Govt abandons indigenisation

Govt abandons indigenisation
mushohwe chris

Ministerof Youth, Indigenisation and Economic Empowerment Chris Mushohwe

GOVERNMENT has abandoned its populist indigenisation policy in a desperate attempt to lure offshore capital required to revive the country’s disintegrating economy, the Financial Gazette can report.
The move is meant to bailout a sick and struggling economy, which has suffered from widespread company closures and job losses, estimated to have pushed the unemployment rate to over 90 percent.
Foreign-owned companies had been given ultimatums to comply with the law before the end of this year or risk nationalisation.
But indications are that this has been abandoned.
The indigenisation policy, which gained traction following the promulgation of the Indigenisation and Economic Empowerment Act in 2008, has been widely blamed for the country’s failure to attract foreign direct investment, amid sagging economic fortunes.
Highly placed sources in the Executive said government was now convinced the contentious policy had to be abandoned in order to pull the country’s economy from the brink of collapse.
The indigenisation law compels foreign-owned companies to cede at least 51 percent of their shareholding in locally-based companies to blacks or specific entities designated by government.
An official within the Ministry of Youth, Indigenisation and Economic Empowerment said government has shifted significantly from the indigenisation policy, by softening its hard-line stance with regards to its application.
President Robert Mugabe has since instructed line ministries to directly handle all acquisitions and transactions linked to their portfolios to circumvent the onerous requirements of the indigenisation law.
More recently, his Cabinet has sanctioned transactions by foreign investors that are far in excess of the thresholds set in the Act.
For example, Blue Ribbon Industries is to be taken-over by Tanzanian firm, Bakhresa Group, which is to inject US$40 million into the business in exchange for a 100 percent shareholding.
The deal was handled by Industry and Commerce Minister Mike Bimha with Cabinet’s express approval, despite the law clearly proscribing such ownership thresholds by foreign companies.
Other recent transactions confirming the paradigm shift in government’s earlier position is the 63,25 percent takeover of Astra Holdings by Tokyo-listed paint manufacturing giant, Kansai Plascon.
President Mugabe appeared to reiterate government’s latest position when he addressed the nation on Heroes Day a fortnight ago, saying: “Being a country that observes and respects the rights of investors, as government, we are prepared to listen to all investor concerns and address them”.
And on Tuesday, he reinforced the position in his State of the nation address.
He said: “In order to buttress the positive economic gains recorded to date, government will implement policies that will improve the business environment, and promote, and attract both domestic and foreign investment”.
Bimha is already taking President Mugabe’s word to foreign investors.
While in Dubai for the Chartered Accountants of Zimbabwe Winter School, the Industry Minister confirmed that government had softened its stance but said this was backed by the indigenisation law.
He said except for resource-based operations such as mines and land ownership, investors in other sectors of the economy were not compelled to comply with the indigenisation law.
He said: “We have (foreign) companies that are coming saying, yes, this is the position but we are prepared to go this way (own more than 49 percent) because we are bringing technology, we are bringing capital, we are bringing a lot of things.
“And in each of those cases we have had, we have had no problem. For example, I have dealt personally with the case of Blue Ribbon Industries and others. I have been really involved and in each and every case, proposals have been coming from investors themselves.
“So I say, the flexibilities are there within the law. Also, we have to ensure we support the investor in terms of what exactly the investor wants, depending on his or her circumstances.”
He said Cabinet ministers insisting on 51 percent local shareholding for foreign-owned companies were ignorant of the law.
“The interesting thing is that some of the ministers are not even conversant with the law,” said Bimha.
“We are very ignorant about this Indigenisation and Economic Empowerment Act. And what we have been doing, which is a wrong thing to do, is just to talk about this 51/49 percent and yet the Act has got a plethora of possibilities,” said Bimha.
“It’s not a question of flexibilities when you talk to the minister but it’s a flexibility contained within the law itself.
“The issue of credits that are allowed, people don’t talk about it, but the emphasis has been more on 51/49 percent ownership. The clarity is that when we are talking about 51/49 percent, we are talking about it in terms of mineral resources and land ownership but in other areas, there are flexibilities that depend on what the investor wants,” Bimha reiterated.
“We say here is the menu, choose what suits you and we engage. There is no problem. The number of cases that I have dealt with, we have never came to where we say you (investors) have to do this.
“So, we believe that the mere fact of now saying you (investor) engage line ministries first is actually more of an attempt to ensure we give support to the investor because the ministry understands the circumstances of the investor.
“The involvement of line ministries is a departure from what we used to do. It’s now up to the line ministers, permanent secretaries and officials to be conversant with the law and work out a deal to suit the investor.”
Vice President Emmerson Mnangagwa, Finance Minister Patrick Chinamasa and Youth, Indigenisation and Economic Empowerment Deputy Minister Mathias Tongofa have also previously highlighted the changing indigenisation policy.
Tongofa recently told a Parliamentarian Portfolio Committee on Youth, Indigenisation and Economic Empowerment that government would not force foreign-owned firms to comply with the law.
Legislators had raised disquiet that the ministry was failing to enforce the law.
Youth, Indigenisation and Economic Empowerment Minister, Christopher Mushohwe, promised to call back when contacted by the Financial Gazette, but had not done so by the time of going to press.
His mobile phone was no longer reachable, when this newspaper tried to call him later.
However, soon after his appointment to the current portfolio, Mushohwe said government would force foreign-owned company to relinquish as much as 99 percent ownership to Zimbabwean locals, insisting that the indigenisation policy had not been abandoned.
His comments followed Mnangagwa’s remarks that government would relax the controversial policy.
Zimbabwe Investment Authority (ZIA) chairman, Nigel Chanakira, said the indigenisation policy had scared away foreign investors and made it difficult for the country to access international capital.
“Clearly, the internal surveys done by ZIA, alongside surveys done by the Common Market for Eastern and Southern Africa and the Southern African Development Community, point to the fact that the 51/49 percent (indigenisation threshold) scares away a lot of investors,” said Chanakira.
newsdesk@fingaz.co.zw

