Indigenisation Act continues to create confusion

via Indigenisation Act continues to create confusion | The Financial Gazette by Maggie Mzumara 5 Jun 2014

AS the government works to clarify, simplify and do away with policy inconsistencies where the Indigenisation and Economic Empowerment Act is concerned, more and more confusion is ensuing. Various government ministers in recent weeks have sought to, at best, explain and, at worst, exonerate the Act, which since its enactment in 2008 has created more controversy, than the empowerment it seeks to bring about.

Generally aimed at empowering indigenous people who were disadvantaged before independence in 1980, the Act seeks to bestow majority ownership and control of the country’s resources to the black majority. More specifically, government, through this Act, endeavours to secure, as per Part 2, (1)(a) that “at least 51 per centum of the shares of every public company and any other business shall be owned by indigenous Zimbabweans; (b) no — (i) merger or restructuring of the shareholding of two or more related or associated businesses; or (ii) acquisition by a person of a controlling interest in a business; that requires to be notified to the Competition Commission in terms of Part IVA of the Competition Act [Chapter 14:28] shall be approved unless — (iii) Fifty-one per centum (or such lesser share as may be temporarily prescribed for the purposes of subsection (5) in the merged or restructured business is held by indigenous Zimbabweans; and (iv) the indigenous Zimbabweans referred to in subparagraph (iii) are equitably represented in the governing body of the merged or restructured entity.”

Since it came into being, the Act has seen a number of companies complying with the 51 percent local ownership: 49 percent foreign.  These include Zimplats, Old Mutual, Unki, among several others.  The Act has also discouraged new investors as the deal on the table has been less than attractive — interpreted to say one will only be able to have 49 percent ownership of their investment, and not all 100 percent of it.

Indigenisation of some sectors such as banking has courted resistance from key players. For example, former Reserve Bank of Zimbabwe governor, Gideon Gono, went toe to toe with the then indigenisation minister, Saviour Kasukuwere, arguing that the banking fraternity was too sensitive to have that law juxtaposed on it; and that while indigenisation and empowerment were noble, there simply could not be a one size fits all approach to empowerment.

The ruling ZANU-PF had indigenisation and empowerment as the centrepiece of its election manifesto; and by the same token, the economic blueprint the party launched in October last year the Zimbabwe Agenda for sustainable Socio-Economic Transformation, aimed at reviving the economy has indigenisation and empowerment front centre. While there has been some considerable steps towards empowering the black masses as seen in increased land ownership of indigenous people, there have been a number of drawbacks. In particular sectors such as  banking, petroleum, among others have seen foreign ownership of firms increasing and dwarfing that of local entities and individuals.

Banks that have seen foreign ownership increase in recent months include Kingdom Bank, which has now become Afrasia Bank and Allied Bank. While the indigenisation programme has in essence pushed for more local ownership, such increase in foreign ownership has obscured the aims and objectives of the programme.  As drawing the line of who should complies with what at what percentage, has muddied the waters of indigenisation and empowerment, so too have some drawbacks in community share ownership trusts (CSOTs), where mining giants among others having been required to give into a fund for the communities where they mine as some form of corporate social responsibility also meant to empower residents of these surrounding environs.

Of late reports have shown that some amounts pledged or understood to have been pledged into some of the CSOTs have not been disbursed as hoped.
Finance Minister, Patrick Chinamasa, in his budget presentation at the end of last year, noted that there was some policy inconsistencies around the particular law of indigenisation. He stressed the need for the policy to be coherent.

Going forth from the beginning of 2014 on, there would be a concerted drive by government to ensure there was consistency in the unpacking of the policy, this message was echoed at various levels of government. However in recent weeks, several key government ministers have created more confusion than understanding.  Two weeks ago in a media interview, Minister of Information, Media and Broadcasting Services, Jonathan Moyo, said the policy would be reviewed to make it flexible.

Government was considering two empowerment models as it sought to amend the Act. Moyo said the Production Sharing Model and the Joint Empowerment Investment Model had been identified. The Minister for Youth, Indigenisation and Economic Empowerment, Francis Nhema, denied that government had plans to review the Act, saying what Moyo had said was merely his opinion. Yet, just the past week, Chinamasa spoke of the policy being reviewed.

These contradictions have not gone any way in addressing policy inconsistencies but instead have made for much confusion and incoherence. At a time when the country is desperate for foreign investment to help kick start and restore the economy, experts says it is critical for government to speak in one coherent voice.  Economist, Prosper Chitambara, said the ministerial contradictions were not good for the country.

“When we have government ministers speaking at cross purposes like that it causes confusion and creates uncertainties. It has a negative effect in terms of investment prospects.  This, in essence, increases the investment premium — the cost of investing in the country increases.”

If indeed it is common knowledge that contradictions are not the best way to go, questions that beg answers become: do these contradictions benefit anyone? If so, who exactly and why? “I can’t think of why ministers would talk at such cross purposes,” Chitambara said.

However, lawyer and politician, Obert Gutu, told the Financial Gazette this week that he was not surprised by the contradictions. “The contradictory statements that are being made by different ZANU-PF cabinet ministers are symptomatic of policy incoherence and institutionalised confusion. This clearly proves that the so-called indigenisation policy lacks a collective buy-in even within ZANU-PF circles,” Gutu said.

“It is a populist indigenisation policy that is benchmarked on emotive utterances that do not resonate with the reality that is presently obtaining within the global macro-economic architecture.

“For as long as the ZANU-PF government trumpets this populist indigenisation policy, Zimbabwe will not attract any meaningful foreign direct investment. Our national economy will remain fragmented, perilous and fragile.”

What is of further challenge to the nation, according to Kempton Gundani, an economist with the Zimbabwe National Chamber of Commerce, is that oftentimes government policy is not being communicated through the right channels.  “The challenge is that government policy is not being communicated through the correct channels.  It is said somewhere  and then people hear it, the media reports it and in the end what people say has more impact than what the actual policy says, and this confuses the environment,” Gundani said.



  • comment-avatar
    zanupf fear me 10 years ago

    Is there a policy ???????????

  • comment-avatar

    Hello! Confusion is a weapon from the pit of hell! God is not confused and so who is in the driving seat? Repent Zimbabwe! Repent ZPf. No repentance! No restoration!

  • comment-avatar
    JOHNSON 10 years ago

    I think after the Climbdown is clarified in the Orgburo…no I mean Politburo meeting lets have on Key ECONOMIC policy spokesperson who clearly communicates the agreed policy shift. Having the Jonathans, Chinamasas, Nhemas etc say things is a bit confusing. There must be a DESIGNATED SPOKESPERSON, preferably a woman of stable senses eg Orpah Muchinguri to say out things. Then anyone else who utters any more contradictions must be disciplined. We need coherence and oneness i the ruling party.

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    Daniel 10 years ago

    Confusing?you must be joking.Just look what the courts decided regarding the BIPPA protected properties.When it comes to investments there are no grey areas.The host country/Zim must stick to the rules or investers will go somwhere else.Is this so difficult to understand???

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    Saddened 10 years ago

    Nothing new here. This crowd have been confused from the onset when they claimed to Marxists now they are the worst type of capitalist. How many ill-fated policies and programmes have they not come up with that have ended up in the dustbin and now we have Zim-asset. If they followed their own ‘land reform programme’ to the letter we wouldn’t be in the mess we are in. What we have here are a bunch of educated people who are reasonably competent at creating a plan but totally incapable of executing it.

  • comment-avatar
    Petal 10 years ago

    Find the Loot

  • comment-avatar
    Petal 10 years ago

    and prosecute even it is done beyond the border