Zimbabwe to press ahead with controversial indigenisation scheme

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by David Pilling and Andrew England

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Zimbabwe is pressing ahead with a controversial scheme to put foreign businesses under the majority control of black Zimbabweans, though its plans need not damage the country’s efforts to re-engage with the international community, said the minister in charge of “indigenisation”.

Despite years of fiery rhetoric, few of the proposals have been implemented but in an interview with the Financial Times, Patrick Zhuwao, a cabinet minister and nephew of veteran leader Robert Mugabe, said the government was adamant the policy would move forward.

“There is no nation which doesn’t need foreign investors,” he said, adding that clear rules on indigenisation ought not to deter businesses serious about investing in the country.

“We definitely need foreign capital, but we also need foreign capital to be able to come in a manner that adds value,” he said.


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Under the plan, which has been under discussion since 2008, foreign companies would transfer 51 per cent of their shares to local entities or individuals. Last month, the government released a set of guidelines intended to clarify the regulations and reassure investors and donors.

The indigenisation programme has been blamed for exacerbating uncertainty and stymieing investment in the ailing economy, with companies such as South Africa’s Impala regularly coming under fire.

“Indigenisation is total nonsense,” said Nelson Chamisa of the opposition Movement for Democratic Change. “It is xenophobic. It is basically Zanu-PFisation,” he said, referring to the party that has run the country since independence in 1980.

The government is also continuing with its controversial land reform programme, which began in about 2000 and triggered the forced seizure of white-owned farms.

The policy was widely blamed for devastating the agricultural sector and driving the economy into a tailspin, although the government insists that the measures were necessary to address colonial legacies.

Harare’s determination to press ahead with the indigenisation programme comes despite the fact that the government is making a strong push to clear nearly $1.9bn of debt arrears with multilateral institutions.

That would enable it to tap fresh funds, badly needed to shore up an economy still recovering from hyperinflationary collapse several years ago.

However, any deal would need the approval of the International Monetary Fund, which opened an office in Harare in 2014 after an absence of a decade. Western donors, including the IMF, fear indigenisation could lead to crude expropriation of foreign assets and become a tool of patronage and corruption.

Under pressure from donors, the government appears to be taking a more pragmatic approach, although Mr Zhuwao dismissed the suggestion.

Speaking separately at an investors’ forum, the minister, who described himself as the “new sheriff in town”, said indigenisation was not up for negotiation. “I’m not here to discuss whether indigenisation is good. It’s the law of the land, a fact.”

Indigenisation is total nonsense. It is xenophobic– Nelson Chamisa, Movement for Democratic Change

Mining has been at the centre of the storm. The government wants to use the value of a mine’s reserves to offset any amount the state might be liable to pay for its 51 per cent stake.

Mr Zhuwao, who has been criticised for sending out conflicting messages, described the resources under the ground as God-given.

“God in his wisdom made it available to the people of Zimbabwe, and we believe that it should be a resource that should be available for the benefit of the people of Zimbabwe.”

In the non-mining sector, foreign businesses such as Barclays, Standard Chartered, British American Tobacco and Nestlé, which have clung on through years of economic chaos and decline, would also be affected.

However, the stake a company would have to shed varies by sector. In finance, for example, banks would be expected to sell a 20 per cent holding, and could make up the remaining 31 per cent by earning “credits” for investing in a range of areas from social housing and skills training to carbon-neutral projects.

Foreign ventures will be banned altogether in 14 industries, including hairdressing, agriculture, fuel retailing and even baking.-Financial Times