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INFO RUCNSAD/SOUTHERN AF DEVELOPMENT COMMUNITY COLLECTIVE
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RUEHC/DEPT OF LABOR WASHDC
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RUZEJAA/JAC MOLESWORTH RAF MOLESWORTH UK
RHMFISS/JOINT STAFF WASHDC
RHEHAAA/NSC WASHDC
RUEHGV/USMISSION GENEVA 1833

UNCLAS SECTION 01 OF 11 HARARE 000042 
 
AF/S FOR B. WALCH 
ADDIS ABABA FOR USAU 
ADDIS ABABA FOR ACSS 
COMMERCE FOR ROBERT TELCHIN 
TREASURY FOR D. PETERS AND T.RAND 
NSC FOR SENIOR AFRICA DIRECTOR B.PITTMAN 
STATE PASS TO USAID FOR L.DOBBINS AND E.LOKEN 
STATE PASS TO EB/IFD/OIA 
STATE PASS TO USTR 
 
SIPDIS 
 
E.O.12958: N/A 
TAGS: EINV EFIN ETRD ELAB KTDB PGOV USTR OPIC ZI
SUBJECT: 2009 INVESTMENT CLIMATE STATEMENT - ZIMBABWE 
 
REF: 08 STATE 123907 
 
¶1.  The Government of Zimbabwe's corruption and mismanagement have 
severely crippled the local economy making it unlikely to attract or 
absorb significant foreign direct investment in 2009.  GDP has 
declined by roughly 50 percent in the past eight years, the largest 
peacetime drop ever recorded.  The Economist Intelligence Unit 
estimates that it contracted 12.8 percent in 2008.  Year on year 
inflation was officially estimated to be 231 million percent in July 
2008, the highest in the world.  Unofficial inflation assessments 
conducted by independent economists estimate annual inflation to be 
in the hundreds of billions, if not quadrillions, but the local 
currency inflation figures are less relevant as dollarization of the 
economy becomes widespread.  Government policies have seriously 
eroded the rule of law and put private property rights at grave 
risk.  In the absence of comprehensive reforms, prospects for 
foreign direct investment, along with the country's economic 
outlook, are bound to remain dismal. 
 
¶2.  The World Bank Group's "Doing Business 2009" report ranked 
Zimbabwe 158 out of 181 countries considered for ease of doing 
business, and one of the worst performers in southern Africa. 
Further illustrative of the abysmal investment climate, Zimbabwe was 
ranked 133 out of 134 countries considered in the World Economic 
Forum's Global Competitiveness Index for 2008-2009.  In addition, 
Zimbabwe was second from the bottom out of 68 regions and countries 
surveyed in the Vancouver-based Fraser Institutes 2007-2008 Annual 
Survey of Mining Companies on the attractiveness of government 
mining policies. 
 
------------------------------ 
Openness to Foreign Investment 
------------------------------ 
 
¶3.  The government's command and control tendencies and its 
intervention in many sectors make Zimbabwe generally unwelcoming to 
foreign direct investment, particularly from Western countries. 
Furthermore, the erosion of the rule of law and sanctity of 
contracts has had a chilling effect on business and on foreign 
direct investment.  Nonetheless, a few U.S. multinationals maintain 
subsidiaries in the country, largely holdovers from better years a 
decade and more ago.  Many others sell their products through 
certified dealers. 
 
¶4.  The government's priority sectors for foreign investment are 
manufacturing, mining and infrastructure development for tourism. 
In these sectors foreign investors have been permitted to own up to 
100 percent of the business enterprise, although in 2008 the 
government introduced an Indigenization Act that mandates, over 
time, 51 percent indigenous ownership of businesses.  It also 
introduced an Amendment to the Mines and Minerals Act that has 
onerous indigenization requirements (see below). 
 
