The Financial Gazette

Shame Makoshori and Clemence Manyukwe, Staff Reporters

THE Zimbabwe Stock Exchange (ZSE)-listed Old Mutual, the country’s largest life assurer, is being targeted as the first company to be forced to comply with a controversial empowerment law requiring foreign-owned companies to cede at least 51 percent of their shareholdings to black investors.

The Financial Gazette is reliably informed that there are covet plans by ZANU-PF functionaries to force Old Mutual into an empowerment deal with companies fronted by their cronies.
This is likely to send tremors in the investor community and unleash bears on the ZSE, which has been on a downward trajectory ever since the new empowerment regulations were gazetted into law.
Investors who had shown interest in local assets are already scurrying for the nearest exit points for fear of burning their fingers in what has been promising to be an exciting destination for their investment.
Empowerment movers see the takeover of a controlling interest in Old Mutual as one sure way of cascading blacks’ dominion in every sphere of the country’s economy.
While this will effectively see indigenous investors controlling the nation’s economic levers and overturn foreign influence on the country’s business front, there are barriers along the way.
Funding is obviously one of them, but not the major hurdle.
Old Mutual is largely owned by ordinary men and women who invested their lifetime savings in its life assurance policies and other products.
Pension funds and investments by local companies also constitute a significant portion of the financial behemoth’s portfolio.
Drawing a line between shareholders and policyholders is therefore seen posing headaches to the authorities.
But given the manner in which the controversial land reform programme and Operation Muramba-tsvina were executed in 2000 and 2005 respectively, nothing could be impossible.
Top 10 shareholders in Old Mutual as of February 26 were ranked as Old Mutual Life Assurance Company, Old Mutual (Zimbabwe) Foundation Trust, Old Mutual Diamond Fund, Frittlewell Investments, University of Zimbabwe Pension Fund, Barclays Zimbabwe Nominees, Datvest Nominees, NDH Nominees, Old Mutual Zimbabwe Nominees and Old Mutual Zimbabwe Staff Pension Fund.
Old Mutual, listed on the ZSE, London and JSE securities exchanges, has the largest life assurance operation in the country and owns Zimbabwe’s largest mortgage lender, CABS.
The British headquartered concern has interests varying between five and 15 percent in 85 percent of the companies listed on the local bourse, as well as controlling interests — directly or indirectly — in a range of unlisted investments such as MBCA Bank.
Old Mutual also owns some of the country’s biggest upmarket buildings and shopping malls, among them Westgate, the largest shopping centre with a total of 155 shops and 12 office organisations.
It also owns Borrowdale Brooke, Chitungwiza shopping complex, High Glen shopping centre, Eastgate Shopping Centre and Nkulumane, the largest shopping complex in Bulawayo among other properties.
With a colossal balance sheet dominated by foreign investors, Old Mutual has perennially courted the ire of President Robert Mugabe’s government, which sees it as one of the vestiges of colonialism.
In August 2007, Old Mutual became the first Zimbabwean company to offer 20 percent of its business in Zimbabwe to staff as part of plans to comply with the Indigenisation and Empowerment Act, which was enacted in 2008, but came into full force this month after Indigenisation and Empowerment Minister, Saviour Kasukuwere, published regulations forcing all businesses owned by foreigners to set out, within 45 days, drafts outlining their empowerment plans.
Kasukuwere said foreign controlled companies will have five years from this month to restructure their stakes to remain with 49 percent, triggering fresh alarm among investors, some of whom are reconsidering their future.
There are fears the scepticism will dampen the country’s long-awaited recovery after a decade of political and economic turmoil.
Zimbabwe’s fragile coalition between President Mugabe, Prime Minister Morgan Tsvangirai and Deputy Prime Minister, Arthur Mutambara, has been divided over the empowerment laws while business leaders have warned government to shelve the law, at least for now until the country starts attracting bigger investment inflows.
But President Mugabe has been adamant that the 49 percent will be enough for foreign investors.
