Zimbabwe business grab scares investors
AFP
By Reagan Mashavave | AFP – 3 hours ago
The launch of the Zvishavane Community Share Ownership Trust at Mimosa
Mine in Zvishavane last month. Zimbabwe’s forcing of foreign firms to hand
over a 51% stake will scare away much-needed investment, with no clarity on
how the cash-strapped state will fund its big stick approach, analysts
sayView Photo
The launch of the Zvishavane Community Share Ownership Trust at Mimosa
Mine in Zvishavane last month. Zimbabwe’s forcing of foreign firms to hand
over a 51% stake will scare away much-needed investment, with no clarity on
how the cash-strapped state will fund its big stick approach, analysts say
Implats chief executive David Brown (left) and Zimbabwe’s indigenisation
minister Saviour Kasukuwere at a news conference in Harare last week. They
announced that Implats has submitted a plan to distribute 51% of its shares
to locals to meet the indigenisation lawView Photo
Implats chief executive David Brown (left) and Zimbabwe’s indigenisation
minister Saviour Kasukuwere at a news conference in Harare last week. They
announced that Implats has submitted a plan to distribute 51% of its shares
to locals to meet the indigenisation law
Zimbabwe’s forcing of foreign firms to hand over a 51 percent stake will
scare away much-needed investment, with no clarity on how the cash-strapped
state will fund its big stick approach, analysts say.
The government’s assurances that its “indigenisation” policy is not a
nationalisation drive is unlikely to soothe nerves after platinum giant
Implats capitulated on Tuesday after being threatened with a state take-over
of its local subsidiary.
“It is doing so much damage to the country in terms of attracting investors
for job creation. The policy is very bad,” said Harare-based economist John
Robertson.
The controversial law orders foreign-owned companies — such as mines, banks
and retailers — to submit plans on how they will give up a majority share
to locals.
But the government has yet to come up with a clear-cut explanation how it
will pay for the shares taken or even how the process will be undertaken.
The confusion comes as Zimbabwe seeks massive investments to rebuild its
economy, which was devastated by a violent land reform programme in which
white-owned farms were seized.
A power-sharing government of rivals President Robert Mugabe and Prime
Minister Morgan Tsvangirai formed after 2008 polls ended years of crisis and
stabilised the economy.
Negative ripples from the indigenisation policy have been felt with key
projects put on hold because investors are not keen to invest without a
controlling stake, said analyst Erich Bloch.
“We have lost the potential to attract investment. The indigenisation policy
is ill-advised and damages the economy,” he said.
“Which investor would want to invest where half of his investment will be
taken and wouldn’t have a say in the running of their businesses?”
The plan for Zimplats, the local subsidiary of South Africa-based Implats,
transfers 10 percent of shares to workers, 10 percent to a community trust
in Ngezi where its mine is located and 31 percent to a National
Indigenisation and Economic Empowerment Fund.
The companies are meant to be compensated, but questions have been raised
about how Harare will be afford to pay for the shares in the local arm of
the world’s second largest platinum miner.
The Treasury has even said the country cannot hold elections, which Mugabe
is pushing to hold this year.
“I think most of them are not going to get their payment or they will have
to wait for many, many years to get their payments for the shares taken,”
said Bloch.
“This process is politically driven and it’s being used to capture votes
ahead of elections.”
David Chapfika, chairman of the indigenisation board, told AFP that
discussions are on-going to determine the value of shares in different
companies.
“We are still working on the commercial value and sovereign value of the
resources, we haven’t made a decision.”
But Finance Minister Tendai Biti last week said the shares taken up from
foreign companies must be paid for.
“This is not nationalisation, money will change hands,” he said.
The local shareholding push is one of several areas of difference in the
uneasy unity arrangement.
Tsvangirai says it will push away investment, while 88-year-old Mugabe calls
it “the next stage of our economic emancipation” after nearly 4,000
white-owned farms were seized in land reforms. Mugabe has threatened to
nationalise companies that refuse to comply with the law.
There is also controversy over the state’s role in the eastern diamond mines
over funds transparency, with profits said to prop up Mugabe’s ZANU-PF.
University of Zimbabwe professor Anthony Hawkins said the law will send
“negative signals to potential investors” with the pressure put on Zimplats
likely to push others to follow and hand in their own plans.
“If the biggest player on the block, Zimplats, is complying then you are
going to see the smaller companies doing the same,” he said.