The legal system in Zimbabwe is based on the common law which law is enforceable in different courts. The court system in Zimbabwe is made up of the Constitutional Court, Supreme Court, High Court, Labour Court, Administrative Court and Magistrates Court. The High Court deals with civil disputes in which the value exceeds ZWL300,000. Commercial disputes with values below ZWL300,000 must be resolved by the Magistrates Court.
A Commercial Court is being set up as an extension of the High Court to deal with commercial disputes as expeditiously as possible and the rules of this court have been released.
Zimbabwe recognises and has domesticated the United Nations Model Law on Arbitration. A commercial arbitration centre exists to co-ordinate arbitrations; awards made in other countries are enforceable in Zimbabwe as long as they are not, among other things, contrary to the public policy of Zimbabwe or obtained by fraud.
Transfer and allotment of shares in a Zimbabwean company to a foreign resident requires prior exchange control approval. Exchange control approval exists to allow a foreign resident to own up to 15% of a listed company. A group of foreign residents can own up to 49% of a listed company.
Compulsory indigenisation was repealed by the new dispensation which came to power in November 2017. Foreign residents can own up to 100% of shares in a Zimbabwean company.
In respect of diamond and platinum-mining companies, foreign residents can own up to 49% of the shares.
The following sectors are reserved for investment by indigenous Zimbabweans only:
Foreign investments in these sectors requires prior approval by the Cabinet.
Foreign companies establishing a place of business in Zimbabwe are required to register a subsidiary or a branch of a foreign company. A foreign company is said to establish a place of business where it transacts.
Typical regulators in Zimbabwe are as follows:
There are also sector regulators such as:
The Competition and Tariff Commission may also be needed in cases of mergers and acquisitions and matters connected or incidental thereto. Transactions often require the approval of sector regulators as well.
Most of the above regulatory entities can be accessed from a One Stop Investment Services Centre (under the control and supervision of ZIDA), which was specifically established to co-ordinate and expedite the process of registering in Zimbabwe. ZIDA is the successor to what was known as the Zimbabwe Investment Authority. It was established to provide a one-stop investment centre which has representatives of entities that play a role in licensing, establishment and operationalising investment. The functions of the Agency are as follows:
Any person who wishes to obtain the approval of ZIDA (the Zimbabwe Investment and Development Agency) to invest in Zimbabwe or have his or her business activity to be approved by ZIDA as a foreign investment is required to submit an application for an investment licence. An application fee of USD500 and a licence fee of USD2,500 shall be paid to ZIDA upon submitting the application.
Although registration of foreign investments is not mandatory, it is essential because registering the investment with ZIDA facilitates payment of dividends to foreign investors and repatriation of their capital and it provides a significant layer of foreign investment protection.
In considering an application for an investment licence, ZIDA will consider:
Any person who is aggrieved with the decision of ZIDA may appeal to the Administrative Court within 30 days of the decision being given. Thereafter, as soon as possible and, in any event, not later than 30 days after the receipt of a notice of appeal, ZIDA must – if a formal record of the proceedings was kept – lodge it with the registrar of the court and, if no formal record of the proceedings was kept, lodge with the Registrar reasons for the decision concerned, together with all the papers relating to the matter in issue. The Registrar of the court will then set the matter down for a hearing.
Common business structures in Zimbabwe are:
In general, members are not liable for debts and defaults of the company except in circumstances where the corporate personality is being used for fraudulent purposes, allowing the court to lift the corporate veil. Furthermore, in the event of liquidation, members will be liable where they will not have paid for their shares. Such liability will be to the extent of the shortfall only.
The steps of registering a company starts with choosing a name, then reserving the name with the Registrar of Companies. After the name is reserved, the company documents are submitted with the prescribed fee. The process from name reservation to registration takes between one week and one month.
