Bureaucratic delays and regulatory uncertainty are a few examples of the challenges that hamper the completion of transactions in Zimbabwe. These hurdles are made lighter by the Zimbabwe Investment and Development Agency Act (Chapter 14:37) (the Act) and, more importantly, the Agency established under it. Whilst the Act provides the general framework for investments in the country, the Agency is tasked, among other things, with streamlining investment approvals and promoting investment in general.

This instalment, the second in a three-part series, puts into focus the Act and the Agency and expands on how these two are critical components in Zimbabwe’s mergers and acquisitions (M&A) landscape. In addition, the article will reveal how both can be invoked to serve as crucial enablers of M&A transactions. By understanding the advantages proffered by the Act and the Agency, foreign investors and local dealmakers can rely on them to facilitate deal execution, investor protection, and ensure regulatory compliance.

ZIDA: THE ENGINE OF INVESTMENT FACILITATION IN ZIMBABWE

The starting point for assessing how one can benefit from the Act and the Agency is to understand the Act. The Act came into force in February 2020, and it is a piece of legislation meant to provide for the promotion, entry, protection and facilitation of investment; to provide for the establishment of the Zimbabwe Investment and Development Agency, and to provide for matters incidental to or connected to the aforementioned.

Therefore, ZIDA is reference not only to the Act itself, but to the Agency which is created under it.

Benefits under the legislative framework

(a) Streamlining processes:

Before the introduction of the Act, Zimbabwe’s investment framework was fragmented across multiple statutes, naturally creating delays, regulatory uncertainty, and inefficiencies in the M&A process. The Act thus consolidated the since-repealed Zimbabwe Investment Authority Act [Chapter 14:30], the Special Economic Zones Act [Chapter 14:34] and the Joint Ventures Act [Chapter 22:22] into a single, investor- friendly law.

The Act also provides a simplified understanding of the investment licensing procedure for Public Private Partnerships and Special Economic Zones, while the underlying and supporting regulations also allow for the issuance of tax and customs related benefits applicable.

For M&A professionals and foreign investors, this is key to providing transaction guidance, and it also constitutes a streamlined legal framework that improves transaction certainty.

(b)The priority list:

This is the equivalent of ‘jumping the bureaucratic queue’ – legally. It is a ‘super power’ for companies dealing with government departments. Sadly, this super power is either not entirely known or it is severely underutilised.

The ability to jump the bureaucratic queue is found under section 6 of the Act. The provision states that, “Every officer, organ or arm of the State, and every statutory body and local authority whose duty it is to consider any application for the grant of any permit, licence, permission, concession or other authorisation required in connection with any activity, or for the provision of a service, shall ensure that, as far as possible, priority is given to the consideration of any application therefor by an applicant whose activity is permitted or approved in terms of an investment licence issued under this Act.”

Therefore, once a company is granted this license, most (if not all) processes must, as a matter of law, be given priority. Sensitising the authorities on this aspect may provide efficiency for any transaction or related applications.

(c) Clarity and legal protection for investors:

The Act incorporates globally accepted investment protection principles that are critical for foreign investors, including: the National Treatment Principle (NT), whereby foreign investors must be treated no less favourably than domestic investors in similar circumstances; the Most-Favoured Nation (MFN) Treatment, whereby any benefits granted to one foreign investor must be equally available to others; the Fair and Equitable Treatment principle, whereby investors are protected from arbitrary regulatory changes and unfair treatment; and protection against expropriation, whereby guarantees are offered against forced takeovers and state interference without adequate, prompt and effective compensation.

Further to the above, the Act also provides for repatriation of funds, and accords investors the right to challenge decisions affecting their investment through dispute resolution mechanisms.

By embedding these principles, the Act seeks to reduce policy uncertainty – a key concern for investors considering Zimbabwe. However, although these principles are reflective of the intention to provide more investor clarity, it should be noted that there is still massive policy inconsistency currently prevailing in Zimbabwe, especially in respect of currency laws in the country. It would be interesting to see investors pivot on this Act to challenge certain policies that affect investment in Zimbabwe.

Benefits from The Agency

As alluded to in the initial article, the Agency is one of the key regulatory bodies that govern M&A transactions in Zimbabwe, and it is essential to drive M&A efficiency. While the Act sets the legal framework, the Agency is the operational body that executes the law, ensuring that M&A transactions proceed smoothly.

ZIDA serves as the primary investment promotion authority, facilitating dealmaking by reducing bureaucratic delays, offering post-investment support, and creating a more predictable regulatory environment. This is primarily done through its One-Stop Investment Services Centre (OSISC). A key obstacle to efficient deal execution in Zimbabwe has been the need to navigate multiple government departments for approvals. The OSISC integrates approvals from all the key regulatory bodies stated in the initial article.

In practice, the Agency also meets up with investors and key stakeholders, upon request, to cater to any investor issues, including any bottlenecks that may arise during subsequent transactions. By bringing these agencies under one coordinated platform, OSISC cuts approval timelines, eliminates redundant processes, and improves regulatory transparency, all essential for fast-tracking M&A transactions.

Unlike traditional regulators that focus solely on approvals, ZIDA provides ongoing support to investors and ensures that their business needs, from a regulatory perspective, are catered for. More recently, in 2024, ZIDA suspended its yearly licensing maintenance fee of approximately US$3,000, rightfully pointing out that the fee actually deterred investment and unnecessarily penalised investors. It also provides for regulatory updates, helping investors stay compliant with evolving policies, and even goes further by making available investment opportunities in different economic sectors in the country.

As Zimbabwe continues to refine its investment climate, the Agency and the Act are both critical components in the M&A landscape. Together, they create a structured, investor-friendly environment for M&A transactions. For investors and M&A professionals, understanding ‘the ZIDA advantage’ is not just advantageous – it is essential. By fully acquainting oneself with the elements provided by the Act and the Agency, one can ensure a more seamless transactional experience for investors in Zimbabwe.

Tapiwa John Chivanga is a Partner | Scanlen & Holderness

This article first appeared in DealMakers AFRICA, the continent’s quarterly M&A publication.

DealMakers AFRICA is a quarterly M&A publication
www.dealmakersafrica.com