  • gutter poet

    Like the so-called land reform program the indegenization law was a classic case about how to shoot yourself in the face! International capital is a shy animal..it needs clever courting not this wanton rape!

  • Unfazed

    The government has now woken up to smell the coffee and swallow the bitter pill of this ignominious surrender and retreat .Bimha did a mea culpa in Dubai , cap in hand. Shame. Some of us saw this coming a long way back and could see through the ruse of indigenisation as an election gimmick meant to woo and fool the gullible.

  • John Banda

    I don’t know how anyone can say the policy is not clear. It’s simple – THE WORST OF BOTH WORLDS. No 51% for Zim’s previously disadvantaged. And hoops to jump through (even if you dress it up with tinsel called “flexibility”) that investors going into Mozambique, Zambia, Botswana, even Malawi don’t have to worry about. Don’t expect this government to come out with one voice and say it’s all off, or it’s all-out on. Expect 5 more years of the same.

  • Ijaha LeManxeleni

    To little too late.This government has to earn trust. Iam not sure if there is any sane investor who trusts our ruling class,not even the Chinese. That is why they pour bllions into South Sudan,Kenya and Tanzania and we get trinkets because they simply don’t trust us. Who would trust a government that runs a CORRUPT and GREED driven economic policy framework.

  • d

    There is nothing wrong with the indIginisation policy the problem exists in that Zimbabwe cant implement anything. Look at UAE to start a business you have to abide by indIgenisation and after that they more or less leave you alone to do your business.

    But muno some idiot can shout the wrong words and slogans and somehow ruin business apa you are not even in gvt.

  • Citizen

    But they can’t be trusted. They will steal again when it suits them.

  • Dopori

    If what the reporter is saying is what Minister Bimha said exactly, one can see for themselves that the Minister is stumbling on himself i.e. he is not coherent which goes on to suggest that the minister himself is not even sure of the application of the 51/49 rule despite his seemingly reassuring intentions.

  • How it is

    So government destroys the economy and the value of the these companies, then allows foreigners to come in and pick up the struggling companies for a song. Great work government.

  • Sabhuku

    I liked, “For example, Blue Ribbon Industries is to be taken-over by Tanzanian firm, Bakhresa Group, which is to inject US$40 million into the business in exchange for a 100 percent shareholding”. This is too wordy. The goverment sold Blue Ribbon Industries to Bakhresa Group for US$40 million – could have been better for a journalist.
    And was ICAZ’s Winter School held in Dubai, as in Dubai? We have no shame, dont we?

  • Mutiro

    If anyone was still unsure, this further confirms that we have very very poor leadership. They create this Indigenisation law that is frightening to investors, then you say ‘look, if you come and talk to me I will find loopholes that allow you to invest.’ Why should an investor have to come and speak to the ministry directly? This kind of set up just breeds corruption.
    Secondly, another major failure that our government has is a lack of consistency, just a few months ago telecel had its license cancelled for non compliance with the indegenisation law, now you are saying that no one will be forced, yet the same indigenisation law exists. It is this sort of inconsistent behaviour that potential investors look at and quiver with fear.
    Lastly, here in Zimbabwe one thing we are very good at is creating red tape and bureaucracy, investment is like water and electricity, it follows the path of least resistance. Until we sort out these issues we will get nowhere. Look at countries like Mozambique, as of last year they received $5bn in FDI, that is more than our entire national budget. Zambia is the same they get billions per year, I mean right now Zambia has got so much food that it is asking to use our silos for additional storage of grain since we aren’t using them.
    Gentlemen, we have a very serious problem and there doesn’t seem to be any light at the end of the tunnel.

  • Department 6

    this relaxation of this law is being done in preparation of elections, from this point to the year 2018. we shall many investors coming and setting up shop in country so that the ‘party’ remains in power//

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