Threat to seize foreign firms is ‘idle rhetoric’
RAY NDLOVU Mar 14 2011 13:28
President Robert Mugabe’s sabre-rattling about the possible seizure of major
companies with “Western links” is an “idle threat, political rhetoric and
mere browbeating by Zanu-PF to coerce foreign companies into speaking out
against sanctions”, economist Eric Bloch said this week.
Until now Zanu-PF has been dilly-dallying over the implementation of the
indigenisation and empowerment law enacted in 2007. However, it has been
given new impetus by the party’s anti-sanctions crusade launched more than a
week ago, which Mugabe explicitly coupled with threats to seize key foreign
companies.
In the spotlight are the country’s “big five”, Nestlé, Rio Tinto, Old
Mutual, Barclays and Standard Chartered and British American Tobacco.
Saviour Kasukuwere, the indigenisation and empowerment minister said 600
foreign companies have already submitted proposals to his ministry on how
they will meet the indigenisation requirements. The empowerment law targets
foreign companies with a value of more than $500 000, which must cede a 51%
controlling stake to indigenous Zimbabweans.
Nestlé Zimbabwe
Swiss-based food conglomerate Nestlé fell out of favour with Mugabe over its
decision, in response to international pressure, not to buy milk from his
Gushungo dairy farm, but insists it remains “committed” to Zimbabwe. With
more than 50 years of operation, it employs 1 000 Zimbabweans. At his 87th
birthday celebration last month, Mugabe instructed Kasukuwere to go after
Nestlé first.
Rio Tinto
The British-Australian mining company holds a 78% stake in one of only two
known kimberlite diamond mines in Zimbabwe, at its Murowa operation. The
remaining shares are already held by Rio-Zim, an independent, indigenous
outfit that is likely to contest Zanu-PF’s ambitions to nationalise the
diamond industry. Rio Tinto recently invested an additional $300-million in
Murowa to increase the production of high-quality gems.
Old Mutual
Old Mutual is the largest investor on the Zimbabwe Stock Exchange and wholly
owns Central Africa Building Society, the country’s largest mortgage lender.
It is highly unlikely that Zanu-PF would go after this cash cow, from which
it nets significant revenue in stock market trading. The Zimbabwe Chamber of
Mines has warned that “picking a fight with Old Mutual would result in a
flight of investment”.
Barclays and Standard Chartered banks
Barclays and Standard Chartered jointly employ 2 000 Zimbabweans and operate
almost 60 branches in the country. As giant multinationals of high
international reputation, they are unlikely to be expropriated. However,
tension is running high between Standard Chartered and Zanu-PF over the
bank’s alleged blocking of a uranium deal with China, which Zanu-PF has
interpreted as a form of sanctions.
British American Tobacco
BAT is a dominant player in a sector which accounts for 40% of Zimbabwe’s
earnings from agricultural production. After years of decline there are
projections of a recovery this year, with nearly 200-million kilograms being
harvested. A Zanu-PF minister said recovery of the agricultural sector was
welcome, but BAT must comply with indigenisation laws and stop moving
profits offshore.