Zimbabwean President Robert Mugabe on Tuesday moved to clarify the government’s plan to enforce its controversial black ownership law, suggesting that the implementation would be reasonable and sector-based, in a move to shore up vital market confidence.
Mugabe said in a statement issued via the office of information minister Christopher Mushohwe that conflicting positions among ministers over the implementation of the indigenization and Economic Empowerment Act has caused confusion among Zimbabweans, the business community, current and potential investors, thereby undermining market confidence.
The act, enacted six years ago as a center piece of Mugabe’s policies, requires foreign businesses to cede the controlling interest to local black Zimbabweans. A follow-up guideline issued in 2010 provides that the process should be completed in five years.
Over the years, the transfer of shares was slow and focused on the mining sector, as ministers in different ministries held varied views on whether to force foreign companies under their watch to sell 51 percent of the shares to local buyers.
The latest market disturbance was caused by the combatant indigenization and economic empowerment minister Patrick Zhuwao, who threatened to close shops of non-compliance foreign companies by a deadline set on March 31.
Mugabe, the brains behind the indigenization policy, however, clarified in Tuesday’s statement that the government would insist on 51 percent ownership of new mining companies while the existing miners are allowed to stay once they retain 75 percent of the “gross value of the exploited resources” in the country, in terms of taxes, wages, community benefits, procurement and etc.
“The natural resources sector, non-resources sector and the reserved sector are to be approached differently,” the veteran leader said, adding that companies outside the natural resources sector, including manufacturing, telecommunications, energy and banking, will negotiate empowerment credits or quotas with appropriate ministries.
Retail and wholesale trade, beauty salons, estate agencies, grain milling, bakeries, tobacco processing and provision of local arts and crafts are reserved for strictly locals.
“The government shall, from time to time, publish in the gazette, any changes to the list of businesses falling under this sector. To the extent that the indigenization and Economic Empowerment Act may not sufficiently conform with this policy position, I have directed that the law be amended or changed forthwith accordingly,” said the president.
This came as Zimbabwe’s economy slipped to its slowest growth rate in six years in 2015.
The dividend of adopting the U.S. dollar as circulation currency and political stability has waned. The country faces a serious shortage of foreign investment.
Zimbabwe attracted just 600 million U.S. dollars FDI last year, ranking low among its rich and emerging neighbors such as South Africa, Botswana, Zambia, and Mozambique.
The IMF has urged the government to clarify the indigenization policy so as to improve the investment climate and make it more favorable to the private sector.