¶5.  The government reserves several sectors for local investors. 
Under current laws, foreign investors wishing to participate in 
these sectors may only do so by entering into joint venture 
arrangements with local partners.  The foreign investors are 
restricted from owning more than 35 percent of the operation.  The 
following industries face these restrictions: 
 
Agriculture/Forestry 
-- Primary production of food and cash crops 
 
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-- Primary horticulture 
-- Game, wildlife ranching and livestock 
-- Forestry 
-- Fishing and fish farming 
-- Poultry farming 
-- Grain milling 
-- Sugar refining 
 
Transportation 
-- Road haulage 
-- Passenger bus, taxis and car hire services of any kind 
-- Tourist Transportation 
-- Rail operations 
 
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 
Bakery and confectionary 
Tobacco packaging and grading post auction 
Cigarette manufacturing 
 
¶6.  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.  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 of Zimbabwe 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.  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, a huge debt overhang, and the current political 
impasse make it unlikely that privatization will go forward in the 
near term. 
 
¶9.  Commensurate with its anti-West stance in recent years, the 
government began 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 
East" 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 project announcements, Asian investment 
is dwarfed by te remaining investment from South Africa and theU.K. 
 
-------------------------------- 
Converson and Transfer Policies 
------------------------------- 
 
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¶10.  For the past several years, Zimbabwe has experienced an acute 
foreign currency deficit that has caused crippling shortages of 
fuel, electric power 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 through licit 
channels due to the Reserve Bank of Zimbabwe's exchange controls, 
the country's poor export performance, 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 lack of foreign exchange 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 meet certain foreign 
obligations falling due. 
 
¶11.  Exporters may retain 85 percent of their foreign currency 
account balance for their own use within 30 days while 15 percent 
must be sold to the Reserve Bank at the highly disadvantageous 
inter-bank exchange rate rather than the market-determined parallel 
rate.  Uncertainties associated with retention requirements and 
retention period, which have been adjusted frequently and without 
notice, constrain business planning and operations.  The retention 
requirement and unfavorable exchange rate act as an effective tax on 
exports. 
 
¶12.  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 made such investments. 
 
------------------------------ 
Expropriation and Compensation 
------------------------------ 
 
¶13.  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.  Many of the farms seized were subsequently 
transferred to government officials and other regime supporters. 
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 and covered by Bilateral Investment 
Promotion and Protection Agreements (BIPPA). 
 
¶14.  In November 2006, the government issued the first batch of 
99-year leases to 125 farmers.  These leases, however, are not 
readily transferable as the government retains the right to strip 
the lease at any time. 
 
¶15.  The government's program to seize commercial farms without 
either the intention or the funds to compensate the titleholders, 
who have no recourse to the courts, has raised serious questions 
about respect for property rights and the rule of law in Zimbabwe. 
 
HARARE 00000042  004 OF 011 
 
 
Accordingly, Zimbabwe was ranked 113 out of 181 countries considered 
with respect to the country's ability to protect investment under 
the World Bank Group's "Doing Business 2009" Report. 
 
¶16.  President Mugabe and other politicians have in the past 
threatened to target the mining and manufacturing sectors for 
similarly forced indigenization.  In 2008, the government amended 
the Mines and Minerals Act outlining indigenization requirements for 
minerals.  For strategic energy minerals (coal, methane, uranium), 
the legislation would require mining companies engaged in their 
extraction or exploitation to transfer ownership to the state of 51 
percent of the shares; 25 percent would be non-contributory (i.e. 
without compensation).  For precious metals/precious stones, 25 
percent of the shares must be transferred to the state without 
compensation and the other 26 percent are required to be owned by 
the state or by indigenous Zimbabweans. 
 
¶17.  In March 2008, the government enacted the Indigenization and 
Economic Empowerment Bill that mandates, over time, 51 percent 
indigenous ownership of business. 
 
------------------ 
Dispute Settlement 
------------------ 
 
¶18.  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. 
 
¶19.  In the event of an investment dispute, 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.  On the other hand, Constitutional 
Amendment 17, enacted in 2005, removed the right of landowners whose 
land has been acquired by the government to challenge the 
acquisition in court. 
 
