eBusiness Weekly
Business Writer
Pro-investor amendments Government intends to undertake on the Indigenisation law next year will unlock significant foreign investment to Zimbabwe, the country’s investment body says.
The Zimbabwe’s Investment Authority contends that the Indigenisation and Economic Empowerment Act, in its current format, is a major impediment to foreign investment into Zimbabwe.
Government will take the proposed amendments to the country’s equity law, which will designate only platinum and diamonds as the extractive sector, to Parliament to legislate the changes.
Mr Mbaiwa
As such, the Indigenisation and Economic Empowerment Act’s 51/49 ratio, in favour of locals, will only apply to foreign investment in the precious metals sector of platinum and diamond mining. This means all other sectors of the economy will be open to total foreign ownership.
ZIA, the country’s foremost State investment processing and approval body, chief executive Richard Mbaiwa told Business Weekly in an interview that the issue of the indigenisation Act featured prominently in investment conferences they held to lure FDI to Zimbabwe.
He said what consistently came out of concerns raised by investors was the fact that they did not want to have indigenous partners prescribed for them, but to freely engage, discuss and agree.
The ZIA boss’ sentiments also come in the wake of changes that happened to the country’s political leadership last month, which brought to an end the long reign of former president, Mugabe.
Mbaiwa said there was palpable, but cautious excitement that the new dispensation would drive investment, especially large scale foreign investment, to Zimbabwe in the near future.
“What constantly came out of conference delegates was the major issue of indigenisation. There feeling that indigenisation was an impediment, as it required and prescribed local shareholders.
“(Investors) want to engage freely and not to have indigenous partners prescribed. They want to discuss and come up with a structure they want, and the new dispensation will certainly allow that.”
Amending the indigenisation law to only cover two minerals and exclude other areas open, marks significant departure from previous scenario where other than mining, it was to be administered sectorally in other sectors by line ministries.
This should calm the nerves of investors.
The law, which many believed disenchanted foreign investors, has many times been blamed for low foreign investment inflows into Zimbabwe, which averaged $400 million in recent years.
Presenting the 2018 National Budget in Harare last week, Finance and Economic Planning Minister, Patrick Chinamasa said diamonds and platinum were the only sub-sectors designated as “extractive”.
“The 51 / 49 threshold will not apply to the rest of the extractive sector, nor will it apply to the other sectors of the economy, which will be open to any investor regardless of nationality. Accordingly, the proposed amendments will confine the 51 / 49 indigenisation threshold to only the two minerals, namely diamonds and platinum, in the extractive sector,” he said.
“Government is, through the Finance Bill being submitted to this August House for the 2018 financial year, amending the Indigenisation and Empowerment Act, to bring the following into effect from April 2018,” Minister Chinamasa said.
Minister Chinamasa stressed that “as we seek to attract both local and foreign investments, existing and potential investors become fully guided by the amendments we seek to effect through the Finance Bill that is being brought to this August House.”
Earlier, Minister Chinamasa had said that nurturing investor confidence would benefit from consistency and coherence of Zimbabwe’s business and investment landscape as insisted by the President.
In terms of other previous local ownership requirements of the indigenisation law the minister said the reserved sector was for Zimbabwean citizens only, and for foreigners, entry into the sector would only be by special dispensation granted by the Government on request.
However, this would only be considered if such investment creates employment, facilitates transfer of skills and technology for the benefit of Zimbabweans, promotes the creation of sustainable value chains; and meets the prescribed socially and economically desirable objectives.
In its quest to promote foreign direct investment, under the new dispensation, Government noted that Zimbabwe’s ranking with regards to the ease of doing business remained unacceptably poor, with its ranking only moving from 161 out of 190 countries in 2016 to 159 in 2017.
Minister Chinamasa said Government was, therefore, seized with the need to implement a broader array of ease of doing business reforms. President Mnangagwa has also pronounced himself over measures to address the ease and cost of doing business in the country.
Hence, the thrust of Government will be to make ease of doing business more practical and administratively accessible for actual transaction processes involving locals and foreigners intending to undertake business or investment.
