, particularly in 
real property, at risk.  The government's 2005 Operation 
Restore Order resulted in the destruction of commercial and 
residential structures belonging 
to 700,000 people, according to UN estimates.  Many of these 
properties had proper titles and licenses.  Although 
Operation Restore Order officially ended in 2005, the 
government continued to evict smaller numbers of people from 
their homes and businesses, primarily in and around Harare, 
in 2006.  In addition to the thousands of agricultural 
properties seized under land reform during the past six 
years, in late 2005, the government for the first time 
authorized the seizure of non-agricultural land for the 
purpose of constructing residential stands in a 
Harare suburb. 
 
¶27. (U)  Since independence, Zimbabwe has applied 
international patent and trademark conventions.  It is a 
member of the World Intellectual Property Organization. 
Generally, the government seeks to honor intellectual 
property ownership and rights, 
although there are serious doubts about its ability to 
enforce these obligations due to 
a lack of expertise and manpower.  We are not aware of any 
grievances over such issues, but pirating of videos and 
computer software is common.  Most videos and computer 
software sold 
on the local market, for example, are pirated goods. 
 
¶28. (U)  The judiciary generally upholds the sanctity of 
contracts between private companies.  However, in the case of 
contracts involving the government or politically influential 
individuals, judgments sometimes appear biased in favor of 
 
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the latter. 
 
------------------------------------- 
Transparency of the Regulatory System 
------------------------------------- 
 
¶29. (U)  The government's officially stated policy is to 
encourage competition within the private sector.  That said, 
bureaucratic functions in this increasingly controlled 
economy lack transparency and corruption within the 
regulatory system is increasingly worrisome. 
 
¶30. (U) Companies, for example, are not allowed to increase 
the price of monitored goods without government approval. 
However, the responsible Ministry of Industry and 
International Trade often fails to process price increase 
requests in a timely and transparent way.  In November 2006, 
two company executives from one of Zimbabwe,s major bakeries 
were convicted and face jail sentences for raising the price 
of bread without authorization. 
 
--------------------------------------------- ----- 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
¶31. (U)  New portfolio investment in Zimbabwe has been very 
limited in recent years. 
According to the IMF, net portfolio inflows reached US$2 
million in 2004 after a massive outflow of US$68 million in 
2001 in response to the start of the land invasions.  Despite 
mounting economic problems, foreign direct investment (FDI) 
inflows to Zimbabwe during 2005 amounted to US$103 million 
according to the World Investment Report compiled by the 
United Nations Conference on Trade and Development (UNCTAD). 
Zimbabwe,s Ministry of Finance projects net inflows of 
US$298 million in 2006; the investment is primarily in the 
platinum industry. 
 
¶32. (U) (fact checking:) Zimbabwe's stock market has 83 
listed companies.  Overall, trading is thin and volatile. 
The public stock of many smaller companies is closely held. 
In 1994, the government opened the stock 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.  In 2005, the government introduced a 5 
percent withholding tax on the sale of marketable securities. 
 It also directed short term insurance companies, long term 
insurance companies, as well as pension funds to invest 25%, 
30% and 35%, respectively, of their portfolios at market 
value in government bonds which are prescribed assets.  In 
order to meet these new requirements pension funds were 
required from November 2004 to direct 40% of net investable 
funds on a monthly basis towards prescribed assets. Foreign 
participation in the bond market is restricted to the primary 
market and only 35 percent of invested capital may be placed 
in bonds. 
 
¶33. (U)  Once relatively robust by regional standards, 
Zimbabwe's financial sector has contracted greatly in recent 
 
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years as business and demand for sophisticated transactions 
evaporates.  Two major international commercial banks and a 
number of regional and domestic banks operate with over 200 
branches total.  Following the well-publicized failure of a 
number of financial institutions in 2003, primarily due to 
fraud and inept management, Reserve Bank regulations have 
tightened greatly.  Nonetheless, financial institutions have 
an uncertain future due to ever-dwindling demand from 
business clients and inconsistent policies on interest rates, 
statutory reserves, and exchange rate policies. 
 
------------------ 
Political Violence 
------------------ 
 
¶34. (U)  The opposition and civil society operate in an 
environment of intimidation and repression.  Individuals and 
companies out of favor with the government or regarded by the 
government as aligned with the opposition, suffer harassment 
and bureaucratic obstacles in their business dealings.  The 
government has closed three independent newspapers, for 
example, and has denied numerous telecommunications licenses 
for apparently political reasons.  Domestic businesspeople 
out of favor with the government have been incarcerated for 
lengthy periods under trying conditions, including alleged 
torture, for allegedly engaging in illegal business practices 
such as externalization of currency. 
 
