83014 Economy Profile: Zimbabwe Doing Business 2014 Zimbabwe 2 © 2013 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 All rights reserved. 1 2 3 4 15 14 13 12 A copublication of The World Bank and the International Finance Corporation. This work is a product of the staff of The World Bank with external contributions. Note that The World Bank does not necessarily own each component of the content included in the work. The World Bank therefore does not warrant that the use of the content contained in the work will not infringe on the rights of third parties. The risk of claims resulting from such infringement rests solely with you. 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. 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Cover design: The Word Express Doing Business 2014 Zimbabwe 3 CONTENTS Introduction .................................................................................................................................. 4 The business environment .......................................................................................................... 5 Starting a business ..................................................................................................................... 14 Dealing with construction permits ........................................................................................... 23 Getting electricity ....................................................................................................................... 34 Registering property .................................................................................................................. 41 Getting credit .............................................................................................................................. 51 Protecting investors ................................................................................................................... 58 Paying taxes ................................................................................................................................ 67 Trading across borders .............................................................................................................. 74 Enforcing contracts .................................................................................................................... 82 Resolving insolvency .................................................................................................................. 92 Employing workers .................................................................................................................... 97 Data notes ................................................................................................................................. 104 Resources on the Doing Business website ............................................................................ 110 Doing Business 2014 Zimbabwe 4 INTRODUCTION Doing Business sheds light on how easy or difficult it is the paying taxes indicators, which cover the period for a local entrepreneur to open and run a small to January–December 2012). medium-size business when complying with relevant The Doing Business methodology has limitations. Other regulations. It measures and tracks changes in areas important to business—such as an economy’s regulations affecting 11 areas in the life cycle of a proximity to large markets, the quality of its business: starting a business, dealing with construction infrastructure services (other than those related to permits, getting electricity, registering property, trading across borders and getting electricity), the getting credit, protecting investors, paying taxes, security of property from theft and looting, the trading across borders, enforcing contracts, resolving transparency of government procurement, insolvency and employing workers. macroeconomic conditions or the underlying strength In a series of annual reports Doing Business presents of institutions—are not directly studied by Doing quantitative indicators on business regulations and the Business. The indicators refer to a specific type of protection of property rights that can be compared business, generally a local limited liability company across 189 economies, from Afghanistan to Zimbabwe, operating in the largest business city. Because over time. The data set covers 47 economies in Sub- standard assumptions are used in the data collection, Saharan Africa, 33 in Latin America and the Caribbean, comparisons and benchmarks are valid across 25 in East Asia and the Pacific, 25 in Eastern Europe economies. The data not only highlight the extent of and Central Asia, 20 in the Middle East and North obstacles to doing business; they also help identify the Africa and 8 in South Asia, as well as 31 OECD high- source of those obstacles, supporting policy makers in income economies. The indicators are used to analyze designing regulatory reform. economic outcomes and identify what reforms have More information is available in the full report. Doing worked, where and why. Business 2014 presents the indicators, analyzes their This economy profile presents the Doing Business relationship with economic outcomes and presents indicators for Zimbabwe. To allow useful comparison, business regulatory reforms. The data, along with it also provides data for other selected economies information on ordering Doing Business 2014, are (comparator economies) for each indicator. The data in available on the Doing Business website at this report are current as of June 1, 2013 (except for http://www.doingbusiness.org. Doing Business 2014 Zimbabwe 5 THE BUSINESS ENVIRONMENT For policy makers trying to improve their economy’s regulatory environment for business, a good place to ECONOMY OVERVIEW start 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 Region: Sub-Saharan Africa business based on indicator sets that measure and benchmark regulations applying to domestic small to Income category: Low income medium-size businesses through their life cycle. Economies are ranked from 1 to 189 by the ease of Population: 13,724,317 doing business index. For each economy the index is calculated as the ranking on the simple average of its GNI per capita (US$): 680 percentile rankings on each of the 10 topics included in the index in Doing Business 2014: starting a business, DB2014 rank: 170 dealing with construction permits, getting electricity, registering property, getting credit, protecting DB2013 rank: 168* investors, paying taxes, trading across borders, Change in rank: -2 enforcing contracts and resolving insolvency. The ranking on each topic is the simple average of the DB 2014 DTF: 42.12 percentile rankings on its component indicators (see the data notes for more details). The employing workers DB 2013 DTF: 40.66 indicators are not included in this year’s aggregate ease of doing business ranking, but the data are presented Change in DTF: 1.42 in this year’s economy profile. The aggregate ranking on the ease of doing business * DB2013 ranking shown is not last year’s published benchmarks each economy’s performance on the ranking but a comparable ranking for DB2013 that indicators against that of all other economies in the captures the effects of such factors as data Doing Business sample (figure 1.1). While this ranking corrections and the addition of 4 economies (Libya, tells much about the business environment in an Myanmar, San Marino and South Sudan) to the economy, it does not tell the whole story. The ranking on sample this year. See the data notes for sources and the ease of doing business, and the underlying definitions. indicators, do not measure all aspects of the business environment that matter to firms and investors or that affect the competitiveness of the economy. Still, a high ranking does mean that the government has created a regulatory environment conducive to operating a business. Doing Business 2014 Zimbabwe 6 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 2014 Zimbabwe 7 THE BUSINESS ENVIRONMENT For policy makers, knowing where their economy relative to the regional average (figure 1.2). The stands in the aggregate ranking on the ease of economy’s rankings on the topics included in the doing business is useful. Also useful is to know how ease of doing business index provide another it ranks relative to comparator economies and perspective (figure 1.3). Figure 1.2 How Zimbabwe and comparator economies rank on the ease of doing business Source: Doing Business database. Doing Business 2014 Zimbabwe 8 THE BUSINESS ENVIRONMENT Figure 1.3 How Zimbabwe ranks on Doing Business topics Source: Doing Business database. Doing Business 2014 Zimbabwe 9 THE BUSINESS ENVIRONMENT Just as the overall ranking on the ease of doing business Doing Business introduced the distance to frontier tells only part of the story, so do changes in that ranking. measure. This measure shows how far on average an Yearly movements in rankings can provide some indication economy is from the best performance achieved by any of changes in an economy’s regulatory environmen t for economy on each Doing Business indicator since 2005, firms, but they are always relative. except for the getting electricity indicators, which were introduced in 2009. Moreover, year-to-year changes in the overall rankings do not reflect how the business regulatory environment in an Comparing the measure for an economy at 2 points in economy has changed over time—or how it has changed time allows users to assess how much the economy’s in different areas. To aid in assessing such changes, regulatory environment as measured by Doing Business has changed over time—how far it has moved toward (or away from) the most efficient practices and strongest regulations in areas covered by Doing Business (figure 1.4). Figure 1.4 How far has Zimbabwe come in the areas measured by Doing Business? Note: The distance to frontier measure shows how far on average an economy is from the best performance achieved by any economy on each Doing Business indicator since 2005, except for the getting electricity indicators, which were introduced in 2009. The measure is normalized to range between 0 and 100, with 100 representing the best performance (the frontier). The overall distance to frontier is the average of the distance to frontier in the first 9 indicator sets shown in the figure and does not include getting electricity. Data on the overall distance to frontier including getting electricity is available at http://www.doingbusiness.org/data/distance-to-frontier. See the data notes for more details on the distance to frontier measure. Source: Doing Business database. Doing Business 2014 Zimbabwe 10 THE BUSINESS ENVIRONMENT The absolute values of the indicators tell another part business regulation—such as a regulatory process that of the story (table 1.1). The indicators, on their own or can be completed with a small number of procedures in comparison with the indicators of a good practice in a few days and at a low cost. Comparison of the economy or those of comparator economies in the economy’s indicators today with those in the previous region, may reveal bottlenecks reflected in large year may show where substantial bottlenecks persist — numbers of procedures, long delays or high costs. Or and where they are diminishing. they may reveal unexpected strengths in an area of Table 1.1 Summary of Doing Business indicators for Zimbabwe Best performer globally South Africa DB2014 Zimbabwe DB2014 Zimbabwe DB2013 Swaziland DB2014 Botswana DB2014 Namibia DB2014 Lesotho DB2014 Angola DB2014 Indicator DB2014 Starting a Business 150 148 178 96 89 132 64 172 New Zealand (1) (rank) Procedures (number) 9 9 8 9 7 10 5 12 New Zealand (1)* Time (days) 90.0 90.0 66.0 60.0 29.0 66.0 19.0 38.0 New Zealand (0.5) Cost (% of income per 141.2 150.0 130.1 1.2 11.4 14.7 0.3 27.7 Slovenia (0.0) capita) Paid-in Min. Capital (% 0.0 0.0 21.8 0.0 0.0 0.0 0.0 0.4 112 Economies (0.0)* of income per capita) Dealing with Hong Kong SAR, Construction Permits 170 173 65 69 145 31 26 51 China (1) (rank) Hong Kong SAR, Procedures (number) 12 12 12 21 11 12 16 13 China (6) Time (days) 496.0 614.0 204.0 111.0 330.0 123.0 78.0 95.0 Singapore (26.0) Doing Business 2014 Zimbabwe 11 Best performer globally South Africa DB2014 Zimbabwe DB2014 Zimbabwe DB2013 Swaziland DB2014 Botswana DB2014 Namibia DB2014 Lesotho DB2014 Angola DB2014 Indicator DB2014 Cost (% of income per 3,055.6 3,246.6 28.6 17.6 832.6 30.6 9.9 109.1 Qatar (1.1) capita) Getting Electricity 157 158 170 107 136 72 150 163 Iceland (1) (rank) Procedures (number) 6 6 7 5 5 6 5 6 10 Economies (3)* Time (days) 106 106 145 121 125 37 226 137 Germany (17) Cost (% of income per 3,686.8 3,917.2 689.7 389.1 1,991.8 395.9 1,432.1 1,232.7 Japan (0.0) capita) Registering Property 93 87 132 41 88 178 99 130 Georgia (1) (rank) Procedures (number) 5 5 7 4 4 8 7 9 4 Economies (1)* Time (days) 36.0 36.0 191.0 15.0 43.0 54.0 23.0 21.0 New Zealand (1.0)* Cost (% of property 7.8 7.8 3.0 5.1 8.7 13.8 6.1 7.1 5 Economies (0.0)* value) Getting Credit (rank) 109 105 130 73 159 55 28 55 Malaysia (1)* Strength of legal rights 7 7 3 6 6 7 7 6 10 Economies (10)* index (0-10) Depth of credit 1 1 4 4 0 4 6 5 31 Economies (6)* information index (0-6) Public registry coverage 0.0 0.0 2.4 0.0 0.0 0.0 0.0 0.0 Portugal (100.0)* (% of adults) Private bureau 3.7 3.8 0.0 60.7 0.0 66.2 55.6 41.6 22 Economies (100.0)* coverage (% of adults) Protecting Investors 128 127 80 52 98 80 10 128 New Zealand (1) (rank) Extent of disclosure 8 8 4 7 3 5 8 2 10 Economies (10)* Doing Business 2014 Zimbabwe 12 Best performer globally South Africa DB2014 Zimbabwe DB2014 Zimbabwe DB2013 Swaziland DB2014 Botswana DB2014 Namibia DB2014 Lesotho DB2014 Angola DB2014 Indicator DB2014 index (0-10) Extent of director 1 1 6 8 4 5 8 5 Cambodia (10) liability index (0-10) Ease of shareholder 4 4 6 3 8 6 8 6 3 Economies (10)* suits index (0-10) Strength of investor 4.3 4.3 5.3 6.0 5.0 5.3 8.0 4.3 New Zealand (9.7) protection index (0-10) United Arab Emirates Paying Taxes (rank) 142 135 155 47 101 114 24 59 (1) Payments (number per Hong Kong SAR, 49 49 30 34 33 37 7 33 year) China (3)* United Arab Emirates Time (hours per year) 242 242 282 152 324 314 200 110 (12) Trading Across Borders 167 168 169 145 144 141 106 127 Singapore (1) (rank) Documents to export 7 7 10 6 7 8 5 7 Ireland (2)* (number) Time to export (days) 53 53 40 27 31 25 16 17 5 Economies (6)* Cost to export (US$ per 3,765 3,280 1,860 3,045 1,695 1,750 1,705 1,880 Malaysia (450) container) Documents to import 8 8 9 6 7 7 6 6 Ireland (2)* (number) Time to import (days) 71 73 43 35 33 20 21 23 Singapore (4) Cost to import (US$ per 5,660 5,200 2,700 3,610 1,945 1,905 1,980 2,145 Singapore (440) container) Enforcing Contracts 118 112 187 86 144 69 80 176 Luxembourg (1) (rank) Doing Business 2014 Zimbabwe 13 Best performer globally South Africa DB2014 Zimbabwe DB2014 Zimbabwe DB2013 Swaziland DB2014 Botswana DB2014 Namibia DB2014 Lesotho DB2014 Angola DB2014 Indicator DB2014 Time (days) 410 410 1,296 625 615 460 600 956 Singapore (150) Cost (% of claim) 113.1 113.1 44.4 39.8 31.3 35.8 33.2 56.1 Bhutan (0.1) Procedures (number) 38 38 46 28 41 33 29 40 Singapore (21)* Resolving Insolvency 156 168 189 34 104 85 82 68 Japan (1) (rank) no Time (years) 3.3 3.3 1.7 2.6 2.5 2.0 2.0 Ireland (0.4) practice no Cost (% of estate) 22 22 18 20 15 18 15 Norway (1) practice Outcome (0 as no piecemeal sale and 1 as 0 0 1 0 0 0 0 practice going concern) Recovery rate (cents on 13.1 0.1 0.0 61.9 28.6 34.9 35.5 38.5 Japan (92.8) the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. * Two or more economies share the top ranking on this indicator. A number shown in place of an economy’s name 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). Source: Doing Business database. Doing Business 2014 Zimbabwe 14 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 Preregistration (for example, name well as to new markets. And their employees can verification or reservation, notarization) benefit from protections provided by the law. An additional benefit comes with limited liability Registration in the economy’s largest companies. These limit the financial liability of business city company owners to their investments, so personal Postregistration (for example, social security assets of the owners are not put at risk. Where registration, company seal) governments make registration easy, more entrepreneurs start businesses in the formal sector, Time required to complete each procedure creating more good jobs and generating more (calendar days) revenue for the government. Does not include time spent gathering What do the indicators cover? information Doing Business measures the ease of starting a Each procedure starts on a separate day (2 business in an economy by recording all procedures cannot start on the same day). procedures officially required or commonly done in Procedures that can be fully completed practice by an entrepreneur to start up and online are an exception to this rule. formally operate an industrial or commercial Procedure completed once final document is business—as well as the time and cost required to received complete these procedures. It also records the paid-in minimum capital that companies must No prior contact with officials deposit before registration (or within 3 months). Cost required to complete each procedure The ranking on the ease of starting a business is (% of income per capita) the simple average of the percentile rankings on the 4 component indicators: procedures, time, cost Official costs only, no bribes and paid-in minimum capital requirement. No professional fees unless services required To make the data comparable across economies, by law Doing Business uses several assumptions about the Paid-in minimum capital (% of income business and the procedures. It assumes that all per capita) information is readily available to the entrepreneur and that there has been no prior contact with Deposited in a bank or with a notary before officials. It also assumes that the entrepreneur will registration (or within 3 months) pay no bribes. And it assumes that the business:  Has a start-up capital of 10 times income per  Is a limited liability company, located in the capita. largest business city and is 100% domestically  Has a turnover of at least 100 times income per owned. capita.  