Private limited companies are obliged by the law to file annual returns every year. In addition to this, they also need to update their CR6 form (a document with the details and list of directors) should the directors of the companies change. Companies are also obliged to keep an up-to-date CR5 form which shows the registered addresses of the companies.
In addition to the above, companies are also obliged to file certain special resolutions (CR8 form) with the Registrar once these resolutions are made.
In Zimbabwe there are executive directors who are in charge of the daily management of the company, but are heavily supported by the non-executive directors. The non-executives are expected to participate in committee meetings whenever needed.
Directors and prescribed officers owe fiduciary and care duties to the company. These duties are both statutory (as primarily stated in Part IV of the Companies and Other Business Entities Act (Chapter 24:31) and common law.
In addition to the above, Zimbabwean law recognises the doctrine of piercing the corporate veil. Under this doctrine, shareholders and/or directors and prescribed officers can be held personally liable for the actions of the company.
The employer/employee relationship in Zimbabwe is governed by the Labour Act (Chapter 28:01). The purpose of the Labour Act is:
As can be deduced from the above, the Labour Act is quite extensive and covers the entire employer/employee relationship. Any contract, agreement or arrangement between employers, employees or any relevant parties, has to be made within the confines of the Labour Act. Any act that is contrary to the Labour Act is invalid and void.
The form and substance of an employment contract is governed by Section 12 of the Labour Act. According to that section, every person who works for another person and is entitled to receive any remuneration in respect of such employment is deemed to be under a contract of employment with that person, regardless of whether the contract is in writing or not. Therefore, in Zimbabwe a verbal contract is as valid as a written one.
A verbal contract, however, brings compliance problems to the employer. In terms of the Labour Act, at the time of engaging an employee, the employer has an obligation to inform the employee in writing of, among other matters, the name and address of the employer, the length of the employment, terms of any applicable employment code, remuneration and benefits, working hours and leave days.
The Labour Act gives discretion to the parties to decide upon the length of engagement. In the event that the parties do not specify the length or date of termination of the employment, the contract is deemed by the law to be a contract without the limit of time. Essentially, what this means is that if the parties do not state the length of the engagement and/or the duration of the employment relationship, the employee will be a permanent employee.
It is important to note that casual workers are only deemed to be in an employment without a limit of time if they work for a certain period of time for the employer. It is not as automatic as in other circumstances. See also 4.4 Termination of Employment Contracts.
According to Section 14C of the Labour Act, every employee is entitled to not less than 24 hours’ continuous hours of rest each week, either on the same day of every week or on a day agreed by the parties.
When an employee consents to work on a public holiday, that employee is entitled to receive not less than twice his current remuneration for that day.
The Labour Act empowers the Minister to make regulations providing for the maximum number of working hours, night shifts, overtime and other related issues.
The law provides for different methods of termination of employment.
The first method is termination by mutual agreement, where parties agree to part ways. In the same respect, an employee can simply resign subject to giving the relevant notice.
Another method is by effluxion of time. This occurs to contracts of employment that specify the duration or date of termination of the contract. These contracts are usually referred to as fixed-term contracts.
An employment contract can also be terminated on notice. This is subject to the Companies Employment Code of Conduct or, in the absence of an employment code, in terms of the model code made in accordance with the Labour Act. Employers and employees are free at law to agree on a longer period of notice than the legislated one. If the contract is silent the following periods will apply:
The Labour Act also provides that an employer can terminate a contract by way of retrenchment in terms of the provisions of the Act.
At termination of employment, whether on notice or retrenchment, every employee is entitled to compensation for loss of employment. The compensation cannot be less than one month's salary or wages for every two years of service as an employee (or the equivalent lesser proportion of one month's salary or wages for a lesser period of service).
The other method of termination of employment is through dismissal. An employee can be fairly dismissed if he or she commits an offence that warrants a penalty of dismissal. If an employee is fairly dismissed from his or her employment, he or she will not be entitled to compensation for loss of employment.
