adminThe Indigenisation and Economic Empowerment Act took effect in February 2010 following the gazetting of regulations operationalising the piece of legislation that President Mugabe had signed into law two years earlier. From 2010 until now, the Government has been implementing the empowerment law, focusing mainly on employee and community share ownership trusts as well as bigger sectors of the economy such as mining and manufacturing. Substantial attention has been put on the financial services sector as well, but not much by way of local investment has entered that industry yet.
In addition to mandating foreign-owned businesses whose shareholding is at least $500 000 to sell 51 percent of their shares to indigenous Zimbabweans, the law prohibits foreign investment in 14 areas where only locals can operate. They are agricultural production of food and cash crops, transport (buses, taxis and car hire services), retail and wholesale trade, barbershops, hairdressing and beauty salons.
Others are employment agencies, estate agencies, valet services, grain milling, bakeries, tobacco grading and packaging, tobacco processing, advertising agencies, milk processing and provision of local arts.
Almost unnoticed as Zimbabwe was engrossed in political campaigns for elections held two months later, the Government gazetted, in May, specific regulations on the reserve sectors. With elections over now, everyone took notice when the Permanent Secretary in the Ministry of Youth, Indigenisation and Economic Empowerment Mr George Magosvongwe told two parliamentary portfolio committees on Thursday that from January next year, the 14 reserved sectors would indeed become what they legally are, reserved for local investment.
Indeed, foreigners invested in the areas must be grateful to have been accorded exactly 35 months to make money in sectors they should have disinvested. Bigger foreign-owned firms were, in fact, given 45 days from 1 March 2010 to inform the Government how they sought to achieve majority indigenous shareholding within five years. Many have gone further and sold the 51 percent stakes as the law demands with foreigners in the 14 sectors getting on with their business.
Reports to the effect that the ultimatum is xenophobic and unAfrican have caught our attention.
Before addressing the xenophobia charge, we must point out that it is curious the claim is being raised now, when the law is 33 months old, and the specific regulations have been in place for the past five months or so. Those opposed to the provision of law had all this time to take up the matter with authorities, but chose to keep it to themselves.
It is not xenophobia when a government implements a law that seeks to encourage its primary stakeholders to benefit more meaningfully from their economy. Governments across the globe exist, first and foremost, to ensure that their citizens are happy, safe, and free and secure to live in their territories. Citizens of other countries resident elsewhere enjoy these rights and privileges but, not as much as locals do, by and large.
That is why a Zimbabwean resident in South Africa or Nigeria, for instance, has to satisfy certain requirements to invest or live legally there; requirements that locals are not expected to meet. Governments do not become xenophobic or investor-unfriendly when they ask foreigners to prove certain things.
The Act defines an indigenous Zimbabwean as any person who, “before the 18th April, 1980, was disadvantaged by unfair discrimination on the grounds of his or her race, and any descendant of such person, and includes any company, association, syndicate or partnership of which indigenous Zimbabweans form the majority of the members or hold the controlling interest.”
This is how the law defines an “indigenous” person or entity, not necessarily a “black” person. It is this definition that forms the basis of whose business must be indigenised or not and which areas one can invest in or not. We do not see a Nigerian or Congolese selling hair-pieces, clothing, cell phones or radios at The Gulf in Harare qualifying under this definition. They are black, yes, but not indigenous.
By pushing for the January deadline, the Government is not frustrating foreign investment as some critics allege. It wants more meaningful investment with a bigger impact on the economy. Foreigners are expected to bring substantial value to the economy which locals cannot. They certainly do not bring anything special or of substantial impact when they import finished goods from Dubai or Beijing for sale or when they run a grinding mill.
It is important to note too that foreign investment is, in many jurisdictions, not allowed in certain sectors for strategic reasons. In regard to the 14, they are strategic in that that is where locals find it easiest to invest.
Mr Magosvongwe highlighted the possibility of shortages and that the Government is drawing up a list of indigenous people to take over the businesses to forestall that eventuality. This is unlikely, given the level of business that foreigners account for in the reserve sectors and their wider significance to the economy. So there is no need for any list of people to take over anything.
Certainly, we do not believe that there is anyone out there looking forward to taking over a Chinese-owned barber shop.
If any shortages arise, they only serve to open eyes to opportunities that indigenous Zimbabweans, enterprising as they always are, will easily take up.
Zimbabwe can do without “taking over” businesses as Mr Magosvongwe said. We justifiably took over land from whites who had taken it from us by force; we cannot do the same with businesses in the 14 reserved areas.
The Government has had challenges with Bulawayo and Harare city councils, which are on record saying they would still license new investors regardless of their nationality or the law. These local authorities said this during the inclusive government period and cannot be expected to continue with their defiance now without inviting sanctions. In any case, the regulations provide punishment to those who defy the law.
Online Reporter