Has between 10 and 50 employees.  Does not qualify for any special benefits.  Conducts general commercial or industrial  Does not own real estate. activities. Doing Business 2014 Zimbabwe 15 STARTING A BUSINESS Where does the economy stand today? What does it take to start a business in Zimbabwe? days, costs 141.2% of income per capita and requires According to data collected by Doing Business, starting paid-in minimum capital of 0.0% of income per capita a business there requires 9 procedures, takes 90.0 (figure 2.1). Figure 2.1 What it takes to start a business in Zimbabwe Paid-in minimum capital (% of income per capita): 0.0 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. Source: Doing Business database. Doing Business 2014 Zimbabwe 16 STARTING A BUSINESS Globally, Zimbabwe stands at 150 in the ranking of 189 regional average ranking provide other useful economies on the ease of starting a business (figure information for assessing how easy it is for an 2.2). The rankings for comparator economies and the entrepreneur in Zimbabwe 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 2014 Zimbabwe 17 STARTING A BUSINESS What are the changes over time? The benchmarks provided by the economies that over 2.3) can help show what is possible in making it easier time have had the best performance regionally or to start a business. And changes in regional averages globally on the procedures, time, cost or paid-in can show where Zimbabwe is keeping up—and where minimum capital required to start a business (figure it is falling behind. Figure 2.3 Has starting a business become easier over time? Procedures (number) Time (days) Doing Business 2014 Zimbabwe 18 STARTING A BUSINESS Cost (% of income per capita) Paid-in minimum capital (% of income per capita) Note: Ninety economies globally have no paid-in minimum capital requirement. DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Zimbabwe 19 STARTING A BUSINESS Economies around the world have taken steps making greater firm satisfaction and savings and more it easier to start a business—streamlining procedures registered businesses, financial resources and job by setting up a one-stop shop, making procedures opportunities. simpler or faster by introducing technology and What business registration reforms has Doing Business reducing or eliminating minimum capital requirements. recorded in Zimbabwe (table 2.1)? Many have undertaken business registration reforms in stages—and they often are part of a larger regulatory reform program. Among the benefits have been Table 2.1 How has Zimbabwe made starting a business easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. Zimbabwe eased business start-up by reducing registration DB2011 fees and speeding up the name search process and company and tax registration. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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. Source: Doing Business database. Doing Business 2014 Zimbabwe 20 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 City: Harare firm. These are identified by Doing Business through collaboration with relevant local Legal Form: Private Limited Liability Company professionals and the study of laws, regulations and Paid in Minimum Capital Requirement: None publicly available information on business entry in that economy. Following is a detailed summary of Start-up Capital: 10 times GNI per capita those procedures, 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). Summary of procedures for starting a business in Zimbabwe—and the time and cost 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 7 days USD 5 1 days for an additional fee. 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 2 printed notarized copy. 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. Doing Business 2014 Zimbabwe 21 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 3 now budget to pay all their company tax within the trading year. The 14 days no charge tax must be paid as follows: 10% by the 25th of March, 10% by the 25th 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. * Register with the National Social Security Authority for pension and Accident Prevention and Compensation Scheme 14 days 4 The employer and the employee must each contribute 3% of employee (simultaneous with no charge the gross monthly salary. procedure 3) * Register with the Manpower Development Fund Employers must register with, and contribute 1% of their wage bill to, 1 day 5 the state-run Manpower Development Fund. The fund allows employers (simultaneous with no charge to recover expenses when employees complete training. procedure 3) * Pick up the form of license application notice from the City Health Department 1 day, 6 (simultaneous with USD 20 procedure 3) * Advertise the application for a trade and business license in a local newspaper 4-6 weeks, A trade and business license applicant must publicly announce the (simultaneous with USD 30 7 proposed application twice in a local newspaper. The form, Notice of procedure 3) 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 than 6 weeks, but at least 4 weeks, before the application will be heard Doing Business 2014 Zimbabwe 22 Time to No. Procedure Cost to complete complete by the licensing authority. The second notice must appear 7 days after the first notice. Any objections to the application must be submitted in writing to the licensing authority within 7 days of the second notice. 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 8 applicant. The Licensing Office also seeks a report from the Harare 30 days USD 530 Town Planner to ensure that the application is consistent with the 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. * Receive inspection by the Licensing officers 1 day, Officers inspect the company site to check if the workplace premises (simultaneous with 9 are suitable for the intended use. The verification criteria used by the no charge previous officers are specified in the relevant bylaws. procedure) * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Zimbabwe 23 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 PERMITS INDICATORS MEASURE excessive constraints on a sector that plays an important part in every economy. Where complying with building regulations is excessively costly in Procedures to legally build a warehouse time and money, many builders opt out. They may (number) pay bribes to pass inspections or simply build Submitting all relevant documents and illegally, leading to hazardous construction that obtaining all necessary clearances, licenses, puts public safety at risk. Where compliance is permits and certificates simple, straightforward and inexpensive, everyone Submitting all required notifications and is better off. receiving all necessary inspections What do the indicators cover? Obtaining utility connections for water, Doing Business records the procedures, time and sewerage and a land telephone line cost for a business in the construction industry to Registering the warehouse after its obtain all the necessary approvals to build a completion (if required for use as collateral or warehouse in the economy’s largest business city, for transfer of the warehouse) connect it to basic utilities and register the Time required to complete each procedure property so that it can be used as collateral or (calendar days) transferred to another entity. Does not include time spent gathering The ranking on the ease of dealing with information construction permits is the simple average of the Each procedure starts on a separate day. percentile rankings on its component indicators: Procedures that can be fully completed online procedures, time and cost. are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final Doing Business uses several assumptions about the document is received business and the warehouse, including the utility connections. No prior contact with officials The business: Cost required to complete each procedure (% of income per capita)  Is a limited liability company operating in Official costs only, no bribes the construction business and located in the largest business city.  Will be connected to water, sewerage (sewage system, septic tank or their  Is domestically owned and operated. equivalent) and a fixed telephone line. The  Has 60 builders and other employees. connection to each utility network will be 10 The warehouse: meters (32 feet, 10 inches) long.  Is a new construction (there was no  Will be used for general storage, such as of previous construction on the land). books or stationery (not for goods requiring special conditions).  Has complete architectural and technical plans prepared by a licensed architect or  Will take 30 weeks to construct (excluding all engineer. delays due to administrative and regulatory requirements). Doing Business 2014 Zimbabwe 24 DEALING WITH CONSTRUCTION PERMITS Where does the economy stand today? What does it take to comply with the formalities to permits there requires 12 procedures, takes 496.0 days build a warehouse in Zimbabwe? According to data and costs 3055.6% of income per capita (figure 3.1). collected by Doing Business, dealing with construction Figure 3.1 What it takes to comply with formalities to build a warehouse in Zimbabwe 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. Source: Doing Business database. Doing Business 2014 Zimbabwe 25 DEALING WITH CONSTRUCTION PERMITS Globally, Zimbabwe stands at 170 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 2014 Zimbabwe 26 DEALING WITH CONSTRUCTION PERMITS What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to deal with time have had the best performance regionally or construction permits. And changes in regional globally on the procedures, time or cost required to averages can show where Zimbabwe is keeping up— deal with construction permits (figure 3.3) help show and where it is falling behind. Figure 3.3 Has dealing with construction permits become easier over time? Procedures (number) Time (days) Doing Business 2014 Zimbabwe 27 DEALING WITH CONSTRUCTION PERMITS Cost (% of income per capita) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Zimbabwe 28 DEALING WITH CONSTRUCTION PERMITS Smart regulation ensures that standards are met while building safety while keeping compliance costs making compliance easy and accessible to all. reasonable, governments around the world have Coherent and transparent rules, efficient processes and worked on consolidating permitting requirements. adequate allocation of resources are especially What construction permitting reforms has Doing important in sectors where safety is at stake. Business recorded in Zimbabwe (table 3.1)? Construction is one of them. In an effort to ensure Table 3.1 How has Zimbabwe made dealing with construction permits easier—or not? By Doing Business report year DB year Reform Instability and severe administrative backlog led to increase of DB2009 costs for all construction permit related procedures by USD 14,851.7 and delays in approvals by 474 days. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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. Source: Doing Business database. Doing Business 2014 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 City : Harare information collected from experts in construction licensing, including architects, civil engineers, Estimated construction lawyers, construction firms, utility USD 997,394 Warehouse Value : service providers and public officials who deal with building regulations. These procedures are those The procedures, along with the associated time and that apply to a company and structure matching cost, are summarized below. the standard assumptions used by Doing Business in collecting the data (see the section in this chapter on what the indicators cover). Summary of procedures for dealing with construction permits in Zimbabwe —and the time and cost 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 1 Inspector of Factories. This is a separate application and carries its own 30 days USD 9,104 application fee, established by the Inspector. The approval period is not less than 30 days. The cost is 1% of the project value. Request and obtain building plan approval by the Harare City Council BuildCo needs to submit the following three documents at the same time: the building permit application, the application for the factories inspection and IF NEEDED (This does not apply to the Dealing with construction permits case study): the TPD-1 form for the planning permit 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 300 days USD 9,104 2 plans for the structure, prepared by a qualified 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), and so forth. Each agency contacts the applicant directly for clarification or rectification, if required. Once all agencies have accepted the plans, the Doing Business 2014 Zimbabwe 30 Time to No. Procedure Cost to complete complete 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 to 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 prioir to the approval of the building plans the local authority now imposes a "Regularisation Fee", or fine, of US$5 000,00. Request and receive inspection from building inspectorate of completion of foundation by independent structural engineer 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 3 inspection will occur only if specifically requested (but is required for 30 days no charge obtaining the occupancy permit). Theoretically, the builder 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. Inform the building inspectorate of the completion of drainage installation 4 The officially required inspection almost never happens unless the fuel 1 day no charge is provided for transportation. Doing Business 2014 Zimbabwe 31 Time to No. Procedure Cost to complete complete Inform and receive inspection from the building inspectorate upon completion of structure As of 2007, inspections are undertaken by the Chief Building Inspector 5 and a deputy inspector. This change, implemented after allegations that 14 days no charge the lower officers were requesting facilitation payments, has caused the time require for this inspection to increase. Request and receive inspection by the building inspectors upon completion of construction Inspectors will visit the site only if there is fuel for vehicles, or the 30 days no charge 6 applicant provides transportation. Once the inspection has taken place, a protocol is written, which generally takes 30 days. * Request water and sewage connection from Zimbabwe National Water Authority (ZINWA) and connect to its networks As of February 1, 2009 the provision of water supplies reverts back from ZINWA to purview of local municipalities. 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. 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 7 following: 1 day USD 2,390 • 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 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 Doing Business 2014 Zimbabwe 32 Time to No. Procedure Cost to complete complete made. It is difficult to provide a precise cost because costs fluctuate so rapidly. 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. * Request telephone connection The applicant needs to submit to Tel One a form, Application for telephone service, form and complete a Telephone Directory Entry application. Connection to the facilities will be made after the payment of a refundable deposit. Obtaining an additional phone line can be a very lengthy process. Until recently, only analog networks existed (a few 1 day USD 180 8 fiber optic lines have been laid but are not the rule), so expansion of the network was difficult. The company may also be charged for the installation equipment. In practice, most people use cellular phones now. * Receive inspection and connection by telecommunications provider 9 75 days no charge Request occupancy certificate An occupation certificate is issued by the local authority once the 10 project is complete and inspected by the Fire Department and the 1 day no charge Building Inspector. 