A contract of employment can also be terminated as a result of death or through physical or mental incapacitation. In the latter case, the employee will be entitled to benefits for loss of employment.
The Zimbabwean law provides different forums for employee representation. The most popular ones are trade unions and workers' committees. According to Section 4 of the Labour Act, every employee has a right, if he or she so wishes, to be an officer or member of a trade union or a worker’s committee.
Workers can only join unions that are registered for the undertaking or industry in which they are employed. This means that a mine worker can only join a trade union for mine workers and not the one for workers in the sugar milling industry. Joining is not automatic; the employee has to comply with the conditions of membership.
Outside the protection of trade unions and workers’ committees, employees have the right to fair labour practices. This includes the right to be granted access to any lawful proceedings that may be available to the employee to enable him to lawfully advance or protect his rights or interests as an employee.
Value added tax (VAT) of 14.5% is levied on the sale of goods or supply of services. Income tax for employees is charged on a sliding scale up to a maximum of 45%.
The corporate tax rate is 245% plus a 3% levy. A levy of 5% is imposed on the net financial profits of registered banking institutions. To encourage exports, a staggered lower corporate tax structure for exporting companies ranging from 15% to 20% was introduced in 2015.
Profits earned from new projects by companies or individuals operating in designated growth point areas are taxed at 15% in the first year in which the operations commence and for four years thereafter. Resident shareholders’ tax is pegged at 20%. Government has extended a rebate of duty on capital equipment imported by the mining, agriculture, energy and manufacturing sectors for equipment valued at USD1 million and above.
Tax concessions are also applied to export manufacturing businesses established in designated export processing zones. Dividends paid by a Zimbabwean company to another Zimbabwean company are not taxable but dividends earned by non-residents in Zimbabwean companies are subject to a withholding tax of 15% in the case of stock exchange-listed companies and 20% in the case of other companies. Capital gains tax is levied on the sale of immovable property at the rate of 20%. The rate is 5% on immovable property acquired by the seller before February 2009. Capital gains tax on securities is 1%.
Double Taxation Agreements
The following countries have a double taxation agreement with Zimbabwe:
In Zimbabwe, although group accounts can be prepared as consolidated financials for accounting purposes, there is no group loss relief. No loss transfer takes place. All Zimbabwean companies are required to complete separate tax returns, calculate their tax liabilities separately and are separately liable for tax.
Zimbabwe has thin capitalisation rules based on a 3:1 debt-to-equity ratio. A portion of overall interest may be disallowed if this ratio is exceeded. In addition, any disallowed interest will be treated as a deemed dividend and subjected to a 15% withholding tax
Income Tax (Transfer Pricing Regulations) were introduced by the Minister of Finance and Economic Development in 2019 under SI 109/2019. Zimbabwe also uses the African Tax Administrators’ Forum, OECD and UN Guidelines on transfer pricing.
All controlled transactions are required to meet arms-length principles.
Each affected taxpayer is required to prepare a transfer pricing documentation on an annual basis. These will include the taxpayers’ transfer pricing policy which will also outline its organisational chart and operations. Details of group members have to be disclosed. These will include their legal form and shareholdings. All controlled transactions have to be disclosed. The taxpayer has to provide an explanation for its selection of the most appropriate transfer pricing methods and of the tested party and financial indicator.
Where the Commissioner requests additional information, the taxpayer has seven days to provide same.
If a taxpayer has adopted non-arm’s length pricing for its related-party transactions and is unable to demonstrate that it has exercised reasonable effort to determine the arm’s length price for such transactions, ZIMRA (the Zimbabwe Revenue Authority) is empowered to impose a penalty by way of additional tax, not exceeding 100% of the amount of the tax undercharged.
Tax avoidance is legal in Zimbabwe. However, aggressive tax avoidance that is tantamount to evasion is illegal. The Commissioner of the Revenue Authority is authorised to look behind the transaction and undo it, if he or she is of the view that the transaction was carried out in the way it was to for the purpose of evading tax.
