Nothing progressive about indigenisation regulations: Economists

via Nothing progressive about indigenisation regulations: Economists – NewsDay Zimbabwe January 6, 2016

The recent frameworks, procedures and guidelines for implementing the Indigenisation and Economic Empowerment Act, described by government as progressive have been savagely criticised as an attempt to offer free lunch to beneficiaries.


Economists say the government is still on the wrong path by seeking to grab 51% shares from foreign companies without paying for them, a move they say will force company closures and drying up of jobs.

Renowned economist, John Robertson said nothing has changed because the new regulations still sought to harshly penalise investors for failing to comply and also force companies to cede 51% of their shares without receiving payment for them.

“Government is saying this is happening in other countries, but it’s not true that in other countries companies are forced to transfer shares to government or other agencies for free. If people want shares they have to pay for them because now we are penalising investors for the privilege of doing business in Zimbabwe. We have made no progress at all, we are on the wrong path,” he said.

Government announced that it had produced a refined and better document, which clarified how the Act will be implemented, with Reserve Bank of Zimbabwe governor John Mangudya saying it showed that Zimbabwe was open for business.

The frameworks also introduces the indigenous compliance and employment levy, with all businesses having to pay towards an empowerment fund, although government is yet to release a structure of the tax.

Zimbabwe National Chamber of Commerce chief executive officer, Christopher Mugaga said government’s inconsistency with the law was causing confusion.

“The problem is not the levy, but the number of times that you adjust the law. The more you keep altering the law the more you confuse the market. The problem is with how you make adjustments on the whole issue of indigenisation compliance. So the people, who will have to comply will now be left in confusion and that is a threat to business. Investors will in turn be scared away from the investing even China, who seem immune to indigenisation, watches this policy very closely,” he said.

Lynton and Edwards, a stockbroking firm, said the empowerment levy is now the elephant in the room, as the market now waits for the tax to be announced.

“What is now important is to know what the levy will be, if it’s not punitive enough business will comply. It really depends on the levy whether people will indigenise or they will go and invest elsewhere,” the company said.

Labour and Economic Development Research Institute of Zimbabwe economist, Prosper Chitambara said generally a levy is a tariff and will increase cost structures and reduces return on investments.

“On the discounts, a lot of discretion will be used that will expose the whole process to rant seeking behavior and people will take advantage of that,” he said.