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. Usually, at least a week’s notice is required. The same issues as with other inspections 7 days no charge 11 apply (no transportation, long 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. The typical wait is a week. Doing Business 2014 Zimbabwe 33 Time to No. Procedure Cost to complete complete Obtain occupancy certificate An occupation certificate is issued by the local authority once the 12 project is complete and inspected by the Fire Department and the 35 days no charge Building Inspector. * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Zimbabwe 34 GETTING ELECTRICITY Access to reliable and affordable electricity is vital WHAT THE GETTING ELECTRICITY for businesses. To counter weak electricity supply, many firms in developing economies have to rely INDICATORS MEASURE on self-supply, often at a prohibitively high cost. Whether electricity is reliably available or not, the Procedures to obtain an electricity first step for a customer is always to gain access by connection (number) obtaining a connection. Submitting all relevant documents and What do the indicators cover? obtaining all necessary clearances and permits Doing Business records all procedures required for Completing all required notifications and a 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 Obtaining external installation works and complete them. These procedures include possibly purchasing material for these works applications and contracts with electricity utilities, Concluding any necessary supply contract and clearances from other agencies and the external obtaining final supply and final connection works. The ranking on the ease of getting electricity is the simple average of Time required to complete each procedure the percentile rankings on its component (calendar days) indicators: procedures, time and cost. To make the Is at least 1 calendar day data comparable across economies, several assumptions are used. Each procedure starts on a separate day The warehouse: Does not include time spent gathering information  Is located in the economy’s largest business city, in an area where other Reflects the time spent in practice, with little warehouses are located. follow-up and no prior contact with officials  Is not in a special economic zone where Cost required to complete each procedure the connection would be eligible for (% of income per capita) subsidization or faster service. Official costs only, no bribes  Has road access. The connection works Excludes value added tax involve the crossing of a road or roads but are carried out on public land.  Is to either the low-voltage or the medium-  Is a new construction being connected to voltage distribution network and either overhead electricity for the first time. or underground, whichever is more common in the economy and area where the warehouse is  Has 2 stories, both above ground, with a located. The length of any connection in the total surface of about 1,300.6 square customer’s private domain is negligible. meters (14,000 square feet), and is built on a plot of 929 square meters (10,000 square  Requires crossing of a 10-meter road but all the feet). works are carried out in a public land, so there is no crossing into other people's private property. The electricity connection:  Involves installing one electricity meter. The  Is 150 meters long and is a 3-phase, 4-wire Y, monthly electricity consumption will be 0.07 140-kilovolt-ampere (kVA) (subscribed gigawatt-hour (GWh). The internal electrical capacity) connection. wiring has been completed. Doing Business 2014 Zimbabwe 35 GETTING ELECTRICITY Where does the economy stand today? What does it take to obtain a new electricity procedures, takes 106 days and costs 3686.8% of connection in Zimbabwe? According to data collected income per capita (figure 4.1). by Doing Business, getting electricity there requires 6 Figure 4.1 What it takes to obtain an electricity connection in Zimbabwe 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. Source: Doing Business database. Doing Business 2014 Zimbabwe 36 GETTING ELECTRICITY Globally, Zimbabwe stands at 157 in the ranking of 189 regional average ranking provide another perspective economies on the ease of getting electricity (figure in assessing how easy it is for an entrepreneur in 4.2). The rankings for comparator economies and the Zimbabwe to 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 2014 Zimbabwe 37 GETTING ELECTRICITY Even more helpful than rankings on the ease of getting performers on these indicators may provide useful electricity may be the indicators underlying those benchmarks. rankings (table 4.1). And regional and global best Table 4.1 The ease of getting electricity in Zimbabwe Best performer in Best performer Indicator Zimbabwe DB2014 Zimbabwe DB2013 Sub-Saharan Africa globally DB2014 DB2014 Rank 157 158 Mauritius (48) Iceland (1) Procedures (number) 6 6 Comoros (3) 10 Economies* (3) Time (days) 106 106 Rwanda (30) Germany (17) Cost (% of income per capita) 3,686.8 3,917.2 Mauritius (281.1) Japan (0.0) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. * Two or more economies share the top ranking on this indicator. For a list of these economies, see the Doing Business website (http://www.doingbusiness.org). Source: Doing Business database. Doing Business 2014 Zimbabwe 38 GETTING ELECTRICITY Obtaining an electricity connection is essential to safety in the connection process while keeping enable a business to conduct its most basic operations. connection costs reasonable, governments around the In many economies the connection process is world have worked to consolidate requirements for complicated by the multiple laws and regulations obtaining an electricity connection. What reforms in involved—covering service quality, general safety, getting electricity has Doing Business recorded in technical standards, procurement practices and Zimbabwe (table 4.2)? internal wiring installations. In an effort to ensure Table 4.2 How has Zimbabwe made getting electricity easier—or not? By Doing Business report year DB year Reform DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Zimbabwe 39 GETTING ELECTRICITY What are the details? The indicators reported here for Zimbabwe are based OBTAINING AN ELECTRICITY CONNECTION on a set of specific procedures—the steps that an entrepreneur must complete to get a warehouse connected to electricity by the local distribution City: Harare utility—identified by Doing Business. Data are collected from the distribution utility, then completed and Name of Utility: Zimbabwe Electricity verified by electricity regulatory agencies and Supply Authority (ZESA) independent professionals such as electrical engineers, The procedures are those that apply to a warehouse electrical contractors and construction companies. The and electricity connection matching the standard electricity distribution utility surveyed is the one assumptions used by Doing Business in collecting the serving the area (or areas) in which warehouses are data (see the section in this chapter on what the located. If there is a choice of distribution utilities, the indicators cover). The procedures, along with the one serving the largest number of customers is associated time and cost, are summarized below. selected. Summary of procedures for getting electricity in Zimbabwe—and the time and cost Time to No. Procedure Cost to complete complete Submit application to ZETDC and await way leave approvals and quotation The application is submitted by the client/electrical contractor in person. To the application one needs to attach Company Registration Certificate copy. After the application is submitted ZESA will be working on issuing 40 calendar days no charge 1 the quotation to the client. At this point ZESA will also seek and obtain way leave approvals from the Municipalities Await external site inspection by ZETDC The site inspection is necessary to determine the “supply termination 2 point”. During the inspection, the utility also looks into the question of 1 calendar day no charge whether additional material is needed. The customer purchases material for external connection works Customers need to buy transformers and switchgear for the utility. The customer would buy the missing material from local providers. 19 calendar days no charge 3 Transformers have to be of ZESA approved type. Doing Business 2014 Zimbabwe 40 Time to No. Procedure Cost to complete complete Await internal wiring inspection from ZETDC On completion of the internal installation the electrician gives ZESA a call and ZESA will carry out an inspection. The electrician submits the 4 completion form to ZESA. Electrical standards are issued by the 4 calendar days no charge Standards Association of Zimbabwe (SAZ) and ZESA. The standards require ZESA to do an inspection. Await installation of the transformer by ZETDC The transformer is installed by the utility. The utility also does the connection between the internal sub- distribution board in the warehouse and the meter board. 5 9 calendar days USD 24,947.8 Await meter installation and electricity starts flowing by ZETDC A separate team than the one that does the connection works installs the meter. This team does a life test of the connection, tests the cable pressure, installs the meter and energizes the connection. 38 calendar days USD 122.5 6 * Takes place simultaneously with another procedure. Source: Doing Business database. Doing Business 2014 Zimbabwe 41 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 immovable property (number) accepted as collateral for loans—limiting access to Preregistration (for example, checking for liens, finance. notarizing sales agreement, paying property transfer taxes) What do the indicators cover? Registration in the economy’s largest business Doing Business records the full sequence of city procedures necessary for a business to purchase property from another business and transfer the Postregistration (for example, filing title with the municipality) property title to the buyer’s name. The transaction is considered complete when it is opposable to Time required to complete each procedure third parties and when the buyer can use the (calendar days) property, use it as collateral for a bank loan or Does not include time spent gathering resell it. The ranking on the ease of registering information property is the simple average of the percentile rankings on its component indicators: procedures, Each procedure starts on a separate day. time and cost. Procedures that can be fully completed online are an exception to this rule. To make the data comparable across economies, Procedure considered completed once final several assumptions about the parties to the document is received transaction, the property and the procedures are used. No prior contact with officials The parties (buyer and seller): Cost required to complete each procedure (% of property value)  Are limited liability companies, 100% domestically and privately owned. Official costs only, no bribes  Are located in the economy’s largest No value added or capital gains taxes included business city. and no rezoning is required.  Have 50 employees each, all of whom are  Has no mortgages attached and has been nationals. under the same ownership for the past 10  Perform general commercial activities. years. The property (fully owned by the seller):  Consists of 557.4 square meters (6,000 square feet) of land and a 10-year-old, 2-story  Has a value of 50 times income per capita. warehouse of 929 square meters (10,000 The sale price equals the value. square feet). The warehouse is in good  Is registered in the land registry or cada- condition and complies with all safety stre, or both, and is free of title disputes. standards, building codes and legal requirements. There is no heating system. The  Is located in a periurban commercial zone, property will be transferred in its entirety. Doing Business 2014 Zimbabwe 42 REGISTERING PROPERTY Where does the economy stand today? What does it take to complete a property transfer in procedures, takes 36.0 days and costs 7.8% of the Zimbabwe? According to data collected by Doing property value (figure 5.1). Business, registering property there requires 5 Figure 5.1 What it takes to register property in Zimbabwe 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. Source: Doing Business database. Doing Business 2014 Zimbabwe 43 REGISTERING PROPERTY Globally, Zimbabwe stands at 93 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 2014 Zimbabwe 44 REGISTERING PROPERTY What are the changes over time? The benchmarks provided by the economies that over what is possible in making it easier to register time have had the best performance regionally or property. And changes in regional averages can show globally on the procedures, time or cost required to where Zimbabwe is keeping up—and where it is falling complete a property transfer (figure 5.3) help show behind. Figure 5.3 Has registering property become easier over time? Procedures (number) Time (days) Doing Business 2014 Zimbabwe 45 REGISTERING PROPERTY Cost (% of property value) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. For more information on “no practice” marks, see the data notes. Source: Doing Business database. Doing Business 2014 Zimbabwe 46 REGISTERING PROPERTY Economies worldwide have been making it easier for have cut the time required substantially—enabling entrepreneurs to register and transfer property—such buyers to use or mortgage their property earlier. What as by computerizing land registries, introducing time property registration reforms has Doing Business limits for procedures and setting low fixed fees. Many recorded in Zimbabwe (table 5.1)? Table 5.1 How has Zimbabwe made registering property easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. Zimbabwe has reduced the cost to transfer a property by 15% DB2010 of the value of the property. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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. Source: Doing Business database. Doing Business 2014 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 City: Harare lawyers, notaries and property registries. These procedures are those that apply to a transaction Property Value: USD 37,248 matching the standard assumptions used by Doing Business in collecting the data (see the section in The procedures, along with the associated time and this chapter on what the indicators cover). cost, are summarized below. Summary of procedures for registering property in Zimbabwe—and the time and cost Time to No. Procedure Cost to complete complete The conveyance 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 Conveyance's fees: Power of Attorney to make the transfer 1-3 days 4% property value 1 +15% VAT A search of the property title is conducted by the Lawyer at the Land 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 Doing Business 2014 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 USD 500 (Approx the value of the property is a function of the location of the property. For average for high the property we are talking about the rates would therefore be around 14 days density suburb, 2 ZWD 500. When the seller pays the outstanding rates payment he (simultaneous though rates receives what is known as the rates clearance certificate. These rates are with procedure 3) constantly paid by the purchaser as pro forma costs, which will then be reimbursed increase) by seller on the date of the transfer for the advance rates paid calculated 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 documentation shall include: No documentation is required in applying for this certificate. 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 seller applies for a capital gains tax clearance certificate Capital gains Tax is (either withholding tax or Capital Gains tax) 20% of the actual The capital gains tax (CGT) is assessed by the Zimbabwe Revenue gains (not Authority (ZIMRA), which determines how much is payable by way of accounted here) capital gains tax. The rate is 20% on the gains and is paid by the seller. *If Seller acquired The Conveyansor will deliver the file in person to ZIMRA. ZIMRA the property customer service helps with the computation. 10-14 days before February The documentation required: (simultaneous 2009 then CGT 3 • Form REV 1 with procedure 2) liability is 5% of • 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 provide the sale price, the expenses of the conveyansor) calculated at 20% • Original and copy of certificate of incorporation for both companies of profit assessed Doing Business 2014 Zimbabwe 49 Time to No. Procedure Cost to complete complete • Proof of payment from sale • 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. 