THE announcement by the Zimbabwean government that it will scrap the Indigenisation policy for all investments into the country comes as a welcome development for domestic and foreign investors. The Indigenisation and Economic Empowerment Bill was signed into law on March 9 amid heated debate and resistance from the business community. The Bill sailed through parliament in September and had been used as the anchor policy for economic development by the incumbent government in the run up to the March 29 general elections. A number of community share ownership trusts were set up to ensure that the indigenous communities benefited from national resources with minerals topping the agenda. The law described indigenisation as a deliberate involvement of indigenous Zimbabweans in the economic activities of the country, to which they had no access, so as to have an equitable distribution of national resources.
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THE announcement by the Zimbabwean government that it will scrap the Indigenisation policy for all investments into the country comes as a welcome development for domestic and foreign investors. The Indigenisation and Economic Empowerment Bill was signed into law on March 9 amid heated debate and resistance from the business community. The Bill sailed through parliament in September and had been used as the anchor policy for economic development by the incumbent government in the run up to the March 29 general elections.
A number of community share ownership trusts were set up to ensure that the indigenous communities benefited from national resources with minerals topping the agenda. The law described indigenisation as a deliberate involvement of indigenous Zimbabweans in the economic activities of the country, to which they had no access, so as to have an equitable distribution of national resources. Further, it described a Zimbabwean as any person who, before April 18 , was disadvantaged by unfair discrimination on the grounds of his or her race and any descendant of such a person and includes any company, association, syndicate or partnership of which indigenous Zimbabweans form the majority of members or hold the controlling interest.
In these countries, certain economic sectors are reserved for the natives or the national government pushes for joint ventures with foreigners on strategic investment portfolios.
The policy also gives preferential treatment to entities that employ more blacks especially at management level or subcontract indigenous companies to supply them and carry out their projects.
Though the policy is voluntary, it makes it difficult for entities that do not comply to partake in government or municipal contracts or do business with other complying companies.
The impact of the policy on the South African economy is mixed with analysts citing the policy for the improved participation of black South Africans in economic development, thereby reducing poverty levels. However, critics point that the policy has nurtured entrepreneurial laziness and political cronyism where a few connected black entrepreneurs canvass for government tenders and contracts while fronting for the elite.
The ongoing State Capture Inquiry which has highlighted the epitome of corruption in South Africa has exposed the advancement of BEE by those politically connected to the demise of key state-owned enterprises such as Eskom and South African Airways. The rationale for advancing the Indigenisation policy in Zimbabwe was very clear on paper.
Soon after the Bill was signed into law, a few foreign-owned companies disinvested from the local market while others moved to parcel significant portions of their equity to local management consortiums or community trusts. Pressure was ratcheted on blue chip companies, especially those in mining and manufacturing. However, foreign companies in loss-making positions or those in financial distress were mysteriously overlooked. A host of indigenous banks had been liquidated due to mismanagement and poor corporate governance since Independence.
In the last four years, a number of investors who have managed to invest in mining, banking and manufacturing have been exempted from the indigenisation policy, showing confusion on the policy and selective application of the law.
The positive impact of the Indigenisation and Empowerment policy on the intended beneficiaries, especially the marginalised or rural communities is next to none. The plea shows that millions of citizens are in need of basic services such as food assistance, healthcare, basic education, water and sanitation with the rural communities being the worst affected.
In terms of foreign direct investment FDI inflows in the economy, Zimbabwe has been struggling to keep pace with its regional peers.
Insofar as economic empowerment through Indigenisation is necessary, it is important to assess whether the intended indigenous beneficiaries have the financial resources to invest in the identified sectors, especially in mining, considering the level of capital required. Another key consideration is on whether mineral resources are of any economic value to the economy if the intended beneficiaries are not mining them in order to benefit from them.
It is rather beneficial to the nation for the government to compel foreign investors to process all minerals including diamond or platinum in Zimbabwe.
That way, the government creates business opportunities for indigenous small and medium enterprises that can be contracted in the value chain. Residual benefits can also come from employment of skilled labour, improved industrial capacity and growth in the tax base. It is therefore good riddance to the business community and economy as a whole that the government will scrap the law altogether so as to boost foreign investment.
Bhoroma is a business and economic analyst. For feedback, mail him on vbhoroma gmail. Victor Bhoroma analyst THE announcement by the Zimbabwean government that it will scrap the Indigenisation policy for all investments into the country comes as a welcome development for domestic and foreign investors.
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Indigenisation and Economic Empowerment Act
The amendments, contained in the Finance Act, which was published in a March 14 Government Gazette Extraordinary, also extend ownership of businesses in the 12 reserved sectors to "citizens of Zimbabwe" as opposed to "indigenous citizens. Non-citizens who commenced business before Jan. The new fund will be housed within the designated ministry and staffed entirely by members of the civil service. It replaces the former National Indigenization and Economic Empowerment Board, which functioned as an autonomous body outside the civil service framework.
Scrapping of Zimbabwe’s toxic indigenisation law good riddance
Please contact customerservices lexology. These far-reaching changes, first announced in the Budget in December , should pave the way for foreign investors wishing to establish operations in the country and boost the economy. Any other person is free to invest in, form, operate and acquire the ownership or control of any business without restriction. Affected companies may apply to the minister potentially, the Minister of Finance to be assigned to administer the Act for permission to comply with the Act within an agreed period of time. In respect of reserved sectors, only a business owned by a Zimbabwean citizen may operate in such sectors.
Indigenisation and Economic Empowerment Act [Chapter 14:33]
The law will give Zimbabweans the right to take over and control many foreign-owned companies in Zimbabwe. Specifically, over 51 per cent of all the businesses in the country will be transferred into local African hands. The law does not specify whether or not the transfer of ownership would simply apply to mergers and restructurings in the future, or if it applies to all current companies. This is not a new idea because there have been proposals for similar transfer actions, but have all come up fruitless. President Mugabe administration had already redistributed the commercial farms owned by non-black-African farmers to poor native Zimbabweans.
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