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Zimbabwe Economy Hurt by Uncertainty About Indigenization Law

  • Peta Thornycroft

Industry Minister of the smaller Movement for Democratic Change Welshman Ncube (file photo)

Industry Minister of the smaller Movement for Democratic Change Welshman Ncube (file photo)

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 recovery.

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 government.

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 said.

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 Zimbabwe.

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 response.

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.

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