13 June 2014

Zimbabwe: Empowerment - Legal Framework Missing Link

IN order to deal with issues concerning the inconsistency and opacity of the Indigenisation and Economic Empowerment Act, the Zanu PF politburo last week agreed that the shareholding structure for the mining sector would be 51% local and 49% foreign, while other sectors like manufacturing and finance would be negotiated on a case-by-case basis.

In the meeting, Indigenisation minister Francis Nhema was directed to come up with a legal framework that clearly stated this position, which President Robert Mugabe has been publicly advocating.

Zanu PF spokesperson Rugare Gumbo said the politburo agreed that the controversial law, blamed for scaring away investors, would not be amended.

"In mining which deals with natural resources, the policy remains at 51/49%, but other sectors that deal with manufacturing and the financial sector, the shareholding will be negotiated. Anything outside mining will be negotiated," Gumbo said.

However, there are concerns that the legal framework, giving powers to the responsible minister to negotiate indigenisation on a case-by-case basis in certain sectors, would not adequately deal with issues raised by foreign investors concerning policy inconsistency and investment protection.

Leaving it to the discretion of the responsible minister did not help clear the confusion and controversy surrounding the policy, analysts said.

Already, Zimbabwe has seen different interpretations of the same law by two empowerment ministers.

During his tenure, former indigenisation minister, Saviour Kasukuwere, an energetic rabble-rouser, gave the impression that his major task was to attain at least 51% indigenous shareholding in all sectors of the economy.

A one-size-fits-all policy appeared to be his guiding principle which basis he clashed with the former Reserve Bank governor Gideon Gono who told him to leave the financial sector alone.

Kasukuwere wrote in March 2013 to Gono telling him banks were not exempt from indigenisation. In the letter he said: "The General Notice requires all financial institutions to comply with the 51% indigenous shareholding requirement within a period of one year from the date of public notice."

Kasukuwere set deadlines for compliance for all sectors, causing panic among foreign investors.

But when Nhema was appointed in September last year, he appeared to take a softer stance on indigenisation, saying the law allowed him to be flexible and not apply a one-size-fits-all approach to indigenisation.

In view of these contradictions, analysts say there can only be consistency if government crafts a legal framework with parameters for each sector as a guide to anyone who would be appointed to the ministry in future.

However, Nhema, who has pointed out that investors were worried with issues of consistency rather than the indigenisation policy itself, on Wednesday allayed such fears.

"Those fears (of inconsistency) are unfounded. I have to consult various stakeholders and make a decision on the facts presented to me," he said.

Kasukuwere said on Tuesday the problem is that people do not want to read the Indigenisation Act before criticising the policy.

"The policy remains the same. The only problem is that people do not want to read the policy in order to appreciate it," he said.

Political analyst Alois Dzvairo said a well-defined legal framework to guide the responsible minister has been long overdue and this has delayed the coming in of foreign investors at a time the economy continues to underperform amid resurgent signs of malaise.

"A legal framework is long overdue and this is what foreign investors are waiting for," Dzvairo said. "What is now needed to make progress is for government to go back to the drawing board to clear this mess by revising the law and coming up with a well thought-out policy which will help attract investors, stabilise the market and ensure economic recovery as well as growth," he said.

Zimbabwe Environmental Lawyers Association (Zela) finance officer Mukasiri Sibanda said ministers are given power to articulate the statutory instruments, but the only difference is their personalities.

"Kasukuwere and Nhema are doing the same duties, namely articulating the same policy, but what differs are their personalities," Sibanda said.

"Kasukuwere was forceful while Nhema appears more cautious. They should just make sure the laws they are propagating serve the best interests of the country."

Some business stakeholders have urged government to adopt the Botswana indigenisation model.

The Botswana citizen economic empowerment policy came into effect in 1999. It emanated from the National Conference on Citizen Economic Empowerment which called for the exclusion of non-citizens from participating in certain economic enterprises and the need to lower costs for citizens to go into business.

Unlike in Zimbabwe, the policy is not enacted in a single Act but is embedded in various laws, which were enacted over time to enforce participation by Botswana citizens.

Botswana has protection measures in place for many sectors, reserving them for local businesspeople only.

These generally relate to smaller businesses such as butcheries, filling stations, liquor stores and supermarkets (not retail chains), while different government departments impose stringent and varying licensing requirements for foreign businesses.

Since its launch in 2007 by the Zanu PF government, the indigenisation policy has been marred by controversy and confusion.

"In the implementation of the indigenisation programme, there has been some confusion," acknowledged Mugabe during celebrations marking 34 years of Independence.

His remarks were welcomed by the European Union, but the EU head of delegation to Zimbabwe, Aldo Dell'Ariccia challenged government to implement constitutional provisions to assure international investors that its one-size-fits-all indigenisation policy would not affect future investments in the country.

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