¶20.  A group of Dutch farmers whose farms were seized under the land 
reform program took their case to the International Centre for the 
Settlement of Investment Disputes (ICSID) in April 2005, demanding 
that the Zimbabwe Government honor the Bilateral Investment 
Promotion and Protection Agreement (BIPPA) between the Netherlands 
and Zimbabwe.  The case was heard by a tribunal in Paris in 
November, 2007, and the tribunal issued a verdict in 2007 that was 
favorable to the farmers.  The Zimbabwe Government acknowledged that 
the farmers had been deprived of their land without payment of 
compensation but disputed the over US$30 million in damages claimed 
by the farmers.  A decision on the amount of damages has not yet 
been reached. 
 
¶21.  In a related case, a three-judge panel of the Southern African 
Development Community (SADC) Tribunal in Windhoek, Namibia, ruled 
that Zimbabwe's violent land reform exercise discriminated against a 
group of white farmers who filed an application challenging the 
seizure of their farms.  The Tribunal ruled that the government was 
in breach of the SADC treaty with regards to discrimination. 
Although the government's first reaction was to refuse to recognize 
the ruling, it has since softened its position.  It subsequently 
recommended that 341 white farmers be allowed to continue farming 
 
HARARE 00000042  005 OF 011 
 
 
throughout the country. 
 
¶22.  Government efforts to influence and intimidate the judiciary 
since the late 1990s have raised serious concerns about investors 
receiving a fair hearing in local courts.  In addition, 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.  Administrations of justice in those commercial cases that 
lack political overtones are still generally impartial.  As the 
government's budget constraint deepens, 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 
--------------------------------------- 
 
¶23.  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: 
 
-Investment allowance of 15 percent in the year of purchase of 
industrial and commercial buildings, staff housing and articles, 
implements, and machinery; 
-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 value added tax (15 percent) for capital goods purchased 
in Zimbabwe and intended for use in priority projects or investment 
in growth points. 
 
¶24. 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. 
 
¶25.  There are no discriminatory import or export policies affecting 
foreign firms, although the government's approval criteria are 
heavily skewed 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. 
 
¶26.  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. 
 
¶27.  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 work and residence 
permits.  Normally, the maximum contract period for an expatriate is 
 
HARARE 00000042  006 OF 011 
 
 
three years, but this will be extended to five years for individuals 
with highly specialized skills.  Expatriates who have prior 
permission from the Reserve Bank's exchange control department are 
permitted to remit one-third of their salaries. 
 
-------------------------------------------- 
Right to Private Ownership and Establishment 
-------------------------------------------- 
 
¶28.  Although Zimbabwean law guarantees the right to private 
ownership, this right is increasingly not respected in practice.  As 
noted above, the government has in recent years seized thousands of 
private farms and conservancies, including ones belonging to 
Americans and other foreign investors, without due process or 
compensation.  Most of these property owners held Zimbabwe 
Investment Authority investment certificates and purchased their 
land after independence in 1980.  Despite repeated U.S. protests, 
the government has not addressed the expropriation of U.S. citizen 
property. 
 
----------------------------- 
Protection of Property Rights 
----------------------------- 
 
¶29.  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 
more than 700,000 persons losing their homes, their means of 
livelihood, or both, 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 and 2007.  In addition to 
the thousands of agricultural properties seized under land reform 
during the past eight 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. 
 
¶30.  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. 
 
¶31.  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 the latter. 
 
------------------------------------- 
Transparency of the Regulatory System 
------------------------------------- 
 
¶32.  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. 
 
