Tuesday, 19 April 2016

MUGABE SPARKS FRESH POLICY CONFUSION

Zimbabwe's move to dramatically revise rules compelling foreign firms to transfer majority control to local blacks marks a major change that analysts said highlights deep policy flaws and inherent confusion in government.

Government, which required foreign firms with assets worth $500 000 to cede 51 percent of their shares to black Zimbabweans within five years, is now proposing to exchange the 51 percent shareholding threshold for value in the form of wages, taxation, community ownership schemes and procurement programmes.

A critical look at the statement signed by President Robert Mugabe on April 11, shows that regulations forcing foreign-owned firms to transfer a 51 percent stake to black Zimbabweans, will no longer apply to existing businesses in the natural resources sector where government does not have 51 percent ownership.

For banks, Mugabe’s statement does not mention 51 percent Zimbabwean ownership at all, but only implores banks “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.”

Mugabe’s statement states that the banking sector will “continue to be under the auspices of the Banking Act, which is regulated by the Reserve Bank of Zimbabwe.”
This comes as the Banking Amendment Bill is currently before Parliament, with the proposed Bill apparently staying the notion of enforcing the 51 percent indigenous ownership rule on foreign financial institutions.

Mugabe’s statement, which is an apparent bid to shore up desperately needed foreign investment, came amid acrimony between Finance minister Patrick Chinamasa and Indigenisation minister Patrick Zhuwao over whether or not foreign-owned players in the banking sector have complied with the indigenisation and economic empowerment law.
Chinamasa, upholding a public statement by Reserve Bank governor John Mangudya, published a statement saying foreign-owned banks were compliant, prompting Zhuwao to promptly and emphatically reject the Finance minister’s statement.

Mugabe’s fire-fighting statement came just after returning from a trip to Japan to scout for investment and ahead of the Washington Spring meetings of the International Monetary Fund (IMF) and the World Bank, attended by Chinamasa and Mangudya.

The IMF and World Bank have been in talks with Zimbabwe’s government to help shore up its economy, stepping up engagement as Harare seeks a financial aid package after decades of international isolation by the Bretton Woods’ institutions.

Mugabe’s statement explicitly amends regulations detailing how foreign firms should achieve majority control by locals, and states that where government does not have 51 percent ownership, in those cases, compliance with the indigenisation and economic empowerment policy should be through ensuring that the “local content” retained in Zimbabwe — value in the form of wages, taxation, community ownership schemes and activities such as procurement and linkage programmes — is not less than 75 percent of the exploited resources.

“To the extent that the Indigenisation and Economic Empowerment Act may not sufficiently conform with this policy position, I have directed that the law be amended or changed forthwith accordingly,” Mugabe’s statement said.

IMF chief to Zimbabwe Domenico Fanizza,  speaking in Washington, said: “The shift is happening. They realised there was no alternative but radically transforming the economic structure of the country. It’s clear the policies they have been following for the past 15 years have come to nothing.”

Former Finance minister Tendai Biti’s PDP opposition party said Mugabe’s statement “is an attempt to mislead ...international stakeholders”, saying it is a “mendacious and dishonest spin” that was intended to arm Chinamasa with a “propaganda tool” at the Spring meetings.
Policy chief in Morgan Tsvangirai’s shadow cabinet Nelson Chamisa, said Mugabe’s climbdown was “the highest mark of elevated policy uncertainty, encyclopedic leadership  inconsistency and unmitigated policy flip flopping”, adding it was “a hopeless and helpless sharp contradiction to ...Zhuwao’s voodoo economics.”

“A proper government must just stop this carefree business of indicating left yet turning right...Any government policy is only meaningful and profitable to the citizenry and investors when it is sinewed on clarity, consistency and predictability,” he said.

Constitutional law expert at the University of Kent in the UK Alex Magaisa, said: “What was presented in ... Mugabe’s ... is actually a policy shift of seismic proportions. In many ways, the statement represents a significant retreat by the Zimbabwe government on a flagship indigenisation policy.”

This comes as the Chamber of Mines has proposed a minimum 15 percent shareholding for locals, with empowerment credits being awarded for firms’ social and infrastructural investments.

Mugabe stated that the purpose of his statement was to “provide clarification on this very vital national policy, for the guidance of government ministers, the business community and current and would-be foreign investors.”

Political commentator McDonald Lewanika said Mugabe’s clarification, while welcome, shows that there is either a measure of dysfunctionality, confusion and incompetence in his government.

“This is not the first time that there has been confusion over key policy issues in government, and pronouncements ... which have either been rebuked or contradicted by other ministries or by Mugabe himself,” Lewanika said.

“Given that background, it would appear that the government operates on the fly and in such murky waters, Zhuwao cannot be solely blamed. It would seem that his initial terms of reference misguided him or he disregarded them in favour of pursuing his own agenda.”
Adding that, “the lack of policy fluency and clarity on government positions and predictability of laws does keep investors away as no one likes to invest in confusion.”

Dewa Mavhinga, a senior Africa researcher at the New York-based Human Rights Watch, said Mugabe’s clarification is actually a major climb down “from a failed and catastrophic hardliner position.”

“Remember Cabinet had endorsed Zhuwao’s position before Mugabe made an about turn,” he said.

“What is happening here is high-stakes politics of smokescreen and mirrors. There is a lot of deception and masking of factional positions as Mugabe tries to perform a delicate balancing act between warring factions.”

Media practitioner Tabani Moyo said this reflected that the country was on “autopilot.”
“Irrespective of the implications of a minister threatening to close banks and the remaining few firms, the country’s CEO remained tight lipped for such a long time,” he said.
Mining activist Farai Maguwu said: “The president’s remarks come way too late and one wonders what they discuss in Cabinet because such a critical issue should have been ironed out in Cabinet, way before implementation. Mugabe is a reactionary leader who is always at his best in crisis.” daily news

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