Finance minister proposes paying debt, compensating farmers
Ruling party faction opposes policy shift on black ownership
Zimbabwean Finance Minister Patrick Chinamasa is gaining the upper hand in a power struggle in the ruling party over his efforts to revive an ailing economy and tap financing from the International Monetary Fund.
In recent weeks, Chinamasa has said the state may compensate white farmers whose land was confiscated and that the southern African nation will pay $1.8 billion of about $10 billion it owes to foreign lenders by June 30. President Robert Mugabe issued a statement on April 12 softening regulations forcing foreign companies to ensure black residents own at least 51 percent of their businesses.
“What was presented in Mugabe’s statement is actually a policy shift of seismic proportions,” said Alex Magaisa, a Zimbabwean constitutional lawyer at the University of Kent in the U.K. “In many ways the statement represents a significant retreat by the Zimbabwe government on a flagship indigenization policy.”
The changes highlight the government’s drive to resuscitate an economy that’s half the size it was 15 years ago, with about 90 percent of the population out of formal employment. Mugabe declared a state of national disaster last month due to the worst drought in almost two decades that’s killed cattle, withered crops and left millions of people needing food aid. The government’s also struggling to meet monthly wage bills that consume over 80 percent of revenue.
Zimbabwe hasn’t been able to access finance to build infrastructure and create jobs since it fell into default to the IMF in 1999. The U.S. and European Union nations imposed sanctions on Mugabe and senior members of the ruling Zimbabwe African National Congress-Patriotic Front, citing allegations of human-rights abuses and electoral fraud.
Resistance to the policy shift has centered around a faction in ZANU-PF known as the Generation-40, which has coalesced around Mugabe’s wife Grace as a potential eventual successor to the 92-year-old president.
Criticism of Chinamasa’s policy direction has been led by Indigenization Minister Patrick Zhuwao, who’s Mugabe’s nephew.
When Chinamasa and central bank Governor John Mangudya assured banks that they were exempt from rules requiring all businesses to be at least 51 percent locally owned, Zhuwao accused them in a statement of disregarding the law and a decision by the cabinet. Chinamasa and Zhuwao declined to comment about any differences within the government or the ruling party.
“My appeal and plea to you is to urgently engage the financial services sector so that all affected institutions make a commitment to developing indigenization implementation plans and indicate such commitment to comply by the deadline of 31st March 2016,” Zhuwao said in a statement.
About two weeks after the deadline passed, Mugabe issued the statement saying that banks wouldn’t be forced into unwanted partnerships. Standard Bank Group Ltd., Barclays Plc and Standard Chartered Plc have units in Zimbabwe.
Mugabe also proposed watering down ownership rules for mining companies that have been in place since 2010. While new miners will have to offer a 51 percent stake to black Zimbabweans, existing operators will be able to retain ownership if they retain or spend 75 percent of their earnings within the country including expenditure on tax and wages. Foreign miners such as Zimplats Ltd., Anglo American Platinum Ltd. and Aquarius Platinum Ltd. met their empowerment obligations as early as 2014.
“It’s a humiliating moment for Zhuwao. The indigenization minister has now been reduced to the role of coordinator, after adopting a belligerent tone in recent months,” Magaisa said. “It’s a victory for Chinamasa in that ugly fight with Zhuwao.”-Bloomberg