HARARE 00000042  007 OF 011 
 
 
 
¶33.  Companies, for example, are not allowed to increase the price 
of monitored goods without government approval.  In June 2007, 
Minister of Industry and International Trade Obert Mpofu went a step 
further and introduced Operation Reduce Prices, a campaign to lower 
prices on all goods and services by half or more.  While the measure 
temporarily slowed the rate of inflation, it wreaked havoc with the 
supply chain and accelerated the pace of economic contraction in 
Zimbabwe.  Over the following months, police arrested and fined more 
than 5,000 business executives and store managers for violating the 
price reduction decree.  Moreover, the responsible Ministry 
implemented the decree in a selective fashion and also failed to 
process price increase requests in a timely and transparent way. 
 
¶34.  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.  On August 1, 2008, the Reserve Bank 
again redenominated the currency, lopping off 10 zeros.  Coins that 
had been taken out of circulation in 2003 were reintroduced at face 
value, which only served to further complicate the monetary 
environment. 
 
--------------------------------------------- ----- 
Efficient Capital Markets and Portfolio Investment 
--------------------------------------------- ----- 
 
¶35.  Zimbabwe's stock market has 83 publicly-listed companies. 
Overall, trading is thin and volatile, and the public stock of many 
smaller companies is closely held.  In September 1996, the 
government 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 any single investor 
allowed to acquire up to 10 percent of the outstanding shares. 
Investment on the Zimbabwe Stock Exchange (ZSE) surged in real terms 
in 2007 and most of 2008 as domestic investors sought a hedge 
against hyperinflation; risk-seeking foreign investors were drawn to 
Zimbabwe by a combination of undervalued assets and the expectation 
of political change in the short-to-medium term.  Furthermore, 
foreign investors recognized that most companies registered on the 
ZSE were already compliant with the onerous indigenization 
requirements under discussion.  The introduction of stringent 
trading conditions on November 17, 2008 which required all trades 
to be backed by a leter of confirmation from bank chief executive 
offcers confirming the availability of funds, burstthe speculative 
bubble. Since November 20, there has been no trading activity on the 
exchange. 
 
¶36.  In 2005, the government introduced a five percent withholding 
tax on the sale of marketable securities.  It also required 
short-term insurance companies, long-term insurance companies, and 
pension funds to invest 25 percent, 30 percent and 35 percent, 
respectively, of their portfolios in prescribed government bonds. 
These requirements essentially tax portfolios at the required 
investment rates, since the real interest rate, with hyperinflation, 
is lower than -99.99 percent.  The Reserve Bank, for example, 
introduced a one-year insurance and pension industry bond on 
November 14, 2008 for sale to pension funds as a mechanism to raise 
cheap capital; it pays 450 percent interest. 
 
HARARE 00000042  008 OF 011 
 
 
 
¶37.  Zimbabwe's mounting economic problems have driven foreign 
direct investment (FDI) inflows from US$103 million in 2005 to US$40 
million in 2006 before rising slightly to US$69 million in 2007, 
according to the World Investment Report compiled by the United 
Nations Conference on Trade and Development (UNCTAD). 
 
¶38.  Once relatively robust by regional standards, Zimbabwe's 
financial sector has contracted greatly in recent 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 been tightened greatly.  Nonetheless, financial 
institutions have an uncertain future due to ever-dwindling demand 
for credit from business clients and inconsistent policies on 
interest rates, statutory reserves, and exchange rates.  Moreover, 
as the economy dollarizes, demand for local currency denominated 
accounts is falling, further impairing local banks. 
 
------------------ 
Political Violence 
------------------ 
 
¶39.  The opposition and civil society groups operate in an 
environment of intimidation and repression.  Human rights 
organizations reported that physical and psychological torture 
perpetrated by security agents and government supporters increased 
in the period between the March 2008 elections and the June 2008 
presidential run-off.  Individuals and companies out of favor with 
the government or regarded by the government as aligned with the 
opposition, routinely suffer harassment and bureaucratic obstacles 
in their business dealings.  Indicatively, the government has closed 
three independent newspapers, and has denied numerous 
telecommunications licenses for apparently political reasons.  On 
occasion, domestic businesspeople out of favor with the government 
have been incarcerated for allegedly engaging in illegal business 
practices such as externalization of currency. 
 