“Forty-nine percent is a hell lot of equity, and its only foolish ones who will say so (that the law drives away investors). Wise ones will tell you that it is good,” he told reporters three weeks ago.
Some of the largest foreign controlled companies in Zimbabwe include British-headquartered Standard Chartered Bank, Barclays Bank, Stanbic Bank, BAT, mining concerns Anglo Platinum, Metallon Gold Zimbabwe, RioZim and South African headquartered Impala Platinum’s Zimbabwean operating subsidiary, Zimplats Holdings.
Bankers, along with captains of industry, have previously warned that foreign direct investment could plunge by as much as 30 percent if government pressed ahead with the controversial empowerment law.
Standard Chartered Bank, and Stanbic Bank, in submissions before Parliament two years ago, warned that foreign banks could withdraw from Zimbabwe if they were forced to cede substantial shareholdings to locals.
“We think it is important for Zimbabwe not to implement an empowerment process that is materially different from what other countries have done,” Stanbic said.
“The proposed indigenisation threshold of 51 percent targeted in Zimbabwe would make our country relatively less attractive to foreign investors,” added Stanbic.
Independent economic analyst, John Robertson, said this week Old Mutual could be the first victim of the fresh expropriation spree because of its huge asset base.
He warned that those targeting the firm should not expect to get rich instantly.
“To pick it (Old Mutual) for nothing and believe you get rich is wrong,” said Robertson. “If they pursue this idea (expropriation), there will be no future investment and the impact on future generations will be bad — no jobs and (there will be) social distress.”
Meanwhile, the empowerment regulations are expected to be reviewed by an extraordinary meeting of the Council of Ministers following a crisis meeting held between Prime Minister Tsvangirai and Kasukuwere on Tuesday.
Kasukuwere yesterday declined to disclose discussions with the premier saying they were confidential.
He, however, said the referral of the matter to the Council of Ministers is for “continued improvement” of the quota policy that is in line with the law.
“The regulations are still in force, but we are open to any views. The meeting is for the continued improvement of the regulations,” Kasukuwere said.
The PM’s spokesperson, James Maridadi, also confirmed the imminent Council of Ministers meeting aimed at dealing with the contentious issue.
“It was resolved that an extra-ordinary meeting of the Council of Ministers would be called to specifically deal with that issue,” said Maridadi.
He added that the Prime Minister’s position is that the indigenisation policy must not enrich a chosen few, but “add value to the lives of Zimbabweans and bring change that Zimbabweans demand and deserve”.
The Chamber of Mines, companies and independent economists have said the regulations spell doom for the country’s economy and will result in the flight of investment.
ArcelorMittal South Africa has already said that the regulations are a “significant obstacle” in acquiring the Zimbabwe Iron and Steel Company, which it is eyeing
The regulations state that defiant  investors or locals who act as fronts for foreigners, are liable to imprisonment for five years.
They also provide mechanism for the sub-contracting of procured goods and services, with offenders also being jailed for the same period of time.
When the regulations were published, Prime Minister Tsvangirai said they were null and void as they had been put in place without following due process, but days later, Kasukuwere appeared to be going against him when he told Parliament that they remained in place.
Apart from the jail sentences, the regulations require all existing businesses with assets valued over US$500 000 to declare their shareholding status to the government within 45 days from March 1.
New enterprises would be required to do so within 60 days. Businesses that fail to meet the 51 percent shareholding are required to submit a plan within 45 days from March 1 on how they intend to meet the requirements.
The law says the Indigenisation Minister shall maintain a database of indigenous Zimbabweans seeking to take up the majority shareholding in foreign firms; or businesses wishing to identify any locals to acquire a controlling or lesser interest in the enterprise.
The law says an employee share ownership scheme or trust that complies with the regulations may be taken into consideration when assessing the extent to which it has achieved the indigenisation and empowerment quota.

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