The implementation of government’s indigenisation policy is off the rails as the liquidity crunch has made it unworkable, experts have said.
BY NDAMU SANDU
This, according to economists, requires a radical policy shift that would entail an acknowledgment that the existing policy is unworkable followed by an amendment to the statutory instrument.
According to the Indigenisation and Economic Empowerment Act, at least 51% shareholding in all companies operating in the country should be in the hands of locals.
The policy also stipulates that the shareholding should be in the hands of employees, communities and the National Indigenisation and Economic Board for future generations.
But the policy has been dogged by inconsistencies with ministers offering different interpretations which have unnerved investors.
Last year, Vice-President Emmerson Mnangagwa told business leaders at his Kwekwe farm that government would amend the legislation to lure foreign direct investment.
A week later, Indigenisation minister Chris Mushohwe said there was no going back on the policy, adding locals could have as high as 99% shareholding.
Analysts say a review of the legislation policy would give a good signal to investors who are waiting in the wings with huge investment portfolios.
“First there should be acknowledgment from the highest office that the policy will not work. This should be followed by the amendment of the statutes and the whipping into line of implementing agencies. Only then can international capital start flowing in,” an independent economist said.
The economist said the focus on shareholding was premised on a wrong foundation because not everyone could become an owner of a business.
He said income comes in five forms — wages, profit, dividend, interest and rent — and recipients of the income could still survive.
“Empowerment does not mean that everyone should have a house. With a good wage, one will be able to pay rentals and live a comfortable life,” the economist said.
Analysts say the broad-based model would bring the desired results instead of devoting efforts on ownership.
“The implementation of the indigenisation policies which emphasises disposal of shareholding in a market facing a liquidity crunch instead of focusing on broad-based empowerment focusing on social and economically desirable activities which uplift large numbers of indigenous Zimbabweans has, unfortunately, made it very difficult for the country to attract foreign investment,” an expert said.
“The focus on shareholding appears to have in mind an investor
willing to invest in a project and them lose control of the project. Very few investors will accept such a situation.”
Since the indigenisation crusade gained currency in 2012, a number of term sheets were signed between mining companies and government. However, there has been no movement except the setting up of community share ownership trusts.
In some cases, the funding of the trusts has created consternation, especially in Marange where diamond companies are arguing that they never pledged money to the trust.
Critics say Zanu PF used the policy to curry favour with the electorate in the run up to the 2013 harmonised elections. They say mining companies, like any other business entity, were in the business of making money and not throwing millions of dollars away through the so-called share ownwership trusts in a bid to please political hawks.
Zimbabwe told the International Monetary Fund recently that it would publish on the website of the Zimbabwe Investment Authority a simplified summary of the Indigenisation and Economic Empowerment legislation as a key step to improve the investment climate.
This however, is yet to happen.