Section 98 of the Income Tax Act dealing with tax avoidance in general provides the following.
"Where any transaction, operation or scheme (including a transaction, operation or scheme involving the alienation of property) has been entered into or carried out, which has the effect of avoiding or postponing liability for any tax or of reducing the amount of such liability, and which in the opinion of the Commissioner, having regard to the circumstances under which the transaction, operation or scheme was entered into or carried out –
(a) was entered into or carried out by means or in a manner which would not normally be employed in the entering into or carrying out of a transaction, operation or scheme of the nature of the transaction, operation or scheme in question; or
(b) has created rights or obligations which would not normally be created between persons dealing at arm’s length under a transaction, operation or scheme of the nature of the transaction, operation or scheme in question;
and the Commissioner is of the opinion that the avoidance or postponement of such liability or the reduction of the amount of such liability was the sole purpose or one of the main purposes of the transaction, operation or scheme, the Commissioner shall determine the liability for any tax and the amount thereof as if the transaction, operation or scheme had not been entered into or carried out, or in such manner as in the circumstances of the case he considers appropriate for the prevention or diminution of such avoidance, postponement or reduction."
Merger notification is made to the Competition and Tariff Commission. It receives notification of all qualifying mergers. The threshold for notification is ZWL10 million or ZWL10 million annual turnover from the previous year, the income being in Zimbabwe or from Zimbabwe assets of the merged entity or gross turnover of the two entities. The Commission approves all mergers involving acquisition of a controlling interest in the business of a competitor, a supplier, a customer or other person. The approval fees have a minimum of USD100,000 and a maximum of USD800,000 and the calculation will be 0.5% of the combined annual turnover or combined value of assets. Penalties for failure to notify the Commission are as high as up to 10% of the assets of the merged entities or their turnover, whichever is greater.
The Competition and Tariff Commission works in collaboration with a regional body, the COMESA Competition Commission, which gets involved in circumstances where the transaction will be have regional effects.
In examining mergers, the Commission will determine whether or not the merger is likely to substantially prevent or lessen competition in Zimbabwe as a whole or in any part of the country by assessing a number of factors, including the following:
The procedure for Merger Notifications in Zimbabwe is evinced in Section 34A of the Competition Act, Chapter 14:28, as quoted below.
"(1) A party to a notifiable merger shall notify the Commission in writing of the proposed merger within thirty days of (a) the conclusion of the merger agreement between the merging parties; or (b) the acquisition by any one of the parties to that merger of a controlling interest in another. (2) Notification in terms of subsection (1) shall be made in such form and manner as may be prescribed and shall be accompanied by the prescribed fee, if any, and such information and particulars as may be prescribed or as the Commission may reasonably require."
The following “unfair business practices” are punishable:
Zimbabwe's Competition Act deals with abuse of dominant position under monopoly situations and substantial market control. The Competition and Tariffs Commission can declare a monopoly situation to be unlawful if it is contrary to public interest. A monopoly situation is generally considered to be contrary to public policy unless the Commission is satisfied as to one or more of the following:
Substantial market control exists where a market player has the power to maintain, reduce or raise prices above or below competitive levels for a substantial time within Zimbabwe. There is no threshold for dominance. A restrictive practice is considered to be contrary to public policy if it is engaged in by a person with substantial market control over a commodity or service to which it relates, unless the Commission is satisfied as to one or more of the following:
In the circumstances, although the legislation does not specifically deal with abuse of market dominance, it indirectly does so by giving the Commission power to control restrictive practices by players with substantial market control and, furthermore, by allowing it to prohibit monopoly situations which are not in the public interest.
Patents are letters of patent granted when a patentee registers an invention. An “invention” means any new and useful art, whether producing a physical effect or not, process, machine, manufacture or composition of matter which is not obvious or any new and useful improvement thereof which is not obvious, capable of being used or applied in trade or industry and includes an alleged invention.
