Doing Business 2016 Zimbabwe 100883 Economy Profile 2016 Zimbabwe Doing Business 2016 Zimbabwe 2 © 2016 The International Bank for Reconstruction and Development / The World Bank 1818 H Street NW, Washington, DC 20433 Telephone: 202-473-1000; Internet: www.worldbank.org Some rights reserved 1 2 3 4 18 17 16 15 This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. The World Bank does not guarantee the accuracy of the data included in this work. The boundaries, colors, denominations, and other information shown on any map in this work do not imply any judgment on the part of The World Bank concerning the legal status of any territory or the endorsement or acceptance of such boundaries. 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Doing Business 2016 Zimbabwe 3 CONTENTS Introduction .................................................................................................................................. 4 Starting a business ..................................................................................................................... 17 Dealing with construction permits ........................................................................................... 25 Getting electricity ....................................................................................................................... 36 Registering property .................................................................................................................. 44 Getting credit .............................................................................................................................. 54 Protecting minority investors ................................................................................................... 60 Paying taxes ................................................................................................................................ 67 Trading across borders .............................................................................................................. 72 Enforcing contracts .................................................................................................................... 78 Resolving insolvency .................................................................................................................. 85 Labor market regulation ........................................................................................................... 92 Distance to frontier and ease of doing business ranking ...................................................... 99 Resources on the Doing Business website ............................................................................ 103 Doing Business 2016 Zimbabwe 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is also provides data for other selected economies for a local entrepreneur to open and run a small to (comparator economies) for each indicator. The data in medium-size business when complying with relevant this report are current as of June 1, 2015 (except for the regulations. It measures and tracks changes in paying taxes indicators, which cover the period January– regulations affecting 11 areas in the life cycle of a December 2014). business: starting a business, dealing with construction The Doing Business methodology has limitations. Other permits, getting electricity, registering property, getting areas important to business—such as an economy’s credit, protecting minority investors, paying taxes, proximity to large markets, the quality of its trading across borders, enforcing contracts, resolving infrastructure services (other than those related to insolvency and labor market regulation. Doing Business trading across borders and getting electricity), the 2016 presents the data for the labor market regulation security of property from theft and looting, the indicators in an annex. The report does not present transparency of government procurement, rankings of economies on labor market regulation macroeconomic conditions or the underlying strength of indicators or include the topic in the aggregate distance institutions—are not directly studied by Doing Business. to frontier score or ranking on the ease of doing The indicators refer to a specific type of business, business. generally a local limited liability company operating in In a series of annual reports Doing Business presents the largest business city. Because standard assumptions quantitative indicators on business regulations and the are used in the data collection, comparisons and protection of property rights that can be compared benchmarks are valid across economies. The data not across 189 economies, from Afghanistan to Zimbabwe, only highlight the extent of obstacles to doing business; over time. The data set covers 47 economies in Sub- they also help identify the source of those obstacles, Saharan Africa, 32 in Latin America and the Caribbean, 25 supporting policy makers in designing regulatory reform. in East Asia and the Pacific, 25 in Eastern Europe and More information is available in the full report. Doing Central Asia, 20 in the Middle East and North Africa and Business 2016 presents the indicators, analyzes their 8 in South Asia, as well as 32 OECD high-income relationship with economic outcomes and presents economies. The indicators are used to analyze economic business regulatory reforms. The data, along with outcomes and identify what reforms have worked, where information on ordering Doing Business 2016, are and why. available on the Doing Business website at This economy profile presents the Doing Business http://www.doingbusiness.org. indicators for Zimbabwe. To allow useful comparison, it Doing Business 2016 Zimbabwe 5 CHANGES IN DOING BUSINESS 2016 As part of a two-year update in methodology, Doing The case study underlying the trading across borders Business 2016 expands the focus of five indicator sets indicators has been changed to increase its relevance. (dealing with construction permits, getting electricity, For each economy the export product and partner are registering property, enforcing contracts and labor now determined on the basis of the economy’s market regulation), substantially revises the comparative advantage, the import product is auto parts, methodology for one indicator set (trading across and the import partner is selected on the basis of which borders) and implements small updates to the economy has the highest trade value in that product. The methodology for another (protecting minority investors). indicators continue to measure the time and cost to export and import. The indicators on dealing with construction permits now include an index of the quality of building regulation and Beyond these changes there is one other update in its implementation. The getting electricity indicators now methodology, for the protecting minority investors include a measure of the price of electricity consumption indicators. A few points for the extent of shareholder and an index of the reliability of electricity supply and governance index have been fine-tuned, and the index transparency of tariffs. Starting this year, the registering now also measures aspects of the regulations applicable property indicators include an index of the quality of the to limited companies rather than privately held joint land administration system in each economy in addition stock companies. to the indicators on the number of procedures and the For more details on the changes, see the “What is time and cost to transfer property. And for enforcing changing in Doing Business?” chapter starting on page contracts an index of the quality and efficiency of judicial 27 of the Doing Business 2016 report. For more details processes has been added while the indicator on the on the data and methodology, please see the “Data number of procedures to enforce a contract has been Notes” chapter starting on page 119 of the Doing dropped. Business 2016 report. For more details on the distance to The scope of the labor market regulation indicator set frontier metric, please see the “Distance to frontier and has also been expanded, to include more areas capturing ease of doing business ranking” chapter in this profile. aspects of job quality. The labor market regulation indicators continue to be excluded from the aggregate distance to frontier score and ranking on the ease of doing business. Doing Business 2016 Zimbabwe 6 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to start ECONOMY OVERVIEW is to find out how it compares with the regulatory environment in other economies. Doing Business provides an aggregate ranking on the ease of doing business Region: Sub-Saharan Africa based on indicator sets that measure and benchmark regulations applying to domestic small to medium-size Income category: Low income businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of doing business ranking. Population: 14,599,325 Doing Business presents results for 2 aggregate measures: the distance to frontier score and the ease of doing GNI per capita (US$): 860 business ranking. The ranking of economies is determined by sorting the aggregate distance to frontier scores, DB2016 rank: 155 rounded to two decimals. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where DB2015 rank: 153* 0 represents the worst performance and 100 the frontier. Change in rank: -2 (See the chapter on the distance to frontier and ease of doing business). DB 2016 DTF: 48.17 The ease of doing business ranking compares economies with one another; the distance to frontier score DB 2015 DTF: 47.33 benchmarks economies with respect to regulatory best practice, showing the absolute distance to the best Change in DTF: 0.84 performance on each Doing Business indicator. When compared across years, the distance to frontier score * DB2015 ranking shown is not last year’s published shows how much the regulatory environment for local ranking but a comparable ranking for DB2015 that entrepreneurs in an economy has changed over time in captures the effects of such factors as data revisions absolute terms, while the ease of doing business ranking and the changes in methodology. See the data notes can show only how much the regulatory environment has starting on page 119 of the Doing Business 2016 changed relative to that in other economies. report for sources and definitions. The 10 topics included in the ranking in Doing Business 2016: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. The labor market regulation indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented in the economy profile. Doing Business 2016 Zimbabwe THE BUSINESS ENVIRONMENT Figure 1.1 Where economies stand in the global ranking on the ease of doing business Source: Doing Business database. Doing Business 2016 Zimbabwe THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy regional average (figure 1.2). The economy’s rankings stands in the aggregate ranking on the ease of doing (figure 1.3) and distance to frontier scores (figure 1.4) business is useful. Also useful is to know how it ranks on the topics included in the ease of doing business relative to comparator economies and relative to the ranking provide another perspective. Figure 1.2 How Zimbabwe and comparator economies rank on the ease of doing business Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Source: Doing Business database. Doing Business 2016 Zimbabwe 9 THE BUSINESS ENVIRONMENT Figure 1.3 Rankings on Doing Business topics - Zimbabwe (Scale: Rank 189 center, Rank 1 outer edge) Figure 1.4 Distance to frontier scores on Doing Business topics - Zimbabwe (Scale: Score 0 center, Score 100 outer edge) Source: Doing Business database. Note: The rankings are benchmarked to June 2015 and based on the average of each economy’s distance to frontier (DTF) scores for the 10 topics included in this year’s aggregate ranking. The distance to frontier score benchmarks economies with respect to regulatory practice, showing the absolute distance to the best performance in each Doing Business indicator. An economy’s distance to frontier score is indicated on a scale from 0 to 100, where 0 represents the worst performance and 100 the frontier. For the economies for which the data cover 2 cities, scores are a population-weighted average for the 2 cities. Doing Business 2016 Zimbabwe 10 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier score. tells only part of the story, so do changes in that ranking. This measure shows how far on average an economy is Yearly movements in rankings can provide some indication from the best performance achieved by any economy on of changes in an economy’s regulatory environment for each Doing Business indicator. firms, but they are always relative. Comparing the measure for an economy at 2 points in time Moreover, year-to-year changes in the overall rankings do allows users to assess how much the economy’s regulatory not reflect how the business regulatory environment in an environment as measured by Doing Business has changed economy has changed over time—or how it has changed over time—how far it has moved toward (or away from) in different areas. To aid in assessing such changes, the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.5). Figure 1.5 How far has Zimbabwe come in the areas measured by Doing Business? Note: The distance to frontier score shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator. Starting a business is comparable to 2010. Getting credit, protecting minority investors, paying taxes and resolving insolvency had methodology changes in 2014 and thus are only comparable to 2013. Dealing with construction permits, registering property, trading across borders, enforcing contracts and getting electricity had methodology changes in 2015 and thus are only comparable to 2014. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). See the data notes starting on page 119 of the Doing Business 2016 report for more details on the distance to frontier score. Source: Doing Business database. Doing Business 2016 Zimbabwe 11 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part of regulation—such as a regulatory process that can be the story (table 1.1). The indicators, on their own or in completed with a small number of procedures in a few comparison with the indicators of a good practice days and at a low cost. Comparison of the economy’s economy or those of comparator economies in the indicators today with those in the previous year may region, may reveal bottlenecks reflected in large numbers show where substantial bottlenecks persist—and where of procedures, long delays or high costs. Or they may they are diminishing. reveal unexpected strengths in an area of business Table 1.1 Summary of Doing Business indicators for Zimbabwe Best performer globally South Africa DB2016 Zimbabwe DB2016 Zimbabwe DB2015 Swaziland DB2016 Botswana DB2016 Namibia DB2016 Lesotho DB2016 Angola DB2016 Indicator DB2016 Starting a Business 182 179 141 143 112 164 120 156 New Zealand (1) (rank) Starting a Business (DTF 51.75 51.42 76.79 76.21 82.85 68.92 81.18 73.46 New Zealand (99.96) Score) Procedures (number) 9.0 9.0 8.0 9.0 7.0 10.0 6.0 12.0 New Zealand (1.00)* Time (days) 90.0 90.0 36.0 48.0 29.0 66.0 46.0 30.0 New Zealand (0.50) Cost (% of income per 112.0 114.6 22.5 0.7 9.3 11.1 0.3 23.4 Slovenia (0.00) capita) Paid-in min. capital (% 0.0 0.0 18.9 0.0 0.0 0.0 0.0 0.4 105 Economies (0.00)* of income per capita) Dealing with Construction Permits 184 185 108 97 172 66 90 80 Singapore (1) (rank) Dealing with Construction Permits 31.67 31.67 66.65 67.95 50.23 72.24 69 70 Singapore (92.97) (DTF Score) Procedures (number) 10.0 10.0 10.0 19.0 11.0 10.0 19.0 13.0 5 Economies (7.00)* Doing Business 2016 Zimbabwe 12 Best performer globally South Africa DB2016 Zimbabwe DB2016 Zimbabwe DB2015 Swaziland DB2016 Botswana DB2016 Namibia DB2016 Lesotho DB2016 Angola DB2016 Indicator DB2016 Time (days) 448.0 448.0 203.0 110.0 179.0 137.0 141.0 96.0 Singapore (26.00) Cost (% of warehouse 25.2 25.7 0.5 0.3 13.5 0.5 1.0 2.9 Qatar (0.00) value) Building quality control 7.0 7.0 6.0 8.0 5.5 6.5 10.5 7.0 New Zealand (15.00) index (0-15) Getting Electricity 161 160 166 122 147 76 168 155 Korea, Rep. (1) (rank) Getting Electricity (DTF 43.91 43.7 42.63 59.34 51.21 71.89 41.99 46.35 Korea, Rep. (99.88) Score) Procedures (number) 6.0 6.0 7.0 5.0 5.0 6.0 5.0 6.0 14 Economies (3.00)* Time (days) 106.0 106.0 145.0 77.0 114.0 37.0 226.0 137.0 Korea, Rep. (18.00)* Cost (% of income per 2,925.0 2,992.8 615.0 297.6 1,628.3 338.7 670.5 1,042.6 Japan (0.00) capita) Reliability of supply and transparency of tariff 0.0 0.0 0.0 0.0 0.0 4.0 0.0 0.0 18 Economies (8.00)* index (0-8) Registering Property 114 114 169 70 108 174 101 113 New Zealand (1) (rank) Registering Property 56.85 56.82 40.87 67.25 58.13 38.61 60.79 57.42 New Zealand (94.46) (DTF Score) Procedures (number) 5.0 5.0 7.0 4.0 4.0 8.0 7.0 9.0 4 Economies (1.00)* Time (days) 36.0 36.0 190.0 12.0 43.0 52.0 23.0 21.0 3 Economies (1.00)* Cost (% of property 7.6 7.6 2.9 5.1 8.4 13.7 6.4 7.1 Saudi Arabia (0.00) value) Quality of the land administration index (0- 8.5 8.5 7.0 10.0 10.0 8.5 14.0 16.0 3 Economies (28.50)* 30) Doing Business 2016 Zimbabwe 13 Best performer globally South Africa DB2016 Zimbabwe DB2016 Zimbabwe DB2015 Swaziland DB2016 Botswana DB2016 Namibia DB2016 Lesotho DB2016 Angola DB2016 Indicator DB2016 Getting Credit (rank) 79 90 181 70 152 59 59 70 New Zealand (1) Getting Credit (DTF 50 45 5 55 25 60 60 55 New Zealand (100) Score) Strength of legal rights 5.0 5.0 1.0 5.0 5.0 5.0 5.0 4.0 3 Economies (12.00)* index (0-12) Depth of credit 5.0 4.0 0.0 6.0 0.0 7.0 7.0 7.0 26 Economies (8.00)* information index (0-8) Credit registry coverage 0.0 0.0 3.3 0.0 0.0 0.0 0.0 0.0 Portugal (100.00) (% of adults) Credit bureau coverage 22 Economies 32.1 29.7 0.0 51.1 1.0 62.8 62.0 46.4 (% of adults) (100.00)* Protecting Minority 81 87 66 81 99 66 14 134 Singapore (1)* Investors (rank) Protecting Minority 55 53.33 56.67 55 51.67 56.67 71.67 43.33 Singapore (83.33)* Investors (DTF Score) Strength of minority investor protection 5.5 5.3 5.7 5.5 5.2 5.7 7.2 4.3 3 Economies (8.30)* index (0-10) Extent of conflict of interest regulation 5.0 4.7 5.3 6.0 5.3 5.7 8.0 4.3 Singapore (9.30)* index (0-10) Extent of shareholder governance index (0- 6.0 6.0 6.0 5.0 5.0 5.7 6.3 4.3 4 Economies (8.00)* 10) United Arab Emirates Paying Taxes (rank) 145 142 141 71 109 93 20 79 (1)* Paying Taxes (DTF United Arab Emirates 61.39 61.52 62.25 77.47 69.72 73.63 88.75 76.16 Score) (99.44)* Payments (number per 49.0 49.0 30.0 34.0 32.0 27.0 7.0 33.0 Hong Kong SAR, Doing Business 2016 Zimbabwe 14 Best performer globally South Africa DB2016 Zimbabwe DB2016 Zimbabwe DB2015 Swaziland DB2016 Botswana DB2016 Namibia DB2016 Lesotho DB2016 Angola DB2016 Indicator DB2016 year) China (3.00)* Time (hours per year) 242.0 242.0 282.0 152.0 324.0 302.0 200.0 110.0 Luxembourg (55.00) Total tax rate (% of 32.8 32.5 48.4 25.1 13.6 21.3 28.8 34.7 Ireland (25.90) profit) Trading Across Borders 100 99 181 51 36 118 130 30 Denmark (1)* (rank) Trading Across Borders 66.83 66.83 19.27 85.93 91.69 61.47 58.01 92.68 Denmark (100)* (DTF Score) Time to export: Border 72 72 240 8 4 120 100 3 15 Economies (0.00)* compliance (hours) Cost to export: Border 285 285 735 317 150 745 428 134 18 Economies (0.00)* compliance (USD) Time to export: Documentary 99 99 169 24 3 90 68 4 Jordan (0.00) compliance (hours) Cost to export: Documentary 170 170 240 179 90 348 170 76 20 Economies (0.00)* compliance (USD) Time to import: Border 60 60 276 4 4 6 144 5 19 Economies (0.00)* compliance (hours) Cost to import: Border 212 212 935 98 150 145 657 134 28 Economies (0.00)* compliance (USD) Time to import: Documentary 81 81 180 3 3 3 36 4 21 Economies (1.00)* compliance (hours) Cost to import: Documentary 150 150 460 67 90 63 213 76 30 Economies (0.00)* compliance (USD) Enforcing Contracts 166 166 185 128 85 103 119 175 Singapore (1) Doing Business 2016 Zimbabwe 15 Best performer globally South Africa DB2016 Zimbabwe DB2016 Zimbabwe DB2015 Swaziland DB2016 Botswana DB2016 Namibia DB2016 Lesotho DB2016 Angola DB2016 Indicator DB2016 (rank) Enforcing Contracts 36.88 36.88 26.26 50.95 59.04 56.03 53.18 33.94 Singapore (84.91) (DTF Score) Time (days) 410.0 410.0 1,296.0 625.0 615.0 460.0 600.0 956.0 Singapore (150.00) Cost (% of claim) 83.1 83.1 44.4 39.8 31.3 35.8 33.2 56.1 Iceland (9.00) Quality of judicial 5.0 5.0 4.5 7.0 9.5 6.5 6.5 6.0 3 Economies (15.50)* processes index (0-18) Resolving Insolvency 152 156 189 56 117 97 41 96 Finland (1) (rank) Resolving Insolvency 27.44 26.16 0 54.66 37.35 42.22 64.29 42.63 Finland (93.81) (DTF Score) Recovery rate (cents on 16.1 13.8 0.0 63.8 28.8 34.9 35.3 38.6 Japan (92.90) the dollar) no Time (years) 3.3 3.3 1.7 2.6 2.5 2.0 2.0 Ireland (0.40) practice no Cost (% of estate) 22.0 22.0 18.0 20.0 14.5 18.0 14.5 Norway (1.00) practice Outcome (0 as no piecemeal sale and 1 as 0 0 1 0 0 0 0 practice going concern) Strength of insolvency 6.0 6.0 0.0 6.5 7.0 7.5 14.5 7.0 4 Economies (15.00)* framework index (0-16) Source: Doing Business database. Note: DB2015 rankings shown are not last year’s published rankings but comparable rankings for DB2015 that capture the effects of such factors as data revisions and changes to the methodology. The global best performer on time for paying taxes is defined as the lowest time recorded among all economies in the DB2016 sample that levy the 3 major taxes: profit tax, labor taxes and mandatory contributions, and VAT or sales tax. If an economy has no laws or regulations covering a specific area—for example, insolvency—it receives a “no practice” mark. Similarly, an economy receives a “no practice” mark if regulation exists but is never used in practice or if a competing regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the ranking on the relevant indicator. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name Doing Business 2016 Zimbabwe 16 indicates the number of economies that share the top ranking on the indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Doing Business 2016 Zimbabwe 17 STARTING A BUSINESS Formal registration of companies has many WHAT THE STARTING A BUSINESS immediate benefits for the companies and for business owners and employees. Legal entities can INDICATORS MEASURE outlive their founders. Resources are pooled as several shareholders join forces to start a company. Procedures to legally start and operate a Formally registered companies have access to company (number) services and institutions from courts to banks as well Preregistration (for example, name as to new markets. And their employees can benefit verification or reservation, notarization) from protections provided by the law. An additional benefit comes with limited liability companies. These Registration in the economy’s largest limit the financial liability of company owners to their business city 1 investments, so personal assets of the owners are not Postregistration (for example, social security put at risk. Where governments make registration registration, company seal) easy, more entrepreneurs start businesses in the formal sector, creating more good jobs and Time required to complete each procedure generating more revenue for the government. (calendar days) What do the indicators cover? Does not include time spent gathering information Doing Business records all procedures officially required, or commonly done in practice, for an Each procedure starts on a separate day (2 entrepreneur to start up and formally operate an procedures cannot start on the same day). industrial or commercial business, as well as the time Procedures that can be fully completed and cost to complete these procedures and the paid- online are recorded as ½ day. in minimum capital requirement. These procedures Procedure completed once final document is include obtaining all necessary licenses and permits received and completing any required notifications, verifications or inscriptions for the company and No prior contact with officials employees with relevant authorities. The ranking of Cost required to complete each procedure economies on the ease of starting a business is (% of income per capita) determined by sorting their distance to frontier scores for starting a business. These scores are the Official costs only, no bribes simple average of the distance to frontier scores for No professional fees unless services required each of the component indicators. by law or commonly used in practice To make the data comparable across economies, Paid-in minimum capital (% of income several assumptions about the business and the per capita) procedures are used. It is assumed that any required information is readily available and that the Deposited in a bank or with a notary before entrepreneur will pay no bribes. Assumptions about registration (or within 3 months) the business:  Is a limited liability company (or its legal  Has a start-up capital of 10 times income per equivalent), located in the largest business city capita and a turnover of at least 100 times 1 and is 100% domestically owned with five income per capita. owners, none of whom is a legal entity.  Has a company deed 10 pages long.  Has at least 10 and up to 50 employees, all of  Does not qualify for any special benefits. them domestic nationals.  Leases the commercial plant or offices and is not  Performs general commercial or industrial a proprietor of real estate. activities. 1 For 11 economies the data are also collected for the second largest business city. Doing Business 2016 Zimbabwe 18 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Zimbabwe? the largest business city of an economy, except for 11 According to data collected by Doing Business, starting a economies for which the data are a population-weighted business there requires 9.00 procedures, takes 90.00 average of the 2 largest business cities. See the chapter days, costs 112.00% of income per capita and requires on distance to frontier and ease of doing business paid-in minimum capital of 0.00% of income per capita ranking at the end of this profile for more details. (figure 2.1). Most indicator sets refer to a case scenario in Figure 2.1 What it takes to start a business in Zimbabwe Paid-in minimum capital (% of income per capita): 0.00 Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the starting a business indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2016 Zimbabwe 19 STARTING A BUSINESS Globally, Zimbabwe stands at 182 in the ranking of 189 average ranking provide other useful information for economies on the ease of starting a business (figure 2.2). assessing how easy it is for an entrepreneur in Zimbabwe The rankings for comparator economies and the regional to start a business. Figure 2.2 How Zimbabwe and comparator economies rank on the ease of starting a business Source: Doing Business database. Doing Business 2016 Zimbabwe 20 STARTING A BUSINESS Economies around the world have taken steps making it they often are part of a larger regulatory reform easier to start a business—streamlining procedures by program. Among the benefits have been greater firm setting up a one-stop shop, making procedures simpler satisfaction and savings and more registered businesses, or faster by introducing technology and reducing or financial resources and job opportunities. eliminating minimum capital requirements. Many have What business registration reforms has Doing Business undertaken business registration reforms in stages—and recorded in Zimbabwe (table 2.1)? Table 2.1 How has Zimbabwe made starting a business easier—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform Zimbabwe eased business start-up by reducing registration DB2011 fees and speeding up the name search process and company and tax registration. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2016 Zimbabwe 21 STARTING A BUSINESS What are the details? Underlying the indicators shown in this chapter for STANDARDIZED COMPANY Zimbabwe is a set of specific procedures—the bureaucratic and legal steps that an entrepreneur must complete to incorporate and register a new Legal form: Private Limited Liability Company firm. These are identified by Doing Business through collaboration with relevant local professionals and Paid-in minimum capital requirement: USD 0 the study of laws, regulations and publicly available City: Harare information on business entry in that economy. Following is a detailed summary of those procedures, Start-up Capital: 10 times GNI per capita along with the associated time and cost. These procedures are those that apply to a company matching the standard assumptions (the “standardized company”) used by Doing Business in collecting the data (see the section in this chapter on what the indicators measure). Table 2.2 Summary of time, cost and procedures for starting a business in Zimbabwe Time to No. Procedure Cost to complete complete Reserve the company name with the Chief Registrar of Companies The reservation is valid for 30 days and can be extended for another 30 days for an additional fee. 7 days USD 5 1 Agency: Chief Registrar of Companies File the memorandum and articles of association with the Registrar of Companies The law provides for model or boilerplate articles of incorporation. On the date of incorporation, the Registrar of Companies must be notified of the appointments of the company’s directors and secretaries. This is done by filing the particulars of the directors and secretaries and any changes therein or a list of directors and principal officers (Form CR 14). These documents must be accompanied by a duplicate original or a printed notarized copy. 2 14 days see comments Registration Fee is US$ 5 for every US$ 100 or part thereof of the nominal/authorized capital of the company with a minimum fee of US$ 100. In practice, companies usually start up with a low amount of capital to avoid the exorbitant stamp duty. A company may also issue shares at a premium to circumvent the requirement. Agency: Registrar of Companies Doing Business 2016 Zimbabwe 22 Time to No. Procedure Cost to complete complete Register with the tax authorities for income tax, VAT, and PAYE Upon formation, a company must register at the regional Zimbabwe Revenue Authority Office. A copy of the company’s certificate of incorporation is required for the Collector's records, along with the memorandum and articles of association and a certified copy of the identification of the assigned public officer. The company will be issued a registration number, as well as the current tax tables and the pay-as- you-earn (PAYE) receipt books. The P8 and P6 Forms now must be generated by the applicant and are not freely available. The ITF 16 Form must be completed in consultation with the Income Tax Office. According to Zimbabwe’s Finance Act (as amended), companies must now budget to pay all their company tax within the trading year. The 3 tax must be paid as follows: 10% by the 25th of March, 10% by the 25th 14 days no charge of June, 40% by the 25th of September, and the balance of the estimated tax for the tax year by the 20th of December. Firms with a turnover of US $60,000 must register for VAT with the Zimbabwe Revenue Authority (ZIMRA). An application must be submitted for a Certificate of Registration (Form VAT 1), which, along with Forms VAT 2 and VAT 3, is found at ZIMRA Web site (www.zimra.co.zw). Firms with a turnover of less than US $60,000 may apply for voluntary VAT registration. Agency: Tax authorities * Register with the National Social Security Authority for pension and Accident Prevention and Compensation Scheme The employer and the employee must each contribute 3% of employee 14 days 4 the gross monthly salary. (simultaneous with no charge procedure 3) Agency: National Social Security Authority * Register with the Manpower Development Fund Employers must register with, and contribute 1% of their wage bill to, the state-run Manpower Development Fund. The fund allows employers 1 day 5 to recover expenses when employees complete training. (simultaneous with no charge procedure 3) Agency: Manpower Development Fund * Pick up the form of license application notice from the City Health Department 1 day, The entrepreneur then retrieves the license application notice form simultaneous with USD 20 6 from the City Health Department. procedure 3 Agency: City Health Department Doing Business 2016 Zimbabwe 23 Time to No. Procedure Cost to complete complete * Advertise the application for a trade and business license in a local newspaper A trade and business license applicant must publicly announce the proposed application twice in a local newspaper. The form, Notice of intention to apply for the issuance of a new license, is available from the City Health Department. The first notice must be published no more 4-6 weeks, 7 than 6 weeks, but at least 4 weeks, before the application will be heard simultaneous USD 30 by the licensing authority. The second notice must appear 7 days after procedure the first notice. Any objections to the application must be submitted in writing to the licensing authority within 7 days of the second notice. Agency: Newspaper Submit an application form for the issuance of new licenses to the Licensing Office in Harare Municipality Two copies of the application forms are submitted along with proof of both publications in a local newspaper of a notice of intention to operate a business. On receipt of the application, the Licensing Office requests a police report from the applicant, as well as a similar report from the person who will be in actual and effective control of the premises to which the application relates, if that person is not the same applicant. The Licensing Office also seeks a report from the Harare 8 Town Planner to ensure that the application is consistent with the 34 days USD 530 zoned use of the premises. Application for the license can start once the Registrar of Companies grants its approval of the company name. It is also possible to apply for a temporary license pending the grant of the full license, which can take up to a month or longer. Agency: Licensing Office in Harare Municipality * Receive inspection by the Licensing officers Officers inspect the company site to check if the workplace premises 1 day, are suitable for the intended use. The verification criteria used by the simultaneous with 9 officers are specified in the relevant bylaws. no charge previous procedure Agency: Licensing Office in Harare Municipality * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2016 Zimbabwe 24 Note: Online procedures account for 0.5 days in the total time calculation. Doing Business 2016 Zimbabwe 25 DEALING WITH CONSTRUCTION PERMITS Regulation of construction is critical to protect the WHAT THE DEALING WITH CONSTRUCTION public. But it needs to be efficient, to avoid excessive PERMITS INDICATORS MEASURE constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in time and money, Procedures to legally build a warehouse many builders opt out. They may pay bribes to pass (number) inspections or simply build illegally, leading to Submitting all relevant documents and hazardous construction that puts public safety at risk. obtaining all necessary clearances, licenses, Where compliance is simple, straightforward and permits and certificates inexpensive, everyone is better off. Submitting all required notifications and What do the indicators cover? receiving all necessary inspections Doing Business records all procedures required for a Obtaining utility connections for water and business in the construction industry to build a sewerage warehouse along with the time and cost to complete Registering and selling the warehouse after its each procedure. In addition, this year Doing Business completion introduces a new measure, the building quality Time required to complete each procedure control index, evaluating the quality of building (calendar days) regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and Does not include time spent gathering professional certification requirements. information The ranking of economies on the ease of dealing with Each procedure starts on a separate day. Procedures that can be fully completed online construction permits is determined by sorting their are recorded as ½ day distance to frontier scores for dealing with construction permits. These scores are the simple Procedure considered completed once final average of the distance to frontier scores for each of document is received the component indicators. No prior contact with officials To make the data comparable across economies, Cost required to complete each procedure (% several assumptions about the construction of warehouse value) company, the warehouse project and the utility Official costs only, no bribes connections are used. Building quality control index (0-15) Assumptions about the construction company Sum of the scores of six component indices: The construction company (BuildCo): Quality of building regulations (0-2)  Is a limited liability company (or its legal equivalent). Quality control before construction (0-1)  Operates in the economy’s largest business Quality control during construction (0-3) city. For 11 economies the data are also Quality control after construction (0-3) collected for the second largest business Liability and insurance regimes (0-2) city. Professional certifications (0-4)  Is 100% domestically and privately owned.  Has five owners, none of whom is a legal entity.  Is fully licensed and insured to carry out construction projects, such as building warehouses. Doing Business 2016 Zimbabwe 26 The construction company (BuildCo) (continued):  Will be a new construction (there was no previous construction on the land), with no  Has 60 builders and other employees, all of trees, natural water sources, natural reserves them nationals with the technical expertise or historical monuments of any kind on the and professional experience necessary to plot. obtain construction permits and approvals.  Will have complete architectural and  Has at least one employee who is a technical plans prepared by a licensed licensed architect or engineer and architect. If preparation of the plans requires registered with the local association of such steps as obtaining further architects or engineers. BuildCo is not documentation or getting prior approvals assumed to have any other employees who from external agencies, these are counted as are technical or licensed experts, such as procedures. geological or topographical experts.  Will include all technical equipment required  Has paid all taxes and taken out all to be fully operational. necessary insurance applicable to its general business activity (for example,  Will take 30 weeks to construct (excluding all accidental insurance for construction delays due to administrative and regulatory workers and third-person liability). requirements).  Owns the land on which the warehouse will be built and will sell the warehouse upon Assumptions about the utility connections its completion. The water and sewerage connections:  Is valued at 50 times income per capita.  Will be 150 meters (492 feet) from the Assumptions about the warehouse existing water source and sewer tap. If there The warehouse: is no water delivery infrastructure in the economy, a borehole will be dug. If there is  Will be used for general storage activities, no sewerage infrastructure, a septic tank in such as storage of books or stationery. The the smallest size available will be installed or warehouse will not be used for any goods built. requiring special conditions, such as food, chemicals or pharmaceuticals.  Will not require water for fire protection reasons; a fire extinguishing system (dry  Will have two stories, both above ground, system) will be used instead. If a wet fire with a total constructed area of protection system is required by law, it is approximately 1,300.6 square meters assumed that the water demand specified (14,000 square feet). Each floor will be 3 below also covers the water needed for fire meters (9 feet, 10 inches) high. protection.  Will have road access and be located in the  Will have an average water use of 662 liters periurban area of the economy’s largest (175 gallons) a day and an average business city (that is, on the fringes of the wastewater flow of 568 liters (150 gallons) a city but still within its official limits). For 11 day. Will have a peak water use of 1,325 liters economies the data are also collected for (350 gallons) a day and a peak wastewater the second largest business city. flow of 1,136 liters (300 gallons) a day.  