Major changes for equity law

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Minister Patrick Chinamasa

-Confines indigenisation to diamonds, platinum
-Reserved sectors preserve for indigenous people
Golden Sibanda
Government has moved to calm longstanding foreign investor discomfort over local ownership threshold provisions of the indigenisation law by confining their application to only two minerals, diamonds and platinum.

The Indigenisation and Economic Empowerment Act, previously compelling a 51/49 ownership ratio in favour of locals across all sectors, and which the Government of former President Mugabe made compulsory for the entire extractive sector last year, has been refined to only apply to platinum and diamonds.

Zimbabwe has the world’s second biggest known platinum deposits after South Africa and is believed have potential to contribute a quarter of diamonds traded on global markets annually. As such, participation of indigenous people in these minerals will go a long way in bringing them into the mainstream economy.

Amending the indigenisation law to only cover two minerals and exclude every other sector, is a marked departure from previous scenario where compliance was applicable sectorally through line ministries.

Mining is one of the major sectors on which the country’s short to medium term economic growth, including the 4,5 percent targeted for 2018, is predicated. It generates between 12 percent and 16 percent of the country’s gross domestic product.

Presenting the 2018 National Budget Statement in Harare yesterday, Finance and Economic Development 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 in the budget.

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 aspects of indigenisation the minister said the reserved sector was only for Zimbabwean citizens, and for non-Zimbabweans, entry into the sector would only be by special dispensation granted by the Government on request.

This would only be considered if such investment creates employment, affords the opportunity for the transfers of skills and technology for the benefit of the people of Zimbabwe, promotes the creation of sustainable value chains; and meets prescribed socially and economically desirable objectives.

Despite the extractive sector being the country’s biggest foreign exchange earner, with inflows targeted at $2,5 billion next year from $2,3 billion in 2017, reservations over the indigenisation law were often cited as a major reason foreign investors were not keen to deploy their investments in Zimbabwe.

Zimbabwe has been averaging foreign direct investment of 400 million in the last 5 years, a depressed threshold compared to about $2,5 billion for neighbours like Mozambique, Zambia and South Africa, a scenario largely blamed on unfavourable policies.

In its quest to promote FDI, 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.

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