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 conveyansor will pay the amount representing the CGT at the a commercial Bank. When payment 4 is made one has to wait until the payment is reflected in the ZIMRA 2-10 days no cost account after which a receipt is issued. The receipt will be surrendered to the ZIMRA official who did the interview for him/her to complete and issue the relevant certificate. Transfer documents are lodged for registration of title with the Registrar of the Deeds’ Office 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 Registration fee payment of the registration fee and the stamp duty (according to USD 20 and Stamp Finance Bill 2009, for payments made in foreign currency). If there are duty: any errors observed by the Deeds Office in form, typographical or in 1% for first USD content for amendments/corrections, OR is the resident property value 5,000 seconded from the Ministry of Local Government and Housing is of the 14 days 2% for next USD 5 view that the declared sale price does not sound genuine, then he will 15,000 carry out an onsite inspection. Then the deed is returned to the 3% for next USD conveyansor. Once the corrections have been attended to and/or valuation has been carried out and additional duties/fees based on this 80,000 increased value have been obtained from the purchaser, the copies are 4% for USD again returned by the conveyansor to the Deeds Office for further balance examination. If there are no more errors the deed is signed (registered) by the Registrar of Deeds or his/her designate. One copy of the deed is filed in the Office of the Registrar of Deed and the second one sent back to the conveyansor for onward transmission to his/her client (the new Doing Business 2014 Zimbabwe 50 Time to No. Procedure Cost to complete complete property owner). The documentation shall include: Rates clearance certificate (obtained in Procedure 3) Capital gains tax clearance (obtained in Procedure 2) Two copies of the draft deed Power of attorney to pass transfer Declaration by seller and buyer Original holding deed * Takes place simultaneously with another procedure. Note: Online procedures account for 0.5 days in the total time calculation. Source: Doing Business database. Doing Business 2014 Zimbabwe 51 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 Strength of legal rights index (0–10) financial history (positive or negative)—valuable Rights of borrowers and lenders through information to consider when assessing risk. And collateral laws they permit borrowers to establish a good credit Protection of secured creditors’ rights through history that will allow easier access to credit. Sound bankruptcy laws collateral laws enable businesses to use their assets, especially movable property, as security to generate Depth of credit information index (0–6) capital—while strong creditors’ rights have been Scope and accessibility of credit information associated with higher ratios of private sector credit distributed by public credit registries and to GDP. private credit bureaus What do the indicators cover? Public credit registry coverage (% of adults) Doing Business assesses the sharing of credit Number of individuals and firms listed in information and the legal rights of borrowers and public credit registry as percentage of adult lenders with respect to secured transactions population through 2 sets of indicators. The depth of credit Private credit bureau coverage (% of adults) information index measures rules and practices Number of individuals and firms listed in affecting the coverage, scope and accessibility of largest private credit bureau as percentage of credit information available through a public credit adult population registry or a private credit bureau. The strength of legal rights index measures whether certain features that facilitate lending exist within the applicable collateral and bankruptcy laws. Doing Business uses case scenarios to determine the scope of the  Has up to 100 employees. secured transactions system, involving a secured  Is 100% domestically owned, as is the lender. borrower and a secured lender and examining legal The ranking on the ease of getting credit is based on restrictions on the use of movable collateral. These the percentile rankings on the sum of its component scenarios assume that the borrower: indicators: the depth of credit information index and  Is a private, incorporated, limited liability the strength of legal rights index. company.  Has its headquarters and only base of operations in the largest business city. Doing Business 2014 Zimbabwe 52 GETTING CREDIT Where does the economy stand today? How well do the credit information system and Globally, Zimbabwe stands at 109 in the ranking of 189 collateral and bankruptcy laws in Zimbabwe facilitate economies on the ease of getting credit (figure 6.1). access to credit? The economy has a score of 1 on the The rankings for comparator economies and the depth of credit information index and a score of 7 on regional average ranking provide other useful the strength of legal rights index (see the summary of information for assessing how well regulations and scoring at the end of this chapter for details). Higher institutions in Zimbabwe support lending and scores indicate more credit information and stronger borrowing. 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 2014 Zimbabwe 53 GETTING CREDIT What are the changes over time? While the most recent Doing Business data reflect how institutions and regulations have been strengthened — well the credit information system and collateral and and where they have not (table 6.1). That can help bankruptcy laws in Zimbabwe support lending and identify where the potential for improvement is borrowing today, data over time can help show where greatest. Table 6.1 The ease of getting credit in Zimbabwe over time By Doing Business report year Indicator DB2005 DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 DB2014 Rank .. .. .. .. .. .. .. .. 105 109 Strength of legal rights 7 7 7 7 7 7 7 7 7 7 index (0-10) Depth of credit 1 1 1 1 1 1 1 1 1 1 information index (0-6) Public registry coverage 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (% of adults) Private bureau 1.5 1.5 1.5 1.5 1.5 1.5 1.5 3.8 3.8 3.7 coverage (% of adults) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Zimbabwe 54 GETTING CREDIT One way to put an economy’s score on the getting and shows the number of economies with this score in credit indicators into context is to see where the 2013 as well as the regional average score. Figure 6.3 economy stands in the distribution of scores across shows the same thing for the depth of credit economies. Figure 6.2 highlights the score on the information index. strength of legal rights index for Zimbabwe in 2013 Figure 6.2 How strong are legal rights for borrowers Figure 6.3 How much credit information is shared— and lenders? and how widely? Number of economies with each score on strength of legal Number of economies with each score on depth of credit rights index (0–10), 2013 information index (0–6), 2013 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. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Source: Doing Business database. Doing Business 2014 Zimbabwe 55 GETTING CREDIT When economies strengthen the legal rights of lenders credit information, they can increase entrepreneurs’ and borrowers under collateral and bankruptcy laws, access to credit. What credit reforms has Doing and increase the scope, coverage and accessibility of Business recorded in Zimbabwe (table 6.2)? Table 6.2 How has Zimbabwe made getting credit easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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. Source: Doing Business database. Doing Business 2014 Zimbabwe 56 GETTING CREDIT What are the details? The getting credit indicators reported here for The data on the legal rights of borrowers and lenders Zimbabwe are based on detailed information collected are gathered through a survey of financial lawyers and in that economy. The data on credit information verified through analysis of laws and regulations as sharing are collected through a survey of a credit well as public sources of information on collateral and registry and/or credit bureau (if one exists). To bankruptcy laws. For the strength of legal rights index, construct the depth of credit information index, a a score of 1 is assigned for each of 8 aspects related to score of 1 is assigned for each of 6 features of the legal rights in collateral law and 2 aspects in credit registry or credit bureau (see summary of bankruptcy law. scoring below). Summary of scoring for the getting credit indicators in Zimbabwe Sub-Saharan Africa OECD high income Indicator Zimbabwe average average Strength of legal rights index (0-10) 7 6 7 Depth of credit information index (0-6) 1 3 5 Public registry coverage (% of adults) 0.0 7.8 42.9 Private bureau coverage (% of adults) 3.7 25.2 73.9 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Regional averages for the depth of credit information index exclude economies with no credit registry or credit bureau. Regional averages for the credit registry coverage exclude economies with no credit registry. Regional averages for the credit bureau coverage exclude economies with no credit bureau. Strength of legal rights index (0–10) Index score: 7 Can any business use movable assets as collateral while keeping possession of the assets; and Yes any financial institution accept such assets as collateral ? 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 Yes its assets, without requiring a specific description of collateral? May a security right extend to future or after-acquired assets, and may it extend automatically Yes to 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 Yes include a maximum amount for which the assets are encumbered? Is a collateral registry in operation, that is unified geographically and by asset type, with an No electronic database indexed by debtor's names? Doing Business 2014 Zimbabwe 57 Strength of legal rights index (0–10) Index score: 7 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 either not subject to an automatic stay on enforcement when a debtor enters a court-supervised reorganization procedure, or does the law provide secured Yes creditors with grounds for relief from an automatic stay or/and sets a time limit to it? Does the law allow parties to agree in a collateral agreement that the lender may enforce its No security right out of court, at the time a security interest is created? Depth of credit information index (0–6) Credit bureau Credit registry Index score: 1 Are data on both firms and individuals distributed? No No 0 Are both positive and negative data distributed? Yes No 1 Does the registry distribute credit information from retailers, trade creditors or utility companies as well as No No 0 financial institutions? Are more than 2 years of historical credit information No No 0 distributed? Is data on all loans below 1% of income per capita No No 0 distributed? Is it guaranteed by law that borrowers can inspect No No 0 their data in the largest credit registry? Note: An economy receives a score of 1 if there is a "yes" to either private bureau or public registry. Credit bureau Credit registry Coverage (% of adults) (% of adults) Number of firms 0 0 Number of individuals 280,000 0 Source: Doing Business database. Doing Business 2014 Zimbabwe 58 PROTECTING INVESTORS Protecting investors matters for the ability of WHAT THE PROTECTING INVESTORS companies to raise the capital they need to grow, INDICATORS MEASURE innovate, diversify and compete. If the laws do not protect minority shareholders, investors may be reluctant to provide funding to companies through Extent of disclosure index (0–10) the purchase of shares unless they become the Approval process for related-party controlling shareholders. Effective regulations define transactions related-party transactions precisely, promote clear Disclosure requirements in case of related- and efficient disclosure requirements, require party transactions shareholder participation in major decisions of the company and set detailed standards of accountability Extent of director liability index (0–10) for company insiders. Ability of minority shareholders to file a direct or derivative lawsuit What do the indicators cover? Ability of minority shareholders to hold Doing Business measures the strength of minority interested parties and members of the shareholder protections against directors’ use of approving body liable for prejudicial related- corporate assets for personal gain—or self-dealing. party transactions The indicators distinguish 3 dimensions of investor protections: transparency of related-party Available legal remedies (damages, repayment of profits, fines, imprisonment and rescission transactions (extent of disclosure index), liability for of the transaction) self-dealing (extent of director liability index) and minority shareholders’ access to evidence before and Ease of shareholder suits index (0–10) during trial (ease of shareholder suits index). The Access to internal corporate documents ranking on the strength of investor protection index is (directly or through a government inspector) the simple average of the percentile rankings on these 3 indices. To make the data comparable across Documents and information available during trial economies, a case study uses several assumptions about the business and the transaction. Strength of investor protection index (0–10) The business (Buyer): Simple average of the extent of disclosure, extent of director liability and ease of  Is a publicly traded corporation listed on the shareholder suits indices economy’s most important stock exchange (or at least a large private company with multiple shareholders). the company purchase used trucks from another company he owns.  Has a board of directors and a chief executive officer (CEO) who may legally act on behalf of  The price is higher than the going price for used Buyer where permitted, even if this is not trucks, but the transaction goes forward. specifically required by law.  All required approvals are obtained, and all The transaction involves the following details: required disclosures made, though the transaction is prejudicial to Buyer.  Mr. James, a director and the majority shareholder of the company, proposes that  Shareholders sue the interested parties and the members of the board of directors. Doing Business 2014 Zimbabwe 59 PROTECTING INVESTORS Where does the economy stand today? How strong are investor protections against self- index (figure 7.1). While the indicator does not dealing in Zimbabwe? The economy has a score of 4.3 measure all aspects related to the protection of on the strength of investor protection index, with a minority investors, a higher ranking does indicate that higher score indicating stronger protections (see the an economy’s regulations offer stronger investor summary of scoring at the end of this chapter for protections against self-dealing in the areas measured. details). Globally, Zimbabwe stands at 128 in the ranking of 189 economies on the strength of investor protection Figure 7.1 How Zimbabwe and comparator economies rank on the strength of investor protection index Source: Doing Business database. Doing Business 2014 Zimbabwe 60 PROTECTING INVESTORS What are the changes over time? While the most recent Doing Business data reflect how the global ranking on the strength of investor well regulations in Zimbabwe protect minority protection index over time shows whether the investors today, data over time show whether the economy is slipping behind other economies in protections have been strengthened (table 7.1). And investor protections—or surpassing them. Table 7.1 The strength of investor protections in Zimbabwe over time By Doing Business report year Indicator DB2006 DB2007 DB2008 DB2009 DB2010 DB2011 DB2012 DB2013 DB2014 Rank .. .. .. .. .. .. .. 127 128 Extent of disclosure 8 8 8 8 8 8 8 8 8 index (0-10) Extent of director 1 1 1 1 1 1 1 1 1 liability index (0-10) Ease of shareholder 4 4 4 4 4 4 4 4 4 suits index (0-10) Strength of investor protection index (0- 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3 4.3 10) Note: n.a. = not applicable (the economy was not included in Doing Business for that year). DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Zimbabwe 61 PROTECTING INVESTORS One way to put an economy’s scores on the protecting shows the number of economies with this score in investors indicators into context is to see where the 2013 as well as the regional average score. Figure 7.3 economy stands in the distribution of scores across applies to the extent of director liability index, and economies. Figure 7.2 highlights the score on the figure 7.4 to the ease of shareholder suits index. extent of disclosure index for Zimbabwe in 2013 and Figure 7.2 How strong are disclosure requirements? Figure 7.3 How strong is the liability regime for directors? Number of economies with each score on the extent of Number of economies with each score on the extent of director liability index (0–10), 2013 disclosure index (0–10), 2013 Note: Higher scores indicate greater liability of directors. Note: Higher scores indicate greater disclosure. Source: Doing Business database. Source: Doing Business database. Doing Business 2014 Zimbabwe 62 PROTECTING INVESTORS Figure 7.4 How easy is accessing internal corporate documents? Number of economies with each score on the ease of shareholder suits index (0–10), 2013 Note: Higher scores indicate greater minority shareholder access to evidence before and during trial. Source: Doing Business database. Doing Business 2014 Zimbabwe 63 PROTECTING INVESTORS The scores recorded over time for Zimbabwe on the changes over time in the regional average score on strength of investor protection index may also be this index. revealing (figure 7.5). Equally interesting may be the Figure 7.5 Have investor protections become stronger over time? Strength of investor protection index (0–10) Note: The higher the score, the stronger the protections. Source: Doing Business database. Doing Business 2014 Zimbabwe 64 PROTECTING INVESTORS Economies with the strongest protections of minority reasonable time. As a result, reforms to strengthen investors from self-dealing require detailed disclosure investor protections may move ahead on different and define clear duties for directors. They also have fronts—such as through new or amended company well-functioning courts and up-to-date procedural laws, securities regulations or civil procedure rules. rules that give minority shareholders the means to What investor protection reforms has Doing Business prove their case and obtain a judgment within a recorded in Zimbabwe (table 7.2)? Table 7.2 How has Zimbabwe strengthened investor protections—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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. Source: Doing Business database. Doing Business 2014 Zimbabwe 65 PROTECTING INVESTORS What are the details? The protecting investors indicators reported here for ease of shareholder suits indices, scores are assigned Zimbabwe are based on detailed information collected to each based on a range of conditions relating to through a survey of corporate and securities lawyers disclosure, director liability and shareholder suits in a about securities regulations, company laws and court standard case study transaction (see the data notes at rules of evidence and procedure. To construct the the end of this chapter). The summary below shows extent of disclosure, extent of director liability and the details underlying the scores for Zimbabwe. Summary of scoring for the protecting investors indicators in Zimbabwe Sub-Saharan OECD high income Indicator Zimbabwe Africa average average Extent of disclosure index (0-10) 8 5 7 Extent of director liability index (0-10) 1 4 5 Ease of shareholder suits index (0-10) 4 5 7 Strength of investor protection index (0-10) 4.3 4.5 6.2 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Score Score description Extent of disclosure index (0-10) 8 What corporate body provides legally sufficient Board of directors and Mr. James is 2 approval for the transaction? not allowed to vote Whether disclosure of the conflict of interest by Mr. 2 Full disclosure of all material facts James to the board of directors is required? Whether immediate disclosure of the transaction to Disclosure on the transaction and Mr. 2 the public and/or shareholders is required? James' conflict of interest Whether disclosure of the transaction in published 1 Disclosure on the transaction only periodic filings (annual reports) is required? Whether an external body must review the terms of 1 Yes the transaction before it takes place? Extent of director liability index (0-10) 1 Whether shareholders can sue directly or derivatively for the damage that the Buyer-Seller transaction 0 No causes to the company? Whether shareholders can hold Mr. James liable for the damage that the Buyer-Seller transaction causes 0 Not liable to the company? Whether shareholders can hold members of the approving body liable for the damage that the Buyer- 1 Liable for negligence Seller transaction causes to the company? Doing Business 2014 Zimbabwe 66 Score Score description Whether a court can void the transaction upon a Not possible or only in case of Seller's 0 successful claim by a shareholder plaintiff? fraud or bad faith Whether Mr. James pays damages for the harm caused to the company upon a successful claim by 0 No the shareholder plaintiff? Whether Mr. James repays profits made from the transaction upon a successful claim by the 0 No shareholder plaintiff? Whether fines and imprisonment can be applied 0 No against Mr. James? Ease of shareholder suits index (0-10) 4 Whether shareholders owning 10% or less of Buyer's shares can inspect transaction documents before 1 Yes filing suit? Whether shareholders owning 10% or less of Buyer's shares can request an inspector to investigate the 0 No transaction? Whether the plaintiff can obtain any documents from 0 No documents available the defendant and witnesses during trial? Whether the plaintiff can request categories of documents from the defendant without identifying 0 No specific ones? Whether the plaintiff can directly question the 2 Yes, without approval from the judge defendant and witnesses during trial? Whether the level of proof required for civil suits is 1 Yes lower than that of criminal cases? Strength of investor protection index (0-10) 4.3 Source: Doing Business database. Doing Business 2014 Zimbabwe 67 PAYING TAXES Taxes are essential. They fund the public amenities, WHAT THE PAYING TAXES INDICATORS infrastructure and services that are crucial for a MEASURE properly functioning economy. But the level of tax rates needs to be carefully chosen—and needless Tax payments for a manufacturing company complexity in tax rules avoided. According to in 2012 (number per year adjusted for Doing Business data, in economies where it is more electronic and joint filing and payment) difficult and costly to pay taxes, larger shares of economic activity end up in the informal sector — Total number of taxes and contributions paid, where businesses pay no taxes at all. including consumption taxes (value added tax, sales tax or goods and service tax) What do the indicators cover? Method and frequency of filing and payment Using a case scenario, Doing Business measures Time required to comply with 3 major taxes the taxes and mandatory contributions that a (hours per year) medium-size company must pay in a given year as well as the administrative burden of paying taxes Collecting information and computing the tax and contributions. This case scenario uses a set of payable financial statements and assumptions about Completing tax return forms, filing with transactions made over the year. Information is proper agencies also compiled on the frequency of filing and Arranging payment or withholding payments as well as time taken to comply with tax laws. The ranking on the ease of paying taxes is Preparing separate tax accounting books, if the simple average of the percentile rankings on required its component indicators: number of annual Total tax rate (% of profit before all taxes) payments, time and total tax rate, with a threshold 1 Profit or corporate income tax being applied to the total tax rate. To make the data comparable across economies, several Social contributions and labor taxes paid by assumptions about the business and the taxes and the employer contributions are used. Property and property transfer taxes  TaxpayerCo is a medium-size business that Dividend, capital gains and financial started operations on January 1, 2011. transactions taxes  The business starts from the same financial Waste collection, vehicle, road and other taxes position in each economy. All the taxes  Taxes and mandatory contributions include and mandatory contributions paid during corporate income tax, turnover tax and all the second year of operation are recorded. labor taxes and contributions paid by the  Taxes and mandatory contributions are company. measured at all levels of government.  A range of standard deductions and exemptions are also recorded. 1 The threshold is defined as the highest total tax rate among the top 15% of economies in the ranking on the total tax rate. It is calculated and adjusted on a yearly basis. The threshold is not based on any economic theory of an “optimal tax rate” that minimizes distortions or maximizes efficiency in the tax system of an economy overall. Instead, it is mainly empirical in nature, set at the lower end of the distribution of tax rates levied on medium-size enterprises in the manufacturing sector as observed through the paying taxes indicators. This reduces the bias in the indicators toward economies that do not need to levy significant taxes on companies like the Doing Business standardized case study company because they raise public revenue in other ways—for example, through taxes on foreign companies, through taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of the methodology). This year’s threshold is 25.5%. Doing Business 2014 Zimbabwe 68 PAYING TAXES Where does the economy stand today? What is the administrative burden of complying with Globally, Zimbabwe stands at 142 in the ranking of 189 taxes in Zimbabwe—and how much do firms pay in economies on the ease of paying taxes (figure 8.1). The taxes? On average, firms make 49 tax payments a year, rankings for comparator economies and the regional spend 242 hours a year filing, preparing and paying average ranking provide other useful information for taxes and pay total taxes amounting to 35.3% of profit assessing the tax compliance burden for businesses in (see the summary at the end of this chapter for Zimbabwe. details). Figure 8.1 How Zimbabwe and comparator economies rank on the ease of paying taxes Source: Doing Business database. Doing Business 2014 Zimbabwe 69 PAYING TAXES What are the changes over time? The benchmarks provided by the economies that over show what is possible in easing the administrative time have had the best performance regionally or burden of tax compliance. And changes in regional globally on the number of payments or the time averages can show where Zimbabwe is keeping up— required to prepare and file taxes (figure 8.2) help and where it is falling behind. Figure 8.2 Has paying taxes become easier over time? Payments (number per year) Time (hours per year) Doing Business 2014 Zimbabwe 70 PAYING TAXES Total tax rate (% of profit) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB201 3 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. DB2013 rankings reflect changes to the methodology. For all economies with a total tax rate below the threshold of 25.5% applied in DB2014, the total tax rate is set at 25.5% for the purpose of calculating the ranking on the ease of paying taxes. Source: Doing Business database. Doing Business 2014 Zimbabwe 71 PAYING TAXES Economies around the world have made paying taxes concrete results. Some economies simplifying tax faster and easier for businesses—such as by payment and reducing rates have seen tax revenue consolidating filings, reducing the frequency of rise. What tax reforms has Doing Business recorded in payments or offering electronic filing and payment. Zimbabwe (table 8.1)? Many have lowered tax rates. Changes have brought Table 8.1 How has Zimbabwe made paying taxes easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. 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. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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. Source: Doing Business database. Doing Business 2014 Zimbabwe 72 PAYING TAXES What are the details? The indicators reported here for Zimbabwe are LOCATION OF STANDARDIZED COMPANY based on a standard set of taxes and contributions that would be paid by the case study company used by Doing Business in collecting the data (see City: Harare the section in this chapter on what the indicators cover). Tax practitioners are asked to review standard financial statements as well as a standard list of transactions that the company completed The taxes and contributions paid are listed in the during the year. Respondents are asked how much summary below, along with the associated number of in taxes and mandatory contributions the business payments, time and tax rate. must pay and what the process is for doing so. Summary of tax rates and administrative burden in Zimbabwe Sub-Saharan Africa OECD high income Indicator Zimbabwe average average Payments (number per year) 49 38 12 Time (hours per year) 242 314 175 Profit tax (%) 20.8 18.4 16.1 Labor tax and contributions (%) 5.1 13.7 23.1 Other taxes (%) 9.4 21.3 2.0 Total tax rate (% profit) 35.3 53.3 41.3 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. 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 separating taxable Corporate income tax 4 78 25% 19.5 out the profit AIDS levy various property Property tax 12 0 8.1 rates value Doing Business 2014 Zimbabwe 73 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 gross Social security salaries 0 paid jointly 96 3% 3.4 contributions with ceiling Road tax 4 0 USD 240 fixed fee 1.2 Manpower development gross 12 0 1% 1.1 duty salaries capital Capital gains tax 1 0 20% 0.7 gains Standards development gross 2 0 0.5% 0.6 levy salaries surcharge on AIDS levy 0 paid jointly 0 3% 0.6 corporate income tax Tax on check transactions 1 0 USD 0.05 per check 0.1 (stamp duty) interest Tax on interest 0 0 15% 0 income value not Value added tax (VAT) 12 68 15% 0 added included included small Fuel tax 1 0 in fuel 0 amount price Totals 49 242 35.3 Source: Doing Business database. Doing Business 2014 Zimbabwe 74 TRADING ACROSS BORDERS In today’s globalized world, making trade between WHAT THE TRADING ACROSS BORDERS economies easier is increasingly important for INDICATORS MEASURE business. Excessive document requirements, burdensome customs procedures, inefficient port operations and inadequate infrastructure all lead to Documents required to export and import extra costs and delays for exporters and importers, (number) stifling trade potential. Research shows that Bank documents exporters in developing countries gain more from Customs clearance documents a 10% drop in their trading costs than from a similar reduction in the tariffs applied to their Port and terminal handling documents products in global markets. Transport documents What do the indicators cover? Time required to export and import (days) Doing Business measures the time and cost Obtaining, filling out and submitting all the (excluding tariffs and the time and cost for sea documents transport) associated with exporting and importing Inland transport and handling a standard shipment of goods by sea transport, and the number of documents necessary to Customs clearance and inspections complete the transaction. The indicators cover Port and terminal handling procedural requirements such as documentation Does not include sea transport time requirements and procedures at customs and other regulatory agencies as well as at the port. They also Cost required to export and import (US$ per cover trade logistics, including the time and cost of container) inland transport to the largest business city. The All documentation ranking on the ease of trading across borders is the simple average of the percentile rankings on its Inland transport and handling component indicators: documents, time and cost Customs clearance and inspections to export and import. Port and terminal handling To make the data comparable across economies, Official costs only, no bribes Doing Business uses several assumptions about the business and the traded goods. The business: military items.  Is of medium size and employs 60 people.  Do not require refrigeration or any other special environment.  Is located in the periurban area of the economy’s largest business city.  Do not require any special phytosanitary or environmental safety standards other than  Is a private, limited liability company, accepted international standards. domestically owned, formally registered and operating under commercial laws and  Are one of the economy’s leading export or regulations of the economy. import products. The traded goods:  Are transported in a dry-cargo, 20-foot full container load.  Are not hazardous nor do they include Doing Business 2014 Zimbabwe 75 TRADING ACROSS BORDERS Where does the economy stand today? What does it take to export or import in Zimbabwe? Globally, Zimbabwe stands at 167 in the ranking of 189 According to data collected by Doing Business, economies on the ease of trading across borders exporting a standard container of goods requires 7 (figure 9.1). The rankings for comparator economies documents, takes 53 days and costs $3765. Importing and the regional average ranking provide other useful the same container of goods requires 8 documents, information for assessing how easy it is for a business takes 71 days and costs $5660 (see the summary of in Zimbabwe to export and import goods. procedures and documents at the end of this chapter for details). Figure 9.1 How Zimbabwe and comparator economies rank on the ease of trading across borders Source: Doing Business database. Doing Business 2014 Zimbabwe 76 TRADING ACROSS BORDERS What are the changes over time? The benchmarks provided by the economies that over possible in making it easier to trade across borders. time have had the best performance regionally or And changes in regional averages can show where globally on the documents, time or cost required to Zimbabwe is keeping up—and where it is falling export or import (figure 9.2) help show what is behind. Figure 9.2 Has trading across borders become easier over time? Documents to export (number) Time to export (days) Doing Business 2014 Zimbabwe 77 TRADING ACROSS BORDERS Cost to export (US$ per container) Documents to import (number) Doing Business 2014 Zimbabwe 78 TRADING ACROSS BORDERS Time to import (days) Cost to import (US$ per container) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Zimbabwe 79 TRADING ACROSS BORDERS In economies around the world, trading across borders systems. These changes help improve the trading as measured by Doing Business has become faster and environment and boost firms’ international easier over the years. Governments have introduced competitiveness. What trade reforms has Doing tools to facilitate trade—including single windows, Business recorded in Zimbabwe (table 9.1)? risk-based inspections and electronic data interchange Table 9.1 How has Zimbabwe made trading across borders easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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. Source: Doing Business database. Doing Business 2014 Zimbabwe 80 TRADING ACROSS BORDERS What are the details? The indicators reported here for Zimbabwe are LOCATION OF STANDARDIZED COMPANY based on a set of specific procedural requirements for trading a standard shipment of goods by ocean transport (see the section in this chapter on what City: Harare the indicators cover). Information on the procedures as well as the required documents and the time and cost to complete each procedure is The procedural requirements, and the associated time collected from local freight forwarders, shipping and cost, for exporting and importing a standard lines, customs brokers, port officials and banks. shipment of goods are listed in the summary below, along with the required documents. Summary of procedures and documents for trading across borders in Zimbabwe Sub-Saharan Africa OECD high income Indicator Zimbabwe average average Documents to export (number) 7 8 4 Time to export (days) 53 31 11 Cost to export (US$ per container) 3,765 2,108 1,070 Documents to import (number) 8 9 4 Time to import (days) 71 38 10 Cost to import (US$ per container) 5,660 2,793 1,090 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Procedures to export Time (days) Cost (US$) Documents preparation 33 300 Customs clearance and technical control 4 180 Ports and terminal handling 4 285 Inland transportation and handling 12 3,000 Totals 53 3,765 Procedures to import Time (days) Cost (US$) Documents preparation 42 360 Doing Business 2014 Zimbabwe 81 Procedures to import Time (days) Cost (US$) Customs clearance and technical control 6 350 Ports and terminal handling 9 450 Inland transportation and handling 14 4,500 Totals 71 5,660 Documents to export Documents to import Bill of Lading Bill of Lading Commercial invoice Cargo release order Customs export declaration (Form 21) Certificate of origin Exchange Control CD1 forms Commercial invoice Packing list Customs import declaration (Form 21) Pre-shipment inspection clean report of findings Packing list Transit entry documents (South Africa's Form Road manifest SAD500) Transit entry documents (South Africa's Form Source: Doing Business database. SAD500) Doing Business 2014 Zimbabwe 82 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 Procedures to enforce a contract through courts encourage new business relationships the courts (number) because businesses know they can rely on the courts if a new customer fails to pay. Speedy trials Steps to file and serve the case are essential for small enterprises, which may lack Steps for trial and judgment the resources to stay in business while awaiting the outcome of a long court dispute. Steps to enforce the judgment Time required to complete procedures What do the indicators cover? (calendar days) Doing Business measures the efficiency of the Time to file and serve the case judicial system in resolving a commercial dispute before local courts. Following the step-by-step Time for trial and obtaining judgment evolution of a standardized case study, it collects Time to enforce the judgment data relating to the time, cost and procedural complexity of resolving a commercial lawsuit. The Cost required to complete procedures (% of ranking on the ease of enforcing contracts is the claim) simple average of the percentile rankings on its Average attorney fees component indicators: procedures, time and cost. Court costs The dispute in the case study involves the breach Enforcement costs of a sales contract between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes the case from simple debt enforcement. To make the data comparable across economies, Doing Business uses several assumptions about the case:  The seller and buyer are located in the economy’s largest business city.  