Will not be located in a special economic  Will have a constant level of water demand or industrial zone. Will be located on a land and wastewater flow throughout the year. plot of approximately 929 square meters (10,000 square feet) that is 100% owned by  Will be 1 inch in diameter for the water BuildCo and is accurately registered in the connection and 4 inches in diameter for the cadastre and land registry. sewerage connection. Doing Business 2016 Zimbabwe 27 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to build business city of an economy, except for 11 economies for a warehouse in Zimbabwe? According to data collected which the data are a population-weighted average of the by Doing Business, dealing with construction permits 2 largest business cities. See the chapter on distance to there requires 10.00 procedures, takes 448.00 days and frontier and ease of doing business ranking at the end of costs 25.20% of the warehouse value (figure 3.1). Most this profile for more details. indicator sets refer to a case scenario in the largest Figure 3.1 What it takes to comply with formalities to build a warehouse in Zimbabwe Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the dealing with construction permits indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. . Doing Business 2016 Zimbabwe 28 DEALING WITH CONSTRUCTION PERMITS Globally, Zimbabwe stands at 184 in the ranking of 189 other useful information for assessing how easy it is for economies on the ease of dealing with construction an entrepreneur in Zimbabwe to legally build a permits (figure 3.2). The rankings for comparator warehouse. economies and the regional average ranking provide Figure 3.2 How Zimbabwe and comparator economies rank on the ease of dealing with construction permits Source: Doing Business database. Doing Business 2016 Zimbabwe 29 DEALING WITH CONSTRUCTION PERMITS What are the details? The indicators reported here for Zimbabwe are BUILDING A WAREHOUSE based on a set of specific procedures—the steps that a company must complete to legally build a warehouse—identified by Doing Business through Estimated value of information collected from experts in construction USD 42,855 warehouse : licensing, including architects, civil engineers, construction lawyers, construction firms, utility City : Harare service providers and public officials who deal with building regulations. These procedures are those that apply to a company and structure matching the The procedures, along with the associated time and cost, standard assumptions used by Doing Business in are summarized below. collecting the data (see the section in this chapter on what the indicators cover). Table 3.2 Summary of time, cost and procedures for dealing with construction permits in Zimbabwe Time to No. Procedure Cost to complete complete Request and obtain approval from the Inspector of Factories Before an application for approval of building plans can be submitted to the local authority, approval must first be obtained from the Inspector of Factories. This is a separate application and carries its own application fee, established by the Inspector. The 30 days USD 429 1 approval period is not less than 30 days. The cost is 1% of the project value. Agency: Inspector of Factories Request and obtain building plan approval by the Harare City Council BuildCo must submit the following documents at the same time: the building permit application, the application for the factories inspection, the TPD-1 form for the planning permit (only if needed which is not the case for the Doing Business case study), and the architects' and structural engineers' drawings and certificates to the relevant local authority for approvals, under the Regional, Town, and Country Planning Act and the model building bylaws. The application must be accompanied by a completed set of plans for the structure, prepared by a qualified 300 days USD 7,966 2 draftsman or architect. The application is circulated for approval to all departments, including the Department of Works, Highways and Works, Chemical Laboratory and Trade Waste, City Planning, Water and Sewerage, Land Survey, Traffic Engineering, Valuation and Estates, Department of Health, Department of Fire, Department of Housing and Community Services, and Zimbabwe Electricity Supply Authority (ZESA). Each agency contacts the applicant directly for clarification or rectification, if required. Once all agencies have accepted the Doing Business 2016 Zimbabwe 30 Time to No. Procedure Cost to complete complete plans, the Chief Building Inspector makes a final assessment and issues an approval of building plans to the applicant. The form contains a commencement of work notice that must be submitted by the applicant once the footings are ready for inspection. Subsequently, all phases of the construction must be approved by the Building Inspectorate. Procedural and approval costs are either 1% or 1.75% of the construction cost, but this varies from one authority to another. The time required for the entire procedure depends on the local authority; in Harare, it is usually not less than 6 months and can be up to a year. Because the approval cost is based on a percentage of the total construction cost, a certain amount is paid based on the estimated cost. However, the local authority may ask for the difference between the estimate and the actual cost at the end of the project (a common requirement). The cost of completion depends on whether the developer is prepared to fund the pre- purchase option. In addition, many developers close an insurance bond with the building contractor on the value of the construction materials. Should construction works commence prior to the approval of the building plans the local authority now imposes a "Regularisation Fee", or fine, of US$5,000. Agency: Harare City Council Request and receive inspection from Building Inspectorate upon completion of foundation Delays frequently occur because the City of Harare inspectors cannot get transportation to inspect a site. Even if offered a lift to the site by the contractor or consultant, the inspectors are not allowed to accept it because they are not insured for travel provided by a third party. Theoretically, inspections are conducted once a month. A final inspection will occur only if specifically requested (but is required 3 for obtaining the occupancy permit). Theoretically, the builder 30 days no charge must stop construction until the inspection is conducted, but doing so is impractical. The City of Harare inspectors generally allow a structural engineer to cover the inspections of foundations. In practice, since 2007 due to lack of fuel and means of transportation, inspections are no longer conducted. Companies use their own engineers for inspections during construction. Agency: Building Inspectorate Doing Business 2016 Zimbabwe 31 Time to No. Procedure Cost to complete complete Inform the Building Inspectorate of the completion of drainage installation The officially required inspection almost never happens unless 4 the fuel is provided for transportation. 1 day no charge Agency: Building Inspectorate Request and receive inspection from the Building Inspectorate upon completion of structure As of 2007, inspections are undertaken by the Chief Building Inspector and a deputy inspector. This change, implemented after allegations that the lower officers were requesting 14 days no charge 5 facilitation payments, has caused the time required for this inspection to increase. Agency: Building Inspectorate Request and receive inspection by the Building Inspectorate upon completion of construction Inspectors will visit the site only if there is fuel for vehicles, or the applicant provides transportation. Once the inspection has taken 30 days no charge 6 place, a protocol is written, which generally takes 30 days. Agency: Building Inspectorate * Request and obtain water and sewage connection from Zimbabwe National Water Authority (ZINWA) In 2007, municipal water supplies have been taken over by a new authority, the Zimbabwe National Water Authority (ZINWA). Obtaining a new connection now requires proof of ownership of the stand and account clearance on any other water billing and is undertaken by the developer (in this case BuildCo) or its agents. Separate applications are made by the construction company for water and sewerage connections. There may be an additional charge for this determined by the local authority. 7 1 day USD 2,390 BuildCo completes and lodges an application for a “new water connection and supply” form, available at the Water and Sewerage Branch of ZINWA. In addition to the form, BuildCo must provide the following: • A letter of commitment addressed to the Director of Works stating BuildCo’s intention to proceed with a connection • A statement of the quality of water required, to determine the appropriate pipe size and meter needed The branch will issue the applicant a T.W. number and notate the application form. A receipt for the application specifying the fees to be paid is issued. Fees come in two parts, a supply deposit Doing Business 2016 Zimbabwe 32 Time to No. Procedure Cost to complete complete and a connection fee, and would be USD 626.00. The applicant must take the notated application form and the receipt to the City Treasury Office, pay the required fees, and have the branch receipt machine-endorsed with the payment. The cost depends on the type of water supply required. The applicant must purchase the water meter; ZINWA are no longer able to supply water meters. Application, connection fee, and account deposit amount to USD 1,764.00 for a 25-milimeter connection. There is no charge for the application, but there is an upfront charge before the connection is made. The embossed receipt and the application form are returned to the branch, which requests that a job number be issued by the Costing Office. The branch then issues a Location Advice internally for the work to be undertaken. The applicant is required to complete an Installation of Water Service form indicating the site of the connection. Where fire hose reels on site are required (a requirement under the building bylaws for any industrial/warehouse building exceeding 400 sq. m. in floor area), a 2-inch (50mm) water meter is required. Agency: Zimbabwe National Water Authority (ZINWA) Request occupancy certificate 8 1 day no charge Agency: Local Authority Request and receive inspection from the local Fire Department on fire equipment installation for occupancy certificate Approval by the Fire Department is required to obtain an occupancy permit. Inspections are made by appointment only. At least one week’s notice is required most of the time. The same 9 issues as with other inspections apply (no transportation, long 7 days no charge delay). Therefore, in practice, the architect or draftsman picks up the inspector and brings the inspector to the site. Otherwise, it might take weeks before the inspector visits the site. Agency: Fire Department and Building Inspectorate Obtain occupancy certificate 10 An occupancy certificate is issued by the local authority once the 35 days no charge project is complete and inspected by the Fire Department and the Building Inspector. Doing Business 2016 Zimbabwe 33 Time to No. Procedure Cost to complete complete Agency: Local Authority * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Doing Business 2016 Zimbabwe 34 DEALING WITH CONSTRUCTION PERMITS Building Quality Control Index The building quality control index is the sum of the The index ranges from 0 to 15, with higher values scores on the quality of building regulations, quality indicating better quality control and safety mechanisms in control before construction, quality control during the construction permitting system. construction, quality control after construction, The indicator is based on the same case study liability and insurance regimes, and professional assumptions as the measures of efficiency. certifications indices. Table 3.3 Summary of quality control and safety mechanisms in Zimbabwe Answer Score Building quality control index (0-15) 7.00 Quality of building regulations index (0-2) 1.50 In what way are the building regulations (including the building code) or any regulations dealing with construction permits made Free of charge. 0.5 available? (0-1) List of required Which requirements for obtaining a building permit are clearly documents; Fees to be specified by the building regulations or by any accessible website, 1.0 paid; Required brochure or pamphlet? (0-1) preapprovals. Quality control before construction index (0-1) 0.00 Who is part of the committee or team that reviews and approves Civil servant reviews building permit applications in the relevant permit-issuing 0.0 plans. agency? (0-1) Quality control during construction index (0-3) 1.00 Unscheduled What types of inspections (if any) are required by law to be inspections; Inspections 1.0 carried out during construction? (0-2) at various phases. Mandatory inspections Do legally mandated inspections occur in practice during are not done in practice 0.0 construction? (0-1) during construction. Quality control after construction index (0-3) 2.00 Is there a final inspection required by law to verify that the Yes, final inspection is building was built in accordance with the approved plans and done by government 2.0 regulations? (0-2) agency. Final inspection does Do legally mandated final inspections occur in practice? (0-1) 0.0 not occur in practice. Liability and insurance regimes index (0-2) 0.50 Which parties (if any) are held liable by law for structural flaws or Architect or engineer. 0.5 problems in the building once it is in use? (0-1) Which parties (if any) are required by law to obtain an insurance No party is required by 0.0 policy to cover possible structural flaws or problems in the law to obtain insurance Doing Business 2016 Zimbabwe 35 Answer Score building once it is in use? (0-1) . Professional certifications index (0-4) 2.00 University degree in architecture or What are the qualification requirements for the professional engineering; Being a responsible for verifying that the architectural plans or drawings 1.0 registered architect or are in compliance with existing building regulations? (0-2) engineer; Passing a certification exam. University degree in engineering, construction or What are the qualification requirements for the professional who construction 1.0 supervises the construction on the ground? (0-2) management; Being a registered architect or engineer. Source: Doing Business database. Doing Business 2016 Zimbabwe 36 GETTING ELECTRICITY Access to reliable and affordable electricity is vital for WHAT THE GETTING ELECTRICITY businesses. To counter weak electricity supply, many firms in developing economies have to rely on self- INDICATORS MEASURE supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the first step for Procedures to obtain an electricity connection a customer is always to gain access by obtaining a (number) connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for a Completing all required notifications and local business to obtain a permanent electricity receiving all necessary inspections connection and supply for a standardized warehouse, as well as the time and cost to complete them. These Obtaining external installation works and procedures include applications and contracts with possibly purchasing material for these works electricity utilities, clearances from other agencies Concluding any necessary supply contract and and the external and final connection works. In obtaining final supply addition, this year Doing Business adds two new measures: the reliability of supply and transparency Time required to complete each procedure of tariffs index (included in the aggregate distance to (calendar days) frontier score and ranking on the ease of doing Is at least 1 calendar day business) and the price of electricity (omitted from these aggregate measures). The ranking of Each procedure starts on a separate day economies on the ease of getting electricity is Does not include time spent gathering determined by sorting their distance to frontier information scores for getting electricity. These scores are the Reflects the time spent in practice, with little simple average of the distance to frontier scores for follow-up and no prior contact with officials each of the component indicators. To make the data comparable across economies, several assumptions Cost required to complete each procedure (% are used. of income per capita) Assumptions about the warehouse Official costs only, no bribes The warehouse: Excludes value added tax  Is owned by a local entrepreneur. The reliability of supply and transparency of tariffs index  Is located in the economy’s largest business city. For 11 economies the data Sum of the scores of six component indices: are also collected for the second largest Duration and frequency of outages business city. Tools to monitor power outages  Is located in an area where similar warehouses are typically located. In this Tools to restore power supply area a new electricity connection is not Regulatory monitoring of utilities’ performance eligible for a special investment promotion Financial deterrents aimed at limiting outages regime (offering special subsidization or faster service, for example). Transparency and accessibility of tariffs  Is located in an area with no physical Price of electricity (cents per kilowatt-hour)* constraints. For example, the property is Price based on monthly bill for commercial not near a railway. warehouse in case study  Is a new construction and is being *Price of electricity is not included in the calculation of connected to electricity for the first time. distance to frontier nor ease of doing business ranking Doing Business 2016 Zimbabwe 37 Assumptions about the monthly consumption The warehouse (continued):  It is assumed that the warehouse operates 8 hours a day for 30 days a month, with  Has two stories, both above ground, with a equipment utilized at 80% of capacity on total surface area of approximately 1,300.6 average, and that there are no electricity cuts square meters (14,000 square feet). The (assumed for simplicity). The subscribed plot of land on which it is built is 929 capacity of the warehouse is 140 kVA, with a square meters (10,000 square feet). power factor of 1 (1 kVA = 1 kW). The  Is used for storage of goods. monthly energy consumption is therefore 26,880 kWh, and the hourly consumption 112 kWh (26,880 kWh/30 days/8 hours). Assumptions about the electricity connection  If multiple electricity suppliers exist, the The electricity connection: warehouse is served by the cheapest supplier.  Is a permanent one.  Tariffs effective in March of the current year  Is a three-phase, four-wire Y, 140-kilovolt- are used for calculation of the price of ampere (kVA) (subscribed capacity) electricity for the warehouse. connection (where the voltage is 120/208 V, the current would be 400 amperes; where it is 230/400 B, the current would be nearly 200 amperes).  Is 150 meters long. The connection is to either the low-voltage or the medium- voltage distribution network and either overhead or underground, whichever is more common in the area where the warehouse is located.  Requires works that involve the crossing of a 10-meter road (such as by excavation or overhead lines) but are all carried out on public land. There is no crossing of other owners’ private property because the warehouse has access to a road.  Includes only a negligible length in the customer’s private domain.  Will supply monthly electricity consumption of 26,880 kilowatt-hours (kWh).  Does not involve work to install the internal electrical wiring. This has already been completed, up to and including the customer’s service panel or switchboard and installation of the meter base. Doing Business 2016 Zimbabwe 38 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity connection Most indicator sets refer to a case scenario in the largest in Zimbabwe? According to data collected by Doing business city of an economy, except for 11 economies for Business, getting electricity there requires 6.00 which the data are a population-weighted average of the procedures, takes 106.00 days and costs 2925.00% of 2 largest business cities. See the chapter on distance to income per capita (figure 4.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 4.1 What it takes to obtain an electricity connection in Zimbabwe Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. For more information on the methodology of the getting electricity indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2016 Zimbabwe 39 GETTING ELECTRICITY Globally, Zimbabwe stands at 161 in the ranking of 189 average ranking provide another perspective in assessing economies on the ease of getting electricity (figure 4.2). how easy it is for an entrepreneur in Zimbabwe to The rankings for comparator economies and the regional connect a warehouse to electricity. Figure 4.2 How Zimbabwe and comparator economies rank on the ease of getting electricity Source: Doing Business database. Doing Business 2016 Zimbabwe 40 GETTING ELECTRICITY What are the details? The indicators reported here for Zimbabwe are based on OBTAINING AN ELECTRICITY CONNECTION* a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution utility— Zimbabwe Electricity identified by Doing Business. Data are collected from the Transmission and Name of utility: distribution utility, then completed and verified by Distribution Company electricity regulatory agencies and independent (ZETDC) professionals such as electrical engineers, electrical contractors and construction companies. The electricity Price of electricity distribution utility surveyed is the one serving the area (US cents per kWh): 11 (or areas) in which warehouses are located. If there is a choice of distribution utilities, the one serving the largest City: Harare number of customers is selected. *Price is calculated as a monthly consumption of 26,880 kWh for business customers, based on a standardized case study The procedures are those that apply to a warehouse and adopted by the getting electricity methodology. Doing Business electricity connection matching the standard measures the price of electricity but does not include these assumptions used by Doing Business in collecting the data when calculating the distance to frontier score for getting data (see the section in this chapter on what the electricity or the ranking on the ease of getting electricity. indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 4.2 Summary of time, cost and procedures for getting electricity in Zimbabwe Time to No. Procedure Cost to complete complete Submit application to ZETDC and await right-of-way approvals and quotation The application is submitted by the client/electrical contractor in person, along with a copy of the Company Registration Certificate. After the application is submitted ZETDC will be working on issuing the quotation to the client. At this point ZETDC will also seek and obtain way leave 40 calendar days USD 0 1 approvals from the Municipalities Agency: ZETDC * Await and receive external site inspection by ZETDC An external site inspection is carried out by the utility to determine the “supply termination point” and if/ or whether additional material is 2 needed. 