September 1999

Zimbabwe ranks among the more diversified and developed economies in Sub-Saharan Africa, and is the second most industrialised country in the region after South Africa.

In 1991, the Government of Zimbabwe shifted away from a socialist policy pursued since independence in 1980, to a market-driven approach which sought to reduce government influence in the economy. To a large extent, the country has been successful in its goal of liberalising the economy. The foreign exchange market has been opened up and facilities are available for investors to fully repatriate funds.

The Zimbabwe Government is now preparing to speed up privatisation of state-owned enterprises. The government is also formally committed to reforms which would lead to the creation of a fully deregulated, market-driven economy, which will be characterised by high levels of foreign and domestic investment as well as external trade, leading to real economic growth and enhanced employment creation. The IMF in August 1999 approved a Standby Arrangement for Zimbabwe which is conditioned on further liberalisation of the economy. The government needs to reduce spending and meet IMF requirements for continued balance-of-payments support if it is to overcome inflation of above 50%, stop the decline in the value of the Zimbabwe dollar (which has fallen by over 60% over a twelve month period), and generally to stabilise the economy. There are numerous investor opportunities especially given the decline of the Zimbabwe dollar, but investors generally are taking a wait-and-see attitude.

Business environment

Zimbabwe has a diversified economy with strong manufacturing and commercial farming sectors, varied mineral resources and an especially well developed infrastructure. The labour force is well-educated and labour costs are still relatively low by international standards.

Since the country is well endowed with natural resources such as minerals, arable land and wildlife, many opportunities lie in resource-based activities such as mining, agriculture and tourism, and their downstream industrial activities. Agriculture, constituting 14% of GDP, is the chief source of income to Zimbabwe and generates approximately one-third of the country's earnings. The manufacturing sector is well developed and contributes to 24% of Zimbabwe's GDP. Mining plays a significant economic role and generates considerable foreign exchange earnings, making up 8% of GDP. Services, a fast-growing sector, contribute 34% of GDP.

International Trade Relations

Zimbabwe is a signatory to the regional trading blocs, the Southern African Development Community (SADC) and the Common Market for Eastern and Southern Africa (COMESA).

South Africa is Zimbabwe's largest trading partner. Other major trading partners are the United Kingdom, Germany, Japan and the United States of America. Zimbabwe's principal exports are tobacco, gold, ferro-alloys and cotton while the main imports include machinery and transport equipment, manufactured goods, chemicals, petroleum products and electricity.

Relations with Canada

Zimbabwe is a small market by international standards, but it still presents numerous opportunities for Canadian companies, particularly in mining. Almost all Canadian investment in Zimbabwe is in the mining sector, with gold being the main interest. Other sectors where Canadian companies will find opportunties are in telecommunications, energy, transport, agriculture and agri-food, and tourism. Canadian expertise and technology in these areas are well-known in Zimbabwe.

In 1998 Canadian exports to Zimbabwe totalled $19.6 million mainly in telecommunications equipment, construction equipment and pharmaceuticals. Other main exports include heavy machinery and mining equipment.

Zimbabwean exports to Canada totalled C$ 9.7 million consisting mostly of precipitated copper, tobacco, coffee, granite and citrus.

Market Access

Canadian companies are encouraged to visit Zimbabwe in order to become familiar with the market and what it has to offer. This demonstrates to the local companies and organisations, including Government departments that your company is serious in its intentions to do business. Furthermore, upon visiting, new and important contacts are made with the local business community which could lead to forming useful business relationships.

A local partner or agent is highly recommended if an exporter is to succeed in exporting to Zimbabwe. Local support is regarded as the most effective way to sustain sales and provide after-sales service and backup. Furthermore, the local company usually is well connected in the sector and has an excellent knowledge of the market.. It is important that Canadian companies choose the right partner. The Zimbabwean business circle is relatively small so the reputation of your partner will strongly influence all potential buyers.

Joint ventures and strategic alliances are also encouraged as these partnerships are looked upon as effective methods of technology transfer as well as an additional source of financing. They are also looked upon favourably by the Government as a way of assisting local business to improve their products and services through the use of a foreign technical partner. These alliances are also advantageous when bidding on large, government tenders.

Some financing is available through the African Development Bank, the World Bank and the CIDA Industrial Cooperation Program. Zimbabwe is on-cover for EDC financing and insurance on a case-by-case basis. Although Zimbabwe has a fairly well developed banking and finance industry, access to credit from local banks is difficult. It is also very expensive, with interest rates currently exceeding 50%.

All projects requiring foreign investment into the country have to be approved by the Zimbabwe Investment Centre, the organisation responsible for the promotion of investment into Zimbabwe. The Investment Centre is a one-stop shop for all potential investors which offers information on the economy, the business environment as well as trade policy. They offer sound advice on how to do business in Zimbabwe.