Banks, building societies, microfinance institutions, venture capitalists and pension funds typically act as sponsors and lenders in Zimbabwe.

Public-private partnerships (PPPs) in Zimbabwe are provided for and governed under Part VII of the Zimbabwe Investment and Development Agency Act (Chapter 14:38). This Act provides for a PPP Unit, whose job is to advise the government on PPPs and proposals in general, as well as monitoring and evaluation of PPPs. It considers such proposals based on price, value for money, risk transfer to private counterparty, and competitiveness. Other key legislation includes the Public Procurement and Disposal of Public Assets Act and the Public Finance Management Act. The typical process flow is:

• Project identification.
• Feasibility study.
• Proposal assessment by the PPP Unit.
• Recommendation to the PPP Committee, followed by referral to the Cabinet for determination.
• Preparation of the PPP agreement.
• Project implementation.

The implementation involves the handover of the relevant assets, with agreed risk and payment allocations.

Factors to consider when structuring a PPP transaction in Zimbabwe include:

• Risk factors and the allocation of such risk.
• The fact that currency is part of the risk profile of the deal must be considered, as there are indications that the US dollar may soon cease to be legal tender in the country. It is therefore key to establish whether the project can remain viable using local currency payments alone.
• Guarantees to hedge against currency and country risk where applicable.
• A robust technical, legal and economic feasibility study backing the transaction to ensure that the counterparty does not assume risk that is disproportionate to the transaction’s potential upside.
• Proper allocation of roles to avoid confusion and disputes.

Funding techniques would involve a mix of private capital and public financing.

Generally, the infrastructure, mining and energy sectors are likely to be active in the coming year given the massive infrastructure gap in the country and considering the financing models used by government in recent times to fund road infrastructure.

Assets available as collateral include movable and immovable property, guarantees and insurance instruments. Where security is taken over immovable property, the lender will register a mortgage bond over the immovable property as security. Registration of a mortgage bond requires depositing the title deed and mortgage bond with the Registrar of Deeds. An endorsement is made on the title deed by the Registrar to show that the property is being held by the lender as collateral. The charges for registration of a mortgage bond are 2.5% of the value of the amount covered by the security, which is paid to the lawyers registering the bond. The Deeds Registry charges USD80, and stamp duty for registration of the bond is 0.004% of the value of the mortgage bond.

Registration of collateral security interests over movable property is done through the Collateral Registry, which sits in the Reserve Bank of Zimbabwe.

Zimbabwean law recognises floating charges over present or future assets of a company, which allows securitisation over fluctuating or uncertain assets of a debtor. Such forms of security are registrable in the Deeds Registry.

The charges for registration of a mortgage bond are 2.5% of the value of the amount covered by the security, which is paid to the lawyers registering the bond. The Deeds Registry charges USD80, and stamp duty for registration of the bond is 0.004% of the value of the mortgage bond.

Registration of movable property as collateral in the Collateral Registry costs not more than USD10.

Each item of collateral must be individually identified in the security document for a valid security interest to be granted over that item.

There are a number of restrictions on the granting of security or guarantees under Zimbabwean law. For instance, there is a general prohibition against the provision of financial assistance by a company to a person wishing to purchase its own shares, which assistance includes guarantees or other forms of security. There are limited circumstances in which such assistance may be allowed by law. There is also a restriction on the provision of guarantees that create foreign obligations and on the registration of securities to secure foreign debts without prior Reserve Bank of Zimbabwe registration and approval.

All liens/encumbrances are endorsed on the item of collateral and they are searchable in the Collateral Registry and the Deeds Registry.

Security is usually released by means of a consent to the cancellation of the encumbrance over the collateral item. The lender usually signs the consent to cancellation once it is satisfied that the debt has been settled in full.

A secured lender can enforce its collateral by foreclosure. The secured lender has the right to approach the courts and obtain an order permitting the secured lender to sell the collateral in order for it to recover the debt owed to it. The first step is placing the borrower in default by sending them a written demand to make good what is owed once there has been a breach of the loan agreement. If the borrower fails to respond to the demand or fails to pay back the debt within the stipulated timeline stated in the demand, the secured lender can proceed to file summons in either the High Court or Magistrates’ Court, depending on the quantum of the debt. The matter is then heard by the court, and if the court makes a ruling in favour of the secured lender, the secured lender can proceed to sell the collateral and use the proceeds to settle the debt owed by the borrower.

A security agent can enforce the lender’s collateral directly if the security agreement makes provision for such action to be taken by such security agent.

According to case law, agreements with a choice of foreign law as their governing law must ensure that they comply with the mandatory law and public policy of Zimbabwe for the contract to be upheld by our courts.

Pursuant to Chapter 8:02 of the Civil Matters (Mutual Assistance) Act, a foreign judgment must be registered first before it can be enforceable. Registration is done through a court application by the judgment creditor to the appropriate court in Zimbabwe.

Foreign lenders may need to obtain approval from the Reserve Bank of Zimbabwe, as stipulated in the Foreign Exchange Control Act Regulations Statutory Instrument 109 of 1996, to enable them to enforce their rights in Zimbabwe. Aside from that, they may be required to provide security for costs by a court in Zimbabwe should they elect to sue here.

Foreign lenders wishing to extend loans into Zimbabwe are required to ensure that the loan is registered with the Reserve Bank of Zimbabwe and that exchange control approval is obtained. The loan agreements themselves must be in alignment with guidelines set by the Central Bank in respect of such aspects as interest rate, tenure and repayment.

In the event that security is to be registered over assets in Zimbabwe, the authority of the Reserve Bank of Zimbabwe is required.

