Chris Muronzi
5 November 2009
Harare — IN a move with damaging implications for investment, Zimbabwe plans to grab a 51% stake in foreign-owned firms within 60 days of the gazetting of the Indigenisation and Economic Empowerment Act regulations, documents in the possession of the Zimbabwe Independent show.
The regulations seek to transfer ownership of any foreign-owned businesses valued at US$500 000 or above to indigenous Zimbabweans in terms of the Indigenisation and Empowerment Act passed in 2007.
While the Act has been public knowledge for several years, the regulations reveal a hardening of government's approach. The documents spell out thresholds, time frames and the process of compliance.
"Any business that within the 60-day period referred to in subsection (1) fails to enter into a transaction that results in 51% or a controlling interest, as the case may be, being held by indigenous Zimbabweans shall within the next 30 days submit a proposal within the next six months from the date of publication of these regulations on how it intends to achieve compliance with the Act," read the regulations.
Companies opposed to the proposed legislation would be required to show cause through Indigenisation and Empowerment minister Saviour Kasukuwere why they will not be able to comply with the provisions of the law.
Upon completion of the transaction, shareholding should be transferred inside a month or the company should show cause to the Indigenisation minister why the firm failed to comply.
Three weeks from the date of adoption of the regulations, the minister would be empowered to effect a merger or restructure if indigenous Zimbabweans fail to acquire the controlling stake in a related sector in line with the Competition and Tariff Commission rules.
But the shareholding in merged or unbundled businesses will be lower than 51%, according to the proposed regulations.
The proposed regulations also state that foreign investors can only set up business in this country on the basis that a controlling stake in the investment is reserved for indigenous Zimbabweans. Investors who have attended successive investment conferences since the formation of the inclusive government at the beginning of the year have spoken out against government's indigenisation project.
South African mining magnate Patrice Motsepe who led a business delegation here in April reminded President Mugabe on the importance of creating a conducive environment.
"The critical thing is that the rules of investment should remain in place," Motsepe said. "The concern is that there should be no shifting of goalposts a few years down the line."
If the regulations are gazetted without amendments, government would need proof of compliance with the empowerment law and carry out indigenisation assessment on an annual basis.
Mobile, tourism, finance, transport, communication and construction sectors will need to attain empowerment within three years.
"When one looks at the schedule," a legal expert who read the schedule said yesterday, "the impression one gets is that, for example, banks must in three years attain a minimum indigenisation and empowerment quota of 30% when in fact a bank should attain 51% by the end of the three years; 39% is supposed to be immediate, and the remaining 21% in the three years."
The expert said the schedule was ambiguous or mum on numerous issues emanating from valuation of assets.
The expert questioned how valuations would be conducted and whether this would be arrived at using agreeable formulas.
He asked: "For example, will this (valuation) be done by asset value or cash value and who will be evaluating this? What of assets purchased through loans? Will this not cause confusion?"
Apart from legal problems, the expert said it is not feasible.
Earlier this year, Kasukuwere told the Independent that government would not embark on a chaotic wealth redistribution.
There were suggestions only a few weeks ago that the legislation would be softened to address the concerns of investors. But following the pullout of the MDC-T from its partnership with Zanu PF, there appears to be a move to punish the MDC-T which favoured changes to the Act.
Zimbabwe embarked on a land reform exercise to correct historical imbalances but Zanu PF officials got the bulk of the prime estates. There are fears the economy will be similarly plundered.
Analysts fear the proposals in their current form will shut the door on potential investment and could benefit a handful of politically connected individuals at the expense of the economy.
Read comments. Write your own.
Copyright © 2009 Zimbabwe Independent. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
this is typical Mugabe/ Zanu-PF and any foreign company should have known this and seen it coming but if there is anyway pull out now. I love how they say they want to give it to indiginous Zimbabweans but guess what that means Mugabe/ Zanu-PF and their cronies...
This has got to be in retaliation for Nestle' not buying the bitches milk.
MDC has majority in Parliament, Mugabe and the ZANU-PF aren't magic, they can't just force this through. If the bill passes, it will be done with the consent of MDC.
It's not magic, it's bullets that will force this through. Just because people fear ZANU-PF, does not mean they agree with ZANU-PF.
Why would anyone support MDC if they think that the MDC is too weak to stand up?
I know I wouldn't support a party that cannot stand up for their so-called ideals, which is why I don't vote for either the Democrats or Republicans. But this sounds more like your vast "MUGABE DID IT!!111!!!!1one!!1!" conspiracy theory that's irrational in the first place.
Why would they support MDC? Belief. Hope that the SADC, or the AU, or even the UN will arrive with their military and overthrow the ZANU tyrrany. It won't happen, of course, and even if it did it would cost thousands of lives.
Belief can move mountains, but it can also make a person think a herring is a racehorse... Or that Mugabe, if given a clear electoral mandate backed by impartial international observers, will bow to the will of the people and leave office if everyone votes against him. Or, if that doesn't work, that a mob of oppressed, unarmed civilians have a chance of leading a successful revolt against a battle-tested army of war heroes.
Outside military action would cost thousands of lives... but outside ambivalence, combined with the stark contrast between belief and reality, will soon cost millions.
I wasn't asking about an ambiguous "they" I was asking why someone (you, for example) would support a party whom they believe is too weak to defend their own positions.
Saying MDC wont vote the way they want too is ridiculous.
See all comments (35).
Anyone stupid enough to still have investments in Zimbabwe deserves to lose their money to Mugabe. How can anybody have not seen this coming?