Is Zanu PF softening on indigenisation?

HARARE - Following years of disastrous economic policies and strong rhetoric, Zimbabwe seems to be softening its stance on ownership requirements for foreign-owned businesses operating in the country.

Statements by President Robert Mugabe at the Zimbabwe International Trade Fair (ZITF) in Bulawayo and during the Independence day celebrations in Harare indicate a softening stance on the indigenisation policy.

Negatively popularised by the then combatant indigenisation minister Saviour Kasukuwere, the controversial policy requires foreign-owned firms operating in the country to cede 51 percent of their shareholding to locals.

However, since its enactment in 2010 the country has witnessed an unprecedented de-industrialisation rate as foreign investors took their resources elsewhere.

The economy, which grew by 9,6 percent in 2009 and 10,6 percent 2010 began to sliding down to 3,4 percent as of last year as more companies closed shop.   

Statistics available from Treasury show that foreign direct investment (FDI), which averaged 14-20 percent of gross domestic product (GDP) from 1980-2000, has declined remarkably in the last 10 years to the current 1,1 percent of GDP.

Foreign investment inflows were $400 million for 2012 and this is less than five percent of the $9,5 billion that was pumped into the Sadc region, placing Zimbabwe among the least attractive investment destinations in the region.

Economic analysts contend that despite the numerous advantages and potential that Zimbabwe enjoys, and notwithstanding the various incentives stipulated in investment laws for encouraging foreign investment, FDI in Zimbabwe remains on the decline.

This is because investors still face formidable barriers that the government is unwilling or unable to remove quickly, such as the indigenisation and empowerment regulations which stipulate 51 percent ownership for locals in business ventures.

Zimbabwe, once touted as the Jewel of Africa at Independence in 1980, has over the years acquired a reputation of the sick man of the southern Africa region, with disastrous economic policies, political instability and a peculiar inability to get itself out of often self-inflicted difficulties.

Faced with an increasingly agitated society blighted by a high unemployment rate, deteriorating social and health services delivery systems, President Robert Mugabe on Friday begged foreign investors to bring their money and rescue the southern African country from collapse.

“Let me take this opportunity to invite potential investors to come and do business in Zimbabwe in which there is huge potential for joint venture partnerships between investors, manufacturers, industrialist and the public sector. We want investment from abroad,” he said.

Mugabe recently said the indigenisation policy was not cast in stone and foreigners can hold majority shareholding in any enterprise, depending on the nature of their investment.

Foreign investors in Zimbabwe — both existing and potential ones — have been trying to get clarity about exactly how much the Zanu PF-led government was ready to dilute empowerment laws that have spooked business for years.

During his re-election campaign last year, Mugabe pledged to enforce laws that he said would give ordinary Zimbabweans control of the economy.

Economist John Robertson said while the softening approach by government was encouraging, more should be done to allay investors’ fears.

“The policy has been hampering investment in the mining sector and I would like to see it abolished from our statutes.

“If there is more investment and production in the mining sectors, then government will earn more in terms of taxes and royalties,” he said.

Robertson said indigenisation was also hindering locals from being innovative and starting up companies waiting to be allocated their shares in existing firms.

“An economy can only grow when more companies are being opened up and employing more people instead of sharing a small cake,” he said.

Another economist Eric Bloch said the latest statements on indigenisation were a disguised admission of policy change.

“These statements show that they all now realise that some changes are needed, but it’s more important that these changes should be reflected in a new piece of law for business to see government’s seriousness,” he said.

Other economic commentators however, feel government is contradicting itself by deviating from a law that was enacted by Parliament.

“It’s a misnomer to say there is a softening of stance by government on indigenisation. This is a classic case of policy inconsistency. If it’s a law, it has to be respected,” said economist Christopher Mugaga.

He added that the softening stance by the Zanu PF government raises uncertainty in the country on policy direction. 

Labour economist Godfrey Kanyenze concurred with Mugaga and said the contradiction in government policy “sends wrong signals to the investors.”

Comments (1)

Mugabe is intelligent and rational, should it suit him now. Which it does, particularly now so that cursing Morgan isn't only ranting! It's business, and Iran, China, North Korea are either poor or bogged desperately to ambitions helping corrupt Zimbabwe is out. Out! Europe will, but only if evil legislation is repealed to colonial parallels. Bad! Washing away all the gains of the revolution- Chimurenga III Hondo yeMinda. But there will be soap and cerevita on the shelves and new machinery at Gomo, Pare and Sirivhera, later. Europe will take the fields yes, but they will employ and pay. Bob will choose Europe.

maombo david - 28 April 2014

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