The term of every patent is 20 years.
A trade mark is any sign which can be represented graphically and is capable of distinguishing the goods or services of undertakings. The proprietor is given a registration certificate which is valid for ten years which is renewable for an additional ten-year period with each renewal. Any person who uses the mark without permission or a licence from the proprietor will be liable to pay compensation to the proprietor.
The remedies that are available to the proprietor for infringement are damages, interdict, attachment, the rendering of account, the delivery of improperly marked goods or of articles used or intended to be used for marking goods or otherwise, as are available in respect of the infringement of any other proprietary right.
The law provides for the registration of an industrial designs. A “design” means features of shape, configuration, pattern or ornamentation applied to an article by any industrial process or means, being features which in the finished article appeal to and are judged solely by the eye, but does not include a method or principle of construction or features of shape or configuration which are dictated solely by the function which the article to be made in that shape or configuration has to perform.
In order for a design to be registered in Zimbabwe it has to be new and original. The registration is valid for ten years and can be further renewed for another period of five years.
Under Zimbabwean Law, copyrights are given to literary works, which include; books, music and films. In terms of the law, the rights of the creator or author are acquired by virtue of the creation of a work. In other words, the moment an author writes the book, copyrights are conferred upon him or her by the operation of the law.
A copyright is valid for 50 years.
Intellectual property is also protected via the common law through the use of instruments such as non-disclosure agreements and non-circumvention agreements. This protection is afforded by the contracts between the parties and damages for breach can be inserted to deter parties from breaching the agreements.
The protection of privacy is a fundamental right that is enshrined in the Zimbabwean Constitution. Currently, there is no designated national legislation dealing with data protection in Zimbabwe. Nonetheless, the Zimbabwean government has recently gazetted the Cyber Security and Data Protection Bill which is set to provide for data protection, the investigation and collection of evidence of cybercrime and unauthorised data collection and breaches as well as, establish a Cyber Security Centre and Data Protection Authority.
The other related laws that regulate the protection of specific data are:
In terms of the Cyber Security and Data Protection Bill, a data controller may not transfer personal information about a data subject to a third party who is in a foreign country unless an adequate level of protection is ensured in the country of the recipient or within the recipient international organisation and the data is transferred solely to allow tasks covered by the competence of the controller to be carried out.
The Bill is applicable to the processing of personal data carried out in the context of the effective and actual activities of any controller permanently established in Zimbabwe, or in a place where Zimbabwean law applies by virtue of international public law. It will also be applicable to the processing of personal data by a controller who is not permanently established in Zimbabwe, if the means used – whether electronic or otherwise – is located in Zimbabwe and such processing is not for the purposes of mere transit of personal data through Zimbabwe.
The main role of the Data Protection Authority will be to:
The above data protection rules are applicable to any foreign company conducting business in Zimbabwe.
New Dispensation and New Investment Climate
Since coming into power in November 2017, the current Zimbabwean administration has passed several policies and enacted laws to encourage foreign investment.
The current administration started by removing an indigenisation law which required that at least 51% of the shareholding in every company operating in Zimbabwe be held by indigenous Zimbabweans. The 51% requirement was repealed through Finance Act No 1/2018. The law is now confined to platinum and diamond-mining companies only.
Furthermore, in pursuit of reducing bureaucracy and enhancing ease of doing business, the government of Zimbabwe recently passed the Zimbabwe Investment and Development Agency Act (Chapter 14:37) (ZIDA Act) which was gazetted on 7 February 2020. The law aims to facilitate entry and implementation of investment projects; in addition, it co-ordinates investment programmes and strategies. It establishes the One-Stop Investment Centre which houses representatives of entities that play a role in licensing, establishment and operationisation of investment. These include: the Immigration Department, the Zimbabwe Revenue Authority, the Environment Management Agency, the Reserve Bank of Zimbabwe, the Companies Office, the National Social Security Authority, the Zimbabwe Energy Regulatory Authority, the Zimbabwe Tourism Authority, and specialised investment units and other line ministries.