1 calendar day USD 0 Agency: ZETDC Doing Business 2016 Zimbabwe 41 Time to No. Procedure Cost to complete complete Purchase material for external works Customers need to buy transformers and switchgear for the utility from local providers. Transformers have to be of ZETDC approved type. 3 19 calendar days USD 0 Agency: Local providers * Obtain internal wiring inspection by ZETDC On completion of the internal installation the electrician notifies ZETDC and request an internal wiring inspection by submitting the completion form. Electrical standards are issued by the Standards Association of 4 Zimbabwe (SAZ) and ZETDC and requires that ZETDC to do an 4 calendar days USD 0 inspection. Agency: ZETDC Obtain installation of transformer by ZETDC The transformer is installed by the utility and does the connection between the internal sub-distribution board in the warehouse and the meter board. 5 9 calendar days USD 24,947.8 Agency: ZETDC Obtain meter installation and electricity flow from ZETDC The meter is installed by a separate team other than the one doing the connection works. This team does a live test of the connection, tests the 6 cable pressure, installs the meter and energizes the connection. 38 calendar days USD 122.5 Agency: ZETDC * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2016 Zimbabwe 42 GETTING ELECTRICITY Reliability of supply and transparency of tariffs index The reliability of supply and transparency of tariffs Doing Business uses the system average interruption index encompasses quantitative data on the duration duration index (SAIDI) and the system average and frequency of power outages as well as interruption frequency index (SAIFI) to measure the qualitative information on the mechanisms put in duration and frequency of power outages in the largest place by the utility for monitoring power outages business city of each economy (for 11 economies the data and restoring power supply, the reporting are also collected for the second largest business city). relationship between the utility and the regulator for SAIDI is the average total duration of outages over the power outages, the transparency and accessibility of course of a year for each customer served, while SAIFI is tariffs and whether the utility faces a financial the average number of service interruptions experienced deterrent aimed at limiting outages (such as a by a customer in a year. Annual data (covering the requirement to compensate customers or pay fines calendar year) are collected from distribution utility when outages exceed a certain cap). companies and national regulators on SAIDI and SAIFI. Both SAIDI and SAIFI estimates include load shedding. The index ranges from 0 to 8, with higher values indicating greater reliability of electricity supply and greater transparency of tariffs. Table 4.3 Reliability of Supply and Transparency of Tariff Index in Zimbabwe Answer Score Reliability of supply and transparency of tariff index (0-8) 0.00 Total duration and frequency of outages per customer a year (0-3) 0.00 System average interruption duration index (SAIDI) 443.2 System average interruption frequency index (SAIFI) 96.0 Mechanisms for monitoring outages (0-1) 0.0 Does the distribution utility use automated tools to monitor outages? No Mechanisms for restoring service (0-1) 0.0 Does the distribution utility use automated tools to restore service? No Regulatory monitoring (0-1) 1.00 Does a regulator—that is, an entity separate from the utility—monitor Yes the utility’s performance on reliability of supply? Financial deterrents aimed at limiting outages (0-1) 0.00 Does the utility either pay compensation to customers or face fines by No the regulator (or both) if outages exceed a certain cap? Communication of tariffs and tariff changes (0-1) 0.00 Are effective tariffs available online? No Link to the website, if available online n.a Doing Business 2016 Zimbabwe 43 Answer Score Are customers notified of a change in tariff ahead of the billing cycle? No Source: Doing Business database. Note: If data on power outages is not collected or if the SAIFI index or SAIDI index are above the threshold of 100, the economy is not eligible to obtain a score in the Reliability of Supply and Transparency of Tariff Index. If SAIDI and SAIFI are 12 (equivalent to an outage of one hour each month) or below, a score of 1 is assigned. If SAIDI and SAIFI are 4 (equivalent to an outage of one hour each quarter) or below, 1 additional point is assigned. Finally, if SAIDI and SAIFI are 1 (equivalent to an outage of one hour per year) or below, 1 more point is assigned. Doing Business measures the price of electricity but does not include these data when calculating the distance to frontier score for getting electricity or the ranking on the ease of getting electricity. The price of electricity is measured in cents per kilowatt-hour. On the basis of the assumptions about monthly consumption, a monthly bill for a commercial warehouse in the largest business city of the economy is computed for the month of March. As noted, the warehouse uses electricity 30 days a month, from 9:00 a.m. to 5:00 p.m., so different tariff schedules may apply if a time-of-use tariff is available. Doing Business 2016 Zimbabwe 44 REGISTERING PROPERTY Ensuring formal property rights is fundamental. WHAT THE REGISTERING PROPERTY Effective administration of land is part of that. If INDICATORS MEASURE formal property transfer is too costly or complicated, formal titles might go informal again. And where property is informal or poorly Procedures to legally transfer title on administered, it has little chance of being accepted immovable property (number) as collateral for loans—limiting access to finance. Preregistration (for example, checking for liens, notarizing sales agreement, paying property What do the indicators cover? transfer taxes) Doing Business records the full sequence of Registration in the economy’s largest business procedures necessary for a business to purchase city 2 property from another business and transfer the property title to the buyer’s name. The transaction is Postregistration (for example, filing title with the municipality) considered complete when it is opposable to third parties and when the buyer can use the property, Time required to complete each procedure use it as collateral for a bank loan or resell it. In (calendar days) addition, this year Doing Business adds a new Does not include time spent gathering measure to the set of registering property information indicators, an index of the quality of the land administration system in each economy. The Each procedure starts on a separate day. ranking of economies on the ease of registering Procedures that can be fully completed online are recorded as ½ day. property is determined by sorting their distance to frontier scores for registering property. These scores Procedure considered completed once final are the simple average of the distance to frontier document is received scores for each of the component indicators. To No prior contact with officials make the data comparable across economies, several assumptions about the parties to the Cost required to complete each procedure transaction, the property and the procedures are (% of property value) used. Official costs only, no bribes The parties (buyer and seller): No value added or capital gains taxes included  Are limited liability companies, 100% Quality of land administration index (0-30) domestically and privately owned and  Is located in a periurban commercial zone, and perform general commercial activities and no rezoning is required. are located in the economy’s largest business city .  Has no mortgages attached, has been under 2 the same ownership for the past 10 years.  Have 50 employees each, all of whom are nationals.  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story The property (fully owned by the seller): warehouse of 929 square meters (10,000  Has a value of 50 times income per capita. square feet). The warehouse is in good The sale price equals the value and entire condition and complies with all safety property will be transferred. standards, building codes and legal  Is registered in the land registry or cada- requirements. There is no heating system. stre, or both, and is free of title disputes. 2 For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2016 Zimbabwe 45 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in Most indicator sets refer to a case scenario in the largest Zimbabwe? According to data collected by Doing business city of an economy, except for 11 economies for Business, registering property there requires 5.00 which the data are a population-weighted average of the procedures, takes 36.00 days and costs 7.60% of the 2 largest business cities. See the chapter on distance to property value (figure 5.1). frontier and ease of doing business ranking at the end of this profile for more details. Figure 5.1 What it takes to register property in Zimbabwe Source: Doing Business database. Note: Time shown in the figure above may not reflect simultaneity of procedures. Online procedures account for 0.5 days in the total time calculation. For more information on the methodology of the registering property indicators, see the Doing Business website (http://www.doingbusiness.org). For details on the procedures reflected here, see the summary at the end of this chapter. Doing Business 2016 Zimbabwe 46 REGISTERING PROPERTY Globally, Zimbabwe stands at 114 in the ranking of 189 regional average ranking provide other useful economies on the ease of registering property (figure information for assessing how easy it is for an 5.2). The rankings for comparator economies and the entrepreneur in Zimbabwe to transfer property. Figure 5.2 How Zimbabwe and comparator economies rank on the ease of registering property Source: Doing Business database. Doing Business 2016 Zimbabwe 47 REGISTERING PROPERTY What are the details? The indicators reported here are based on a set of STANDARD PROPERTY TRANSFER specific procedures—the steps that a buyer and seller must complete to transfer the property to the buyer’s name—identified by Doing Business through information collected from local property lawyers, Property value: USD 42,855 notaries and property registries. These procedures are those that apply to a transaction matching the City: Harare standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). The procedures, along with the associated time and cost, are summarized below. Table 5.2 Summary of time, cost and procedures for registering property in Zimbabwe Time to No. Procedure Cost to complete complete The conveyancer prepares the draft deed, power of attorney to pass transfer as well as declarations for signing by buyer and seller Upon payment of transfer fees to the conveyance, he will draft a proposal deed of transfer (in duplicate) deriving the powers to do so from the signed and witnessed agreement of sale. In drafting the proposal transfer deed the conveyancer will always refer to the deed from the seller and other information from the Deeds Office. The proposal must also refer to the diagram deed which will be annexed to the first transfer deed. The documentation shall include: Declaration by seller and by purchaser (for stamp duty purposes) Sale agreement Power of Attorney to make the transfer Conveyancer’s 1 1-3 days fees: 4% property A search of the property title is conducted by the Lawyer at the Land value +15% VAT Registry Conveyancor fees are determined according to the following scale pursuant Law Society of Zimbabwe By-laws S.I. 24/2013 with effect since March 1st, 2013: US$ 400 on first US$ 10 000.00 and under 4% on next US$ 10 000.00 - US$ 250 000.00 of value, 3% on next US$ 250 000.00 - US$ 500 000.00, 2% on next US$ 500 000.00 - 1 000 000.00 1% on next US$ 1 000 000.00 and above Agency: Conveyancer Doing Business 2016 Zimbabwe 48 Time to No. Procedure Cost to complete complete The seller applies for the rates clearance certificate to the local authority under whose jurisdiction the property falls This application is performed by a conveyancor (fees already covered by Procedure 1). The local authority will provide an assessment of how much is payable by way of advance rates and outstanding rates, if any. In Zimbabwe there is at the moment no land tax, instead rates are paid to the local authority. So every property in Zimbabwe is subject to these rates paid by the property owner to the municipality or any other local authority for the services provided, like refuse, sewage etc. Before one can transfer a property all the rates due should be paid to the local authority, so it depends on outstanding amount due to the municipality. The rates in Zimbabwe are based on the value of the property, size and whether there are improvements or not. It is also important to note that the value of the property is a function of the location of the property. For USD 500 (Approx the property we are talking about the rates would therefore be around average for high ZWD 500. When the seller pays the outstanding rates payment he 14 days density suburb, 2 receives what is known as the rates clearance certificate. These rates are (simultaneous though rates paid by the purchaser as pro forma costs, which will then be reimbursed with procedure 3) constantly by seller on the date of the transfer for the advance rates paid calculated increase) on pro rata basis from the date of payment to date of transfer (where purchaser does not have vacant possession or occupation prior to transfer since in this event risk and profit in the property has usually passed in terms of the agreement of sale.) The rates account No. has to be supplied in the letter to the rates department. The local authority will only need to be furnished with details of the seller and buyer and their present postal or physical addresses, and description of the property being transferred. The amount to be paid will be dependent on whether there are any rates in arrears plus no less than 3 months rates paid in advance. Agency: Local Authority * The seller applies for a capital gains tax clearance certificate Capital gains Tax is (either withholding tax or Capital Gains tax) 20% of the actual gains (not The capital gains tax (CGT) is assessed by the Zimbabwe Revenue accounted here) Authority (ZIMRA), which determines how much is payable by way of *If Seller acquired capital gains tax. The rate is 20% on the gains and is paid by the seller. the property The Conveyansor will deliver the file in person to ZIMRA. ZIMRA 10-14 days before February customer service helps with the computation. (simultaneous 3 2009 then CGT The documentation required: with procedure 2) liability is 5% of • Form REV 1 • Capital Gains Tax Clearance Application [C.G.T.1] Form gross selling price. • Original and copy of Title Deed If property • Original and copy of Seller and Buyer C.R.14 (The current list of acquired after Directors as registered at the Companies Office) February 2009, • CR6 form (The company’s registered address) then CGT • Agreement of Sale signed by both the buyer and seller (which will calculated at 20% Doing Business 2016 Zimbabwe 49 Time to No. Procedure Cost to complete complete provide the sale price, the expenses of the conveyansor) of profit assessed • Original and copy of certificate of incorporation for both companies from sale • Proof of payment • Directors’ resolution to buy/sell this warehouse by born the buyer and seller (must be signed by the 2 Directors and the Public Officer/Company Secretary) • Original and copies of the ID's of the people mentioned in the Resolution • Contact details of the representative of both companies • Copy of Deed of Transfer ZIMRA will conduct physical interviews on two directors; one from the selling, and one from the purchasing companies separately and normally on the day when the documents are submitted. The representatives from each company who are interviewed by ZIMRA are those who sign the Resolution of the Company and are the directors. After verification, ZIMRA will tabulate what is the actual cost of the CGT and will inform the conveyansor of the amount to be paid. A notice of payment is delivered to the Conveyansor providing details of ZIMRA bank account where the payment is to be made. Agency: Zimbabwe Revenue Authority (ZIMRA) Payment of Capital Gains Tax and obtain CGT certificate with ZIMRA When the assessment is issued the seller is given a Business Partner No. which enables to pay capital gains tax. The conveyancer will pay the amount representing the CGT at the a commercial Bank. When payment is made one has to wait until the payment is reflected in the ZIMRA 4 account after which a receipt is issued. The receipt will be surrendered 2-10 days no cost to the ZIMRA official who did the interview for him/her to complete and issue the relevant certificate. Agency: Zimbabwe Revenue Authority (ZIMRA) Transfer documents are lodged for registration of title with the Registrar of the Deeds’ Office Registration fee The stamp duty is paid upon lodging at the Deeds Office. The copies of the deeds are lodged with the Registrar of Deeds for examination upon USD 20 and Stamp payment of the registration fee and the stamp duty (according to duty: 1% for first Finance Bill 2009, for payments made in foreign currency). The deed is USD 5,0002% for 5 14 days signed (registered) by the Registrar of Deeds or his/her designate. One next USD copy of the deed is filed in the Office of the Registrar of Deed and the 15,0003% for next second one sent back to the conveyancer for onward transmission to USD 80,0004% for his/her client (the new property owner). USD balance The documentation shall include: Rates clearance certificate (obtained in Procedure 3) Capital gains tax clearance (obtained in Procedure 2) Doing Business 2016 Zimbabwe 50 Time to No. Procedure Cost to complete complete Two copies of the draft deed Power of attorney to pass transfer Declaration by seller and buyer Original holding deed The Deeds Office no longer has the capacity of sending the properties for valuation. Unless ZIMRA calls for a valuation of the property sold, once CGT clearance is obtained the Deeds office does not have a basis for sending properties for valaution. Prior to ZIMRA taking over this responsibility, the Deeds office could and did send properties for valuation in case of errors or disagreements regarding the value of the property. Agency: Deeds Office * Takes place simultaneously with another procedure. Source: Doing Business database. Note: Online procedures account for 0.5 days in the total time calculation. Doing Business 2016 Zimbabwe 51 REGISTERING PROPERTY Quality of land administration The quality of land administration index is the sum of If private sector entities were unable to register property the scores on the reliability of infrastructure, transfers in an economy between June 2014 and June transparency of information, geographic coverage 2015, the economy receives a “no practice” mark on the and land dispute resolution indices. procedures, time and cost indicators. A “no practice” economy receives a score of 0 on the quality of land The index ranges from 0 to 30, with higher values administration index even if its legal framework includes indicating better quality of the land administration provisions related to land administration. system. Table 5.3 Summary of quality of land administration in Zimbabwe Answer Score Quality of the land administration index (0-30) 8.50 Reliability of infrastructure index (0-8) 1.00 Deeds Registries What is the institution in charge of immovable property registration? Office In what format are the majority of title or deed records kept in the largest business city—in a paper format or in a computerized format Paper 0.0 (scanned or fully digital)? Is there an electronic database for checking for encumbrances (liens, No 0.0 mortgages, restrictions and the like)? Institution in charge of the plans showing legal boundaries in the Surveyor largest business city: General’s Office In what format are the majority of maps of land plots kept in the largest business city—in a paper format or in a computerized format Paper 0.0 (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing cadastral information (geographic information No 0.0 system)? Is the information recorded by the immovable property registration Separate agency and the cadastral or mapping agency kept in a single database, 0.0 databases in different but linked databases or in separate databases? Do the immovable property registration agency and cadastral or Yes 1.0 mapping agency use the same identification number for properties? Transparency of information index (0–6) 2.50 Who is able to obtain information on land ownership at the agency in Anyone who pays 1.0 charge of immovable property registration in the largest business city? the official fee Is the list of documents that are required to complete any type of Yes, in person 0.0 Doing Business 2016 Zimbabwe 52 Answer Score property transaction made publicly