The dispute on the quality of the goods requires an expert opinion.  The buyer orders custom-made goods, then fails to pay.  The judge decides in favor of the seller; there is no appeal.  The seller sues the buyer before a competent court.  The seller enforces the judgment through a public sale of the buyer’s movable assets.  The value of the claim is 200% of income per capita.  The seller requests a pretrial attachment to secure the claim. Doing Business 2014 Zimbabwe 83 ENFORCING CONTRACTS Where does the economy stand today? How efficient is the process of resolving a commercial Globally, Zimbabwe stands at 118 in the ranking of 189 dispute through the courts in Zimbabwe? According to economies on the ease of enforcing contracts (figure data collected by Doing Business, contract enforcement 10.1). The rankings for comparator economies and the takes 410 days, costs 113.1% of the value of the claim regional average ranking provide other useful and requires 38 procedures (see the summary at the benchmarks for assessing the efficiency of contract end of this chapter for details). enforcement in Zimbabwe. Figure 10.1 How Zimbabwe and comparator economies rank on the ease of enforcing contracts Source: Doing Business database. Doing Business 2014 Zimbabwe 84 ENFORCING CONTRACTS What are the changes over time? The benchmarks provided by the economies that over help show what is possible in improving the efficiency time have had the best performance regionally or of contract enforcement. And changes in regional globally on the number of steps, time or cost required averages can show where Zimbabwe is keeping up— to enforce a contract through the courts (figure 10.2) and where it is falling behind. Figure 10.2 Has enforcing contracts become easier over time? Time (days) Cost (% of claim) Doing Business 2014 Zimbabwe 85 ENFORCING CONTRACTS Procedures (number) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. Source: Doing Business database. Doing Business 2014 Zimbabwe 86 ENFORCING CONTRACTS Economies in all regions have improved contract often work on reducing backlogs by introducing enforcement in recent years. A judiciary can be periodic reviews to clear inactive cases from the docket improved in different ways. Higher-income economies and by making procedures faster. What reforms tend to look for ways to enhance efficiency by making it easier (or more difficult) to enforce contracts introducing new technology. Lower-income economies has Doing Business recorded in Zimbabwe (table 10.1)? Table 10.1 How has Zimbabwe made enforcing contracts easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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. Source: Doing Business database. Doing Business 2014 Zimbabwe 87 ENFORCING CONTRACTS What are the details? The indicators reported here for Zimbabwe are COURT NAME based on a set of specific procedural steps required to resolve a standardized commercial dispute through the courts (see the section in this City: Harare chapter on what the indicators cover). These procedures, and the time and cost of completing Claim Value LCU: 1529 them, are identified through study of the codes of civil procedure and other court regulations, as well Court Name: Harare Magistrates Court as through surveys completed by local litigation lawyers (and, in a quarter of the economies The procedures for resolving a commercial lawsuit, and covered by Doing Business, by judges as well). the associated time and cost, are listed in the summary below. Summary of procedures for enforcing a contract in Zimbabwe—and the time and cost Sub-Saharan Africa OECD high income Indicator Zimbabwe average average Time (days) 410 652 529 Filing and service 14 Trial and judgment 247 Enforcement of judgment 149 Cost (% of claim) 113.1 51.1 21.0 Attorney cost (% of claim) 100.0 Court cost (% of claim) 8.0 Enforcement Cost (% of claim) 5.1 Procedures (number) 38 39 31 Note: In cases where an economy’s regional classification is “OECD high income,” regional averages above are only displayed once. Doing Business 2014 Zimbabwe 88 ENFORCING CONTRACTS No. Procedure Filing and service: Plaintiff’s filing of summons and complaint: Plaintiff files his summons and complaint with the court, orally * or in writing. * Plaintiff’s payment of court fees: Plaintiff pays court duties, stamp duties, or any other type of court fee. Registration of court case: The court administration registers the lawsuit or court case. This includes 1 assigning a reference number to the lawsuit or court case. Assignment of court case to a judge: The court case is assigned to a specific judge through a random * procedure, automated system, ruling of an administrative judge, court officer, etc. Plaintiff’s request for service: Plaintiff makes a written request to the court that process be served on 2 Defendant. 3 Court order for service: Upon Plaintiff’s request, judge orders process be served on Defendant. Delivery of summons and complaint to person authorized to perform service of process on Defendant: 4 The judge or a court officer delivers the summons to a summoning office, officer, or authorized person (including Plaintiff), for service of process on Defendant. First attempt at physical delivery: A first attempt to physically deliver summons and complaint to 5 Defendant is successful in the majority of cases. * Proof of service: Plaintiff submits proof of service to court. Application for pre-judgment attachment: Plaintiff submits an application in writing for the attachment of * Defendant's property prior to judgment. (see assumption 5) Decision on pre-judgment attachment: The judge decides whether to grant Plaintiff’s request for pre- * judgment attachment of Defendant’s property and notifies Plaintiff and Defendant of the decision. This step may include requesting that Plaintiff submit guarantees or bonds to secure Defendant Pre-judgment attachment.: Defendant's property is attached prior to judgment. Attachment is either 6 physical or achieved by registering, marking, debiting or separating assets. (see assumption 5) Trial and judgment: Defendant’s filing of defense or answer to Plaintiff’s claim: Defendant files a written pleading which includes his defense or answer on the merits of the case. Defendant's written answer may or may not 7 include witness statements, expert statements, the documents Defendant relies on as evidence and the legal authori Plaintiff’s written response to Defendant's defense or answer: Plaintiff responds to Defendant’s defense or 8 answer with a written pleading. Plaintiff's answer may or may not include a witness statements or expert (witness) statements. Doing Business 2014 Zimbabwe 89 No. Procedure Filing of pleadings: Plaintiff and Defendant file written pleadings and submissions with the court and 9 transmit copies of the written pleadings or submissions to one another. The pleadings may or may not include witness statements or expert (witness) statements. Adjournments: Court procedure is delayed because one or both parties request and obtain an 10 adjournment to submit written pleadings. Framing of issues: Plaintiff and Defendant assist the court in framing issues on which evidence is to be 11 presented. Pre-trial conference on procedure: The judge meets with the parties to discuss procedural issues (for 12 example which applications and motions parties intend to file, which documents parties intend to rely on, what will be presented as evidence the oral hearing or trial, etc.) Setting of date for mediation hearing: The judge sets a date for a mediation hearing, sometimes also * called a 'pre-trial conference,' and notifies the parties of the hearing date. Mediation hearing: The judge during this informal meeting with the parties encourages them to settle the 13 case. The judge acts as mediator. If the case cannot be settled, the judge may draft a pre-trial conference report, after which the case may be allocated to another judg Request for interlocutory order: Defendant raises preliminary issues, such as jurisdiction, statute of * limitation, etc. Court’s issuance of interlocutory order: Court decides the preliminary issu es the Defendant raised by * issuing an interlocutory order. Discovery requests: Plaintiff and Defendant make requests for the disclosure of documents, attempting to * force the other party to reveal potentially detrimental documents. Discovery disputes: Following a request for discovery of documentary evidence, the other party disputes 14 the request and calls upon the judge to decide the issue. 15 Request for oral hearing or trial: Plaintiff applies for the date(s) for the oral hearing or trial. * Setting of date(s) for oral hearing or trial: The judge sets the date(s) for the oral hearing or trial. Pre-trial conference aimed at preparing for trial: The judge meets with parties to make practical 16 arrangements for the trial (for example, the number of witnesses parties intend to call on during trial, how much time each party is given to present oral arguments etc.). Adjournments: Court proceedings are delayed because one or both parties request and obtain an 17 adjournment to prepare for the oral hearing or trial. Trial (prevalent in common law): The parties argue the merits of the case at (an) oral session(s) before the 18 court. Witnesses and expert witnesses are questioned and cross-examined during trial. Adjournments: Court proceedings are delayed because one or both parties request and obtain an 19 adjournment during the oral hearing or trial, resulting in an additional or later trial or hearing date. Final arguments: The parties present their final factual and legal arguments to the court either by oral * presentation or by a written submission. 20 Judgment date: The judge sets a date for delivery of the judgment. Doing Business 2014 Zimbabwe 90 No. Procedure 21 Notification of judgment in court: The parties are notified of the judgment at a court hearing. 22 Writing of judgment: The judge produces a written copy of the judgment. Registration of judgment: The court office registers the judgment after receiving a written copy of the 23 judgment. Court notification of availability of the written judgment: The court notifies the parties that the written 24 judgment is available at the courthouse. 25 Plaintiff's receipt of a copy of written judgment: Plaintiff receives a copy of the written judgment. Notification of Defendant of judgment: Plaintiff or court formally notifies the Defendant of the judgment. 26 The appeal period starts to run the day the Defendant is formally notified of the judgment. Appeal period: By law, Defendant has the opportunity to appeal the judgment during a period specified in 27 the law. Defendant decides not to appeal. Judgment becomes final the day the appeal period ends. Reimbursement by Defendant of Plaintiff's court fees: The judgment obliges Defendant to reimburse 28 Plaintiff for the court fees Plaintiff has advanced, because Defendant has lost the case. Enforcement of judgment: Plaintiff’s request for enforcement order: Plaintiff applies to the court to obtain the enforcement order * ('seal' on judgment). Plaintiff’s advancement of enforcement fees: Plaintiff pays the fees related to the enforcement of the 29 judgment. Attachment of enforcement order to judgment: The judge attaches the enforcement order (‘seal’) to the 30 judgment. Delivery of enforcement order: The court's enforcement order is delivered to a court enforcement officer * or a (private) bailiff. Identification of Defendant's assets for attachment by court official or Defendant: Judge, a court 31 enforcement officer, a (private) bailiff or the Defendant himself identifies Defendant's movable assets for attachment. Attachment: Defendant’s movable goods are attached (physically or by registering, marking or separating 32 assets). Report on execution of attachment: A court enforcement officer or private process server delivers a report 33 on the attachment of Defendant's movable goods to the judge. Call for public auction: The judge calls a public auction by, for example, advertising or publication in the 34 newspapers. 35 Sale through public auction: The Defendant’s movable property is sold at public auction. Distribution of proceeds: The proceeds of the public auction are distributed to various creditors (including 36 Plaintiff), according to the rules of priority. Reimbursement of Plaintiff’s enforcement fees: Defendant reimburses Plaintiff's enforcement fees which 37 Plaintiff had advanced previously. Doing Business 2014 Zimbabwe 91 No. Procedure 38 Payment: Court orders that the proceeds of the public auction or the direct sale be delivered to Plaintiff. * Not counted in the total number of procedures. Source: Doing Business database. Doing Business 2014 Zimbabwe 92 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 Time required to recover debt (years) businesses to normal operation and increase Measured in calendar years returns to creditors. By improving the expectations of creditors and debtors about the outcome of Appeals and requests for extension are insolvency proceedings, well-functioning included insolvency systems can facilitate access to finance, Cost required to recover debt (% of debtor’s save more viable businesses and thereby improve estate) growth and sustainability in the economy overall. Measured as percentage of estate value What do the indicators cover? Court fees Doing Business studies the time, cost and outcome Fees of insolvency administrators of insolvency proceedings involving domestic entities. It does not measure insolvency Lawyers’ fees proceedings of individuals and financial Assessors’ and auctioneers’ fees institutions. The data are derived from survey Other related fees responses by local insolvency practitioners and verified through a study of laws and regulations as Outcome well as public information on bankruptcy systems. Whether business continues operating as a The ranking on the ease of resolving insolvency is going concern or business assets are sold based on the recovery rate, which is recorded as piecemeal cents on the dollar recouped by creditors through Recovery rate for creditors (cents on the reorganization, liquidation or debt enforcement dollar) (foreclosure) proceedings. The recovery rate is a Measures the cents on the dollar recovered function of time, cost and other factors, such as by creditors lending rate and the likelihood of the company continuing to operate. Present value of debt recovered To make the data comparable across economies, Official costs of the insolvency proceedings Doing Business uses several assumptions about the are deducted business and the case. It assumes that the Depreciation of furniture is taken into company: account  Is a domestically owned, limited liability Outcome for the business (survival or not) company operating a hotel. affects the maximum value that can be recovered  Operates in the economy’s largest business city.  