Zimbabwe Ripe for Investment, Poised for Growth

Presentation at ICAZ Investor Conference

Polokwane, 2-5 October 2014

Ease of doing business in Zimbabwe: “One Stop Shop Concept”

BY

NIGEL CHANAKIRA

ZIA BOARD CHAIRPERSON

"Your Investment, Our Passion" 2

PRESENTATION OUTLINE

About ZIA

Overview of doing business in Zimbabwe

Zimbabwe Doing Business ranking

Analysis of Doing Business Indicators-Zimbabwe vs. Region

Top Performers in Doing Business Reforms in the Region

Implications

Efforts to Improve Doing Business Environment

Conclusion

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ZIA MANDATE

Policy Advisory Role: Advise the Minister on investment policy & all matters relating to investment in Zimbabwe so as to enhance economic growth

To promote decentralisation of investment

To promote joint ventures between domestic and foreign investors

To promote, facilitate and coordinate investment by domestic and foreign investors in Zimbabwe

To deal with applications for investment Licenses

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Overview of Doing Business in Zimbabwe: feedback from investors

Poor Electricity, Water and weak transport infrastructure

Over-regulated economy: stringent and multiple compliance requirements

High cost and length of time to register

Corruption

Negative Image / Perception

Business environment in Zimbabwe is perceived to be among the worst in the world due to varied constraints

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Overview of Doing Business Environment in Zimbabwe Cont.

Land issue – there is need to make land in Zimbabwe bankable

Lack of e-government platform

Production below capacity – industry is operating at below 40% capacity

Lack of access to Finance

Brain drain: limited specialist skills

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ZIMBABWE DOING BUSINESS RANKINGS (OUT OF 185 )

Topic DB 2013 Rank DB 2014 Rank Movement

Starting a Business 143 150 -7

Dealing with Construction Permits

170 170 -

Getting Electricity 157 157 -

Registering Property 85 93 -1

Getting Credit 129 109 +20

Protecting Investors 128 128 -

Paying Taxes 134 142 -8

Trading Across Borders 167 167 -

Enforcing Contracts 111 118 -7

Resolving Insolvency 169 156 +13

Overall ranking 172 170 +2

WO

RLD

BA

NK

Zimbabwe Ranking trend

Indicator

Year

Overall

Ease of

Doing

Business

Indicator

Starting

a

Business

Construct

ion

Permits

Registerin

g

Property

Getting

Credit

Trading

Across

Borders

2010 159 145 178 84 113 167

2011 157 143 172 82 128 168

2012 171 144 166 85 126 172

2013 172 143 170 85 129 167

2014 170 150 170 93 109 167

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Doing Business Indicators 2014 Zimbabwe vs. Region

COUNTRY Overall Rank (Out

of 183 Countries)

Starting a

Business

Dealing With

Construction

Permits

Registering

Property

Paying Taxes

Botswana 56 96 69 41 47

Mauritius 20 19 123 65 13

Mozambique 139 95 77 152 129

DRC 183 185 90 133 176

Rwanda 32 9 85 8 22

South Africa 41 64 26 99 24

Angola 179 178 65 132 155

Tanzania 145 119 177 146 141

Zambia 83 45 57 102 68

Zimbabwe 170 150 170 93 142

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COMPETITIVENESS INDEX 2013-2014 (OUT OF 148)

GCI 2013-2014 GCI 2012-2013

COUNTRY RANK RANK CHANGE

South Africa 53 52 -1

Zambia 93 102 +9

Rwanda 66 66 0

Tanzania 125 120 -5

Mauritius 45 45 0

Botswana 74 74 0

Zimbabwe 131 132 +1

Mozambique 137 134 -3

Angola 142 n/a n/a

WO

RLD

EC

ON

OM

IC F

OR

UM

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FDI INFLOWS: ZIM VS SELECTED AFRICAN COUNTRIES

COUNTRY2012

US$ Millions2013

US$ Millions

Rwanda 160 111

Botswana 147 188

Democratic Republic of Congo, 3 312.1 2 098.2

Tanzania 1 800 1 872

Mauritius 589 259

Angola 6 898 4 285

United Republic of Tanzania 1 706.0 1 872.4

South Africa 4 559 8 188

Mozambique 5 629 5 935.1

Zambia 1 066.0 1 810.9

Zimbabwe 399.5 400.0

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UN

CTA

D

REGIONAL BEST PRACTICE CASES

1. Rwanda

• Reform process led by the President.

• Set up a Doing Business Unit to oversee reform process (WB Funding)

• Setting up of the physical OSS started without legislation.

• Act later put in place to give legal effect to the OSS

• Officers have powers to issue permits in the OSS

• Online company registration

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REGIONAL BEST PRACTICE CASES

2. Mauritius:

• Started with an initiative called Setting the Stage for Robust Growth by the Minister of Finance in August of 2005.

