The new leadership in Zimbabwe is on a path to recovery and the first port of call in its endeavour to attract much needed foreign direct investments necessitated the clarification of the much-maligned Indigenisation and Economic Empowerment Act.
Speaking during the national budget presentation in Harare, Finance Minister Patrick Chinamasa said the government is committed to attracting investors in every sector of the economy and is on the path of mending and correcting all policy inconstancies and hesitancies, which were a major characteristic of the past regime. The first step in this recovery process starts with the clarification of the Indigenisation and Economic Empowerment Act.
The Finance Minister said the contentious 51/49 percent requirement only applies to those seeking to make investments in either diamond or platinum exploration and mining. With this pronouncement, it brings to an end the nagging questions about which sectors are covered by the 51/49 percent requirement.
What the 51/49 percent requirement means to companies seeking to invest in either diamond or platinum exploration and mining is that they will be required to cede 51 percent of their company’s shares to the local indigenous people.
There are different ways, in which companies can cede the 51 percent to local indigenous people including through the National Indigenisation and Economic Empowerment Fund (NIEEB), a fund that uses funds from investors to help empower entrepreneurial, vocational and technical up-skilling of young Zimbabweans. The Sovereign Wealth Fund, which helps government, raise funds. Employee Share Ownership Trusts that make employees own a small stake in the company or Community Share Ownership Trusts that instruct companies to develop the local area in which the investment takes place.
Since its enactment, the Indigenisation law has had several amendments. The last amendment approved by the former President, Robert Mugabe, specified that any investment in the natural resource sector was liable to the 51/49 percent requirement. This created disharmony and created loopholes in which many suggested agriculture fell under natural resource sector while others differed saying the natural resources sector only consisted of the mining industry.
The Minister of Finance said that the President, Emmerson Mnangagwa, emphasised that speed and urgency were of essence in clarifying the Indigenisation Law. He said the Indigenisation Law in its previous form failed to satisfy both the investors and the indigenous people. The Indigenisation Law promised empowerment to the people but could not deliver while at the same time it scared away investors.
Announcing the news, Finance Minister Patrick Chinamasa, also stated that in the near future the government is going to unveil a new domestic framework that will spell out in clear terms what is on offer for both the investors and the indigenous people.
Chinamasa said the framework would also take cognisance of Zimbabweans living in the diaspora. He said they are targeting those living in the diaspora because of four main reasons. These are (1) wield skills that are critical to economic recovery, (2) they may have made savings that will aid quick development and implementation of specific tasks, (3) they may have struck partnerships with well-resourced foreigners and (4) they may act as ambassadors vouching for their country as a safe place for investment.