US investors face significant barriers in Zimbabwe due to pervasive corruption

HARARE – US Ambassador to Zimbabwe Pamela Tremont has highlighted that corruption, coupled with an unpredictable regulatory landscape, significantly deters American investors from establishing businesses in Zimbabwe.

Her remarks underscore findings from a recent parliamentary report detailing the severe challenges faced by formal businesses in the country.

Speaking on the “Friday Drinks” podcast last week, Ambassador Tremont shared a striking story from a ministerial meeting, where a minister’s wife reportedly had to visit 30 different offices to secure permits and licenses for a restaurant.

“It’s complicated here to register the business. I was in a meeting last time and the minister was explaining that his wife was trying to register a restaurant and she had to go to 30 offices to get permits and licences. Just imagine an American investor who doesn’t know Harare,” she stated.

The Ambassador further noted the high level of regulatory uncertainty, where “rules change everyday which makes it difficult for investors to plan out their risk and rewards.”

She pointed to a survey conducted by the Zimbabwe National Chamber of Commerce (ZNCC), where a staggering 81% of its members reported that corruption had severely undermined the business enabling environment.

“That’s not just for US investors. That’s for Zimbabwean entrepreneurs. It’s making their lives difficult. It raises the cost of doing business and depriving Zimbabwean people of resources that could be used for health, education and infrastructure,” Ambassador Tremont asserted.

She stressed the need for collaborative efforts with the government and other investors to “make Zimbabwe a better investment for everybody.”

These sentiments are echoed in a report tabled in the National Assembly last week by the Parliamentary Portfolio Committee on Industry and Commerce, led by Zaka legislator Clemence Chiduwa.

The report outlined how the government’s taxation framework imposes multiple charges on formal businesses, consuming nearly 5% of their total expenses.

A key point of contention is the Intermediated Money Transfer Tax (IMTT), a 2% levy on electronic transactions, which the report identified as the highest in the region.

This steep rate, according to the committee, discourages digital payments and pushes economic activity into an unregulated, cash-based system.

The report confirmed Ambassador Tremont’s observation regarding the arduous licensing process. It revealed that running a single supermarket necessitates obtaining over 30 different licenses and permits, each associated with substantial costs and administrative hurdles.

“The formal retail and wholesale sectors are encumbered by an excessive number of licences and permits required to operate legally,” the report noted.

“Running a single supermarket necessitates obtaining over 30 different licences and permits, each associated with significant costs and administrative procedures.

“This complex regulatory framework not only increases operational expenses but also diverts valuable time and resources away from core business activities Consequently, many small and medium-sized enterprises (SMEs) are deterred from formalising their operations, opting instead to remain in the informal sector to avoid these burdens.”

The committee further noted that: “Zimbabwe’s licensing and regulatory environment remains overly complex, with businesses required to comply with multiple, often overlapping, regulations.

“There is a proliferation of statutory instruments (SIs) with an SI enacted on average every 1,43 days in 2024 and this creates uncertainty and increases compliance costs.

“The high cost of regulatory compliance, redundant licensing requirements and fragmented enforcement mechanisms are pushing many businesses into informality.”