¶40. Despite rising dissatisfaction with government policy, there 
have been no large-scale demonstrations, although sporadic cases of 
looting by soldiers and small-scale demonstrations have occurred. 
 
---------- 
Corruption 
---------- 
 
¶41.  There is widespread corruption in government. 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, agricultural inputs, machinery and 
fuel. 
 
¶42.  In 2005 the government enacted an Anti-Corruption Act that 
established a government-appointed Anti-Corruption Commission to 
investigate corruption; however, it includes no members from civil 
society or the private sector.  The Ministry of State Enterprises, 
Anti-Monopolies, and Anti-Corruption was also established to oversee 
 
HARARE 00000042  009 OF 011 
 
 
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 members of the favored 
elite. 
 
------------------------------- 
Bilateral Investment Agreements 
------------------------------- 
 
¶43.  The U.S. has no bilateral investment or trade treaty with 
Zimbabwe.  Zimbabwe has Bilateral Investment Protection and 
Promotion Agreements (BIPPA) with 17 countries; only four of these 
treaties (with the Netherlands, Denmark, Germany and Switzerland) 
have been ratified. 
 
-------------------------------------------- 
OPIC and Other Investment Insurance Programs 
-------------------------------------------- 
 
¶44.  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 programs, as well as investment 
insurance, due largely to Zimbabwe's mounting multilateral and 
bilateral arrears and deteriorating investment climate. 
 
----- 
Labor 
----- 
 
¶45.  Zimbabwe's interconnected economic and political crises have 
prompted many of the country's most skilled and well educated 
citizens 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. 
 
¶46.  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 15.6 percent in 2007. 
 
¶47.  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. 
 
¶48.  In light of the hyperinflationary environment, employers and 
 
HARARE 00000042  010 OF 011 
 
 
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, advocates for 
workers' rights. 
 
¶49.  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.  A continuing impasse for the TFN is disagreement between 
business and labor over indexing wages to the poverty datum line 
(PDL), which calculates the minimum required for a family of five to 
pay basic expenses.  Independent economists estimate that roughly 80 
percent of Zimbabwe's population lives below the PDL. 
 
¶50.  The government continued its harassment of the ZCTU and its 
leadership.  In May 2008 and prior to the presidential run-off in 
June, police arrested ZCTU leaders for "spreading falsehoods 
prejudicial to the state".  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 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 
------------------------------ 
 
¶51.  The government promulgated legislation creating Export 
Processing Zones (EPZs) in 1996.  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.  The merger between the 
Zimbabwe Investment Centre and the Zimbabwe Export Processing Zones 
Authority which began in 2006, has been completed and the new 
institution - the Zimbabwe Investment Authority, now serves as a 
one-stop shop for both local and foreign investors. 
 
------------------------------------ 
Foreign Direct Investment Statistics 
------------------------------------ 
 
¶52.  Zimbabwe Net Investment Flows 1998-2007 (US$ million) 1998 
1999  2000  2001  2002  2003  2004  2005  2006  2007 
 
Direct Investment 
436    50    16    0      23    4     9    103    40    69 
 
 
HARARE 00000042  011 OF 011 
 
 
Portfolio Investment 
11     21    -1    -68    -2    4     2 
 
Source: IMF, UNCTAD, Ministry of Finance 
 
--------- 
Resources 
--------- 
 
¶53.  Zimbabwe Investment Authority 
Investment House 
109 Rotten Row 
P.O. Box 5950 
Harare 
Telephone: (263) (4) 757 931/4 
Fax: (263) (4) 773 843 
www.zia.co.zw 
 
Zimbabwe Tourism Authority 
www.zimbabwetourism.co.zw 
 
State Enterprise Restructuring Agency 
www.sera.co.zw 
 
Zimtrade 
www.zimtrade.co.zw 
 
Zimbabwe International Trade Fair 
www.zitf.co.zw 
 
MCGEE