Has 201 employees, 1 main secured  Has a higher value as a going concern—and creditor and 50 unsecured creditors. the efficient outcome is either reorganization or sale as a going concern, not piecemeal liquidation. Doing Business 2014 Zimbabwe 93 RESOLVING INSOLVENCY Where does the economy stand today? Speed, low costs and continuation of viable businesses piecemeal sale. The average recovery rate is 13.1 cents characterize the top-performing economies. How on the dollar. efficient are insolvency proceedings in Zimbabwe? Globally, Zimbabwe stands at 156 in the ranking of 189 According to data collected by Doing Business, economies on the ease of resolving insolvency (figure resolving insolvency takes 3.3 years on average and 11.1). The rankings for comparator economies and the costs 22% of the debtor’s estate, with the most likely regional average ranking provide other useful outcome being that the company will be sold as benchmarks for assessing the efficiency of insolvency proceedings in Zimbabwe. Figure 11.1 How Zimbabwe and comparator economies rank on the ease of resolving insolvency Source: Doing Business database. Doing Business 2014 Zimbabwe 94 RESOLVING INSOLVENCY What are the changes over time? The benchmarks provided by the economies that over possible in improving the efficiency of insolvency time have had the best performance regionally or proceedings. And changes in regional averages can globally on the time or cost of insolvency proceedings show where Zimbabwe is keeping up—and where it is or on the recovery rate (figure 11.2) help show what is falling behind. Figure 11.2 Has resolving insolvency become easier over time? Time (years) Cost (% of estate) Doing Business 2014 Zimbabwe 95 RESOLVING INSOLVENCY Recovery rate (cents on the dollar) Note: DB2013 rankings shown are not last year’s published rankings but comparable rankings for DB2013 that capture the effects of such factors as data corrections and the addition of 4 economies (Libya, Myanmar, San Marino and South Sudan) to the sample this year. “No practice” indicates that in each of the previous 5 years the economy had no cases involving a judicial reorganization, judicial liquidation or debt enforcement procedure (foreclosure). This means that creditors are unlikely to recover their money through a formal legal process (in or out of court). The recovery rate for “no practice” economies is 0. Regional averages on time and cost exclude economies with a “no practice” mark. Source: Doing Business database. Doing Business 2014 Zimbabwe 96 RESOLVING INSOLVENCY A well-balanced bankruptcy system distinguishes change. Many recent reforms of bankruptcy laws have companies that are financially distressed but been aimed at helping more of the viable businesses economically viable from inefficient companies that survive. What insolvency reforms has Doing Business should be liquidated. But in some insolvency systems recorded in Zimbabwe (table 11.1)? even viable businesses are liquidated. This is starting to Table 11.1 How has Zimbabwe made resolving insolvency easier—or not? By Doing Business report year DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. DB2011 No reform as measured by Doing Business. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. 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. Source: Doing Business database. Doing Business 2014 Zimbabwe 97 EMPLOYING WORKERS Doing Business measures flexibility in the regulation of employing workers methodology proposed by the employment, specifically as it affects the hiring and consultative group are available on the Doing Business redundancy of workers and the rigidity of working website (http://www.doingbusiness.org). The data on hours. Over the period from 2007 to 2011 employing workers are based on a detailed survey of improvements were made to align the methodology employment regulations that is completed by local for the employing workers indicators with the letter lawyers and public officials. Employment laws and and spirit of the International Labour Organization regulations as well as secondary sources are reviewed (ILO) conventions. Only 4 of the 188 ILO conventions to ensure accuracy. cover areas measured by Doing Business: employee To make the data comparable across economies, termination, weekend work, holiday with pay and night several assumptions about the worker and the work. The Doing Business methodology is fully business are used. consistent with these 4 conventions. The ILO conventions covering areas related to the Employing The worker: Workers indicators do not include the ILO core labor  Earns a salary plus benefits equal to the standards—8 conventions covering the right to economy’s average wage during the entire collective bargaining, the elimination of forced labor, period of his employment. the abolition of child labor and equitable treatment in  Has a pay period that is the most common for workers in the economy. employment practices.  Is a lawful citizen who belongs to the same race and religion as the majority of the Between 2009 and 2011 the World Bank Group worked economy’s population. with a consultative group—including labor lawyers,  Resides in the economy’s largest business city. employer and employee representatives, and experts  Is not a member of a labor union, unless from the ILO, OECD, civil society and the private membership is mandatory. sector—to review the employing workers methodology and explore future areas of research. A i The business:  Is a limited liability company. full report with the conclusions of the consultative  Operates in the economy’s largest business group is available at city. http://www.doingbusiness.org/methodology/employin  Is 100% domestically owned. g-workers.  Operates in the manufacturing sector.  Has 60 employees. This year Doing Business continued research collecting  Is subject to collective bargaining agreements additional data on regulations covering the in economies where such agreements cover probationary period for new employees. more than half the manufacturing sector and apply even to firms not party to them. Doing Business 2014 presents the data on the  Abides by every law and regulation but does not grant workers more benefits than employing workers indicators in an annex. The report mandated by law, regulation or (if applicable) does not present rankings of economies on the collective bargaining agreement. employing workers indicators nor include the topic in the aggregate ranking on the ease of doing business. Detailed data collected on labor regulations and the Doing Business 2014 Zimbabwe 98 EMPLOYING WORKERS What do some of the data show? One of the employing workers indicators is the worker in his or her first job. Doing Business data show difficulty of hiring index. This measure assesses, among the trend in the minimum wage applied by Zimbabwe other things, the minimum wage for a 19-year-old (figure 12.1). Figure 12.1 Has the minimum wage for a 19-year-old worker or an apprentice increased over time? Minimum wage (US$ per month) Note: A horizontal line along the x-axis of the figure indicates that the economy has no minimum wage. Source: Doing Business database. Doing Business 2014 Zimbabwe 99 EMPLOYING WORKERS Employment laws are needed to protect workers from past 5 years did so in ways that increased labor market arbitrary or unfair treatment and to ensure efficient flexibility. What changes did Zimbabwe adopt that contracting between employers and workers. Many affected the Doing Business indicators on employing economies that changed their labor regulations in the workers (table 12.1)? Table 12.1 What changes did Zimbabwe make in employing workers in 2013? DB year Reform DB2009 No reform as measured by Doing Business. DB2010 No reform as measured by Doing Business. Zimbabwe reduced the severance payment obligation DB2011 applicable in case of redundancy dismissals. DB2012 No reform as measured by Doing Business. DB2013 No reform as measured by Doing Business. DB2014 No reform as measured by Doing Business. Source: Doing Business database. Doing Business 2014 Zimbabwe 100 EMPLOYING WORKERS What are the details? The data on employing workers reported here for lawyers and public officials. Employment laws and Zimbabwe are based on a detailed survey of regulations as well as secondary sources are reviewed employment regulations that is completed by local to ensure accuracy. Rigidity of employment index The rigidity of employment index measures 3 areas of labor regulation: difficulty of hiring, rigidity of hours and difficulty of redundancy. Difficulty of hiring index The difficulty of hiring index measures whether fixed- worker. (The average value added per worker is the term contracts are prohibited for permanent tasks; the ratio of an economy’s gross national income per capita maximum cumulative duration of fixed-term contracts; to the working-age population as a percentage of the and the ratio of the minimum wage for a trainee or total population.) first-time employee to the average value added per Difficulty of hiring index 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 for a 19-year old worker or an apprentice (US$/month) 246.5 Ratio of minimum wage to value added per worker 2.43 Source: Doing Business database. Doing Business 2014 Zimbabwe 101 EMPLOYING WORKERS Rigidity of hours index The rigidity of hours index has 5 components: whether respond to a seasonal increase in production; and there are restrictions on night work; whether there are whether the average paid annual leave for a worker restrictions on weekly holiday work; whether the with 1 year of tenure, a worker with 5 years and a workweek can consist of 5.5 days or is more than 6 worker with 10 years is more than 26 working days or days; whether the workweek can extend to 50 hours or fewer than 15 working days. more (including overtime) for 2 months a year to Rigidity of hours index Data 8 1/2 hours, since the working hours Standard workday in manufacturing (hours) shall not exceed 44 hours per week or 10 hours in any period of 24 hours 50-hour workweek allowed for 2 months a year in case of a seasonal Yes increase in production? Maximum working days per week 6.0 Premium for night work (% of hourly pay) in case of continuous 15% operations Premium for work on weekly rest day (% of hourly pay) in case of 100% continuous operations Major restrictions on night work in case of continuous operations? Yes Major restrictions on weekly holiday in case of continuous operations? No Paid annual leave for a worker with 1 year of tenure (in working days) 22.0 Paid annual leave for a worker with 5 years of tenure (in working days) 22.0 Paid annual leave for a worker with 10 years of tenure (in 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. Doing Business 2014 Zimbabwe 102 EMPLOYING WORKERS Difficulty of redundancy index The difficulty of redundancy index has 8 components: worker; whether the employer needs approval from a whether redundancy is disallowed as a basis for third party to terminate a group of 9 redundant terminating workers; whether the employer needs to workers; whether the law requires the employer to notify a third party (such as a government agency) to reassign or retrain a worker before making the worker terminate 1 redundant worker; whether the employer redundant; whether priority rules apply for needs to notify a third party to terminate a group of 9 redundancies; and whether priority rules apply for redundant workers; whether the employer needs reemployment. approval from a third party to terminate 1 redundant Difficulty of redundancy index Data Dismissal due to redundancy allowed by law? Yes Third-party notification if 1 worker is dismissed? Yes Third-party approval if 1 worker is dismissed? Yes Third-party notification if 9 workers are dismissed? Yes Third-party approval if 9 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 2014 Zimbabwe 103 EMPLOYING WORKERS Redundancy cost The redundancy cost indicator measures the cost of notice requirements and severance payments advance notice requirements, severance payments and applicable to a worker with 1 year of tenure, a worker penalties due when terminating a redundant worker, with 5 years and a worker with 10 years is used to expressed in weeks of salary. The average value of assign the score. Redundancy cost indicator Data Notice period for redundancy dismissal (for a worker with 1 year of tenure, in salary 13.0 weeks) Notice period for redundancy dismissal (for a worker with 5 years of tenure, in 13.0 salary weeks) Notice period for redundancy dismissal (for a worker with 10 years of tenure, in 13.0 salary weeks) Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years 13.0 of tenure, in salary weeks) Severance pay for redundancy dismissal (for a worker with 1 year of tenure, in 13.0 salary weeks) Severance pay for redundancy dismissal (for a worker with 5 years of tenure, in 65.0 salary weeks) Severance pay for redundancy dismissal (for a worker with 10 years of tenure, in 130.0 salary weeks) Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years 69.3 of tenure, in salary weeks) Source: Doing Business database. Doing Business 2014 Zimbabwe 104 DATA NOTES The indicators presented and analyzed in Doing rounds of verification, leading to revisions or Business measure business regulation and the expansions of the information collected. protection of property rights—and their effect on businesses, especially small and medium-size domestic firms. First, the indicators document the complexity of ECONOMY CHARACTERISTICS regulation, such as the number of procedures to start a business or to register and transfer commercial property. Second, they gauge the time and cost to Gross national income per capita achieve a regulatory goal or comply with regulation, such as the time and cost to enforce a contract, go Doing Business 2014 reports 2012 income per capita through bankruptcy or trade across borders. Third, as published in the World Bank’s World Development they measure the extent of legal protections of Indicators 2013. Income is calculated using the Atlas property, for example, the protections of investors method (current U.S. dollars). For cost indicators against looting by company directors or the range of expressed as a percentage of income per capita, assets that can be used as collateral according to 2012 gross national income (GNI) in U.S. dollars is secured transactions laws. Fourth, a set of indicators used as the denominator. GNI data were not documents the tax burden on businesses. Finally, a set available from the World Bank for Afghanistan, The of data covers different aspects of employment Bahamas, Bahrain, Barbados, Brunei Darussalam, regulation. The 11 sets of indicators measured in Djibouti, the Islamic Republic of Iran, Kuwait, Libya, Doing Business were added over time, and the sample Myanmar, New Zealand, Oman, San Marino, the of economies expanded. Syrian Arab Republic, West Bank and Gaza, and the Republic of Yemen. In these cases GDP or GNP per The data for all sets of indicators in Doing Business 2 capita data and growth rates from other sources, 2014 are for June 2013. such as the International Monetary Fund’s World Economic Outlook database and the Economist Intelligence Unit, were used. Methodology Region and income group The Doing Business data are collected in a standardized way. To start, the Doing Business team, Doing Business uses the World Bank regional and with academic advisers, designs a questionnaire. The income group classifications, available at questionnaire uses a simple business case to ensure http://data.worldbank.org/about/country- classifications. The World Bank does not assign comparability across economies and over time—with regional classifications to high-income economies. assumptions about the legal form of the business, its For the purpose of the Doing Business report, high- size, its location and the nature of its operations. income OECD economies are assigned the “regional” Questionnaires are administered to more than 10,200 classification OECD high income. Figures and tables local experts, including lawyers, business consultants, presenting regional averages include economies accountants, freight forwarders, government officials from all income groups (low, lower middle, upper and other professionals routinely administering or middle and high income). advising on legal and regulatory requirements (table Population 21.2). These experts have several rounds of interaction with the Doing Business team, involving conference Doing Business 2014 reports midyear 2012 calls, written correspondence and visits by the team. population statistics as published in World For Doing Business 2014 team members visited 33 Development Indicators 2013. economies to verify data and recruit respondents. The data from questionnaires are subjected to numerous The Doing Business methodology offers several advantages. It is transparent, using factual information about what laws and regulations say and allowing 2 The data for paying taxes refer to January – December 2012. multiple interactions with local respondents to clarify Doing Business 2014 Zimbabwe 105 potential misinterpretations of questions. Having entrepreneurs reported in the World Bank Enterprise representative samples of respondents is not an issue; Surveys or other perception surveys. Doing Business is not a statistical survey, and the texts This year Doing Business completed subnational of the relevant laws and regulations are collected and studies in Colombia, Italy and the city of Hargeisa answers checked for accuracy. The methodology is (Somaliland) and is currently updating indicators in inexpensive and easily replicable, so data can be Egypt, Mexico and Nigeria. Doing Business also collected in a large sample of economies. Because published regional studies for the g7+ and the East standard assumptions are used in the data collection, African Community. The g7+ group is a country- comparisons and benchmarks are valid across owned and country-led global mechanism established economies. Finally, the data not only highlight the in April 2010 to monitor, report and draw attention to extent of specific regulatory obstacles to business but the unique challenges faced by fragile states. The also identify their source and point to what might be member countries included in the report are reformed. Information on the methodology for each Afghanistan, Burundi, the Central African Republic, Doing Business topic can be found on the Doing Chad, the Comoros, the Democratic Republic of Business website at Congo, Côte d’Ivoire, Guinea, Guinea-Bissau, Haiti, http://www.doingbusiness.org/methodology. Liberia, Papua New Guinea, Sierra Leone, the Solomon Islands, South Sudan, Timor-Leste and Togo. Limits to what is measured The subnational studies point to differences in business regulation and its implementation —as well as The Doing Business methodology has 5 limitations that