Zimbabwe is generally receptive to foreign investment, primarily via the Zimbabwe Stock Exchange and the Victoria Falls Stock Exchange for investors seeking entry into listed stocks. For investors wishing to invest outside of the listed space, there is a requirement to obtain an investment licence from the Zimbabwe Investment and Development Agency. The intended investment must also be registered with the Reserve Bank of Zimbabwe, especially if there is any debt component or need for expatriation of proceeds. There is no restriction on the amount of investment that comes into the country, which may take the form of debt or equity or both, and may be injected in the form of cash or equipment. Subject to registration of the investment, investors are entitled to repatriate 100% of their disinvestment proceeds as well as dividends.

Payments outside Zimbabwe require exchange control approval. In respect of repatriation of capital on disinvestment, foreign investors are allowed to repatriate 100% of their funds provided that the investment itself was properly registered.

Project companies are allowed to operate offshore foreign currency accounts.

Financing agreements are required to be registered with the Reserve Bank of Zimbabwe, while project documents may need to be presented to the Zimbabwe Investment and Development Agency in order to obtain an investment licence.

There is no special licence required for a foreign investor or any other person to own land or natural resources.

Agent and trust concepts are recognised in Zimbabwean law. These two concepts are most commonly used when third parties are to undertake tasks on behalf of another or hold property for another.

Priority of competing security interests in movables is determined by time of registration, with a prior registrant being prioritised over a later registrant. There are exemptions – for instance, priority of equipment financiers or statutory creditors. In order for security over movables to receive priority, it is a requirement that it be perfected by registration under the Movable Property Security Interests Act. Secured creditors are given priority over other creditors. Unregistered security interests have lower priority unless the later holder of a secured interest had prior notice of the unregistered right.

A project company must be locally registered to allow it to undertake a project in Zimbabwe. It is this local registration which allows it to register for taxes and local authority services, and it facilitates the opening of bank accounts. The most common legal form of a project company is a limited liability private company.

Company reorganisation is provided for under the Insolvency Act, which provides for both voluntary corporate rescue, which is a process instituted at the behest of the company’s board in order to return the company to solvency, and compulsory business rescue, where the company is placed under a corporate rescue practitioner by order of court at the behest of creditors or other stakeholders. The corporate rescue practitioner is tasked with developing a feasible restructuring plan, which requires creditor approval followed by court sanction to ensure that the company avoids liquidation. There is also the limited application of forced reconstruction of companies that owe the state through the Reconstruction of State-Indebted Insolvent Companies Act. This Act is invoked at the instance of a Minister once the Minister opines that, as a result of fraud, mismanagement or any other reason, a state-indebted company is unable or unlikely to repay sums owed to the public purse, or the state is facing imminent liability to pay out based on a sovereign guarantee in favour of a company, and if the Minister opines that placing the said company under reconstruction will restore it to viability, the Minister may commence the process of placing that state-indebted company under reconstruction.

No legal proceedings or enforcement action may be taken or proceeded with against a company that has commenced corporate rescue proceedings unless the creditor obtains consent from the corporate rescue practitioner or has obtained a court order, among other exceptions provided for in the Insolvency Act.

A secured creditor may also request the court to grant an order for it to sell the security it holds in cases where liquidation proceedings have commenced.

Creditors on a company’s insolvency are paid according to the following order of priority: secured creditors are ranked highest, followed by preferential creditors including employees, unsecured creditors and, finally, shareholders.

Unsecured lenders run the risk of sharing proceeds from the borrower’s assets with other lenders. They might not end up recovering the full debt.

Insurance companies, banks, registered securities exchanges, central securities depository operators, or any person licensed in terms of the Securities and Exchange Act, and persons registered under the Asset Management Act or Collective Investment Schemes Act, are excluded from bankruptcy proceedings under the Insolvency Act in Zimbabwe.

There are a number of restrictions, controls, fees and taxes on insurance policies over project assets. The first is the Foreign Insurance Broker Levy, then there is an Insurance Commission Tax and other regulatory fees provided for in regulations such as SI67/2025. Further, insurance policy payments over project assets due to foreign creditors are required to be registered as foreign obligations with the Reserve Bank of Zimbabwe before payments can be made.

Insurance policies over project assets are payable to foreign creditors, provided that the obligations have been registered with the Reserve Bank of Zimbabwe.

A 15% withholding tax is payable on interest accruing to lenders resident in Zimbabwe. Foreign lenders are subject to a rate between 15% and 25%, subject to the provisions of any double taxation agreements that may affect the transaction.

Lenders making loans into Zimbabwe must be cognisant of any withholding taxes due on interest earned.

The Money Lending and Rates of Interest Act, as read with the Prescribed Rate of Interest Act, proscribes usury, which is the charging of interest above that which is prescribed by law. The “in duplum” rule is part of our law as well. This rule prohibits interest on a debt exceeding the principal which was lent.

Project agreements are governed by common law contractual principles. Certain projects have specific legislation governing them, such as PPP project agreements, which are governed under the Public Procurement and Disposal of Public Assets Act as read with the Zimbabwe Investment and Development Agency Act.

Financing agreements are typically governed by common law contractual principles, with some influence from legislation such as the Moneylending and Rates of Interest Act, the Movable Property Security Interests Act, the Deeds Registries Act, the Companies and Other Business Entities Act, the Banking Act, the Public Finance Management Act, the Public Debt Management Act, the Prescribed Rates of Interest Act and the Microfinance Act, among others.

Domestic law governs such aspects as licensing, taxation, work permits, constitutional and administrative rights, currency and repatriation of funds, investment framework, environmental permitting and related aspects of transactions.