Online Reporter
Wallace Ruzvidzo
INVESTMENT RETENTION has emerged as a critical challenge for developing economies seeking to maintain economic growth momentum and achieve sustainable development targets.
For Zimbabwe, which has positioned itself as an increasingly attractive investment destination, the ability to protect and nurture existing investments while attracting new capital flows has become paramount to achieving its ambitious goal of an upper middle-class economy by 2030.
Against this backdrop, the Zimbabwe Investment and Development Agency (ZIDA) recently launched the Investor Grievance Response Mechanism (IGRM), a systematic approach to addressing investor concerns before they escalate into capital flight or legal disputes.
For many, this initiative signals Zimbabwe’s recognition that successful investment promotion requires robust post-establishment support mechanisms.
While Zimbabwe has made solid progress in positioning itself as a viable investment destination, particularly under the Second Republic, the legacy of past abrupt policy shifts and opaque regulatory environments has left a lingering trust gap between the Government and investors.
The introduction of the IGRM is, therefore, seen as a confidence-building measure that will create a more predictable, responsive and transparent investment environment.
Foundations
The foundations for Zimbabwe’s investment drive were laid over the past four years following the promulgation of the Zimbabwe Investment and Development Agency Act.
This law, along with the Government’s increasingly investor-friendly policy reforms, has transformed the country’s investment climate.
The ZIDA Act established crucial investor guarantees and protections, while clearly delineating rights and obligations for all the parties.
Building on this foundation, ZIDA promulgated the Zimbabwe Investment and Development Agency (General Investments) Regulations (GI Regulations), Statutory Instrument (SI) 227 of 2023, in December 2023.
These regulations streamlined licensing procedures and significantly established the formal framework for the IGRM.
The mechanism addresses a critical gap in Zimbabwe’s investment ecosystem: the need for structured resolution of grievances arising from actions or policy changes by Government ministries, agencies or departments (MDAs) that could negatively impact existing investment projects.
“Whether an investor faces adverse regulatory changes, contract breaches or other investment-related challenges, this mechanism provides a direct and structured avenue for resolution,” said ZIDA on the launch of the IGRM.
“The aim is for these grievances to be addressed promptly and effectively, before they escalate.”
A four-stage process
The mechanism operates through a carefully structured four-stage process designed to ensure both efficiency and accountability.
Stage 1: Grievance submission
Investors facing challenges from MDA actions that threaten project continuation or affect their rights can submit grievances through the ZIDA investment grievance form.
This digital platform reduces administrative burdens while enabling real-time tracking, allowing both investors and ZIDA to monitor progress throughout the resolution process.
Stage 2: Review and assessment
ZIDA conducts comprehensive assessments of submitted grievances, evaluating impact and urgency based on multiple criteria, including the nature and severity of issues, potential financial implications, project impediments and risks of immediate divestment.
This analytical approach ensures resources are allocated appropriately based on threat levels.
Stage 3: Authority engagement
ZIDA coordinates directly with relevant MDAs to address identified issues.
Once a grievance is forwarded to the relevant MDA, it is required to respond within five days, ensuring accountability for timely feedback.
Investors are given up to 30 days to submit any additional information needed to complete the grievance assessment, allowing sufficient time for clarifications or supporting documents.
Stage 4: Resolution and feedback
The process concludes with formal resolution and comprehensive feedback to investors regarding actions taken.
When necessary, ZIDA facilitates direct meetings between investors and relevant MDAs to achieve mutually acceptable solutions.
International best practices
The IGRM concept has demonstrated measurable success across multiple jurisdictions.
A World Bank (WB) analysis reveals that the most common grievance sources include sudden or arbitrary regulatory changes (60 percent), contract breaches (22 percent) and expropriation (18 percent).
“Indeed, retention mechanisms address issues arising from governmental conduct early on that are severely affecting the operations of the investors, thereby allowing for retention and expansion of investment,” notes the World Bank.
“It also avoids the escalation of an issue into a full-blown dispute.
“Given the highly regulated environment for doing business that exists in most countries, investors may regularly experience various problems linked to the acts and omissions of specific public agencies.”
The WB has supported IGRM projects in various regions, including Central Asia, East Africa, Eastern and Southern Europe, the Middle East, North
and Southeast Asia and South America.
For countries such as Zimbabwe, Ethiopia’s experience provides compelling evidence of IGRM effectiveness.
In Ethiopia, the establishment of their IGRM was motivated by two factors.
First, Ethiopia sought to retain the numerous investments attracted since 2013 by reducing post-establishment cancellations after investors registered with the Ethiopian Investment Commission (EIC).
Second, prior to the IGRM, investors reported grievances to multiple places, leading to inefficiencies and failure to effectively address issues.
Following the IGRM’s implementation, Ethiopia retained at least US$232 million in investments and 590 jobs by the end of 2020.
Similarly, Rwanda’s approach through the Rwanda Development Board’s expanded Reinvestment and Investor Aftercare Department has yielded concrete results.
As of April 2021, the department had registered 17 high-risk issues and resolved eight contract breach cases, retaining US$26,5 million in investments and 761 jobs.
Investment performance and future prospects
Zimbabwe’s investment momentum provides a strong foundation for the IGRM’s implementation.
ZIDA’s first quarter report demonstrates robust investor confidence, with 207 licences issued totalling US$4,7 billion, alongside 78 licence renewals worth over US$363 million.
These figures reflect growing confidence in Government policies and suggest significant potential for the IGRM to protect and enhance this investment base.
The timing of the IGRM launch is particularly strategic, coinciding with Zimbabwe’s attraction of multi-million-dollar investments.
With proper implementation and operation, the mechanism should enable licensed projects to reach their full potential, supporting the sustained economic growth necessary to achieve upper middle-class economic status by 2030.
By creating structured channels for addressing investor concerns before they escalate, Zimbabwe has positioned itself to protect existing investments while enhancing its attractiveness to future investors.
The mechanism’s success will ultimately depend on consistent implementation, stakeholder engagement and the Government’s commitment to maintaining responsive, accountable governance structures that support long-term economic development objectives.
Online Reporter