Sharon Kavhu
Government is set to amend the Zimbabwe Investment Authority Act in a bid to lure more foreign investors as foreign direct investment continues to drop, it has been learnt.

The Permanent Secretary in the Ministry of Economic Planning and Investment Promotion, Dr Desire Sibanda, said the amendment will include zero percent income tax for the first five years, exemption from capital gains tax and from non-resident taxes, including duty-free importation and refunds on sales tax on goods and services.
These incentives will specially apply for Special Economic Zones (SEZ) . SEZs are strategically selected zones where companies operating within these areas enjoy privileged exemptions compared to any other regions.

“The Act will allow our ministry to give incentives to licensed investors whether foreign or domestic, such as primary producers, exporters and investors. In some cases this is meant to promote value addition.
“We need now, in our quest to attract foreign direct investment, to apply the ZIA Act in full and amend it before the year ends,” explained Dr Sibanda.

He said the creation of SEZs will attract more foreign investors, help to formalise the informal sector and encourage all investors to contribute in moving the country from exporting raw materials to exporting manufactured products. If exports increase, it means more money will be going into the banking sector and thus, the problem of high interest on borrowing rates will be solved, he said.

According to the Medium Term Plan, the biggest challenge in attracting capital to the productive sectors of the economy is the high interest rates levied by banks.
Said Dr Sibanda: “Our current interest rate of 25 percent on borrowing is by any standard too high and is pushing away investors.
“If we increase on our exports, the problem can be solved. As a ministry, we support the Buy Zimbabwe Campaign and there is need to reduce our import bill as well.”

The MTP states that foreign investors and visitors are allowed to bring any amount of foreign exchange into the country and their equity may also come in the form of machinery and equipment.

Only raw materials, technical fees and other services may not be considered as part of the equity. Investors are also entitled to up to 100 percent of dividends from net tax profit through their local authorised dealers, while also being given the leeway to remit 100 percent of the original capital investment in the event of disinvestment.

Investment into the country has been affected by a lack of lines of credit, and efforts are being made by Government to attract liquidity through the signing of

Bilateral Investment Promotion and Protection Agreements (Bippas).
“The private sector and our banking sector should also move towards offshore financing to address liquidity shortages. Countries that promised us lines of credit have not yet met their commitments; however, this year we have managed to visit South Africa, India, the United Kingdom, Nigeria and other bilateral partners.

“Bippas are changing the negative perceptions of foreign companies and thus creating an opportunity to link Zimbabwe with fast-growing countries such as China,” said Dr Sibanda.

Government also intends to re-establish export processing zones to attract foreign direct investment and domestic investment in the form of joint ventures and partnership between locals and foreigners.

While in other African countries Diaspora investments account for 25 percent of GDP, Zimbabwe has only 6 percent and yet it has one of the largest Diaspora populations.
“We need to harness such investments to 25 percent like other African countries and create a conducive economic climate for our Diasporans to invest,” said Dr Sibanda.
Government hopes the incentives will also help in formalising the informal sector. It is estimated that there is over $3 billion circulating in the informal sector.