• Ministerial Committees on Red Tape and Bureaucracy were set up, including joint Public/Private Sector Committees to review the investment climate.

• Critical to the whole process was the transformation of the legal framework (Omnibus legislation)

• Silence is consent rule

• Company licencing now takes 3 days from 46 days before reform

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REGIONAL BEST PRACTICE CASES

3. ZAMBIA

• Government through the Private Sector Development Reform Program (PSDRP) undertook comprehensive PSD reforms:

• Substantially reduce the number of unnecessary licensing requirements

• Make the licensing regiments simpler, transparent and easy to comply with.

• Ensure licensing is focused on legitimate regulatory purposes, and

• Focus government and stakeholder attention on business regulation and not revenue generation as primary purpose of business licensing.

Unnecessary licenses were removed and a Central Electronic Registry created

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IMPLICATIONS OF A POOR DOING BUSINESS ENVIRONMENT

Which has resulted in increased dependence on imports

In turn, low industry capacity utilisation has led to low productivity and job losses

It has resulted in low levels of inward FDI and domestic investment

Doing Business Environment in Zimbabwe is undermining Investor Confidence

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INITIATIVES TO IMPROVE THE BUSINESS CLIMATE

Ministry of Finance and Economic Development working with the World Bank on the Doing Business Reform Agenda in Zimbabwe

A workshop was held 1-2 October 2014 that covered the following:

• World Bank technical team to advise on the technical issues of the doing business methodology so that stakeholders may appreciate what it entails

• Presentations were made by key Zimbabwean stakeholders with progress updates work done so far e.g. Doing Business Committee under Ministry of Industry and Commerce.

• Agreement on the roadmap and structure to be followed in implementing the agreed reforms

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THE ONE SHOP SHOP

Physical OSS has been in place since 2012

Intention was for 5 working day approvals for all processes

Participating Agencies/Deptsin One Stop Shop

Agencies in OSS:

• ZIA

• Registrar of Companies

• Immigration Control Department

• ZIMRA

• Ministry of Mines and Mining Development Ministry of Local Government

• Ministry of Youth Development, Indigenisation and Economic Empowerment

• Ministry of Local Government

• EMA

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Challenges facing the OSS

OSS fraught with its own challenges:

• Attendance by Officers: Erratic and sometimes non-attendance by officers from some departments e.g. Immigration Control

• Legislation: Organisations in the OSS have

• Different legislation making it difficult for some departments to transact from within ZIA (need harmonised legislation-Mauritius)

• Authority of seconded Officials: Current OSS set up requires officers to be empowered (case of Rwanda).

• Conditions of Service for Seconded Officers:

• Need for consideration to incentivise seconded officers (case of Uganda and Rwanda)

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Challenges facing OSS Contd’

Low volume of traffic in the OSS:

• discourages seconded officials from coming to the OSS as they would be idle.

• There is need for organisations to divert clients that can be assisted through the OSS to the OSS Centre

Online Processing: Departments in the OSS not ‘networked’ i.e. Virtual vs physical OSS

Funding of OSS: Adequate funding needed to fully operationalise the OSS (incentives, advertising the OSS Services)

Separate payment systems for different departments

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Viability of OSS

If properly managed and fully operational OSS removes unnecessary bottlenecks in decision-making and reduces start up time.

Need for legal framework (Rwanda and Uganda)

Physical OSS coupled with on line processing reduces processing time (Rwanda)

Virtual OSS (Mauritius). This is the route we will pursue

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WAY FORWARD: IMMEDIATE ATTENTION AREAS

Reviewing overall licensing processes

Strengthening ZIA and its role in business climate improvement (funding)

Zim should strengthen the re-engagement with multi-lateral financiers to provide development funds

Improving dialogue platforms with the private sector (e.g. investors roundtable)

Setting up relevant regulations related to business reforms

Reviewing laws related to business

Registrar of companies / Company Incorporation computerization

Making One Stop Shop operational

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WAY FORWARD CONT.

In short - Improve Doing Business environment across the board

ZACC and anti-corruption processes should be seen bringing culprits to book

Train all regulatory agencies that deal with investors to be investor and business friendly.

Take away discretionary policies - simplify

Strengthen all institutions and automate processes to add speed

Ensure policy Consistency it is very critical for policy makers to speak with one voice

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CONCLUDING REMARKS

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Zimbabwe is clearly punching below its weight due to weak Doing Business Environment among other factors

It is therefore imperative that Doing Business Environment Specific Actions receive immediate attention

There is need to streamline all investment processes including harmonisation of all laws and regulations affecting investment.

Computerization of all registration processes will score many marks for efficiency and turnaround time

Improving dialogue platforms with the private sector

Strengthening and reinforcing ZIA and its role in business climate improvement

Thank You For Your

Attention

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