available–and if so, how? Link for online access: Is the applicable fee schedule for any property transaction at the Yes, on public agency in charge of immovable property registration in the largest 0.5 boards business city made publicly available–and if so, how? Link for online access: Does the agency in charge of immovable property registration commit to delivering a legally binding document that proves property No 0.0 ownership within a specific time frame–and if so, how does it communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about a problem that occurred at the agency in charge of immovable property No 0.0 registration? Contact information: Are there publicly available official statistics tracking the number of No 0.0 transactions at the immovable property registration agency? Number of property transfers in the largest business city in 2014: Freely accessible Who is able to consult maps of land plots in the largest business city? 0.5 by anyone Is the applicable fee schedule for accessing maps of land plots made Yes, on public 0.5 publicly available—and if so, how? boards Link for online access: Does the cadastral or mapping agency commit to delivering an updated map within a specific time frame—and if so, how does it Yes, in person 0.0 communicate the service standard? Link for online access: Is there a specific and separate mechanism for filing complaints about No 0.0 a problem that occurred at the cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.00 Are all privately held land plots in the economy formally registered at No 0.0 the immovable property registry? Are all privately held land plots in the largest business city formally No 0.0 registered at the immovable property registry? Doing Business 2016 Zimbabwe 53 Answer Score Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Land dispute resolution index (0–8) 5.00 Does the law require that all property sale transactions be registered at the immovable property registry to make them opposable to third Yes 1.5 parties? Is the system of immovable property registration subject to a state or Yes 0.5 private guarantee? Is there a specific compensation mechanism to cover for losses incurred by parties who engaged in good faith in a property transaction No 0.0 based on erroneous information certified by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a property transaction (e.g., checking the compliance of Yes 0.5 contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar. Does the legal system require verification of the identity of the parties Yes 0.5 to a property transaction? If yes, who is responsible for verifying the identity of the parties? Registrar. Is there a national database to verify the accuracy of identity No 0.0 documents? For a standard land dispute between two local businesses over tenure rights of a property worth 50 times gross national income (GNI) per High Court of capita and located in the largest business city, what court would be in Zimbabwe charge of the case in the first instance? How long does it take on average to obtain a decision from the first- Between 1 and 2 2.0 instance court for such a case (without appeal)? years Are there any statistics on the number of land disputes in the first No 0.0 instance? Number of land disputes in the largest business city in 2014: Source: Doing Business database. Doing Business 2016 Zimbabwe 54 GETTING CREDIT Two types of frameworks can facilitate access to WHAT THE GETTING CREDIT INDICATORS credit and improve its allocation: credit information MEASURE systems and borrowers and lenders in collateral and bankruptcy laws. Credit information systems enable lenders’ rights to view a potential borrower’s financial Strength of legal rights index (0–12) history (positive or negative)—valuable information to Rights of borrowers and lenders through consider when assessing risk. And they permit collateral laws borrowers to establish a good credit history that will Protection of secured creditors’ rights through allow easier access to credit. Sound collateral laws bankruptcy laws enable businesses to use their assets, especially movable property, as security to generate capital— Depth of credit information index (0–8) while strong creditors’ rights have been associated Scope and accessibility of credit information with higher ratios of private sector credit to GDP. distributed by credit bureaus and credit registries What do the indicators cover? Credit bureau coverage (% of adults) Doing Business assesses the sharing of credit information and the legal rights of borrowers and Number of individuals and firms listed in lenders with respect to secured transactions through largest credit bureau as percentage of adult 2 sets of indicators. The depth of credit information population index measures rules and practices affecting the Credit registry coverage (% of adults) coverage, scope and accessibility of credit Number of individuals and firms listed in information available through a credit registry or a credit registry as percentage of adult credit bureau. The strength of legal rights index population measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses two case scenarios, Case A and Case B, to determine the scope of the secured transactions system, involving a  Has up to 50 employees. secured borrower and a secured lender and  Is 100% domestically owned, as is the lender. examining legal restrictions on the use of movable collateral (for more details on each case, see the Data The ranking of economies on the ease of getting Notes section of the Doing Business 2016 report). credit is determined by sorting their distance to These scenarios assume that the borrower: frontier scores for getting credit. These scores are the distance to frontier score for the strength of legal  Is a private limited liability company. rights index and the depth of credit information  Has its headquarters and only base of index. operations in the largest business city. For the 11 economies with a population of more than 100 million, data for a second city have been added. Doing Business 2016 Zimbabwe 55 GETTING CREDIT Where does the economy stand today? How well do the credit information system and collateral Globally, Zimbabwe stands at 79 in the ranking of 189 and bankruptcy laws in Zimbabwe facilitate access to economies on the ease of getting credit (figure 6.1). The credit? The economy has a score of 5.00 on the depth of rankings for comparator economies provide other useful credit information index and a score of 5.00 on the information for assessing how well regulations and strength of legal rights index (see the summary of institutions in Zimbabwe support lending and borrowing. scoring at the end of this chapter for details). Higher scores indicate more credit information and stronger legal rights for borrowers and lenders. Figure 6.1 How Zimbabwe and comparator economies rank on the ease of getting credit Source: Doing Business database. Doing Business 2016 Zimbabwe 56 GETTING CREDIT One way to put an economy’s score on the getting credit rights index for Zimbabwe and shows the scores for indicators into context is to see where the economy comparator economies as well as the regional average stands in the distribution of scores across economies. score. Figure 6.3 shows the same for the depth of credit Figure 6.2 highlights the score on the strength of legal information index. Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared — and lenders? and how widely? Economy scores on strength of legal rights index Economy scores on depth of credit information index Source: Doing Business database. Source: Doing Business database. Note: Higher scores indicate that collateral and bankruptcy Note: Higher scores indicate the availability of more credit laws are better designed to facilitate access to credit. information, from either a credit registry or a credit bureau, Source: Doing Business database. to facilitate lending decisions. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Doing Business 2016 Zimbabwe 57 GETTING CREDIT When economies strengthen the legal rights of lenders information, they can increase entrepreneurs’ access to and borrowers under collateral and bankruptcy laws, and credit. What credit reforms has Doing Business recorded increase the scope, coverage and accessibility of credit in Zimbabwe (table 6.1)? Table 6.1 How has Zimbabwe made getting credit easier—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform DB2016 In Zimbabwe the credit bureau began to provide credit scores. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2005), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2016 Zimbabwe 58 GETTING CREDIT What are the details? The getting credit indicators reported here for Zimbabwe The data on the legal rights of borrowers and lenders are are based on detailed information collected in that gathered through a survey of financial lawyers and economy. The data on credit information sharing are verified through analysis of laws and regulations as well collected through a survey of a credit registry and/or as public sources of information on collateral and credit bureau (if one exists). To construct the depth of bankruptcy laws. For the strength of legal rights index, a credit information index, a score of 1 is assigned for each score of 1 is assigned for each of 10 aspects related to of 8 features of the credit registry or credit bureau (see legal rights in collateral law and 2 aspects in bankruptcy summary of scoring below). law. Strength of legal rights index (0–12) Index score: 5.00 Does an integrated or unified legal framework for secured transactions that extends to the creation, publicity and enforcement of functional equivalents to security interests in movable No assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of Yes movable assets, without requiring a specific description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its Yes assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically to Yes the products, proceeds or replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and obligations be secured between parties; and can the collateral agreement include a Yes maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is No unified geographically and by asset type, with an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and No searches can be performed online by any interested third party? Are secured creditors paid first (i.e. before tax claims and employee claims) when a debtor Yes defaults outside an insolvency procedure? Are secured creditors paid first (i.e. before tax claims and employee claims) when a business is No liquidated? Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure? Does the law protect secured creditors’ rights by No providing clear grounds for relief from the stay and/or sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law allow the secured creditor to sell the collateral through public auction and No private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Doing Business 2016 Zimbabwe 59 Depth of credit information index (0–8) Credit bureau Credit registry Index score: 5.00 Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? No No 0 Are data from retailers or utility companies - in addition to data from banks and financial institutions - Yes No 1 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more than 10 years No No 0 of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per Yes No 1 capita distributed? By law, do borrowers have the right to access their data No No 0 in the credit bureau or credit registry? Can banks and financial institutions access borrowers’ credit information online (for example, through an online Yes No 1 platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value- added service to help banks and financial institutions Yes No 1 assess the creditworthiness of borrowers? Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of firms 149,498 0 Number of individuals 2,529,922 0 Total 2,679,420 0 Total percentage of adult population 32.10 0.00 Source: Doing Business database. Doing Business 2016 Zimbabwe 60 PROTECTING MINORITY INVESTORS Protecting minority investors matters for the ability of companies to raise the capital they need to grow, WHAT THE PROTECTING MINORITY innovate, diversify and compete. Effective regulations INVESTORS INDICATORS MEASURE define related-party transactions precisely, promote clear and efficient disclosure requirements, require shareholder participation in major decisions of the Extent of disclosure index (0–10) company and set detailed standards of accountability Review and approval requirements for related-party for company insiders. transactions; Disclosure requirements for related- What do the indicators cover? party transactions Doing Business measures the protection of minority Extent of director liability index (0–10) investors from conflicts of interest through one set of Ability of minority shareholders to sue and hold indicators and shareholders’ rights in corporate interested directors liable for prejudicial related-party governance through another. The ranking of economies transactions; Available legal remedies (damages, on the strength of minority investor protections is disgorgement of profits, fines, imprisonment, determined by sorting their distance to frontier scores rescission of the transaction) for protecting minority investors. These scores are the Ease of shareholder suits index (0–10) simple average of the distance to frontier scores for the extent of conflict of interest regulation index and the Access to internal corporate documents; Evidence extent of shareholder governance index. To make the obtainable during trial and allocation of legal data comparable across economies, a case study uses expenses several assumptions about the business and the Extent of conflict of interest regulation index transaction. (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of shareholder indices  Is a publicly traded corporation listed on the economy’s most important stock exchange Extent of shareholder rights index (0-10) (or at least a large private company with Shareholders’ rights and role in major corporate multiple shareholders). decisions  Has a board of directors and a chief executive Extent of ownership and control index (0-10) officer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not Governance safeguards protecting shareholders from undue board control and entrenchment specifically required by law. Extent of corporate transparency index (0-10) The transaction involves the following details: Corporate transparency on ownership stakes,  Mr. James, a director and the majority compensation, audits and financial prospects shareholder of the company, proposes that the company purchase used trucks from Extent of shareholder governance index (0– another company he owns. 10)  The price is higher than the going price for Simple average of the extent of shareholders rights, used trucks, but the transaction goes forward. extent of ownership and control and extent of corporate transparency indices  All required approvals are obtained, and all required disclosures made, though the Strength of investor protection index (0–10) transaction is prejudicial to Buyer. Simple average of the extent of conflict of interest regulation and extent of shareholder governance  Shareholders sue the interested parties and indices the members of the board of directors. Doing Business 2016 Zimbabwe 61 PROTECTING MINORITY INVESTORS Where does the economy stand today? How strong are minority investor protections against protection index (figure 7.1). While the indicator does self-dealing in Zimbabwe? The economy has a score of not measure all aspects related to the protection of 5.50 on the strength of minority investor protection minority investors, a higher ranking does indicate that an index, with a higher score indicating stronger economy’s regulations offer stronger minority investor protections. protections against self-dealing in the areas measured. Globally, Zimbabwe stands at 81 in the ranking of 189 economies on the strength of minority investor Figure 7.1 How Zimbabwe and comparator economies perform on the strength of minority investor protection index Source: Doing Business database. Doing Business 2016 Zimbabwe 62 PROTECTING MINORITY INVESTORS One way to put an economy’s scores on the A summary of scoring for the protecting minority investors protecting minority investors indicators into context indicators at the end of this chapter provides details on is to see where the economy stands in the how the indices were calculated. distribution of scores across comparator economies. Figure 7.2 highlights the scores on the various minority investor protection indices for Zimbabwe. Figure 7.2 Summary of the various minority investor protection indices for Zimbabwe and comparator economies. Source: Doing Business database. Doing Business 2016 Zimbabwe 63 PROTECTING MINORITY INVESTORS Economies with the strongest protections of minority result, reforms to strengthen minority investor investors from self-dealing require detailed disclosure protections may move ahead on different fronts—such and define clear duties for directors. They also have well- as through new or amended company laws, securities functioning courts and up-to-date procedural rules that regulations or civil procedure rules. What minority give minority shareholders the means to prove their case investor protection reforms has Doing Business recorded and obtain a judgment within a reasonable time. As a in Zimbabwe (table 7.1)? Table 7.1 How has Zimbabwe strengthened minority investor protections—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform Zimbabwe strengthened minority investor protections by DB2016 introducing provisions allowing legal practitioners to enter into contingency fee agreements with clients. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2016 Zimbabwe 64 PROTECTING MINORITY INVESTORS What are the details? The protecting minority investors indicators reported to disclosure, director liability, shareholder suits, here for Zimbabwe are based on detailed information shareholder rights, ownership and control and corporate collected through a survey of corporate and securities transparency in a standard case study (for more details, lawyers about securities regulations, company laws and see the Data Notes section of the Doing Business 2016 court rules of evidence and procedure. To construct the report). The summary below shows the details underlying six indicators on minority investor protection, scores are the scores for Zimbabwe. assigned to each based on a range of conditions relating Table 7.2 Summary of scoring for the protecting minority investors indicators in Zimbabwe Answer Score Strength of minority investor protection index (0-10) 5.50 Extent of conflict of interest regulation index (0-10) 5.00 Extent of disclosure index (0-10) 8.00 Which corporate body can provide legally sufficient Board of directors excluding 2.0 approval for the Buyer-Seller transaction? (0-3) interested members Is disclosure by the interested director to the board of Full disclosure of all material facts 2.0 directors required? (0-2) Is disclosure of the transaction in published periodic filings Disclosure on the transaction only 1.0 (annual reports) required? (0-2) Is immediate disclosure of the transaction to the public Disclosure on the transaction and 2.0 and/or shareholders required? (0-2) on the conflict of interest Must an external body review the terms of the transaction Yes 1.0 before it takes place? (0-1) Extent of director liability index (0-10) 2.00 Can shareholders sue directly or derivatively for the damage caused by the Buyer-Seller transaction to the company? (0- Yes 1.0 1) Can shareholders hold the interested director liable for the Not liable 0.0 damage caused by the transaction to the company? (0-2) Can shareholders hold members of the approving body liable for the damage cause by the transaction to the Liable if negligent 1.0 company? (0-2) Must the interested director pay damages for the harm caused to the company upon a successful claim by a No 0.0 shareholder plaintiff? (0-1) Must the interested director repay profits made from the transaction upon a successful claim by a shareholder No 0.0 plaintiff? (0-1) Is the interested director fined and imprisoned or disqualified upon a successful claim by the shareholder No 0.0 plaintiff? (0-1) Can a court void the transaction upon a successful claim by Only in case of fraud or bad faith 0.0 a shareholder plaintiff? (0-2) Ease of shareholder suits index (0-10) 5.00 Before filing suit, can shareholders owning 10% of the Yes 1.0 Doing Business 2016 Zimbabwe 65 company’s share capital inspect the transaction documents? (0-1) Can the plaintiff obtain any documents from the defendant No 0.0 and witnesses during trial? (0-3) Can the plaintiff request categories of documents from the No 0.0 defendant without identifying specific ones? (0-1) Can the plaintiff directly question the defendant and Yes 2.0 witnesses during trial? (0-2) Is the level of proof required for civil suits lower than that of Yes 1.0 criminal cases? (0-1) Can shareholder plaintiffs recover their legal expenses from Yes if successful 1.0 