Zimbabwe’s legislative agenda for 2025 marked by two distinct, but equally significant regulatory shifts that is the formalisation of the International Financial Services Centre (IFSC) through new banking regulations and a continued push for transparency and localisation within investment landscape in Zimbabwe. These parallel developments signal a government effort to both attract specialised foreign capital and ensure rigorous oversight of domestic public spending.
IFSC under the microscope: SI 29 of 2025
The promulgation of Statutory Instrument 29 of 2025, officially the Banking (International Financial Services Centre) Regulations, 2025, under the Banking Act [Cap 24:20], formalises the operational framework for entities seeking to conduct offshore financial business within the country’s designated IFSC zones. These regulations are designed to create a highly controlled, ring-fenced environment for international transactions, aiming to attract foreign direct investment (FDI) without exposing the domestic banking system to undue external volatility.
The SI imposes stringent minimum capital thresholds for IFSC banking units, significantly higher than those for standard commercial banks, reflecting the specialized nature of the business. The regulations strictly delineate permissible activities, focusing on cross border lending, asset management for non-residents, and trade finance, while explicitly restricting direct engagement with the local Zimbabwean currency market.
The SI codifies the previously announced tax incentives such as reduced corporate tax rates and exemption from certain local levies or entities operating strictly within the IFSC framework, provided they meet strict compliance.
Anaysis of SI 49 of 2025 in company law and its negative impact
Company law constitutes the comprehensive body of rules that governs the entire lifecycle of a business entity specifically regulating its formation, ongoing operation, and eventual dissolution. This legal framework places significant emphasis on corporate governance, the protection of stakeholder rights, and the prudent management of corporate capital. A foundational concept established by this body of law is the recognition of a company as a juristic person, meaning it is legally distinct and separate from its owners or shareholders The famous case that cemented this principle is Salomon v A Salomon & Co Ltd. Company law serves as the foundational legal architecture upon which the nation’s entire corporate sector is built. Governed primarily by the Companies and Other Business Entities Act [Chapter 24:31], this body of law is instrumental in balancing the need for economic dynamism with the imperative of stakeholder protection and regulatory oversight. Section 20(1) of SI 29 of 2025, which explicitly lists statutes that are excluded from application within the SEZ and Companies and Other Business Entities Act [Chapter 24:31 is exempted.
The most direct implication of Statutory Instrument (SI) 29 of 2025 is that ,it grants the Victoria Falls Special Economic Zone (SEZ) a significant degree of legal autonomy from the standard national corporate framework . Specifically, companies operating within this designated International Financial Services Centre (IFSC) are exempt from the core provisions of the Companies and Other Business Entities Act [Chapter 24:31] (COBE Act) concerning their formation, registration, internal management, and general reporting requirements . This legislative carve-out is a deliberate measure designed to create a highly liberalized, predictable, and internationally competitive environment however, this move is very questionable since, the COBE Act is there to govern the operation of companies in Zimbabwe. Standard corporate governance often mandates detailed public disclosure, mandatory independent directors, and specific audit requirements, If the IFSC regulations are more relaxed as is common in offshore financial centres designed for speed and confidentiality which can lead to a lack of transparency, making it difficult for external regulators or stakeholders to monitor the true financial health and operations of these entities .
- Impact of SI 29 of 2025 in Zimbabwe’s company law
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Directors of IFSC companies might be governed by the IFSC’s specific regulations, which may not impose the same robust fiduciary duties or liability standards as provided by part IV of COBE Act .This creates a risk that directors might operate with less accountability to minority shareholders or creditors, The provisions outlined in Section 54 of the Companies and Other Business Entities Act [Chapter 24:31] (COBE Act) establish the Duty of Care and the Business Judgment Rule for company officers and directors . This section mandates that every director or officer must execute their role in good faith, always acting in the best interests of the registered business entity. Crucially, this duty is measured against the standard of the care, skill, and attention that a diligent business person would exercise in the same circumstances . This codification of fiduciary responsibility is fundamental because it serves as the legal bedrock for maintaining corporate transparency and provides essential legal recourse for protecting the interests of minority shareholders or creditors against mismanagement or self-dealing by those in control .This raises concerns about regulatory arbitrage.
Furthermore, if an IFSC company commits an act of fraud or insolvency that harms a local Zimbabwean party, enforcing a judgment obtained under the IFSC’s specialised rules against assets located outside the zone (which are governed by the COBE Act) becomes legally fraught.
The lack of a clear, unified enforcement mechanism undermines investor protection for all parties involved and this is against the Zimbabwe Investment and Development Agency Act as per its objectives of the Act is to provide for promotion, entry, protection and facilitation of investment in Zimbabwe.
Financial stability relies on consistent oversight. If a large, interconnected IFSC entity fails due to governance weaknesses that the COBE Act would have prevented, the resulting financial shock could easily spill over into the domestic Zimbabwean banking system, creating a complex systemic risk that the national regulator (the Reserve Bank of Zimbabwe) might not be fully equipped to handle under the standard framework therefore, affecting the flow of foreign investment in Zimbabwe.
Adam Mavhiko is a fourth-year law student at Midlands State University and is the vice-president at faculty of law association. He is a passionate leadership trainer, researcher and has keen interest in changing the narratives of Africa through his writings and he writes in his capacity. He can be contacted on +263776026385
