Policy review not a climbdown | The Herald

via Policy review not a climbdown | The Herald May 27, 2014

THE proposed review of the indigenisation and economic empowerment policy is not a climb down from the indigenisation drive, but is actually an intensification of the policy as it moves from requiring at least 51 percent equity in the hands of indigenous Zimbabweans to ensuring they retain 100 percent ownership of their natural resources, analysts said yesterday.
Government is in the process of clarifying the Indigenisation Act to ensure a sector specific approach that puts 100 percent ownership of resources in the hands of Zimbabweans, with the only debate pertaining to the percentage of sharing proceeds from the investment with investors.

Ultimately, the review will allow investors to recover initial capital investment, receive an appropriate return on investment and recoup operational costs.
As currently constituted, the Indigenisation and Empowerment Act requires all foreign-owned businesses worth at least US$500 000 to cede 51 percent shareholding to indigenous Zimbabweans.

But under the proposed arrangement, the resources are wholly indigenised as Government has identified the Production Sharing Model (PSM) and the Joint Empowerment Investment Model (JEIM) as the two vehicles through which the indigenisation policy will now be implemented. The PSM is a broad cover for an assortment of production sharing agreements signed between Government and extraction companies concerning how much of a resource extracted from the country each will receive.

Under JEIM, outside mining, agriculture and particular tourism investments, indigenous Zimbabweans will be encouraged to enter into joint ventures as a way of generating capital to build wholly Zimbabwean-owned enterprises.

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Since the story of the proposed review broke over the weekend, some sections of the local private, South African and western media have portrayed the policy review as a climb down on the part of Government, hailing it as a victory for perceived ‘’moderates’’ like former Reserve Bank of Zimbabwe governor Dr Gideon Gono who was averse to the indigenisation of the banking sector and proposed an alternative model that he called Supply Side Intervention.

Analysts who spoke to The Herald said it was wrong to equate the PSM model to Dr Gono’s proposals as he advocated a Supply Side Model that concentrated on procurement while keeping equity in the hands of foreigners but under the PSM and JEIM, indigenous Zimbabweans retain full equity while sharing production and profits with the foreign investors who carry the risk of the financial investment.

‘’We do not know where those who think (Dr) Gono should take credit for the review are reading it from or what they are taking because the review and Gono’s proposed supply-side interventions are as alike as day and night,’’ Mr Tawanda Chigodora, a Zimbabwean economist resident in South Africa, said.

‘’One policy advocates ownership while the other (Dr Gono’s) calls for employment yet President Mugabe has always said we must take full ownership and control of our resources,’’ Mr Chigodora said.

Mr Israel Kanengoni, also hailed the proposed review saying:
‘’The good thing about the Production Sharing Model is that there is no 51/49 percent, its 100 percent ownership. The issue to debate and negotiate is the sharing of the production or the profit not the ownership of the resource its ours always. So this is actually a climb-up not the climb-down some people have been talking about,’’ he said

‘’More so,’’ he added, ‘’This climb-up also recognises that people do not invest as charity, since here an investor is entitled to recover their costs and get a return on their investment.’’

National Business Council of Zimbabwe president Mr Keith Guzah said the policy shift was not a climb down, but opens avenues for realistic policy options “which appeal to the common sense of sustainable business development’’.

“The agreement is consonant with indigenisation and land reform, underlying principles whereby the autochthonous stakeholders remain with 100 percent ownership to mineral resources and agricultural land,” he said.

“Investors on the other hand recover start-up and get returns from investment and rebates on operations costs before the sharing of the production outputs.
“This way, partners get immediate utility from participation in the local economy, while the locals immediately build capacity for future sustainability. More than ever before the Zimbabwean Government has demonstrated to the world that the indigenisation and empowerment agenda is not a retributive agenda, but a corrective measure to inequalities which after their redress facilitate a return to business normality than can satisfy the basic laws of economics and business production.”

Mr Guzah said his organisation supported the pragmatic approach being taken by the Government.
Prominent Harare lawyer Mr Terrence Hussein of Hussein and Ranchod Legal Practitioners said the policy review would help change the attitude of investors on Zimbabwe.

“With Government policy, you cannot remain static,” Mr Hussein said. “We should be grateful that we are not rigid and this is not the first time that Government had to modify a major policy and these changes were always for the better and this is what we are experiencing with the indigenisation policy modification to realise the best results possible.”

Mr Hussein said in the past Government had changed the price control policy when it faced constraints and discarded the Zimdollar, major policy changes that helped economic growth.

Other economists who spoke to The Herald said the deliberate distortion of the review is some sections of the media appeared meant to create angst in the electorate that gave Zanu-PF a resounding victory in last year’s harmonised elections.

And Evangelical Fellowship of Zimbabwe president Bishop Trevor Manhanga concurred as he warned the Zanu-PF Government to be cautious not give away too much with regards to the indigenisation policy modification.

“That was the key policy which won Zanu-PF the two thirds majority in the harmonised elections last year,” he said. “It was a very strong election policy and you should be very careful not to throw away everything.”

The PSM model has worked very well particularly in the oil-producing countries in the Middle East which accounts for their phenomenal revenue, and closer to home Angola has also successfully implemented the model.