USTR - 1996 National Trade Estimate-Zimbabwe
Office of the United States Trade Representative

 

1996 National Trade Estimate-Zimbabwe

In 1995, the U.S. trade surplus with Zimbabwe was $24 million, a shift from a $10 million trade deficit in 1994. U.S. merchandise exports to Zimbabwe were $122 million, up $29 million or 31 percent from 1994. Zimbabwe was the United States' one hundred second largest export market in 1995. U.S. imports from Zimbabwe totaled $98 million in 1995, $4 million less than in 1993.

IMPORT POLICIES

Zimbabwe's tariff regime must be viewed in the context of an economy that is in transition from a statist, highly controlled model to an open, market-based economic system. During the first phase of its structural adjustment program that ended in 1995. Zimbabwe abolished quantitative restrictions in favor of a tariff-based trading system. In early 1996, Zimbabwe undertook a comprehensive review and rationalization of its tariff policies and rates with substantial World Bank input and the cooperation of the Confederation of Zimbabwe Industries (CZI), but results are pending. Rationalization is not expected to mean removing all duties on raw materials as desired by the manufacturing sector and CZI, but rather a general lowering of duties on raw materials and other inputs, removing the anomaly of higher duties on raw materials than on finished products.

Tariff rates applied to processed agricultural imports are high, ranging from 20 percent to 45 percent. As of early 1996, the tariff on ready-to-eat cereals is 25 percent, plus an import tax of 15 percent, and a 10 percent surcharge on product on a cost, insurance and freight (CIF) basis. The effect of such high tariffs has been to preclude U.S. firms from pricing specific processed agricultural goods within reach of the average consumer, thereby handicapping their ability to develop the domestic market. High tariffs on imported tobacco cartons also have been reinstated. The high rates on agro-processing products reflect the power of the commercial farmer lobby in Zimbabwe.

On the other hand, free access to foreign exchange, abolition of import licensing, and establishment of the Zimbabwe Investment Centre (ZIC) have greatly increased U.S. firms' access to the Zimbabwe market. The Export Processing Zones (EPZ) and certain related tax concessions should boost foreign investment, but there is a restrictive requirement that eligible companies export at least 80 percent of output. The Zimbabwe government appointed a Board for the EPZ authority which is expected, after a long delay, to become fully operational soon.

INVESTMENT BARRIERS

The Government of Zimbabwe, in an effort to radically improve its investment climate has eliminated the most onerous restrictions on foreign investment. It recently permitted pre-independence investors to remit 100 percent of declared dividends and removed restrictions on local borrowing. In September 1995, the Reserve Bank of Zimbabwe (RBZ) took more steps toward liberalization. It removed most restrictions on repatriation of blocked profits and dividends accrued on pre-1993 investments. The RBZ permitted blocked corporate funds in Government of Zimbabwe external bonds and those in blocked accounts with authorized dealers to be repatriated over a three-year period. It also authorized Zimbabwean travelers to take in cash up to $500 or its equivalent in other foreign currencies and to use credit cards abroad.

Zimbabwe and the United States signed an OPIC Agreement in 1990, and Zimbabwe also is a signatory of the World Bank's Multilateral Investment Guarantee Agreement (MIGA). However, it has not yet embraced the concept of national treatment and has a sizable "reserved list" of sectors open only to domestic investors or to foreigners in joint ventures with local partners. The RBZ must approve remittances for royalties, technical services and management fees.

Other problem areas remain. Serious complaints by U.S. firms and others about the lack of transparency and fairness in the Government of Zimbabwe's tender process on two major energy and telecommunications tenders resulted in long delay of tender awards, highlighting the adverse impact on foreign investment by the lack of a level playing field. The combined total of the tenders could result roughly in a $25-100 million increase in U.S. exports. A RBZ ruling on the amount and rate of disinvestment is blocking free access by U.S. petroleum companies to their share of almost $3 million in funds paid by the government of Zimbabwe for use of storage facilities at a refinery owned but closed down by the investors. The RBZ has approved release of the funds to the refinery owners over 20 years at four percent interest. It steadfastly refused to authorize, as requested in this case, the preferred "currency switch deal" option, allowing the investors to swap currency in the account with that of investor(s) outside the refinery deal who may wish access to Zimbabwean dollars. The RBZ discontinued currency switch deals in December 1994 after reported abuse. Another roadblock to foreign investment is delay in Government of Zimbabwe processing of work permits for representatives of U.S. firms.

LACK OF INTELLECTUAL PROPERTY RIGHTS PROTECTION

Since independence, Zimbabwe has joined international patent and trademark conventions. It is a member of the World Intellectual Property Organization, the Paris Convention for the protection of industrial property (Stockholm Text) and the Berne Convention for the protection of literary and artistic works (Rome Text). In addition, while the Government of Zimbabwe seeks to honor intellectual property ownership and rights, there are some enforcement problems. Audio and videocassette piracy is the most widespread IPR Issue in Zimbabwe, but the volumes involved are relatively small. While software bootlegging undoubtedly occurs by users, pirated software is rarely sold commercially.

OTHER BARRIERS

Parastatals

The Government of Zimbabwe does not have presently a well-defined privatization program, but it is in the process of canvassing both the public and private sectors for input into development of a comprehensive program that will liquidate some parastatals, commercialize others and wholly or partially privatize the rest. Responsibility for decision-making and implementation of privatization policy is unclear. The pace of privatization further slowed after President Robert Mugabe criticized a late 1995 sale of government of Zimbabwe shares in the Delta Corporation, a large conglomerate, on the Zimbabwe Stock Market after revenue from the sale did not support the government's indigenization efforts. A key Government of Zimbabwe goal is to use a privatization program to increase black ownership of economic assets. Specifically, there is interest in using sale of State assets to set up a national investment trust to fuel indigenization efforts and to retire massive government debt. The Government of Zimbabwe will likely take several more months of study and liberation before it unveils its plan.

Zimbabwe, for example, has commercialized all of its agricultural marketing boards and intends ultimately to privatize several of them. It has committed itself to selling off its stake in a sizeable number of publicly traded firms. The majority-government owned cotton company of Zimbabwe (CCZ), formerly the Cotton Marketing Board (CMB), and the Dairy Company of Zimbabwe (DCZ), formerly the Dairy Marketing Board (DMB), now work as private commercial enterprises. As promised, the government ended a cotton subsidy which had violated the terms of the World Bank second credit's First Tranche. All parastatals, including the CCZ, must now pay tax and declare dividends. The World Bank identified a Polish team to manage the Zimbabwe Iron and Steel Company (ZISCO), with a view toward improving the company's balance sheet. ZISCO, a major loss-making Government of Zimbabwe-owned company, and an Anglo-French Consortium signed a $616 million agreement to revitalize the former. However, as of early 1996, no progress has been made, and the agreement will expire in May 1996.

 
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