in the pace of regulatory reform—across cities in the should be considered when interpreting the data. First, same economy. For several economies subnational the collected data refer to businesses in the economy’s studies are now periodically updated to measure largest business city (which in some economies differs change over time or to expand geographic coverage from the capital) and may not be representative of to additional cities. This year that is the case for all the regulation in other parts of the economy. To address subnational studies published. this limitation, subnational Doing Business indicators were created (box 21.1). Second, the data often focus on a specific business form—generally a limited liability company (or its legal equivalent) of a specified Changes in what is measured size—and may not be representative of the regulation The methodology for 2 indicator sets—trading across on other businesses, for example, sole proprietorships. borders and paying taxes—was updated this year. For Third, transactions described in a standardized case trading across borders, documents that are required scenario refer to a specific set of issues and may not purely for purposes of preferential treatment are no represent the full set of issues a business encounters. longer included in the list of documents (for example, Fourth, the measures of time involve an element of a certificate of origin if the use is only to qualify for a judgment by the expert respondents. When sources preferential tariff rate under trade agreements). For indicate different estimates, the time indicators paying taxes, the value of fuel taxes is no longer reported in Doing Business represent the median included in the total tax rate because of the difficulty values of several responses given under the of computing these taxes in a consistent way across all assumptions of the standardized case. economies covered. The fuel tax amounts are in most cases very small, and measuring these amounts is Finally, the methodology assumes that a business has often complicated because they depend on fuel full information on what is required and does not consumption. Fuel taxes continue to be counted in the waste time when completing procedures. In practice, number of payments. completing a procedure may take longer if the business lacks information or is unable to follow up In a change involving several indicator sets, the rule promptly. Alternatively, the business may choose to establishing that each procedure must take at least 1 disregard some burdensome procedures. For both day was removed for procedures that can be fully reasons the time delays reported in Doing Business completed online in just a few hours. This change 2014 would differ from the recollection of affects the time indicator for starting a business, Doing Business 2014 Zimbabwe 106 dealing with construction permits and registering with one another, while the distance to frontier property. For procedures that can be fully completed measure benchmarks economies to the frontier in 3 online, the duration is now set at half a day rather than regulatory practice, measuring the absolute distance to a full day. the best performance on each indicator. Both measures can be used for comparisons over time. The threshold for the total tax rate introduced in 2011 When compared across years, the distance to frontier for the purpose of calculating the ranking on the ease measure shows how much the regulatory environment of paying taxes was updated. All economies with a for local entrepreneurs in each economy has changed total tax rate below the threshold (which is calculated over time in absolute terms, while the ease of doing and adjusted on a yearly basis) receive the same business ranking can show only relative change. ranking on the total tax rate indicator. The threshold is not based on any economic theory of an “optimal tax Ease of doing business rate” that minimizes distortions or maximizes efficiency The ease of doing business index ranks economies in the tax system of an economy overall. Instead, it is from 1 to 189. For each economy the ranking is mainly empirical in nature, set at the lower end of the calculated as the simple average of the percentile distribution of tax rates levied on medium-size rankings on each of the 10 topics included in the index enterprises in the manufacturing sector as observed in Doing Business 2014: starting a business, dealing through the paying taxes indicators. This reduces the with construction permits, getting electricity, bias in the indicators toward economies that do not registering property, getting credit, protecting need to levy significant taxes on companies like the investors, paying taxes, trading across borders, Doing Business standardized case study company enforcing contracts, and resolving insolvency. The because they raise public revenue in other ways—for employing workers indicators are not included in this example, through taxes on foreign companies, through year’s aggregate ease of doing business ranking. taxes on sectors other than manufacturing or from natural resources (all of which are outside the scope of Construction of the ease of doing business index the methodology). This year the threshold is 25,5%. Here is one example of how the ease of doing business index is constructed. In Denmark it takes 4 procedures, 5.5 days and 0.2% of annual income per capita in fees Data challenges and revisions to open a business. The minimum capital requirement Most laws and regulations underlying the Doing is 24% of annual income per capita. On these 4 Business data are available on the Doing Business indicators Denmark ranks in the 12th, 11th, 1st and website at http://www.doingbusiness.org. All the 79th percentiles. So on average Denmark ranks in the sample questionnaires and the details underlying the 25th percentile on the ease of starting a business. It indicators are also published on the website. Questions ranks in the 21st percentile on getting credit, 19th on the methodology and challenges to data can be percentile on paying taxes, 27th percentile on submitted through the website’s “Ask a Question” enforcing contracts, 5th percentile on resolving function at http://www.doingbusiness.org. insolvency and so on. Higher rankings indicate simpler regulation and stronger protection of property rights. Ease of doing business and distance to The simple average of Denmark’s percentile rankings frontier on all topics is 17th. When all economies are ordered Doing Business 2014 presents results for 2 aggregate by their average percentile rankings, Denmark stands measures: the aggregate ranking on the ease of doing at 5 in the aggregate ranking on the ease of doing business and the distance to frontier measure. The business. ease of doing business ranking compares economies More complex aggregation methods—such as 3 For getting electricity the rule that each procedure must take a principal components and unobserved components— minimum of 1 day still applies because in practice there are no yield a ranking nearly identical to the simple average cases in which procedures can be fully completed online in less than a day. For example, even though in some cases it is possible to apply for an electricity connection online, additional requirements mean that the process cannot be completed in less than 1 day. Doing Business 2014 Zimbabwe 107 4 used by Doing Business. Thus, Doing Business uses 58 on enforcing contracts, 116 on dealing with the simplest method: weighting all topics equally and, construction permits and 145 on getting electricity. within each topic, giving equal weight to each of the Variation in performance across the indicator sets is topic components. not at all unusual. It reflects differences in the degree If an economy has no laws or regulations covering a of priority that government authorities give to specific area—for example, insolvency—it receives a particular areas of business regulation reform and the “no practice” mark. Similarly, an economy receives a ability of different government agencies to deliver “no practice” or “not possible” mark if regulation exists tangible results in their area of responsibility. but is never used in practice or if a competing Distance to frontier measure regulation prohibits such practice. Either way, a “no practice” mark puts the economy at the bottom of the A drawback of the ease of doing business ranking is ranking on the relevant indicator. that it can measure the regulatory performance of economies only relative to the performance of others. The ease of doing business index is limited in scope. It It does not provide information on how the absolute does not account for an economy’s proximity to large quality of the regulatory environment is improving markets, the quality of its infrastructure services (other over time. Nor does it provide information on how than services related to trading across borders and large the gaps are between economies at a single getting electricity), the strength of its financial system, point in time. the security of property from theft and looting, macroeconomic conditions or the strength of The distance to frontier measure is designed to underlying institutions. address both shortcomings, complementing the ease of doing business ranking. This measure illustrates the Variability of economies’ rankings across topics distance of an economy to the “frontier,” and the Each indicator set measures a different aspect of the change in the measure over time shows the extent to business regulatory environment. The rankings of an which the economy has closed this gap. The frontier is economy can vary, sometimes significantly, across a score derived from the most efficient practice or indicator sets. The average correlation coefficient highest score achieved on each of the component between the 10 indicator sets included in the indicators in 10 Doing Business indicator sets aggregate ranking is 0.38, and the coefficients (excluding the employing workers indicators) by any between any 2 sets of indicators range from 0.18 economy. In starting a business, for example, Canada (between getting electricity and getting credit) to 0.58 and New Zealand have achieved the highest (between trading across borders and resolving performance on the number of procedures required (1) insolvency and between trading across borders and and on the time (0.5 days), Denmark and Slovenia on getting electricity). These correlations suggest that the cost (0% of income per capita) and Chile, Zambia economies rarely score universally well or universally and 99 other economies on the paid-in minimum badly on the indicators. capital requirement (0% of income per capita) (table 22.2). Consider the example of Canada. It stands at 19 in the aggregate ranking on the ease of doing business. Its Calculating the distance to frontier for each economy ranking is 2 on starting a business, 4 on protecting involves 2 main steps. First, individual indicator scores investors, and 8 on paying taxes. But its ranking is only are normalized to a common unit: except for the total tax rate, each of the 31 component indicators y is rescaled to (max − y)/(max − min), with the minimum 4 See Simeon Djankov, Darshini Manraj, Caralee McLiesh and Rita Ramalho, “Doing Business Indicators: Why Aggregate, and How to value (min) representing the frontier—the highest Do It” (World Bank, Washington, DC, 2005). Principal components performance on that indicator across all economies and unobserved components methods yield a ranking nearly since 2003 or the first year the indicator was collected. 5 identical to that from the simple average method because both these methods assign roughly equal weights to the topics, since the For the total tax rate, consistent with the calculation of 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 5 Even though scores for the distance to frontier are calculated from importance in the context of a specific economy. 2005, data from as early as 2003 are used to define the frontier Doing Business 2014 Zimbabwe 108 the rankings, the frontier is defined as the total tax rate Economies that improved the most across 3 or at the 15th percentile of the overall distribution of more Doing Business topics in 2012/13 total tax rates for all years. Second, for each economy Doing Business 2014 uses a simple method to calculate the scores obtained for individual indicators are which economies improved the most in the ease of aggregated through simple averaging into one doing business. First, it selects the economies that in distance to frontier score, first for each topic and then 2012/13 implemented regulatory reforms making it across all topics. An economy’s distance to frontier is easier to do business in 3 or more of the 10 topics indicated on a scale from 0 to 100, where 0 represents included in this year’s ease of doing business ranking. 6 the lowest performance and 100 the frontier. Twenty-nine economies meet this criterion: Azerbaijan, The maximum (max) and minimum (min) observed Belarus, Burundi, Côte d’Ivoire, Croatia, Djibouti, values are computed for all economies included in the Gabon, Guatemala, Guinea, Italy, Kosovo, Latvia, the Doing Business sample since 2003 and for all years former Yugoslav Republic of Macedonia, Malaysia, (from 2003 to 2013). To mitigate the effects of extreme Mauritius, Mexico, Moldova, Mongolia, Morocco, outliers in the distributions of the rescaled data (very Panama, the Philippines, the Republic of Congo, few economies need 694 days to complete the Romania, the Russian Federation, Rwanda, Sri Lanka, procedures to start a business, but many need 9 days), Ukraine, Uzbekistan and the United Arab Emirates. th the maximum (max) is defined as the 95 percentile of Second, Doing Business sorts these economies on the the pooled data for all economies and all years for increase in their distance to frontier measure from the each indicator. The exceptions are the getting credit, previous year using comparable data. protecting investors and resolving insolvency Selecting the economies that implemented regulatory indicators, whose construction precludes outliers. In reforms in at least 3 topics and improved the most in addition, the cost to export and cost to import for each the distance to frontier measure is intended to year are divided by the GDP deflator, so as to take the highlight economies with ongoing, broadbased reform general price level into account when benchmarking programs. The criterion for identifying the top these absolute-cost indicators across economies with improvers was changed from last year. The different inflation trends. The base year for the deflator improvement in ease of doing business ranking is no is 2013 for all economies. longer used. The improvement in the distance to The difference between an economy’s distance to frontier measure is used instead because under this frontier score in any previous year and its score in measure economies are sorted according to their abs- 2013 illustrates the extent to which the economy has olute improvement instead of relative improvement. closed the gap to the frontier over time. And in any given year the score measures how far an economy is from the highest performance at that time. Take Colombia, which has a score of 70.5 on the distance to frontier measure for 2014. This score indicates that the economy is 29.5 percentage points away from the frontier constructed from the best performances across all economies and all years. Colombia was further from the frontier in 2009, with a score of 66.2. The difference between the scores shows an improvement over time. The distance to frontier measure can also be used for comparisons across economies in the same year, complementing the ease of doing business ranking. For example, Colombia stands at 63 this year in the ease of doing business ranking, while Peru, which is 6 Doing Business reforms making it more difficult to do business are 29.3 percentage points from the frontier, stands at 42. subtracted from the total number of those making it easier to do business. Doing Business 2014 Zimbabwe 110 RESOURCES ON THE DOING BUSINESS WEBSITE Current features Doing Business reforms News on the Doing Business project Short summaries of DB2014 business regulation http://www.doingbusiness.org reforms, lists of reforms since DB2008 and a ranking simulation tool Rankings http://www.doingbusiness.org/reforms/ How economies rank—from 1 to 189 http://www.doingbusiness.org/rankings/ Historical data Customized data sets since DB2004 Data http://www.doingbusiness.org/custom-query/ All the data for 189 economies—topic rankings, indicator values, lists of regulatory procedures and Law library details underlying indicators Online collection of business laws and regulations http://www.doingbusiness.org/data/ relating to business and gender issues http://www.doingbusiness.org/law-library/ Reports http://wbl.worldbank.org/ Access to Doing Business reports as well as subnational and regional reports, reform case Contributors studies and customized economy and regional More than 10,200 specialists in 189 economies profiles who participate in Doing Business http://www.doingbusiness.org/reports/ http://www.doingbusiness.org/contributors/doing- business/ Methodology The methodologies and research papers Entrepreneurship data underlying Doing Business Data on business density for 139 economies http://www.doingbusiness.org/methodology/ http://www.doingbusiness.org/data/exploretopics/e ntrepreneurship Research Abstracts of papers on Doing Business topics and Doing Business iPhone App related policy issues Doing Business at a Glance App presents the full http://www.doingbusiness.org/research/ report, rankings and highlights http://www.doingbusiness.org/specialfeatures/ iphone Doing Business 2014 Zimbabwe 111