Economy hurt by undertainty about indigenisation law
Peta Thornycroft | Johannesburg February 08, 2011
Protests this week in Zimbabwe's capital saw small Nigerian-owned shops
looted by President Robert Mugabe’s loyalists, who say their demonstrations
were in support of so-called indigenization laws. Politicians and economists
say the uncertainty about the laws is harming Zimbabwe's slow economic
A year ago, new laws were published that said all companies valued at more
than $500,000 must surrender a 51-percent share to black Zimbabweans.
This sent shock waves through the business community at a time when many
were trying to revive the economy shattered by the former ZANU-PF
The laws have since been revised, but President Robert Mugabe and other
ZANU-PF leaders regularly tell supporters they can help themselves to
majority shareholdings in white and foreign-owned companies.
Industry Minister Welshman Ncube of the smaller Movement for Democratic
Change, has been trying to manage the fallout from the indigenization law,
which he says, has several shortcomings.
"There is a law providing for a framework for indigenization, that law
leaves a lot to be desired in many areas, particularly in terms of clarity
and fairness, [but] unless and until it is changed, it is the law," Ncube
He says the wording within the legislation allows for some flexibility and
discretion within the indigenization law.
"Remember it is not a directory law, it is an aspirational law,” he added.
“It says we shall aspire to have such and such percentage of ownership in
companies in Zimbabwe. It does not say we shall have, it says 'we shall
aspire,' which the government shall endeavour to achieve XYZ."
Earlier this month, a Mauritius company, Essar Africa, took over 55 percent
of Zimbabwe’s only iron and steel company, ZISCO, which was previously
state-owned and went bankrupt under the former ZANU-PF government.
Ncube said flexibility in the indigenization law allowed a foreign company a
majority shareholding of ZISCO.
"For us, what is important is to bring ZISCO back into line and for it to
contribute to the economy of the country, and not to quibble about
six-percent difference in equity," said Ncube.
Ncube says the uncertainty of the indigenization laws has frightened off
many foreign-owned companies from recapitalizing aging factories, such as
the only vehicle tire manufacturer, Dunlop, based in Bulawayo.
"There are many, many companies whose foreign shareholders were about to put
more money in them, say a company such as Dunlop, and they immediately put
on hold some of those plans," he said.
ZANU-PF Youth Minister Saviour Kasukuwere told party members last month they
had a right to take over South African-owned sugar companies in southeastern
Ncube said Kasukuwere and others who encourage people to take over companies
were inciting them to break the law.
"When Kasukuwere has said that, we have responded, instantly as part of the
government, that it is not government policy, that it does not have any
foundation in law, and therefore is unlawful," said Ncube.
Kasukuwere did not answer his mobile phone Tuesday when VOA sought a
Ncube says the uncertainty of the indigenization laws and threats to take
over foreign companies are seriously affecting economic recovery.
While Zimbabwe previously manufactured much of what it consumed, most retail
goods are now imported from South Africa.
Most foreign companies in Zimbabwe are South African-owned.