Mugabe backtracks on law demanding foreign firms cede ownership to locals
What you need to know:
In a statement after a Cabinet meeting Wednesday, the veteran ruler said the law had complicated had caused confusion among investors and local businesses.
Law forces foreign owned companies to cede 51 percent of their shareholding to locals since 2008 saying it would correct colonial imbalances.
Foreign owned companies were given a March 31 deadline to comply with the law or face closure.
The IMF has been putting pressure on Zimbabwe to relax the empowerment law as part of raft of reforms
HARARE , Wednesday
Zimbabwe President Robert Mugabe has admitted that his government’s controversial economic empowerment policy is scaring away investors, indicating softening of demands on foreign owned banks and mines to give majority shares to locals.
In a statement after a Cabinet meeting Wednesday, the veteran ruler said the law had complicated had caused confusion among investors and local businesses.
“This has caused confusion among Zimbabweans, the business community, current and potential investors, thereby undermining market confidence,” he said.
“The situation has also led to increase in cost of doing business, thus further weakening the country’s economic competitiveness.”
President Mugabe has been pushing for the full implementation of the empowerment law that forces foreign owned companies to cede 51 percent of their shareholding to locals since 2008 saying it would correct colonial imbalances.
Foreign owned companies were given a March 31 deadline to comply with the law or face closure.
However, President Mugabe’s government was divided over the interpretation of the law resulting in an ugly fallout between Indeginisation minister Patrick Zhuwao and Finance minister Patrick Chinamasa on the status of foreign owned banks.
Mr Zhuwao, a nephew of President Mugabe, accused Mr Chinamasa of trying to shield the banks by insisting that they had complied with the law.
The public spat between the ministers forced the 92 year-old leader to take the unprecedented step of publishing the statement in the State controlled media on Wednesday clarifying his position on the law.
He said the government would treat the fragile banking sector with care as he censured his nephew who has also clashed with the Reserve Bank of Zimbabwe (RBZ) governor John Mangudya over the same law.
“The banking sector shall continue to be under the auspices of the Banking Act, which is regulated by the Reserve Bank of Zimbabwe and the insurance sector under the auspices of the Provident and Insurance Act,” President Mugabe added.
“This policy position is essential for the promotion of financial sector stability, confidence and financial inclusion.
“These institutions will, nonetheless, be expected to make their contributions by way of financing facilities for key economic sectors and projects, employee share ownership schemes, linkage programme and such other financial empowerment facilities as maybe introduced by the RBZ.”
IMF ARMTWISTING
The International Monetary Fund has been putting pressure on Zimbabwe to relax the empowerment law as part of raft of reforms that could see the southern African country getting loans from the Bretton Woods institutions for the first time in over a decade.
The law has been blamed for the country’s unending economic problems as foreign investors continue sitting on the fence.
This came as Zimbabwe’s economy slipped to its slowest growth rate in six years in 2015.
The dividend of adopting the US dollar as circulation currency and political stability has waned.
The country faces a serious shortage of foreign investment.
Zimbabwe attracted just 600 million US dollars FDI last year, ranking low among its rich and emerging neighbours such as South Africa, Botswana, Zambia, and Mozambique.
The IMF has urged the government to clarify the indigenisation policy so as to improve the investment climate and make it more favourable to the private sector.