¶35. (U)  In April 2005, with no notice and in the middle of 
the country,s winter, the GOZ embarked upon Operation Restore 
Order, destroying the purportedly unpermitted homes, 
businesses, or both, of over 700,000 people.  Police 
demolished or forced victims to destroy their own homes and 
businesses, many of which did appear to have all relevant 
permits, without providing alternative accommodation or means 
of reestablishing their livelihoods.  The government then 
blocked the efforts of NGOs and international organizations 
to provide emergency relief.  Although Operation Restore 
Order formally came to an end in 2005, the government in 2006 
periodically evicted residents and business-owners from 
properties that were deemed substandard. 
 
¶36. (U)  In August 2006, the Reserve Bank redenominated the 
inflation-ridden currency, slashing three zeros from its 
value.  As part of the redenomination regulations, the public 
and business were allowed to convert only set amounts at 
financial institutions.  Police extended this prohibition to 
the general cash-carrying public, although there was no 
regulatory or legal basis for limiting the amount of cash one 
carried.  Police, military, and youth militia aligned to the 
ruling party mounted roadblocks throughout the country and 
seized cash, deemed to be in an &excessive8 amount, from 
individuals.  Often no receipts were issued for the seized 
cash, leaving no recourse to protest the seizures. 
 
---------- 
Corruption 
---------- 
 
¶37. (U)  There is widespread corruption in government. 
 
HARARE 00001481  009 OF 012 
 
 
Implementation of the government's ongoing redistribution of 
expropriated commercial farms has substantially favored the 
ruling party elite and continues to lack transparency.  Top 
ruling party officials and business people supporting the 
ruling party have received priority in distribution of the 
country's resources, including priority access to limited 
foreign exchange and fuel.  The government's campaign to 
provide housing plots and vending sites for victims of 
Operation Restore Order appears to be benefiting mostly civil 
servants, security forces, and ruling party supporters. 
 
¶38. (U)  In January 2005 the government enacted an 
Anti-Corruption Act, which established a government-appointed 
Anti-Corruption Commission to investigate corruption; 
however, 
it includes no members from civil society or the private 
sector.  In the same month, the Ministry of State 
Enterprises, Anti-Monopolies, and Anti-Corruption was 
established to oversee and coordinate the government,s 
efforts to combat corruption; however, government officials 
and police lack sufficient political backing at senior levels 
of the government to effectively investigate cases.  The 
government prosecutes individuals selectively, focusing on 
those who have fallen out of favor with the ruling party and 
ignoring transgressions by favored elite. 
A number of highly publicized corruption cases came to light 
in 2006, including the arrest of 
a deputy minister and the arrest and conviction of the 
chairman of the state-owned public transport company for 
soliciting bribes.  The government, however, has failed to 
act on a National Economic Conduct Inspectorate report that 
reportedly implicates numerous high-ranking officials in the 
ruling party in widespread corruption and looting at the 
state-owned iron and steel company. 
 
 
------------------------------- 
Bilateral Investment Agreements 
------------------------------- 
 
¶39. (U)  The U.S. has no bilateral investment or trade treaty 
with Zimbabwe.  (fact checking): Zimbabwe currently has 
bilateral investment agreements with Germany, the United 
Kingdom, Netherlands, Belgium, Portugal, Switzerland, Sweden, 
Malaysia, Mozambique and China.  It is negotiating bilateral 
investment treaties with Italy and South Africa.  However, as 
noted above, commercial farms covered by some of the treaties 
have been seized or listed for acquisition, thereby denying 
the owner benefits under these treaties. 
 
-------------------------------------------- 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
¶40. (U)  The U.S. Government and Zimbabwe concluded an OPIC 
agreement in April 1999. Zimbabwe acceded to the World Bank's 
Multilateral Investment Guarantee Agency (MIGA) in September 
¶1989.  Support by the Export-Import Bank of the U.S. is not 
available to Zimbabwe.  Many other major donor countries have 
also suspended their trade finance and export promotion 
 
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programs, as well as investment insurance, due largely to 
Zimbabwe,s mounting bilateral 
arrears and deteriorating investment climate. 
 
----- 
Labor 
----- 
 
¶41. (U)  Zimbabwe's interconnected economic and political 
crises have prompted many of the country's most skilled and 
well educated to emigrate, leading to widespread labor 
shortages 
for managerial and technical jobs.  At the same time, the 
severe contraction of the economy 
in recent years has caused formal sector employment to drop 
significantly.  The best available surveys place formal 
sector unemployment as high as 80 percent.  Independent 
analysts estimate that only about 700,000 people, or roughly 
7 percent of Zimbabwe,s population, are employed in the 
formal sector.  As noted above, foreign investors are 
encouraged to hire local nationals. 
 