The ZIDA Act provides that foreign investors should be treated the same way as local investors and that foreign investors from all countries will be treated equally. It further provides that investors are free to invest in any sector save for those reserved for locals. The following sectors are reserved for investment by indigenous Zimbabweans only:
It provides that foreign investors should be treated the same way as local investors and that foreign investors from all countries will be treated equally.
The law also contains guarantees that the property of investors should not be expropriated or nationalised except for public purposes in accordance with the laws of general application. It makes provision for the payment of prompt, adequate and effective compensation in respect of expropriated property. In addition, it contains and clarifies procedures preliminary to the conclusion of public private partnerships.
The current Zimbabwean government has been actively engaging the international community in an effort to end the "pariah state" status the country has endured for several decades. The dispensation sees itself as the Second Republic and is anxious to end the isolation which was earned by the First Republic. The current administration moved to amend the Money Laundering and Proceeds of Crime Act, Chapter 9:24, as part of its commitment to a comprehensive legal framework to combat money laundering and terrorist financing. Zimbabwe has been a member of the Eastern and Southern African Anti Laundering Group since 1999. It committed itself to implementing 40 recommendations of that group to avoid isolation from the international financial system. To ensure that it is fully compliant with the recommendations it recently amended the Money Laundering and Proceeds of Crime Act.
In February 2009, following years of astronomical hyperinflation, Zimbabwe abandoned its own currency and adopted the use of currencies of other countries in normal trade. Exchange control restrictions on the use of foreign currency were relaxed.
In 2016 the government introduced an export incentive in terms of which exporters were paid a bonus of 5% of the value of their export earnings. This introduced bond notes which traded as a currency with a value of 1:1 with the US dollar.
In February 2019 the government introduced a virtual currency called the RTGS dollar and all liabilities existing at that date, regardless of currency, were converted to RTGS dollar liabilities on an exchange rate of 1:1 with the US Dollar. Exceptions were made for foreign liabilities and funds held in nostro foreign currency accounts.
Foreign currency is now freely tradeable on what is called an "interbank market" where the RTGS dollar is currently pegged at 1:25 relative to the US dollar.
The government passed a law prohibiting producers and suppliers from selling their products or charging for services in foreign currency for domestic transactions. This has since been reversed as of 29 March 2020 as the use of free funds is now encouraged.
Exporters are generally entitled to access and utilise their foreign currency earnings subject to a retention period of 30 days after which the funds are converted to RTGS dollars at the prevailing interbank market rate.
On 24 June 2019, the Minister of Finance and Economic Development promulgated a statutory instrument to bring the use of multi-currencies to an end. The Zimbabwean dollar shall be the sole tender in all domestic transactions. However, foreign currency accounts and possession of foreign currency will be allowed. The foreign currency accounts will be used to settle foreign liabilities whereas domestic liabilities will be settled in local currency. This too has since been reversed as of 29 March 2020, via another statutory instrument which allows the use of foreign currency to settle obligations and for domestic transactions for the duration of the COVID-19 pandemic.
Zimbabwe has recently promulgated the Companies and Other Business Entities Act (Chapter 24:31). This repeals the previous Companies Act which had been in force since 1951. The most outstanding matters to be introduced include the following:
The Microfinance Amendment Act of 2019 was passed on 19 November 2019, and amends the Micro Finance Act (Chapter 24:30). Essentially, it reduces the number of microfinance institutions and recognises two types: credit-only microfinance institutions (namely, companies that provide loans and credit to small-scale borrowers); and deposit-taking microfinance institutions (namely, companies that accept deposits from small-scale businesses and members of lower-income groups).
Previously, legislation envisaged the following:
The other object of the amendment is to strengthen the supervision exercised over micro-finance institutions.
