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Conducive environment necessary for Sezs

While the proposed establishment of the Special Economic Zones (Sezs) is commendable, there is need to have a conducive environment for investment and doing business, analysts have said.

Kudzai Kuwaza

Sezs are designated geographical regions that operate under special economic regulations different from other areas in the same country.

Speaking at a forum for creating value on Wednesday, Industry and Commerce minister Mike Bimha said that the framework for the setting up of the economic zones was on course.

“The Sez concept paper is now in place and a roadmap which will lead towards the operationalisation of the concept has also been developed,” Bimha told delegates.

Speaking at a conference on Sezs last month, Finance minister Patrick Chinamasa said the country was ready for a policy that would help attract the much needed investment.

Sezs were initially established under the Income Tax Act; they were then called Export Processing Zones (EPZs). Exporters who operated within such regions were given tax exemptions but otherwise enjoyed, no special exemptions from the ordinary laws of Zimbabwe.

Later, in 1995, the Export Processing Zones Act was promulgated which established a parastatal responsible for establishing export processing zones, attracting investment to the zones, and issuing licences for businesses to operate within them.

In 2007, the Export Processing Zones (EPZ) Act, was repealed by the Zimbabwe Investment Authority Act.

Veritas, an organisation which provides information on the work of Zimbabwean parliament as well as the country’s laws, notes that “a feature that may have reduced the effectiveness of the Export Processing Zones Act was that any premises or place could be declared an export processing zone; even single rooms could be so declared.”

“Virtually any manufacturing business which was export-oriented to at least some degree could get a licence under the Act, and many did. They did not have to move to a special zone to get the tax benefits accorded to them under the Act, but could remain where they were,” it says.

Veritas also states that the EPZs , according to a paper quoted on the government website, by 2004 projects in export processing zones had created over 32 000 jobs and US$172 million worth of investments.

It says that for the Sezs to be effective “excellent infrastructure must be provided within the zones so that businesses can operate with maximum efficiency” and needed significant involvement of the private sector as well as close links with the rest of the country’s economy.

Veritas adds that setting up business within these zones should be simple with a clear and secure regulatory regime.

“It is open to doubt whether our Government will be able to meet all, or indeed any, of these conditions in its planned Sezs,” the organisation says.

Economist Godfrey Kanyenze said the proposed zones were not in themselves “the dragon slayer” to the country’s economic logjam charaterised by a paralysing liquidity crunch.

“Government has to implement comprehensive Doing Business Reforms,” Kanyenze said. “Unless and until government does that we will face the same problems.”

The country ranks a lowly 170th position out of 189 economies on the Ease of Doing Business index, a damning indictment on the country’s ability to attract investment. It looks at aspects such as starting a business, dealing with construction permits, getting electricity and protecting investors.

He said there was a need for a comprehensive review of why the EPZs set up earlier did not have the desired economic impact before embarking on setting up the zones.

Kanyenze said the Sezs must have their own industrial parks for them to be effective, adding that government will not have “the fiscal legroom” to put in place such parks.

Former Zimbabwe National Chamber of Commerce (ZNCC) president Oswald Binha said although the setting up of the economic zones was laudable, he questioned whether the government could provide a conducive environment to provide investment.

“The setting up of economic zones is good. It allows competition,” Binha said. “Still the question remains, do we have a business environment to attract investment in those areas? We can run from pillar to post but what we need is liquidity.”

He said the government “was moving around in circles” instead of addressing key economic deliverables.

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