Zim understudies special economic zones

HARARE - Zimbabwe has begun understudying various countries that successfully implemented the special economic zones (SEZs) concept as part of strategies to have greater understanding of the notion, businessdaily has established.

“Last month, a delegation of senior government officials and captains of industry embarked on a study tour in China to appreciate how the SEZs have been implemented,” a senior Finance ministry official said.

“Study tours have also been done in countries such as, India, Japan, Malaysia, Ethiopia, Tanzania, Nigeria, Kenya and Ghana among many others, as government firmed its resolve to implement the SEZs,” the source added.

This was after the country recently enacted the Special Economic Zones Act [Chapter 14:34] aimed at foreign direct investment (FDI), which is critical to stimulate value added exports, create employment and boost economic growth.

Market experts said over the years, the country has been receiving low levels of FDI inflows averaging less than $400 million annually, against regional average levels of around $1,2 billion.

The low foreign direct investment levels cannot sustain the envisaged average growth rates of seven percent enunciated in the country’s five-year economic blueprint, ZimAsset.

To date, the government has identified three SEZs pilot projects which are Bulawayo, Sunway City in Harare and the Victoria Falls.

In Bulawayo, the target is to create an industrial economic zone covering the beef and leather industry, cotton and textile, steel and foundry as well as the rehabilitation of the National Railways of Zimbabwe.

In addition, a tourism hub is targeted for the corridor stretching from Victoria Falls-Gwayi–Binga–Kariba, while Victoria Falls is targeted as a financial hub and Sunway City as a technology hub.

However, there is ongoing debate among policy makers and stakeholders on whether to declare the whole country or towns, special economic zones due to the level of deindustrialisation that took place over the years.

Documents from the Finance ministry seen by this paper showed that foreign investors will be exempted for the first five years of operation and a corporate tax rate of 15 percent will be applicable thereafter.

“A special initial capital expenditure allowance at a rate of 50 percent of cost in the first year will be offered to the investors, thereafter a rate of 25 percent will be applied in the subsequent two years,” read part of the document

Other incentives offered by the government under the SEZ Act, include a flat rate of 15 percent tax on specialised expatriate staff and duty-free imports for capital equipment to be used in the designated areas.

In addition, inputs which include raw materials and intermediate products imported for use by companies set up in the SEZs will be imported duty-free.

However, exemption will not apply where such raw materials are produced locally.

Crucially, the SEZ Act proposes to exempt businesses from strict labour laws and indigenisation regulations in order to court potential investors.

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