¶42. (U)  The country's HIV/AIDS epidemic is also taking a 
heavy toll on the workforce.  However, with substantial 
support from the U.S. Government and other donors, Zimbabwe 
has instituted policies that have contributed to reducing the 
adult infection rate from 22.1 percent in 2003 to 20.1 
percent in 2005, making Zimbabwe only the second country in 
Sub-Saharan Africa to stem the disease's tide. 
 
¶43. (U)  The government is a signatory to International Labor 
Organization (ILO) conventions protecting worker rights, 
although the world body has designated Zimbabwe as a 
"notorious country" for its continued attempts to limit 
workers' right to organize and hold labor union meetings. The 
1985 Labor Relations Act set strict standards for 
occupational health and safety, but enforcement is fairly lax 
and inconsistent across the industrial sectors. 
 
¶44. (U)  In light of the hyperinflationary environment 
(private sector estimates put the annualized inflation rate 
close to 2,000 percent), employers and workers have agreed to 
negotiate wages and other benefits on a quarterly and monthly 
rather than annual basis.  Collective bargaining takes place 
through a National Employment Council (NEC) in each industry, 
comprising representatives from labor, business, and 
government.  In addition, the Zimbabwe Congress of Trade 
Unions (ZCTU), the country's umbrella labor organization and 
traditional advocate for workers to both business and 
government.  In addition, a Tripartite Negotiating Forum 
(TNF) was established in 2001 for labor, business, and 
government to tackle macro-social issues.  However, these 
talks have been fitful and unproductive since their 
inception.  The most recent impasse for the TFN is that 
business and labor cannot agree on indexing wages to the 
poverty datum line (PDL), which calculates the minimum 
required for a family of six to pay basic expenses. 
According to one prominent local economist, 80 percent of the 
Zimbabwe's population lived below the PDL. 
 
 
HARARE 00001481  011 OF 012 
 
 
¶45. (U)  The government continued its harassment of the ZCTU 
and its leadership, and has charged ZCTU officials with 
violating foreign exchange controls.  In September, police 
arrested and tortured 15 ZCTU officials for demonstrating 
against mounting economic hardships.  Under Zimbabwe labor 
law, the government can intervene in ZCTU's internal affairs 
if it determines that the leadership is not acting in the 
workers' interest.  The government has threatened to 
eliminate the ZCTU, and has taken steps to marginalize the 
traditional unions and the formal labor dispute resolution 
mechanism.  To undercut the strength of ZCTU, the government 
has created an alternative umbrella organization, the 
Zimbabwe Federation of Trade Unions (ZFTU).  However, outside 
of government, the ZFTU is not regarded as a legitimate labor 
organization.  The ZCTU remains the voice of labor in 
Zimbabwe and the country's official and internationally 
recognized labor organization. 
 
------------------------------ 
Foreign-Trade Zones/Free Ports 
------------------------------ 
 
¶46. (U)  The government promulgated legislation creating 
Export Processing Zones (EPZs) in 1996.  (fact checking): 
Zimbabwe now has 183 EPZ-designated companies.  Benefits 
include a five-year tax holiday, duty-free importation of raw 
materials and capital equipment for use in the EPZ, and no 
tax liability from capital gains arising from the sale of 
property forming part of the investment in EPZs.  Since 
January 2004 the government has generally required that 
foreign capital comprise a majority of the investment.  The 
requirement on EPZ-designated companies to export at least 80 
percent of output has constrained foreign investment in the 
zones.  In 2006, the merger began of the Zimbabwe Investment 
Center and the Zimbabwe Export Processing Zones Authority 
into a new institution - the Zimbabwe Investment Authority. 
The Zimbabwe Investment Authority is intended to be a 
one-stop shop for both local and foreign investors. 
 
------------------------------------ 
Foreign Direct Investment Statistics 
------------------------------------ 
 
¶47. (U) Zimbabwe Net Investment Flows 1998-2005 in Million 
US$ 
1998  1999  2000  2001  2002  2003  2004  2005  2006 est. 
 
Direct Investment 
436    50    16    0      23    4     9    103    298 
 
Portfolio Investment 
11     21    -1    -68    -2    4     2 
 
Source: IMF, UNCTAD, Ministry of Finance 
 
--------- 
Resources 
--------- 
 
¶48. (U) 
 
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Zimbabwe Investment Center 
Investment House 
109 Rotten Row 
P.O. Box 5950 
Harare 
Telephone: (263) (4) 757931/4 
Fax: (263) (4) 759 917 
www.zic.co.zw 
 
Zimbabawe Tourism Authority: 
www.tourismzimbabwe.co.zw 
 
Privatization Agency of Zimbabwe 
www.paz.co.zw 
 
Zimtrade 
www.zimtrade.co.zw 
 
Zimbabwe International Trade Fair 
Zitf.mweb.co.zw 
 
SCHULTZ