the company? (0-2) Extent of shareholder governance index (0-10) 6.00 Extent of shareholder rights index (0-10) 8.00 Does the sale of 51% of Buyer’s assets require shareholder Yes 1.0 approval? Can shareholders representing 10% of Buyer’s share capital Yes 1.0 call for an extraordinary meeting of shareholders? Must Buyer obtain its shareholders’ approval every time it Yes 1.0 issues new shares? Do shareholders automatically receive preemption rights Yes 1.0 every time Buyer issues new shares? Must shareholders approve the election and dismissal of the Yes 1.0 external auditor? Must changes to the voting rights of a class of shares be Yes 1.0 approved only by the holders of the affected shares? Assuming that Buyer is a limited company, does the sale of No 0.0 51% of Buyer’s assets requires shareholder approval? Assuming that Buyer is a limited company, can shareholders representing 10% of Buyer’s share capital call for an Yes 1.0 extraordinary meeting of shareholders? Assuming that Buyer is a limited company, must Buyer obtain its shareholders’ approval every time it issues new Yes 1.0 shares? Assuming that Buyer is a limited company, do shareholders automatically receive preemption rights every time Buyer No 0.0 issues new shares? Extent of ownership and control index (0-10) 6.00 Is the CEO prohibited from also being chair of the board of Yes 1.0 directors? Must the board of directors include independent and No 0.0 nonexecutive board members? Can shareholders remove members of Buyer’s board of Yes 1.0 directors without cause before the end of their term? Must Buyer’s board of directors include a separate audit No 0.0 committee? Must a potential acquirer make a tender offer to all Yes 1.0 shareholders upon acquiring 50% of Buyer? Must Buyer pay dividends within a maximum period set by Yes 1.0 law after the declaration date? Is a subsidiary prohibited from acquiring shares issued by its No 0.0 parent company? Doing Business 2016 Zimbabwe 66 Assuming that Buyer is a limited company, can shareholders remove members of Buyer’s board of directors without Yes 1.0 cause before the end of their term? Assuming that Buyer is a limited company, must a potential acquirer make a tender offer to all shareholders upon Yes 1.0 acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer pay dividends within a maximum period set by law after the No 0.0 declaration date? Extent of corporate transparency index (0-10) 4.00 Must Buyer disclose direct and indirect beneficial ownership No 0.0 stakes representing 5%? Must Buyer disclose information about board members’ other directorships as well as basic information on their Yes 1.0 primary employment? Must Buyer disclose the compensation of individual No 0.0 managers? Must a detailed notice of general meeting be sent 30 days No 0.0 before the meeting? Can shareholders representing 5% of Buyer’s share capital No 0.0 put items on the agenda for the general meeting? Must Buyer's annual financial statements be audited by an Yes 1.0 external auditor? Must Buyer disclose its audit reports to the public. Yes 1.0 Assuming that Buyer is a limited company, must a detailed notice of general meeting be sent 30 days before the No 0.0 meeting? Assuming that Buyer is a limited company, can shareholders representing 5% of Buyer’s share capital put items on the No 0.0 agenda for the general meeting? Assuming that Buyer is a limited company, must Buyer's annual financial statements be audited by an external Yes 1.0 auditor? Source: Doing Business database. Doing Business 2016 Zimbabwe 67 PAYING TAXES Taxes are essential. The level of tax rates needs to be carefully chosen—and needless complexity in tax WHAT THE PAYING TAXES INDICATORS rules avoided. Firms in economies that rank better MEASURE on the ease of paying taxes in the Doing Business study tend to perceive both tax rates and tax Tax payments for a manufacturing company administration as less of an obstacle to business in 2014 (number per year adjusted for according to the World Bank Enterprise Survey electronic and joint filing and payment) research. Total number of taxes and contributions paid, What do the indicators cover? including consumption taxes (value added tax, Using a case scenario, Doing Business records the sales tax or goods and service tax) taxes and mandatory contributions that a medium- Method and frequency of filing and payment size company must pay in a given year as well as Time required to comply with 3 major taxes measures of the administrative burden of paying (hours per year) taxes and contributions. This case scenario uses a set of financial statements and assumptions about Collecting information and computing the tax transactions made over the year. Information is also payable compiled on the frequency of filing and payments as Completing tax return forms, filing with well as time taken to comply with tax laws. The proper agencies ranking of economies on the ease of paying taxes is Arranging payment or withholding determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are Preparing separate tax accounting books, if the simple average of the distance to frontier scores required for each of the component indicators, with a Total tax rate (% of profit before all taxes) threshold and a nonlinear transformation applied to one of the component indicators, the total tax rate . 3 Profit or corporate income tax All financial statement variables are proportional to Social contributions and labor taxes paid by 2012 income per capita. To make the data the employer comparable across economies, several assumptions Property and property transfer taxes are used. Dividend, capital gains and financial  TaxpayerCo is a medium-size business that transactions taxes started operations on January 1, 2013. Waste collection, vehicle, road and other taxes  The business starts from the same financial  Taxes and mandatory contributions include position in each economy. All the taxes corporate income tax, turnover tax and all and mandatory contributions paid during labor taxes and contributions paid by the the second year of operation are recorded. company.  Taxes and mandatory contributions are  A range of standard deductions and measured at all levels of government. exemptions are also recorded. The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. 3 The threshold is defined as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Doing Business 2016 Zimbabwe 68 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with average of the 2 largest business cities. See the chapter taxes in Zimbabwe—and how much do firms pay in on distance to frontier and ease of doing business taxes? On average, firms make 49.00 tax payments a ranking at the end of this profile for more details. year, spend 242.00 hours a year filing, preparing and Globally, Zimbabwe stands at 145 in the ranking of 189 paying taxes and pay total taxes amounting to 32.80% of economies on the ease of paying taxes (figure 8.1). The profit (see the summary at the end of this chapter for rankings for comparator economies and the regional details). Most indicator sets refer to a case scenario in average ranking provide other useful information for the largest business city of an economy, except for 11 assessing the tax compliance burden for businesses in economies for which the data are a population-weighted Zimbabwe. Figure 8.1 How Zimbabwe and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2016 Zimbabwe 69 PAYING TAXES Economies around the world have made paying taxes and exemptions. Many have lowered tax rates. Changes faster, easier and less costly for businesses—such as by have brought concrete results. Some economies consolidating payments and filings of taxes, offering simplifying tax payment and reducing rates have seen electronic systems for filing and payment, establishing tax revenue rise. What tax reforms has Doing Business taxpayer service centers or allowing for more deductions recorded in Zimbabwe (table 8.1)? Table 8.1 How has Zimbabwe made paying taxes easier—or not? By Doing Business report year from DB2011 to DB2016 DB year Reform Zimbabwe reduced the corporate income tax rate from 30% to 25%, lowered the capital gains tax from 20% to 5% and DB2011 simplified the payment of corporate income tax by allowing quarterly payment through commercial banks. Source: Doing Business database. Note: For information on reforms in earlier years (back to DB2006), see the Doing Business reports for these years, available at http://www.doingbusiness.org. Doing Business 2016 Zimbabwe 70 PAYING TAXES What are the details? The indicators reported here for Zimbabwe are based LOCATION OF STANDARDIZED COMPANY on the taxes and contributions that would be paid by a standardized case study company used by Doing Business in collecting the data (see the section in this City: Harare chapter on what the indicators cover). Tax practitioners are asked to review a set of financial statements as well as a standardized list of assumptions and transactions that the company The taxes and contributions paid are listed in the completed during its 2nd year of operation. summary below, along with the associated number of Respondents are asked how much taxes and payments, time and tax rate. mandatory contributions the business must pay and how these taxes are filed and paid. Table 8.2 Summary of tax rates and administration Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate taxable Corporate income tax 4 78 0.25 17.56 profit various property Property tax 12 8.15 rates value gross salaries Social security contributions 0 jointly 96 0.035 3.95 with ceiling gross Manpower development duty 12 0.01 1.13 salaries capital Capital gains tax 1 0.2 0.71 gains gross Standards development levy 2 0.005 0.56 salaries surcharge on AIDS levy 0 jointly 0.03 0.53 corporate income tax Road tax 4 $240 fixed fee 0.18 Tax on check transactions 1 USD 0.05 per check 0.01 (stamp duty) Doing Business 2016 Zimbabwe 71 Total tax Notes on Tax or mandatory Payments Notes on Time Statutory Tax base rate (% of total tax contribution (number) payments (hours) tax rate profit) rate interest Tax on interest 0 0.15 0 income gross salaries Social tax on employee 0 jointly 0.035 0 with ceiling included in small Fuel tax 1 0 fuel price amount value not Value added tax (VAT) 12 68 0.15 0 added included Totals 49.00 242.00 32.80 Source: Doing Business database. Doing Business 2016 Zimbabwe 72 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE FOR IMPORT & EXPORT business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead Documentary compliance – cost (US$) & time to extra costs and delays for exporters and (hours) importers, stifling trade potential. Obtain, prepare and submit documents: What do the indicators cover? -During transport, clearance, inspections and port or border handling in origin economy Doing Business records the time and cost associated with the logistical process of exporting -Required by origin, transit and destination and importing goods. Under the new methodology economies introduced this year, Doing Business measures the Covers all documents by law and in practice time and cost (excluding tariffs) associated with Border compliance – cost (US$) & time (hours) three sets of procedures—documentary compliance, border compliance and domestic Customs clearance and inspections transport—within the overall process of exporting Inspections by other agencies or importing a shipment of goods. The ranking of Port or border handling economies on the ease of trading across borders is determined by sorting their distance to frontier Obtaining, preparing and submitting documents scores for trading across borders. These scores are during clearance, inspections and port or border the simple average of the distance to frontier handling scores for the time and cost for documentary Domestic transport* compliance and border compliance to export and Loading and unloading of shipment import. Transport between warehouse and terminal/port To make the data comparable across economies, a Transport between terminal/port and border few assumptions are made about the traded goods Obtaining, preparing and submitting documents and the transactions: during domestic transport Time Traffic delays and road police checks while shipment is en route  Time is measured in hours, and 1 day is 24 hours (for example, 22 days are * Although Doing Business collects and publishes data on the recorded as 22 × 24 = 528 hours). If time and cost for domestic transport, it does not use these customs clearance takes 7.5 hours, the data in calculating the distance to frontier score for trading data are recorded as is. Alternatively, across borders or the ranking on the ease of trading across suppose that documents are submitted borders. to a customs agency at 8:00 a.m., are Cost processed overnight and can be picked up at 8:00 a.m. the next day. In this case  Insurance cost and informal payments for which the time for customs clearance would be no receipt is issued are excluded from the costs recorded as 24 hours because the actual recorded. Costs are reported in U.S. dollars. procedure took 24 hours. Contributors are asked to convert local currency into U.S. dollars based on the exchange rate prevailing on the day they answer the questionnaire. Doing Business 2016 Zimbabwe 73 Assumptions of the case study  For each of the 189 economies covered by  Shipping cost based on weight is assumed to be Doing Business, it is assumed that a shipment greater than shipping cost based on volume. travels from a warehouse in the largest  If government fees are determined by the value business city of the exporting economy to a of the shipment, the value is assumed to be warehouse in the largest business city of the $50,000. importing economy. For 11 economies the data are also collected, under the same case  The product is new, not secondhand or used study assumptions, for the second largest merchandise. business city.  The exporting firm is responsible for hiring and  The import and export case studies assume paying for a freight forwarder or customs different traded products. It is assumed that broker (or both) and pays for all costs related to each economy imports a standardized international shipping, domestic transport, shipment of 15 metric tons of containerized clearance and mandatory inspections by auto parts (HS 8708) from its natural import customs and other government agencies, port partner—the economy from which it imports or border handling, documentary compliance the largest value (price times quantity) of auto fees and the like for exports. The importing firm parts. It is assumed that each economy is responsible for the above costs for imports. exports the product of its comparative  The mode of transport is the one most widely advantage (defined by the largest export used for the chosen export or import product value) to its natural export partner—the and the trading partner, as is the seaport, economy that is the largest purchaser of this airport or land border crossing. product. Precious metal and gems, live animals and pharmaceuticals are excluded  All electronic submissions of information from the list of possible export products, requested by any government agency in however, and the second largest product connection with the shipment are considered to category is considered as needed. be documents obtained, prepared and submitted during the export or import process.  To identify the trading partners and export product for each economy, Doing Business  A port or border is defined as a place (seaport, collected data on trade flows for the most airport or land border crossing) where recent four-year period from international merchandise can enter or leave an economy. databases such as the United Nations  Government agencies considered relevant are Commodity Trade Statistics Database (UN agencies such as customs, port authorities, road Comtrade). For economies for which trade police, border guards, standardization agencies, flow data were not available, data from ministries or departments of agriculture or ancillary government sources (various industry, national security agencies and any ministries and departments) and World Bank other government authorities. Group country offices were used to identify the export product and natural trading partners.  A shipment is a unit of trade. Export shipments do not necessarily need to be containerized, while import shipments of auto parts are assumed to be containerized. Doing Business 2016 Zimbabwe 74 TRADING ACROSS BORDERS Where does the economy stand today? The Trading across Border indicator refers to a case Globally, Zimbabwe stands at 100 in the ranking of 189 study scenario of a warehouse in the largest business city economies on the ease of trading across borders (figure of an economy (except for 11 economies for which the 9.1). data are a population-weighted average of the 2 largest While not included in the distance to frontier or ease of business cities) trading with the main import and export doing business ranking, data on domestic transportation partner through the economy’s main border crossing. is also recorded for all economies and provided in Table 9.3. Figure 9.1 How Zimbabwe and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2016 Zimbabwe 75 TRADING ACROSS BORDERS What are the details? The indicators reported here for Zimbabwe are based LOCATION OF STANDARDIZED COMPANY on a set of specific predefined procedures for trading a shipment of goods by the most widely used mode of transport (whether sea, land, air or some City: Harare combination of these). The information on the time and cost to complete export and import is collected The details on the predefined set of procedures, and the from local freight forwarders, customs brokers and associated time and cost, for exporting and importing a traders. shipment of goods are listed in the summary bellow, along with the required documents. Table 9.2 Summary of export and import time and cost for trading across borders in Zimbabwe Zimbabwe Sub-Saharan Africa Time to export: Border compliance (hours) 72 108 Cost to export: Border compliance (USD) 285 542 Time to export: Documentary compliance (hours) 99 97 Cost to export: Documentary compliance (USD) 170 246 Time to import: Border compliance (hours) 60 160 Cost to import: Border compliance (USD) 212 643 Time to import: Documentary compliance (hours) 81 123 Cost to import: Documentary compliance (USD) 150 351 Source: Doing Business database. Table 9.3 Summary of trading details, transport time and documents for trading across borders in Zimbabwe Export Import HS 24 : Tobacco and HS 8708: Parts and accessories Product manufactured tobacco of motor vehicles substitutes Trade partner South Africa South Africa Border Beitbridge border crossing Beitbridge border crossing Distance (km) 580 580 Domestic transport time (hours) 36 36 Domestic transport cost (USD) 862 1669 Domestic transport speed (km/hour) 16.1 16.1 Domestic transport cost per distance (USD/km) 1.5 2.9 Doing Business 2016 Zimbabwe 76 Source: Doing Business database. Note: Although Doing Business collects and publishes data on the time and cost for domestic transport, it does not use these data in calculating the distance to frontier score for trading across borders or the ranking on the ease of trading across borders. Documents to export Bill of Entry (Form 21) Bill of lading Commercial invoice Exchange Control CD1 forms Export Permit Packing list Phytosanitary certificate SADC Certificate of origin Transit entry documents (South Africa's Form SAD500) Documents to import Bill of Entry (Form 21) Bill of lading Cargo release order Commercial invoice Packing list Road manifest SADC - Certificate of origin Transit entry documents (South Africa's Form SAD500) Value Declaration Form Source: Doing Business database. Note: Doing Business continues to collect data on the number of documents needed to trade internationally. Unlike in previous years, however, these data are excluded from the calculation of the distance to frontier score and ranking. The time and cost for documentary compliance serve as better measures of the overall cost and complexity of compliance with documentary requirements than does the number of documents required. Doing Business 2016 Zimbabwe 77 Figure 9.2 Summary of Zimbabwe on the ease of trading across borders Export Import Source: Doing Business database. Doing Business 2016 Zimbabwe 78 ENFORCING CONTRACTS Effective commercial dispute resolution has many WHAT THE ENFORCING CONTRACTS benefits. Courts are essential for entrepreneurs INDICATORS MEASURE because they interpret the rules of the market and protect economic rights. Efficient and transparent courts encourage new business relationships because Time required to enforce a contract through businesses know they can rely on the courts if a new the courts (calendar days) customer fails to pay. Speedy trials are essential for Time to file and serve the case small enterprises, which may lack the resources to Time for trial and to obtain the judgment stay in business while awaiting the outcome of a long court dispute. Time to enforce the judgment What do the indicators cover? Cost required to enforce a contract through the courts (% of claim) Doing Business measures the time and cost for resolving a standardized commercial dispute through Attorney fees a local first-instance court. In addition, this year it Court fees introduces a new measure, the quality of judicial Enforcement fees processes index, evaluating whether each economy has adopted a series of good practices that promote Quality of judicial processes index (0-18) quality and efficiency in the court system. This new Court structure and proceedings (0-5) index replaces the indicator on procedures, which was eliminated this year. The ranking of economies Case management (0-6) on the ease of enforcing contracts is determined by Court automation (0-4) sorting their distance to frontier scores. These scores Alternative dispute resolution (0-3) are the simple average of the distance to frontier scores for each of the component indicators. The dispute in the case study involves the breach of a sales contract between 2 domestic businesses. The  The value of the dispute is 200% of the case study assumes that the court hears an expert on income per capita or the equivalent in local the quality of the goods in dispute. This distinguishes currency of USD 5,000, whichever is greater. the case from simple debt enforcement. To make the  The seller sues the buyer before the court data comparable across economies, Doing Business with jurisdiction over commercial cases worth uses several assumptions about the case: 200% of income per capita or $5,000.  