Pro-poor or Anti-investor?
About 700 foreign companies in Zimbabwe have missed the end-September deadline to submit plans to sell 51% of their shares to the local black population under the indigenisation programme. This legislation – first signed into law by long-ruling President Robert Mugabe in 2008 – states that all foreign-owned companies, including banks, mining and manufacturing firms, must sell 51% of their equity to local blacks by 2015.
President Mugabe says the indigenisation law aims to fight poverty and put control of the economy in local hands, but the scheme has caused tensions within the shaky unity government. Prime Minister Morgan Tsvangirai says the regulations are eroding investor confidence in the country, which is desperate to secure investment after years of economic decline. Reserve Bank of Zimbabwe (RBZ) Governor Gideon Gono said they would “irreparably harm the nerve-centre” of the recovering economy.
Wilson Gwatiringa, head of the government’s National Indigenisation and Economic Empowerment Board, says firms defying the indigenisation law will face “serious consequences” including “cancellation or suspension of operating licences as well as payment of hefty fines.”
The Zimbabwean says the law is flawed. “Forcibly taking companies, or nationalisation, does not change the character of the current status quo but only replaces it with a politically correct colour – black.” But Economic Planning and Investment Promotion Minister Tapiwa Mashakada says that the law is “flexible” and not to be construed as nationalisation or expropriation, Business Day reported. The Zimbabwe Guardian reports that at least 137 mining companies are risking losing their mining licences for refusing to comply including Anglo-American and Metallon Gold. The paper says 38 companies have complied.
Mining.com said the government appeared to be softening its requirements for some mining companies and was willing to do deals.
Some individual companies, including platinum miner, Zimplats, have been given more time to comply. Zimbabwe has the largest platinum reserves outside number one producer South Africa. Others, including multinational Rio Tinto’s Zimbabwean subsidiary Murowa Diamonds have made it. Others still have been accused of “showing disrespect for our laws” by Indigenisation Minister Saviour Kasukuwere.
(All Economic series, Vol. 48)