PRESIDENT Mugabe has moved in to clarify the confusion over the interpretation of the indigenisation law, which he said undermined market confidence and increased the cost of doing business while weakening the country’s competitiveness in the wake of a public spat between Cabinet ministers.
The President’s intervention puts to rest squabbles pitting Finance and Economic Development Minister Cde Patrick Chinamasa on one hand and his Youth, Indigenisation and Economic Empowerment counterpart Cde Patrick Zhuwao on the other pertaining to the financial services sector.
Said President Mugabe: “The banking sector shall continue to be under the auspices of the Banking Act, which is regulated by the Reserve Bank of Zimbabwe, and the insurance sector under the auspices of the Provident and Insurance Act.
“This policy position is essential for the promotion of financial sector stability, confidence and financial inclusion. These institutions will, nonetheless, be expected to make their contributions by way of financing facilities for key economic sectors and projects, employee share ownership schemes, linkage programmes and such other financial empowerment facilities as may be introduced by the Reserve Bank of Zimbabwe from time to time.”
Banks would use empowerment credits or quotas to contribute towards the indigenisation threshold with a greater emphasis on lending to key sectors of the economy. The President said conflicting positions on the interpretation of the law had caused confusion among Zimbabweans, the business community, and current and potential investors, thereby undermining market confidence.
He made the clarification on the Indigenisation and Economic Empowerment Policy in a statement issued yesterday through Information, Media and Broadcasting Services Minister Dr Christopher Mushohwe.
The President said businesses under the reserved sectors category were exclusively for Zimbabwean entrepreneurs except for existing ones and where a special dispensation was granted by the line minister.
Reserved sectors include transportation (passenger buses, taxis, car hire services) retail and wholesale, barber shops, hair dressing and beauty salons, employment agencies, estate agencies, valet services, grain milling, bakeries, tobacco processing, advertising agencies and provision of local arts and crafts and marketing and distribution.
However, he said the laws were not cast in stone and would be changed from time to time. “Government shall from time to time decide and publish in the gazette, any changes to the list of businesses falling under the sector,” said President Mugabe
The clarification limits the role of the Youth and Indigenisation and Economic Empowerment Ministry by allowing line ministries to come up with models of compliance. The President said the ministry’s role was to coordinate activities of line ministries in the implementation of the indigenisation policy through a Cabinet committee, chaired by the minister.
“Sector based empowerment credits or quotas will be granted to reflect the contribution of investors in such businesses to the national development efforts. “This will be agreed upon through negotiations involving relevant line ministries and investors.”
Cde Zhuwao has recently been making pronouncements that conflicted with statements by Cde Chinamasa and Reserve Bank of Zimbabwe Governor Dr John Mangudya. While all of them agreed on Government’s irreversible position regarding indigenisation and empowerment, Minister Zhuwao’s seemingly combative approach seemed to unnerve investors while he seemed not to recognise superiority of the Banking Act in that regard.
“It is therefore fit and proper that I provide clarification on this very vital national policy, for the guidance of Government Ministers, the business community and would-be foreign investors,” said President Mugabe.
“To the extent that the Indigenisation and Economic Empowerment Act does not sufficiently conform to this policy position, I have directed that the law be amended or changed forthwith accordingly,” the President said.
The Indigenisation and Economic Empowerment Act compels foreign owned firms in Zimbabwe, valued from $500 000, to sell at least 51 percent of their shareholding to indigenous black Zimbabweans.
The President reiterated Government’s unequivocal position on empowerment, saying the indigenisation and economic empowerment policy was meant to grant Zimbabweans ownership and control of the means and factors of production, said the policy position was to bring indigenous people into the mainstream of the economy.
He said Government had sub-divided the economy into three main sectors namely resources, non-resources and reserved sectors. He said Government attached great importance to the indigenisation of the resources sector due to the finite nature of minerals.
“Government has therefore, a sacrosanct duty to ensure that such resources are exploited in a manner that safeguards the best interests of the country’s current and future generations,” the President said.
“As such, in terms of the policy, Government and or its designated entities will hold a 51 percent stake in businesses in the natural resources sector, with the remaining 49 percent belonging to the partnering investor(s).
“The need for investors in this sector to comply with prescribed indigenisation obligations is therefore non-negotiable,” the President added. However for existing businesses in the Natural Resources Sector where Government does not have 51 percent ownership, compliance with the Indigenisation and Economic Policy should be through ensuring that local content retained in Zimbabwe by such businesses is not less than 75 percent of gross value of the exploited resources.
Local content refers to the value retained in Zimbabwe in the form of wages, salaries, taxation, community ownership schemes, and other activities such as procurement and linkage programmes.
In terms of the non-resources sector the President said in this sector should exhibit economically desirable strategic objectives that contribute towards turnaround and sustainable socio-economic transformation, among them beneficiation and value addition of minerals.
He also said the desirable objectives include transfer of appropriate technology to Zimbabwe to enhance productivity, that created employment and impart skills, the granting of ownership and or employee share schemes for value to Zimbabweans and the developing and creating of linkage programmes, enterprise development, value chains and other desirable objectives, as may be defined by responsible minister, for the purpose of attracting foreign direct investment. herald