23 May 2014

Zimbabwe: Indigenisation Now a Mess

Photo: IRIN
A fresh produce market in Mbare, Harare.

editorial

GOVERNMENT's controversial indigenisation programme has now degenerated from being unworkable to the depths of confusion bordering on a circus as authorities, from President Robert Mugabe to the lowest officials, contradict and even clash with each other publicly.

While at the beginning it was characterised by criticisms that it was impractical in its current form, the programme is now a mess as Mugabe and his officials continue to make remarks which not only fail to clarify it but fuel the chaos, uncertainty and scare away investors.

It must be said upfront, empowering locals and bringing them into the mainstream economy is a good thing.

However, a good thing done in a bad way does not serve a useful purpose. Policy must be structured and informed by reality on the ground, not emotional outbursts and daydreaming.

Despite having been part of the national discourse since 2007 when Zanu PF first formally mulled the process, and more actively since 2010, the programme is fast deteriorating into a farce as its architects now publicly fight over its framework, thrust and implementation matrix.

Major indigenisation deals involved Portland Holdings, Unki Mine, Mimosa Mining Company and Zimplats, mostly brokered by Brainworks Capital Management, amid allegations of cronyism, bribery and corruption.

Even if its promoters say this is a genuine programme of empowerment premised on resource nationalism to lift up previously underprivileged Zimbabweans from the depths of poverty by leveraging the abundance of the country's mineral wealth, the reality is that the policy is more like racketeering by regulation.

It has created havoc across the economy, while fuelling uncertainty and damaging the country's image as a safe investment destination.

The promulgation of the Indigenisation and Economic Empowerment Act, as read with the relevant general regulations, statutory instrument and supplemented by required notices, requires foreign-owned companies to dispose of 51% of their shares to locals at fair market value.

However, Mugabe and his officials have been ambiguous on implementation and in the process created a farcical situation. Take for instance what Indigenisation deputy minister Mathias Tongofa told parliament on Wednesday when he said government has no intention of revisiting the policy to make it more investor-friendly and progressive.

This was in sharp contrast to what Mugabe said on Independence Day when he indicated 51% should only apply where foreign companies have been established, mainly on the basis of natural resources, mostly in mining and agriculture.

Finance minister Patrick Chinamasa recently said there will be no one-size-fits-all approach to indigenisation.

So the question is what is going on here? Of course the law is clear but its interpretation and implementation is not. Instead, there is a lot of confusion about the issue.

What is now needed to go forward is that government must go back to the drawing board to clear this mess by revising or repealing the law and come up with a well-thought-out policy which will help attract investors, stabilise the markets and ensure economic recovery as well as growth.

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