Zimbabwe's new indigenisation policy - smoke and mirrors?

The Zimbabwean

government’s

recent review of

its Indigenisation

and Empowerment Policy

Framework – ref lecting a

supposedly more relaxed

stance – demands careful

scrutiny.

Intended to be more

conducive to attracting

much-needed foreign direct

investment (FDI) to the

country, it adds up to little

more than a provision for

penalties that will continue

until indigenisation

threshold is reached,

says managing director

at Robertson Economics,

John Robertson.

The new policy – agreed

to and signed in parliament

earlier this month – still

calls for at least 51% local

control and ownership of

foreign companies but it

allows for some f lexibility

with regard to timeframes

for compliance.

According to local

journalist Elias Mambo

– who referred to the

old policy framework

as “racketeering by

regulation” – the period

of compliance for foreign

investors has been

moved out to five years

instead of the previous

“with immediate effect”

stipulation. Furthermore,

the period of compliance

can go up to 20 years

should investors request

this, subject to approval

by relevant government

authorities.

Mambo added that there

was another key element

in the new framework,

which stipulated that

should a foreign-owned

company refuse to comply

with the indigenisation

policy it would not be

closed down, forced out or

nationalised as previously

threatened by some highprofile

government leaders.

“Instead, they will be

charged a levy or tax for

non-compliance,” he said.

But, according to

Robertson, this policy

is even more damaging

because the penalty is to

be calculated from

turnover figures and not

net profits. Furthermore,

while the government

insists that payments for

shares (by indigenous

parties) should be made

from future dividends,

local shareholders should

be able to gain title to the

shares immediately.

Robertson pointed

out that the danger

with this was that with

the 51% majority being

indigenous they could

take command at annual

general meetings of each

company’s shareholders

and threaten to dismiss

other shareholders from the

board as leverage to ensure

compliance.

“Investment levels from

non-indigenous people

are therefore bound to be

minimal while this policy

framework is in place,”

commented Robertson.

Minister of Finance and

Economic Development,

Patrick Chinamasa,

disagrees, noting in

a prepared statement

that the new framework

is “very conducive” to

FDI. “It’s a milestone in

the turnaround of the

economy.”

He also addressed the

individual ownership issue,

stating that government

would now only pursue

indigenisation through

state enterprises and

“not allow individuals to

capitalise on the policy for

self-enrichment”.

Economic adviser and

CEO of Oxlink Capital,

Brains Muchemwa, told

FTW that he welcomed

the fact that there was

more clarity around

implementation of the

policy and that the

“discord” in government

(around the old policy

framework) had been

addressed, noting that it

had created even more

economic uncertainty.

“But investors will need

clarity on the proposed levy

for non-compliance,” he said.

CAPTION

The official signing of the Indigenisation and Empowerment

Policy Framework … (from left) Reserve Bank of Zimbabwe

governor, John Mangudya; Minister of Finance and Economic

Development, Patrick Chinamasa; and Minister of Youth

Indigenisation and Economic Development, Patrick Zhuwao.