Home » Business » No Quick Fixes After Indigenisation Comments [opinion]

Over the past couple of days we have heard various statements from President Robert Mugabe and the Finance Minister Pat Chinamasa on the “seemingly” softening stance on indigenisation.

The President has clearly said empowerment policies are flexible while Chinamasa said they will be done on a sector by sector approach. Given the chagrin of foreign investors over the straight jacket perceptions, these statements indeed are welcome developments for the investment climate in Zimbabwe. At the same time one needs to be fair and say, this is what the indigenisation laws have always said.

The President and of course the Minister of Finance’s statements are not confusing at all, especially coming from a Government whose party won the last election based on the same indigenisation policy.

What’s clear is a total lack of understanding of the law by some within Government and those outside it. Or perhaps someone never read it in full. Most in fact just saw the word cede (which was later amended by the way) and immediately made their verdict about the law.

The indigenisation law has set a target of 51 percent local shareholding in all businesses above a certain value. This is the Law and there is no confusion about that at all.

However, the same law also allows for flexibility at the discretion of Government, acting through the minister responsible for indigenisation to allow for sector specific or enterprise specific targets and thresholds. This is contained in the Indigenisation Act.

This is why EssarZisco (which we all hope will start being operational soon) was approved at that 54 percent threshold Trust Bank even though it’s closed was allowed to sign for a100 percent stake to MOGS well before the elections.

AfrAsia Mauritius was allowed to increase its shareholding after its issues with Nigel and Grindrod is above 65 percent in United Refineries. TianZe went in 100 percent . . . but then the argument would be that these are our Chinese comrades!

If all this is clear, where is the problem? It’s in the communication! A lot of investors will stay away merely on the basis of how the media or third parties express the intentions of the laws.

Not so many understood the law well enough to articulate it. In the end what came out was that it would be similar to the chaos and jambanja that characterised the land reform. Forced Company Grab was a familiar headline.

It was also made worse by the mistake that it was turned into a political process whereas its not. At one particular point you would think ZANU-PF coined the word indigenisation.

However, the US has certain sectors reserved for its citizens Germany has similar indigenisation thresholds and many other countries. The idea of promoting partnerships with locals is not new.

On the ground all investors that actually came in person and had the laws explained to them ended up investing and even former Minister of Economic Planning and Investment Promotion Tapiwa Mashakada ended up speaking for the law on his numerous trips.

So maybe ex-indigenisation minister Saviour Kasukuwere made people more confused about the whole process. Sometimes he was militant (threatening company closures and making the white boys fly from South Africa with pink cheeks).

It was expected because this was a new law. Yet in spite of all this, the process turned out to be more technical and to the book than what everyone thought. A process which was hailed by international research houses as good corporate finance structures.

That being said indigenisation has been one of the main deterrents of investments in the country being blamed for the low investment levels in the country.

However, the CZI-led delegation which went to the EU early this year said indigenisation even though an issue was only a bullet of the main deterrent: the non-finalisation of land reform or what other sectors of the country and the World Bank constantly refer to as DISREGARD OF PROPERTY RIGHTS.

In fact in the recent meeting with IMF in early April, a couple of issues were highlighted indigenisation, clarity and consistency of policy, high taxes, high costs and power and energy.

The country needs to create an environment conducive for business with lower tax levels and tax breaks than those prevailing within the SADC region giving the country an obvious aantage. Ireland is one such country that has attracted international corporations because of a low tax rate of about 12,5 percent.

With a favourable tax regime the country is bound to attract a few corporate head offices or administrative offices for global corporations targeting Africa, for instance Facebook is seriously looking into opening an African office. This in part is job creation (the promised 2million jobs) and tax revenue. Any policy that scares away investors should be done away with.

We need transparency and consistency in all our ways of doing things, mining most importantly. Policy shifts, has been witnessed before, are not good for the country and they cause confusion.

Part of the royalties from mining should go towards financing agriculture focusing on maize and wheat for example, rather than recurrent expenditure.

Increasing production leads to food security and potential export earnings going forward. And future royalty receipts could be structured and securitised to raise sovereign bonds, with the monies being used to finance infrastructure and other meaningful projects.

Consideration should be made to possibly auction some of the diamond and platinum mining rights to the highest bidder, who should also offer an empowerment sweetener, with the money realised going to the fiscus.

Government needs to work on a debt repayment plan, maybe financed in part by disposals and semi privatisation of some corporations. This requires the current Government to consider selling its shareholding for cash in companies like CBZ, ZB Holdings, ZHL, and a few other-like companies.

In most cases some companies are distressed and posting perennial losses further eroding value. This then should be followed by partial privatisations (part buy-in and buy-out) of some State enterprises such as Air Zimbabwe, TelOne, NetOne, ZBC, TransMedia, PowerTel, ARDA, NRZ, and CAAZ also classifying some of them as HIGHLY REGULATED with restrictions on shareholding.

Then overall questions should be asked as to why we have lost some global brands that are now opting to export into Zimbabwe rather than manufacture, and real answers should be given. And those answers will give us solutions. This is the self examination which we lack as a country.

And I will repeat what has been moved on the FinX platform: It’s high time we change the governing ethos of attracting investment with a Pengaudzoke (a musical group from Marondera) song.

The current excitement around “Munotidako” (you want us there) will not deliver this country, economy, people nor its leadership. Let’s engage the world with a serious “Tinokudai mese” attitude!

Source : The Herald

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