SI 96/2020 Deferral of Rent and Mortgage payments during COVID-19 National Lockdown contains regulations made by the President under the Presidential Powers (Temporary Measures) Act, which provide for a moratorium on mortgage payments during the National Lockdown.
Recently, business rescue was introduced into Zimbabwean law. The new Insolvency Act provides for corporate rescue.
Commencement of business rescue
A company is placed under corporate rescue either by a resolution of the directors or by a court order following an application.
Where it is placed under corporate rescue compulsorily by a court order, creditors or employees or shareholders may apply for such an order. This court application is made on notice to each affected person by standard notice.
Time of commencement of corporate rescue
Compulsory corporate rescue commences when the corporate rescue application is filed with the court, whereas voluntary corporate rescue commences when a resolution to commence corporate rescue proceedings is passed and is filed with the Master of the High Court and the Registrar of Companies, in the case of companies.
Corporate rescue lasts for three months. There is, however, provision for an extension with the support of the majority of the creditors or by the court. The Act is still too new to be able to estimate the duration in practice.
Corporate rescue practitioner
A corporate rescue practitioner takes control of the company. Directors are answerable to him or her. All decisions made in connection with the affairs of the company require the approval of the corporate rescue practitioner to be valid.
Proof of claims
Within 15 business days after being appointed, the Master of the High Court must convene and preside over a first meeting of the creditors. at which he or she may receive proof of claims by creditors.
Consequences of corporate rescue
Corporate rescue plan
The plan is the centre of corporate rescue proceedings. It is expected to set out in detail the situation of the company and proposals made for its rehabilitation or removal from distress. The plan has to be voted on by creditors. Acceptance is by 75% in value of the creditors voting in favour of the plan. The vote is subject to any aggrieved person making an application to court to order differently from what will have been voted upon. Otherwise, an acceptance plan is binding on all creditors.
Termination of corporate rescue occurs when either (i) the court will have set aside the resolution in terms of which business rescue proceedings will have commenced, or (ii) the business rescue practitioner will have filed a notice of termination of the business rescue.
Liquidation in the event of failure
Where the corporate rescue fails or conditions precedent of the plan are not fulfilled, the company may be placed under liquidation.
Value added tax (VAT) was reduced from 15% to 14.5% in February 2020. Also, the VAT registration threshold was changed from USD60,000 to RTGS60,000, then to ZWL60,000. In 2020, it was then raised to ZWL1 million per annum.
To enhance revenue collection, the government of Zimbabwe introduced a new 2% electronic transaction tax. The Finance Act No 3 of 2019 exempts the following from the electronic transaction tax:
Upcoming legislation includes the following.
New national Competition Policy
In 2017, the Cabinet approved a new Competition Policy and it awaits enactment in 2020.
The proposed Competition Policy aims to encourage investment through the timely and effective handling of unfair trade practice cases to further industrial trade policies. This policy is aimed at enhancing doing business in Zimbabwe.
The proposed Competition Policy also aims to promote the acquisition and mergers of various entities through the timely review of mergers and acquisitions from the previous 90 days to the proposed 60 days.
The proposed new Competition Policy also seeks to widen the mandate of the Zimbabwe Competition and Tariff Commission through introducing the mandate of enforcing the Consumer Protection Act.
The policy aims to set out clear rules on anti-cartel enforcement as well as anti-competitive conducts in public procurement.
Proposed establishment of a Trade Restriction Unit
A Trade Restriction Unit is also proposed to be in the new Competition Policy. The role of this unit will be to actively ensure that international companies are not dumping products in Zimbabwe.
This unit will actively enforce the provisions of statutory instrument 266 of the 2002 Competition (Anti-Dumping and Countervailing Duty) (Investigation) Regulations.
Through the unit, the Zimbabwe Competition and Tariff Commission will be empowered to levy penalties on international companies that violate competition laws.
