Scrap indigenisation policy: Analysts

via Scrap indigenisation policy: Analysts – DailyNews Live by Thelma Chikwanha  13 APRIL 2014

Government needs to stall the indigenisation process and change some of its economic policies and implement practices that will resuscitate the economy, analysts have said.

The indigenisation policy compels foreign companies to cede at least 51 percent ownership to Zimbabweans in a move which has spooked foreign investors.

Analyst canvassed by the Daily News on Sunday said Zimbabwe, which is currently experiencing a severe liquidity crunch, should put in place measures to attract Foreign Direct Investment (FDI) which is expected to give the economy the boost it badly needs.

Rashweat Mukundu, a media consultant, said while it was noble to initiate the policy where government hopes to realise at least $7,3 billion from the indigenisation of 1 138 companies across 14 sectors, the economy was in a resuscitation phase where many companies reeling from the effects of the liquidity crunch needed investment to stay afloat. “The demand that foreigners cede the majority shareholding when the economy is almost collapsing does not seem to work, and is akin to putting the cart before the horse,” Mukundu said.

“Indigenisation must be more of wealth creation than wealth grabbing. As we have seen by now, no Zimbabwean has benefited from the 51 percent policy and as many companies are closing and retrenching.”

Maxwell Saungweme, another analyst, believes the policy which government hopes will unlock capital in the economy should be moderated or stopped all together.

“But it will be a bit naive to think that just halting the policy will get the country out of the current economic quagmire,” he said.

“There is more needed. The country at present needs a huge injection of foreign capital to jump-start and sustain the economy.”

Saungweme said if the policy was shelved, it would indeed give good pointers to foreign investors but there was need to deal decisively with corruption which has contributed to the economic decline.

“You also need to decisively deal with corruption and send the right signals to investors that the country does not tolerate corruption as corruption dissuades investment by increasing the cost of doing business,” he said.

“You also need to look at the taxation policies of the country as our taxes are too high and investors shun us for Mozambique, Zambia etceteras, countries that have more attractive tax regimes.”

Government needs to create a semblance of rule of law and respect for basic human rights as serious investors are not attracted to lawless states, he added. “You also need to create good incentives for Zimbabwe’s human capital abroad to come back home and provide the skills required at a lower rate than what the country pays to expatriates,” he said.

“We also need to open up our borders by removing most tariff and non-tariff barriers to free flow of goods and services and trade.

“Issues like the corruption at the borders and the long time it takes to clear goods at the borders present some form of non-tariff barriers that discourage investors.

In short there is more required to rejuvenate our economy than just moderating the indigenisation policy.”

Tafadzwa Matiza, a researcher with the University of Limpopo said the country needed to undergo a rebranding exercise and shake off the “bad boy identity” to attract investors.

Pedzisayi Ruhanya, a media and political analyst, said the indigenisation policy was political election propaganda message that was largely a slogan.

“It cannot be taken seriously because economies and day-to-day administration of the State are not premised on propaganda and corrupt practices,” Ruhanya said.

“It is now clear that it was never a policy but a propaganda act by the regime.”