Harare – Zimbabwe’s indigenisation programme has remained a millstone around the neck of the country’s economy while moves to close down non-compliant foreign firms are uninformed, a lobby group said on Tuesday.
Foreign firms in the country – which is battling for liquidity to boost its economy – are scrambling to meet a March 31 deadline to submit empowerment plans. Failure to do so will see the government shutting down non-compliant companies on April.
However, the Buy Zimbabwe Pressure and lobby group said on Tuesday that the government should reconsider its decision to cancel licences for non-compliant companies.
The contentious indigenisation policy seeks to compel foreign companies – among them groups such as Zimplats, Mimosa, Unki mine, Standard Bank, Standard Chartered and others – to cede majority shares into the hands of black locals.
State media also reported on Tuesday that about 35 foreign companies have submitted empowerment plans, according to the Zimbabwe Investment Authority (ZIA). Indigenisation Minister Patrick Zhuwao last week said foreign companies have mostly failed to comply with the policy.
Buy Zimbabwe has now said that the cabinet directive to close firms “as a punitive measure against companies is tantamount to condemn(ing) Zimbabwe into continued economic decline and abject poverty”, and described the move as “unfortunate and uninformed”.
“Threatening to close companies shows a lack of understanding of the economy and forces of economic prosperity,” said Oswell Bimha, chairperson of the business affairs committee at Buy Zimbabwe.
Buy Zimbabwe wants the government to reconsider its position, adding its weight to investment fund managers, economists and other experts who say the indigenisation policy is deterring foreign direct investments.
“In the midst of this economic malaise, Zimbabwe’s contentious indigenisation programme remains a millstone around the neck of the economy amid lack of a settled and progressive policy informed by a realistic economic agenda beyond the current legal framework,” said Bimha.
Funders and development partners such as the International Monetary Fund and the World Bank have said Zimbabwe should assure investors that investments will be safe. They have also demanded that the indigenisation policy be clarified to ensure investors are certain of the regulatory policy framework in the country.
Bimha said: “Zimbabwe’s economy is in dire straits and the government has been trying to shore it up by engaging the IMF and other multilateral institutions.” He added the government has made an effort to attract meaningful foreign direct investment by improving the ease of doing business in the country.
Zimbabwean industries have been hamstrung by liquidity challenges in efforts to revive production, which has sagged to below 40%.
The agricultural sector has also suffered from current dry weather conditions which will cut the country’s tobacco, cotton, maize and sugar output for this year, according to commercial farmers.
“There are a few resilient companies which are doing their best to stay afloat under this harsh operating environment. While the act was ostensibly promulgated to empower Zimbabweans economically by ensuring at least 51% of the shares (in businesses), the process has since degenerated into a farce amid indications of inconsistency and lack of genuine dialogue and engagement,” Bimha said.