Martin Kadzere Interview
The Government has formalised the amendments to the Indigenisation Act. The requirement that 51 percent of all businesses worth more than $500 000 should be owned by locals has been removed leaving only diamond and platinum sectors. On the 12 reserved sectors, any citizen of Zimbabwe, not indigenous citizen is now free to invest in, form, operate, and acquire the ownership or control of any businesses under the reserved sector. Martin Kadzere (MK) talks to Dr Gift Mugano (GM) on the latest development with regards the amendments.
MK — Dr Mugano what do you make of the new amendments to the indigenisation and empowerment policy? What makes the new policy different from the previous one?
GM — The previous indigenisation policy pursued a blanket approach to the indigenisation of the economy, that is, foreign investors were required to shed off to locals or Zimbabweans 51 percent of equity regardless of the sector of the economy. It was a one size fit all. The new amendments have seen indigenisation now being relevant to only the mining sub-sectors of platinum and diamonds and reserved sectors which inter alia, include transport sector, bakeries, milling, retail and salons again with flexibility. This brings in much relief to investors as Zimbabwe pushes for the mantra “Zimbabwe is Open for Business”.
MK — You made reference to investors’ relief, are these new changes likely to drive up foreign direct investments?
GM: — Certainly. The Indigenisation and Empowerment Act before its amendment was a draconian policy to say the least. I can equate it to a guy who is proposing marriage to a young lady in return for routine beatings after marriage. Surely, there was no way we were going to expect investors to come and invest their money and shed off 51 percent of their equity to the locals who have no money in the first place and will pay for the acquired equity by forfeiting dividends. This was a forced marriage. As we know even in our society, forced marriages don’t work.
We are competing for investments with the rest of the world. Investors put their money where their mouth is. In other words, they invest their money where they can get better returns. Because of the indigenisation policy and of course our past ugly political landscape, we received meagre investments in the region of $300 million annually at a time when our neighbours such as Mozambique, Zambia and South Africa, are getting annual average FDI of $5 billion, $2 billion and $3 billion, respectively. With the new political dispensation and the new amendment to the indigenisation and empowerment policy coupled with vast mineral resources and strong human capital base, there is no doubt that Zimbabwe will make headlines in attracting significant foreign direct investments — leading the pack in Africa.
MK — From your own point of view, can we safely say that the indigenisation policy is now perfect?
GM — The indigenisation policy after amendments is now very good. However, in my humble view, it will become perfect after dropping out the name indigenisation and replace it with empowerment thrust where companies can own 100 percent of equity in the platinum and diamond sectors as well as reserve sectors but then meet the minimum empowerment threshold. For example, players in the mining sector must empower the communities through Small and Medium Enterprises development support, supporting local content by giving tenders to SMEs and undertake suppliers’ developments, infrastructure development. At a national level the mining sectors must build refineries and support the Government’s thrust to push exports of processed minerals.
The retail sector should be part of the equation of the industrialization strategy which the Ministry of Industry, Commerce and Enterprise Development is pushing by providing markets or shelf space for local producers, finance supplier development initiative especially for SMEs and help in exporting Zimbabwean manufactured goods to the regions in the case of regional supermarkets. If both players in the reserve sectors and mining sectors meet these minimum requirements, there is no doubt that Government will not heed the call to review the indigenisation policy again. At this point in time, the new indigenisation policy is lekker! Private sector should play ball to move the motion for further amendments if need be.
MK — There are some quarters who are saying that Government has become too generous with these amendments especially in the mining sector. What is your comment?
GM — I am a trained economist with impeccable evidence impact not only locally but internationally. So, get it from me. Numbers don’t lie. We promulgated the Indigenisation and Empowerment Act in 2008, that is, 10 years ago. What did we get from it? We harvested massive capital flight, subdued investments, unemployment and poverty. Our experience for the last 10 years shows that indigenisation doesn’t work. In the last 100 days, we have seen that market oriented policies are sweet music to investors and as such we are hearing investments deals and enquiries exceeding $3 billion already. Isn’t this enough evidence that we are doing the right thing?
What I can only say is that after opening the economy to the rest of the world we must not go to sleep. Rather, we must now come up with raft of measures aimed at domesticating the money through local content policy, SMEs development, value addition and beneficiation initiatives and the broad based empowerment thrusts. We must take a leaf from South Africa.
MK — How do these new amendments gel with the Zimbabwe is open to business mantra?
GM — The old indigenisation policy was very restrictive really. It was a policy which repelled investors. As I said before, in an environment where countries are competing for investments you don’t need an indigenisation policy as part of your compendium of policies. So with the new amendments we are saying to the world, Zimbabwe is open for business, come and invest freely without any restrictions.