5 January 2016

Zimbabwe: March Deadline for Foreign Firms As Zim Curbs Investors

Zimbabwe on Monday put in place a March deadline for all foreign companies to submit indigenisation compliance plans. It also announced new measures to restrict foreign businesses from operating in reserved areas such as retail and agriculture.

The indigenisation policy compels foreign firms in Zimbabwe to cede 51% of their shares into the hands of black Zimbabwean groups. However, it has caused alarm among investors, prompting the government to announce new measures aimed at clarifying the policy.

Indigenisation Minister Patrick Zhuwao and Finance Minister Patrick Chinamasa earlier haggled over the policy framework but on Monday reached agreement over the new measures. Zhuwao, a nephew of President Robert Mugabe, said the government is now geared to implement the policy.

"The emphasis is on implementation of the indigenisation law starting with the submission of the Indigenisation Implementation Plan which every company affected should submit as soon as possible but no later than March 31 2016," said Zhuwao.

Mugabe said in December that there would be no mercy for non-compliant foreign firms in 2016. The government is also set to introduce an empowerment levy, with companies that have a large foreign shareholding paying a greater amount.

Shares disposed of by foreign companies will be acquired, among others, by entities such as the National Indigenisation and Economic Empowerment Fund, the government's Sovereign Wealth Fund, Employee Share Ownership and Community Share Ownership Trusts, the Zimbabwe Mining Development Corporation and any other company incorporated by government.

The new guidelines outline reserved areas for investment by locals and these include retail, agriculture, bakeries, advertising agencies, cigarette manufacturing, milk processing and fuel retailing among others.

"No new non-indigenous businesses will be allowed to invest in the reserved sector unless under special cases as determined by line ministries and approved by Cabinet," reads part of the new guidelines.

The government may also have backed down from its earlier position which rejected empowerment credits and corporate social responsibility as part of the measures through which to achieve indigenisation.

The new guidelines say "empowerment credits may be taken into account in achieving the 51% indigenisation threshold in order to support economic empowerment of indigenous Zimbabweans through achieving socially and economically desirable objectives".

The government has previously had run-ins with companies such as Impala Platinum [JSE:IMP], which wholly owns Zimplats and jointly owns Mimosa together with Aquarius Platinum [JSE:AQP]. It has also had disagreements with Tongaat Hulett's [JSE:TON] units in the country, Triangle Sugar Corporation and Hippo Valley.

The undertaking of specified development work in communities, beneficiation to a specified extent of raw materials extracted in Zimbabwe, the transfer to a specified extent of new technology to Zimbabwe and the employment to a specified extent of local skills or the imparting of new skills to Zimbabweans will also be considered as part compliance with indigenisation.

Source: Fin24


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