The dispute concerns a lawful transaction  The seller requests a pretrial attachment to between two businesses (Seller and Buyer), secure the claim. both located in the economy’s largest  The dispute on the quality of the goods business city. For 11 economies the data requires an expert opinion. are also collected for the second largest business city.  The judge decides in favor of the seller; there is no appeal.  The buyer orders custom-made goods, then fails to pay.  The seller enforces the judgment through a public sale of the buyer’s movable assets. Doing Business 2016 Zimbabwe 79 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial frontier and ease of doing business ranking at the end of dispute through the courts in Zimbabwe? According to this profile for more details. data collected by Doing Business, contract enforcement Globally, Zimbabwe stands at 166 in the ranking of 189 takes 410.00 days and costs 83.10% of the value of the economies on the ease of enforcing contracts (figure claim. Most indicator sets refer to the largest business 10.1). The rankings for comparator economies and the city of an economy, except for 11 economies for which regional average ranking provide other useful the data are a population-weighted average of the 2 benchmarks for assessing the efficiency of contract largest business cities. See the chapter on distance to enforcement in Zimbabwe. Figure 10.1 How Zimbabwe and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2016 Zimbabwe 80 ENFORCING CONTRACTS What are the details? The data on time and cost reported here for ECONOMY DETAILS Zimbabwe are built by following the step-by-step evolution of a commercial sale dispute within the court, under the assumptions about the case Court name: Harare Magistrates Court described above (figure 10.2). The time and cost of resolving the standardized dispute are identified City: Harare through study of the codes of civil procedure and other court regulations, as well as through questionnaires completed by local litigation lawyers (and, in a quarter of the economies covered by Doing Business, by judges as well). Figure 10.2 Time and cost of contract enforcement in Zimbabwe and comparator economies Source: Doing Business database. Doing Business 2016 Zimbabwe 81 Table 10.2 Details on time and cost for enforcing contracts in Zimbabwe Sub-Saharan Indicator Zimbabwe Africa average Time (days) 410 653 Filing and service 14 Trial and judgment 247 Enforcement of judgment 149 Cost (% of claim) 83.1 44.9 Attorney fees (% of claim) 70.0 Court fees (% of claim) 8.0 Enforcement fees (% of claim) 5.1 Source: Doing Business database. Doing Business 2016 Zimbabwe 82 ENFORCING CONTRACTS Quality of judicial processes index The quality of judicial processes index measures The scores reported here show which of these good whether each economy has adopted a series of good practices are available in Zimbabwe. practices in its court system in four areas: court This methodology was initially developed by Djankov and structure and proceedings, case management, court others (2003) and is adopted here with several changes. automation and alternative dispute resolution. The The quality of judicial processes index was introduced in score on the quality of judicial processes index is the Doing Business 2016. The good practices tested in this sum of the scores on these 4 sub-components. The index were developed on the basis of internationally index ranges from 0 to 18, with higher values recognized good practices promoting judicial efficiency. indicating more efficient judicial processes. Figure 10.3 Quality of judicial processes index in Zimbabwe and comparator economies Source: Doing Business database. Doing Business 2016 Zimbabwe 83 Table 10.3 Details of the quality of judicial processes index in Zimbabwe Answer Score Quality of judicial processes index (0-18) 5.00 Court structure and proceedings (0-5) 3.0 1. Is there a court or division of a court dedicated solely to hearing No 0.0 commercial cases? 2. Small claims court 1.5 2.a. Is there a small claims court or a fast-track procedure for small Yes claims? 2.b. If yes, is self-representation allowed? Yes 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes 0.5 Case management (0-6) 0.0 1. Time standards 0.0 1.a. Are there laws setting overall time standards for key court events in No a civil case? 1.b. If yes, are the time standards set for at least three court events? n.a. 1.c. Are these time standards respected in more than 50% of cases? n.a. 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that No can be granted? 2.b. Are adjournments limited to unforeseen and exceptional No circumstances? 2.c. If rules on adjournments exist, are they respected in more than 50% n.a. of cases? 3. Can two of the following four reports be generated about the competent court: (i) time to disposition report; (ii) clearance rate report; No 0.0 (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques No 0.0 used before the competent court? 5. Are there any electronic case management tools in place within the No 0.0 competent court for use by judges? 6. Are there any electronic case management tools in place within the No 0.0 competent court for use by lawyers? Court automation (0-4) 0.0 Doing Business 2016 Zimbabwe 84 Answer Score 1. Can the initial complaint be filed electronically through a dedicated No 0.0 platform within the competent court? 2. Is it possible to carry out service of process electronically for claims No 0.0 filed before the competent court? 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.0 4.a Are judgments rendered in commercial cases at all levels made available to the general public through publication in official gazettes, No in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme court level made available to the general public through No publication in official gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.0 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or consolidated chapter or section of the applicable code of civil Yes procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public order or public policy—that cannot be submitted to No arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the Yes courts? 2. Mediation/Conciliation 0.5 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or consolidated chapter or section of the applicable code of civil No procedure encompassing substantially all their aspects? 2.c. Are there financial incentives for parties to attempt mediation or conciliation (i.e., if mediation or conciliation is successful, a refund of No court filing fees, income tax credits or the like)? Source: Doing Business database. Doing Business 2016 Zimbabwe 85 RESOLVING INSOLVENCY A robust bankruptcy system functions as a filter, WHAT THE RESOLVING INSOLVENCY ensuring the survival of economically efficient companies and reallocating the resources of INDICATORS MEASURE inefficient ones. Fast and cheap insolvency proceedings result in the speedy return of businesses Time required to recover debt (years) to normal operation and increase returns to Measured in calendar years creditors. By clarifying the expectations of creditors and debtors about the outcome of insolvency Appeals and requests for extension are proceedings, well-functioning insolvency systems can included facilitate access to finance, save more viable Cost required to recover debt (% of debtor’s businesses and sustainably grow the economy. estate) What do the indicators cover? Measured as percentage of estate value Doing Business studies the time, cost and outcome of Court fees insolvency proceedings involving domestic legal Fees of insolvency administrators entities. These variables are used to calculate the recovery rate, which is recorded as cents on the Lawyers’ fees dollar recovered by secured creditors through Assessors’ and auctioneers’ fees reorganization, liquidation or debt enforcement Other related fees (foreclosure or receivership) proceedings. To determine the present value of the amount Outcome recovered by creditors, Doing Business uses the Whether business continues operating as a lending rates from the International Monetary Fund, going concern or business assets are sold supplemented with data from central banks and the piecemeal Economist Intelligence Unit. Recovery rate for creditors In addition, Doing Business evaluates the adequacy Measures the cents on the dollar recovered and integrity of the existing legal framework by secured creditors applicable to liquidation and reorganization proceedings through the strength of insolvency Outcome for the business (survival or not) framework index. The index tests whether economies determines the maximum value that can be adopted internationally accepted good practices in recovered four areas: commencement of proceedings, Official costs of the insolvency proceedings management of debtor’s assets, reorganization are deducted proceedings and creditor participation. Depreciation of furniture is taken into The ranking of economies on the ease of resolving account insolvency is determined by sorting their distance to Present value of debt recovered frontier scores for resolving insolvency. These scores are the simple average of the distance to frontier Strength of insolvency framework index (0- scores for the recovery rate and the strength of 16) insolvency framework index. The Resolving Sum of the scores of four component indices: Insolvency indicators do not measure insolvency Commencement of proceedings index (0-3) proceedings of individuals and financial institutions. The data are derived from questionnaire responses Management of debtor’s assets index (0-6) by local insolvency practitioners and verified through Reorganization proceedings index (0-3) a study of laws and regulations as well as public information on bankruptcy systems. Creditor participation index (0-4) Doing Business 2016 Zimbabwe 86 RESOLVING INSOLVENCY Where does the economy stand today? According to data collected by Doing Business, resolving The resolving insolvency indicators are based on detailed insolvency takes 3.30 years on average and costs 22.00% information collected through questionnaires completed of the debtor’s estate, with the most likely outcome by insolvency experts, including lawyers, practitioners being that the company will be sold as piecemeal sale. (administrators, trustees), accountants and judges. Data The average recovery rate is 16.10 cents on the dollar. on the time, cost and outcome refer to the most likely in- Most indicator sets refer to a case scenario in the largest court insolvency procedure applicable under specific business city of an economy, except for 11 economies for case study assumptions. Data on provisions applicable to which the data are a population-weighted average of the judicial liquidation and reorganization is based on the 2 largest business cities. current law governing insolvency proceedings in each Globally, Zimbabwe stands at 152 in the ranking of 189 economy. economies on the ease of resolving insolvency (figure 11.1). Figure 11.1 How Zimbabwe and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2016 Zimbabwe 87 Figure 11.2 Efficiency of proceedings - time, cost and recovery rate in Zimbabwe and comparator economies. Source: Doing Business database. Note: The recovery rate is calculated based on the time, cost and outcome of insolvency proceedings involving domestic legal entities and is recorded as cents on the dollar recovered by secured creditors. The calculation takes into account the outcome: whether the business emerges from the proceedings as a going concern or the assets are sold piecemeal. Then the costs of the proceedings are deducted. Finally, the value lost as a result of the time the money remains tied up in insolvency proceedings is taken into account. The recovery rate is the present value of the remaining proceeds, based on end-2014 lending rates. Doing Business 2016 Zimbabwe 88 Table 11.1 Details of data on efficiency of insolvency proceedings in Zimbabwe Indicator Answer Explanation After Mirage's default on payment, BizBank would initiate liquidation proceeding by filing the petition at the High Court. According to Section 12 of the Insolvency Act Chapter 6:04, BizBank is most likely to file a petition for the sequestration of Mirage's assets. The High Court will review the petition and appoint a trustee Proceedin liquidation who takes charge of Mirage's assets and chooses the most appropriate g insolvency proceeding. Considering the current market of Zimbabwe, the most likely proceeding would be liquidation with Mirage's assets sold piecemeal to recoup the investment for creditors. The hotel will stop operating and Mirage's assets will be sold by a court apppointed trustee. According to Section 96 of the Insolvency Act Chapter 6:04, the trustee shall, after the second meeting of creditors, proceed to sell all the Outcome piecemeal sale property of the insolvent estate in such manner and on such conditions as the creditors may direct or, where no such directions have been given, in such manner and on such conditions as the Master may direct. The liquidation proceeding until BizBank is repaid some or all of the money Time (in 3.3 owed to it takes approximate 3.3 years. The time to resolve insolvency remained years) the same since 2007/2008. The costs associated with the case would amount to approximately 22% of the value of the debtor's estate. Cost incurred during the entire insolvency process Cost (% of mainly include court or government agency fees (4%), attorney fees (10%), costs 22.0 estate) of notification and publication (1%), insolvency representative fees(1%), fees of accountants, assessors, inspectors and other professionals (4%), fees of auctioneers (2%), and fees of service providers and/or government levies (1%). Recovery rate: 16.10 Source: Doing Business database. Doing Business 2016 Zimbabwe 89 RESOLVING INSOLVENCY Strength of resolving insolvency index The strength of insolvency framework index is the with higher values indicating insolvency legislation that is sum of the scores on the commencement of better designed for rehabilitating viable firms and proceedings index, management of debtor’s assets liquidating nonviable ones. Zimbabwe’s score on the index, reorganization proceedings index and creditor strength of insolvency framework index is 6.00 out of 16. participation index. The index ranges from 0 to 16, Figure 11.3 Strength of insolvency framework index (0-16) in Zimbabwe and comparator economies Source: Doing Business database. Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice”. Doing Business 2016 Zimbabwe 90 Table 11.3 Summary of data for the strength of insolvency framework index in Zimbabwe Answer Score Strength of insolvency framework index (0-16) 6.00 Commencement of proceedings index (0-3) 3.00 (a) Debtor may What procedures are available to a DEBTOR when commencing insolvency file for both 1.0 proceedings? liquidation and reorganization (a) Yes, a creditor Does the insolvency framework allow a CREDITOR to file for insolvency of may file for both 1.0 the debtor? liquidation and reorganization (a) Debtor is What basis for commencement of the insolvency proceedings is allowed generally unable 1.0 under the insolvency framework? to pay its debts as they mature Management of debtor's assets index (0-6) 2.00 Does the insolvency framework allow the continuation of contracts No 0.0 supplying essential goods and services to the debtor? Does the insolvency framework allow the rejection by the debtor of overly No 0.0 burdensome contracts? Does the insolvency framework allow avoidance of preferential Yes 1.0 transactions? Does the insolvency framework allow avoidance of undervalued Yes 1.0 transactions? Does the insolvency framework provide for the possibility of the debtor No 0.0 obtaining credit after commencement of insolvency proceedings? (c) No priority is Does the insolvency framework assign priority to post-commencement assigned to post- 0.0 credit? commencement creditors Reorganization proceedings index (0-3) 0.00 (c) Other, please Which creditors vote on the proposed reorganization plan? 0.0 specify Does the insolvency framework require that dissenting creditors in reorganization receive at least as much as what they would obtain in a No 0.0 liquidation? Are the creditors divided into classes for the purposes of voting on the reorganization plan, does each class vote separately and are creditors in No 0.0 the same class treated equally? Doing Business 2016 Zimbabwe 91 Answer Score Creditor participation index (0-4) 1.00 Does the insolvency framework require approval by the creditors for Yes 1.0 selection or appointment of the insolvency representative? Does the insolvency framework require approval by the creditors for sale No 0.0 of substantial assets of the debtor? Does the insolvency framework provide that a creditor has the right to No 0.0 request information from the insolvency representative? Does the insolvency framework provide that a creditor has the right to No 0.0 object to decisions accepting or rejecting creditors' claims? Source: Doing Business database. Doing Business 2016 Zimbabwe 92 LABOR MARKET REGULATION Doing Business has historically studied the flexibility of regulations as well as secondary sources are reviewed to regulation of employment, specifically as it relates to the ensure accuracy. areas of hiring, working hours and redundancy. This year Doing Business has expanded the scope of the labor To make the data comparable across economies, several market regulation indicators by adding 16 new assumptions about the worker and the business are questions, most of which focus on measuring job quality. used. Over the period from 2007 to 2011 improvements were The worker: made to align the methodology for the labor market  Is a cashier in a supermarket or grocery store, regulation indicators (formerly the employing workers age 19, with one year of work experience. indicators) with the letter and spirit of the International  Is a full-time employee. Labour Organization (ILO) conventions. Ten of the 189  Is not a member of the labor union, unless ILO conventions cover areas now measured by Doing membership is mandatory. Business (up from four previously): employee The business: termination, weekend work, holiday with pay, night work,  Is a limited liability company (or the equivalent protection against unemployment, sickness benefits, in the economy). maternity protection, working hours, equal remuneration  Operates a supermarket or grocery store in the and labor inspections. economy’s largest business city. For 11 economies the data are also collected for the Between 2009 and 2011 the World Bank Group worked second largest business city. with a consultative group—including labor lawyers,  Has 60 employees. employer and employee representatives, and experts  Is subject to collective bargaining agreements if from the ILO, the Organisation for Economic Co- such agreements cover more than 50% of the operation and Development (OECD), civil society and the food retail sector and they apply even to firms private sector—to review the methodology for the labor that are not party to them. market regulation indicators and explore future areas of  Abides by every law and regulation but does not research. grant workers more benefits than those mandated by law, regulation or (if applicable) A full report with the conclusions of the consultative collective bargaining agreements. group, along with the methodology it proposed, is available on the Doing Business website at: http://www.doingbusiness.org/methodology/labor- market-regulation. Doing Business 2016 presents the data for the labor market regulation indicators in an annex. The report does not present rankings of economies on these indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business. Detailed data collected on labor market regulation are available on the Doing Business website (http://www.doingbusiness.org). The data on labor market regulation are based on a detailed questionnaire on employment regulations that is completed by local lawyers and public officials. Employment laws and Doing Business 2016 Zimbabwe 93 LABOR MARKET REGULATION Employment laws are needed to protect workers from the past 5 years did so in ways that increased labor arbitrary or unfair treatment and to ensure efficient market flexibility. What changes did Zimbabwe adopt contracting between employers and workers. Many that affected the Doing Business indicators on labor economies that changed their labor market regulation in market regulation (table 12.1)? Table 12.1 What changes did Zimbabwe make in terms of labor market regulation? DB year Reform Zimbabwe reduced the severance payment obligation DB2011 applicable in case of redundancy dismissals. Source: Doing Business database. Doing Business 2016 Zimbabwe 94 LABOR MARKET REGULATION What are the details? The data reported here for Zimbabwe are based on a Employment laws and regulations as well as secondary detailed survey of labor market regulation that is sources are reviewed to ensure accuracy. completed by local lawyers and public officials. Hiring Data on hiring cover five areas: (i) whether fixed-term wage to the average value added per worker (the ratio of contracts are prohibited for permanent tasks; (ii) the an economy’s GNI per capita to the working-age maximum cumulative duration of fixed-term contracts; population as a percentage of the total population), and (iii) the minimum wage for a cashier, age 19, with one (v) the availability of incentives for employers to hire year of work experience; (iv) the ratio of the minimum employees under the age of 25*. Hiring Data Fixed-term contracts prohibited for permanent tasks? No Maximum length of a single fixed-term contract (months) No limit Maximum length of fixed-term contracts, including renewals (months) No limit Minimum wage applicable to the worker assumed in the case study 261.9 (US$/month) Ratio of minimum wage to value added per worker 2.1 Incentives for employing workers under age 25? No Source: Doing Business database. *A new question introduced in the Doing Business 2016 report for the first time. Doing Business 2016 Zimbabwe 95 LABOR MARKET REGULATION Working hours Data on working hours cover nine areas: i) the maximum and nonnursing women can work the same night hours number of working days allowed per week; (ii) the as men*; (vii) whether there are restrictions on weekly premium for night work (as a percentage of hourly pay); holiday work; (viii) whether there are restrictions on (iii) the premium for work on a weekly rest day (as a overtime work*; and (ix) the average paid annual leave percentage of hourly pay); (iv) the premium for overtime for workers with 1 year of tenure, 5 years of tenure, and work (as a percentage of hourly pay)*; (v) whether there 10 years of tenure. are restrictions on night work; (vi) whether nonpregnant Working Hours Data Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 0.0 Premium for work on weekly rest day (% of hourly pay) 0.0 Premium for overtime work (% of hourly pay) 50.0 Restrictions on night work? 0.0 Whether nonpregnant and nonnursing women can work the same night Yes hours as men Restrictions on weekly holiday? 0.0 Restrictions on overtime work? No Paid annual leave for a worker with 1 year of tenure (working days) 22.0 Paid annual leave for a worker with 5 years of tenure (working days) 22.0 Paid annual leave for a worker with 10 years of tenure (working days) 22.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in 22.0 working days) Source: Doing Business database. *A new question introduced in the Doing Business 2016 report for the first time. Doing Business 2016 Zimbabwe 96 LABOR MARKET REGULATION Redundancy rules Data on redundancy cover nine areas: (i) the length of whether the employer needs approval from a third party the maximum probationary period (in months) for to terminate one redundant worker; (vi) whether the permanent employees; (ii) whether redundancy is employer needs approval from a third party to terminate allowed as a basis for terminating workers; (iii) whether a group of nine redundant workers; (vii) whether the law the employer needs to notify a third party (such as a requires the employer to reassign or retrain a worker government agency) to terminate one redundant worker; before making the worker redundant; (viii) whether (iv) whether the employer needs to notify a third party to priority rules apply for redundancies; and (ix) whether terminate a group of nine redundant workers; (v) priority rules apply for reemployment. Redundancy rules Data Maximum length of probationary period (months) 3.0 Dismissal due to redundancy allowed by law? Yes Third-party notification if one worker is dismissed? Yes Third-party approval if one worker is dismissed? Yes Third-party notification if nine workers are dismissed? Yes Third-party approval if nine workers are dismissed? Yes Retraining or reassignment obligation before redundancy? Yes Priority rules for redundancies? No Priority rules for reemployment? No Source: Doing Business database. Doing Business 2016 Zimbabwe 97 LABOR MARKET REGULATION Redundancy cost Redundancy cost measures the cost of advance notice severance payments applicable to a worker with 1 year of requirements and severance payments due when tenure, a worker with 5 years and a worker with 10 years terminating a redundant worker, expressed in weeks of is considered. One month is recorded as 4 and 1/3 salary. The average value of notice requirements and weeks. Redundancy cost indicator (in salary weeks) Data Notice period for redundancy dismissal for a worker with 1 year of tenure 13.0 Notice period for redundancy dismissal for a worker with 5 years of tenure 13.0 Notice period for redundancy dismissal for a worker with 10 years of tenure 13.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 13.0 of tenure) Severance pay for redundancy dismissal for a worker with 1 year of tenure 13.0 Severance pay for redundancy dismissal for a worker with 5 years of tenure 65.0 Severance pay for redundancy dismissal for a worker with 10 years of tenure 130.0 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 69.3 of tenure) Source: Doing Business database. Doing Business 2016 Zimbabwe 98 LABOR MARKET REGULATION Job quality Doing Business 2016 report presents, for the first time, on-the-job training at no cost to the employee; (viii) data on 12 job quality areas: (i) whether the law whether a worker is eligible for an unemployment mandates equal remuneration for work of equal value; protection scheme after one year of service; (ix) the (ii) whether the law mandates nondiscrimination based minimum duration of the contribution period (in months) on gender in hiring, (iii) whether the law mandates paid required for unemployment protection; (x) whether an or unpaid maternity leave; (iv) the minimum length of employee can create or join a union; (xi) the availability maternity leave in calendar days (minimum number of of administrative or judicial relief in case of infringement days that legally have to be paid by the government, the of employees’ rights; and (xii) the availability of a labor employer or both); (v) whether employees on maternity inspection system. If no maternity leave is mandated by leave receive 100 % of wages; (vi) the availability of five law, parental leave is measured if applicable. fully paid days of sick leave a year; (vii) the availability of Job Quality Data Equal remuneration for work of equal value? Yes Gender nondiscrimination in hiring? Yes Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 98.0 Receive 100% of wages on maternity leave? Yes Five fully paid days of sick leave a year? Yes On-the-job training? No Unemployment protection after one year of employment? No Minimum contribution period for unemployment protection (months)? n.a. Can employee create or join union? Yes Administrative or judicial relief for infringement of employees' rights? Yes Labor inspection system? Yes Source: Doing Business database. Doing Business 2016 Zimbabwe 99 DISTANCE TO FRONTIER AND EASE OF DOING BUSINESS RANKING Doing Business presents results for two aggregate even though it is no longer at the frontier in a measures: the distance to frontier score and the ease of subsequent year. doing business ranking, which is based on the distance For scores such as those on the strength of legal rights to frontier score. The ease of doing business ranking index or the quality of land administration index, the compares economies with one another; the distance to frontier is set at the highest possible value. For the total frontier score benchmarks economies with respect to tax rate, consistent with the use of a threshold in regulatory best practice, showing the absolute distance calculating the rankings on this indicator, the frontier is to the best performance on each Doing Business defined as the total tax rate at the 15th percentile of the indicator. When compared across years, the distance to overall distribution for all years included in the analysis frontier score shows how much the regulatory up to and including Doing Business 2015. For the time to environment for local entrepreneurs in an economy has pay taxes the frontier is defined as the lowest time changed over time in absolute terms, while the ease of recorded among all economies that levy the three major doing business ranking can show only how much the taxes: profit tax, labor taxes and mandatory regulatory environment has changed relative to that in contributions, and value added tax (VAT) or sales tax. For other economies. the different times to trade across borders, the frontier is Distance to Frontier defined as 1 hour even though in many economies the time is less than that. The distance to frontier score captures the gap between an economy’s performance and a measure of best In the same formulation, to mitigate the effects of practice across the entire sample of 36 indicators for 10 extreme outliers in the distributions of the rescaled data Doing Business topics (the labor market regulation for most component indicators (very few economies indicators are excluded). For starting a business, for need 700 days to complete the procedures to start a example, the former Yugoslav Republic of Macedonia business, but many need 9 days), the worst performance and New Zealand have the smallest number of is calculated after the removal of outliers. The definition procedures required (1), and New Zealand the shortest of outliers is based on the distribution for each time to fulfill them (0.5 days). Slovenia has the lowest component indicator. To simplify the process two rules cost (0.0), and Australia, Colombia and 103 other were defined: the 95th percentile is used for the economies have no paid-in minimum capital indicators with the most dispersed distributions requirement (table 14.1 in the Doing Business 2016 (including minimum capital, number of payments to pay report). taxes, and the time and cost indicators), and the 99th percentile is used for number of procedures. No outlier is Calculation of the distance to frontier score removed for component indicators bound by definition Calculating the distance to frontier score for each or construction, including legal index scores (such as the economy involves two main steps. In the first step depth of credit information index, extent of conflict of individual component indicators are normalized to a interest regulation index and strength of insolvency common unit where each of the 36 component framework index) and the recovery rate (figure 14.1). indicators y (except for the total tax rate) is rescaled In the second step for calculating the distance to frontier using the linear transformation (worst − y)/(worst − score, the scores obtained for individual indicators for frontier). In this formulation the frontier represents the each economy are aggregated through simple averaging best performance on the indicator across all economies into one distance to frontier score, first for each topic since 2005 or the third year in which data for the and then across all 10 topics: starting a business, dealing indicator were collected. Both the best performance and with construction permits, getting electricity, registering the worst performance are established every five years property, getting credit, protecting minority investors, based on the Doing Business data for the year in which paying taxes, trading across borders, enforcing contracts they are established, and remain at that level for the five and resolving insolvency. More complex aggregation years regardless of any changes in data in interim years. methods—such as principal components and Thus an economy may set the frontier for an indicator unobserved components—yield a ranking nearly Doing Business 2016 Zimbabwe 100 identical to the simple average used by Doing Business . The nonlinear transformation is not based on any 4 Thus Doing Business uses the simplest method: economic theory of an “optimal tax rate” that minimizes weighting all topics equally and, within each topic, giving distortions or maximizes efficiency in an economy’s equal weight to each of the topic components . overall tax system. Instead, it is mainly empirical in 5 nature. The nonlinear transformation along with the An economy’s distance to frontier score is indicated on a threshold reduces the bias in the indicator toward scale from 0 to 100, where 0 represents the worst economies that do not need to levy significant taxes on performance and 100 the frontier. All distance to frontier companies like the Doing Business standardized case calculations are based on a maximum of five decimals. study company because they raise public revenue in However, indicator ranking calculations and the ease of other ways—for example, through taxes on foreign doing business ranking calculations are based on two companies, through taxes on sectors other than decimals. manufacturing or from natural resources (all of which are The difference between an economy’s distance to outside the scope of the methodology). In addition, it frontier score in any previous year and its score in 2015 acknowledges the need of economies to collect taxes illustrates the extent to which the economy has closed from firms. the gap to the regulatory frontier over time. And in any Calculation of scores for economies with 2 cities given year the score measures how far an economy is covered from the best performance at that time. For each of the 11 economies in which Doing Business Treatment of the total tax rate collects data for the second largest business city as well The total tax rate component of the paying taxes as the largest one, the distance to frontier score is indicator set enters the distance to frontier calculation in calculated as the population-weighted average of the a different way than any other indicator. The distance to distance to frontier scores for these two cities (table frontier score obtained for the total tax rate is 13.1). This is done for the aggregate score, the scores for transformed in a nonlinear fashion before it enters the each topic and the scores for all the component distance to frontier score for paying taxes. As a result of indicators for each topic. the nonlinear transformation, an increase in the total tax rate has a smaller impact on the distance to frontier score for the total tax rate—and therefore on the distance to frontier score for paying taxes—for economies with a below-average total tax rate than it would have had before this approach was adopted in Doing Business 2015 (line B is smaller than line A in figure 14.2 of the Doing Business 2016 report). And for economies with an extreme total tax rate (a rate that is very high relative to the average), an increase has a greater impact on both these distance to frontier scores than it would have had before (line D is bigger than line C in figure 14.2 of the Doing Business 2016 report). 4 See Djankov, Manraj and others (2005). Principal components and unobserved components methods yield a ranking nearly identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the pairwise correlations among indicators do not differ much. An alternative to the simple average method is to give different weights to the topics, depending on which are considered of more or less importance in the context of a specific economy. 5 For getting credit, indicators are weighted proportionally, according to their contribution to the total score, with a weight of 60% assigned to the strength of legal rights index and 40% to the depth of credit information index. Indicators for all other topics are assigned equal weights Doing Business 2016 Zimbabwe 101 Table 13.1 Weights used in calculating the distance to implemented regulatory reforms making it easier to do frontier scores for economies with 2 cities covered business in 3 or more of the 10 topics included in this year’s aggregate distance to frontier score. Changes Economy City Weight (%) making it more difficult to do business are subtracted Dhaka 78 Bangladesh from the total number of those making it easier to do Chittagong 22 São Paulo 61 business. Twenty-four economies meet this criterion: Brazil Armenia; Azerbaijan; Benin; Costa Rica; Côte d’Ivoire; Rio de Janeiro 39 Shanghai 55 Cyprus; Hong Kong SAR, China; Indonesia; Jamaica; China Beijing 45 Kazakhstan; Kenya; Lithuania; Madagascar; Mauritania; Mumbai 47 Morocco; Romania; the Russian Federation; Rwanda; India Delhi 53 Senegal; Togo; Uganda; the United Arab Emirates; Jakarta 78 Uzbekistan; and Vietnam. Second, Doing Business sorts Indonesia Surabaya 22 these economies on the increase in their distance to Tokyo 65 Japan frontier score from the previous year using comparable Osaka 35 data. Mexico City 83 Mexico Monterrey 17 Selecting the economies that implemented regulatory Lagos 77 reforms in at least three topics and had the biggest Nigeria Kano 23 improvements in their distance to frontier scores is Karachi 65 intended to highlight economies with ongoing, broad- Pakistan Lahore 35 based reform programs. The improvement in the Moscow 70 Russian Federation distance to frontier score is used to identify the top St. Petersburg 30 New York 60 improvers because this allows a focus on the absolute United States improvement—in contrast with the relative improvement Los Angeles 40 Source: United Nations, Department of Economic and Social shown by a change in rankings—that economies have Affairs, Population Division, World Urbanization Prospects, made in their regulatory environment for business. 2014 Revision. http://esa.un.org/unpd/wup/CD- ROM/Default.aspx. Ease of Doing Business ranking Economies that improved the most across 3 or more Doing Business topics in 2014/15 The ease of doing business ranking ranges from 1 to 189. The ranking of economies is determined by sorting the Doing Business 2016 uses a simple method to calculate aggregate distance to frontier scores, rounded to 2 which economies improved the ease of doing business decimals. the most. First, it selects the economies that in 2014/15 Doing Business 2016 Zimbabwe 102 Doing Business 2016 Zimbabwe 103 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Law library News on the Doing Business project Online collection of business laws and regulations http://www.doingbusiness.org relating to business http://www.doingbusiness.org/law-library Rankings How economies rank—from 1 to 189 Contributors http://www.doingbusiness.org/rankings More than 11,400 specialists in 189 economies who participate in Doing Business Data http://www.doingbusiness.org/contributors/doing- All the data for 189 economies—topic rankings, business indicator values, lists of regulatory procedures and details underlying indicators Entrepreneurship data http://www.doingbusiness.org/data Data on business density (number of newly registered companies per 1,000 working-age Reports people) for 136 economies Access to Doing Business reports as well as http://www.doingbusiness.org/data/exploretopics/ent subnational and regional reports, case studies and repreneurship customized economy and regional profiles http://www.doingbusiness.org/reports Distance to frontier Data benchmarking 189 economies to the frontier Methodology in regulatory practice and a distance to frontier The methodologies and research papers underlying calculator Doing Business http://www.doingbusiness.org/data/distance-to- http://www.doingbusiness.org/methodology frontier Research Information on good practices Abstracts of papers on Doing Business topics and Showing where the many good practices identified related policy issues by Doing Business have been adopted http://www.doingbusiness.org/research http://www.doingbusiness.org/data/good-practice Doing Business reforms Short summaries of DB2016 business regulation reforms and lists of reforms since DB2008 http://www.doingbusiness.org/reforms Historical data Customized data sets since DB2004 http://www.doingbusiness.org/custom-query Doing Business 2016 Zimbabwe 104