The amendment to introduce criminal sanctions for companies, officers and directors of firms is intended to enhance deterrence.
Proposed establishment of a Price Control Unit
Another point of interest that clients should look forward to is that the Zimbabwe Competition and Tariff Commission is in the process of introducing an active Price Control Unit whose mandate includes price control management and adjustment of import tax duty at Zimbabwean borders.
This unit is a measure to curb the increases in prices across all markets that have negatively impacted on consumer welfare.
Active participation in the International Competition Network
Although Zimbabwe is a member of the International Competition Network, the Commission is making an effort to actively participate in the network's international project-oriented working groups.
It is hoped this will provide the Zimbabwe Competition Commission with opportunities to discuss working group projects and their implications for enforcement.
Finance Act No 3 of 2019 introduces unexplained wealth orders which may be made by the High Court following an application. The application is required to specify or describe the property and the person whom the enforcement authority thinks holds the property. The respondent will be required to provide a statement:
In deciding whether to make unexplained wealth order the High Court must be satisfied that there is reasonable cause to believe that: (i) the respondent holds the property; and (ii) the value of the property is greater than USD10,000 or its equivalent in any currency.
The High Court must be satisfied that there are reasonable grounds for suspecting that the known source of the respondent’s lawfully obtained income would have been insufficient for the purposes of enabling the respondent to hold the property.
The High Court must be satisfied that:
The Consumer Protection Act (Chapter 14:14) was gazetted as Act No 5 of 2019 in December 2019.
It applies to all transactions conducted in Zimbabwe. Exceptions are goods and services promoted or supplied to the state, services supplied under an employment contract and transactions which the consumer is a juristic person whose asset value or annual turnover equals or exceeds the threshold value prescribed in a government gazette notice by the Minister of Industry and Commerce. The Act does not apply to transactions for the sale, letting or hire of immovable property and contract of employment.
The law also establishes the Consumer Protection Commission. The functions of the Commission are centred on the protection of consumers from unjust, unreasonable, improper and unacceptable, deceptive, unfair and fraudulent conduct and trading practices. The Commission also promotes fair business practices by co-ordinating and networking consumer activities with consumers vis-à-vis consumer organisations, and protect consumer interests. Further, the Commission promotes consumer awareness and empowerment by referring and appearing before any court of law.
In addition, the Act provides for the right to fair value, good quality and safety of goods and services. There is an implied warranty of quality, a producer, importer, distributor or retailer will be expected to give the consumer.
Warnings of risks will be required and punitive measures to those who contravene will be provided for. Recovery and safe disposal of designated products or components will be provided for.
The Consumer Protection Commission is expected to develop mechanisms to allow consumer complaints, reports and investigation. The mechanisms will provide for return, repair and recalling of such goods.
New listing requirements were gazetted on 14 June 2019. They do not represent a radical departure from the current listing rules. Additional concepts which have been defined and were not defined in the old rules are exactly as understood in practice when dealing with listing issues under the old rules.
The new rules are more detailed than the current rules. Practices of the listing committee of the stock exchange, which were not written, have been reduced to writing and added to the listing rules. There is a clear intention to enhance supervision and promote transparency of listed companies, as subsequently described.
Changes in the board of directors have to be notified to the Zimbabwe Stock Exchange through a sponsoring broker. They have to be announced as soon as practical. Members of the board of directors have to retire on rotation at least once every three years, and not more than 40% of the directors may be executive directors. Furthermore, the company must, in respect of any new director, submit a declaration to the Zimbabwe Stock Exchange within 14 days prior to the director’s appointment becoming effective. Transactions in which directors have a direct or indirect interest have to be reported by the company to the Stock Exchange.
Detailed corporate governance rules have been included requiring:
Independent directors can only be those who:
Independent directors must be the majority on the board of a listed company.
The chairperson of the board must be an independent director.
The chairperson and the Chief Executive Officer must be appointed by the board.