HARARE, March 29 (The Source) – Buy Zimbabwe, a lobby group for domestic production and consumption, has hit out at government over threats to close foreign controlled firms that fail to comply with a controversial local ownership law by Friday this week, saying the move was against the spirit of reforms needed to help the economy recover.
Empowerment Minister Patrick Zhuwao last week said last Wednesday Zimbabwe will, from April 1 cancel licences for foreign firms, including those operating mines and banks, that have not complied with its law to sell majority shares to locals.
The government gave foreign-owned firms a March 2016 deadline to comply with the indigenisation law, which was enacted in 2008 and requires foreign owned companies valued at over $500,000 to cede 51 percent to black locals. Analysts say the law works against foreign investment, which Zimbabwe’s economy needs to recover from a decade-long recession between 2000-2009.
Buy Zimbabwe, which is chaired by NicozDiamond Insurance managing director Grace Muradzikwa, warned on Tuesday that threats to close firms presented hurdles to economic recovery.
“The latest turnaround in flip flops on indigenisation are likely to further discourage investment in a country already hard hit by a debilitating liquidity squeeze, low capacity utilisation, company closures and job losses,” said Oswell Binha, business affairs committee chairman at Buy Zimbabwe.
Buy Zimbabwe has been leading a campaign to encourage consumers to buy local products.
“While the Act was ostensibly promulgated to empower Zimbabweans economically, by ensuring at least 51 percent of the shares of every public company and any other business shall be owned by indigenous people, the process has since degenerated into a farce amid indications of inconsistency and lack of genuine dialogue and engagement,” said Binha, who is a former president of the Zimbabwe National Chamber of Commerce.
“The proposed Cabinet directive to close companies as a punitive measure against companies is tantamount to condemn Zimbabwe into continued economic decline and abject poverty. This issue of government trying to decimate the private sector is very uninformed. Threatening to close companies shows a lack of understanding of the economy and forces of economic prosperity.”
Buy Zimbabwe said the economic malaise would only be resolved through “progressive policy informed by a realistic economic agenda beyond the current legal framework.”
Zhuwao, who is Mugabe’s nephew, told journalists last week that Cabinet ‘unanimously passed a resolution directing that from 1 April 2016, all line ministries proceed to issue orders to the licensing authority to cancel licenses of non-compliant business within their respective sectors of the economy.’
Some companies had been reluctant to comply with the law as Cabinet appeared divided over implementation of the law.
Zhuwao said all government ministries would be required to submit names of companies within their portfolios that have complied with the law, adding the firms had been given ample time to comply.
Two of the world’s largest platinum producers — Anglo American Platinum and Impala Platinum — are some of the foreign-owned firms with operations in Zimbabwe. International banking groups Standard Chartered Plc and Barclays Plc, along with regional financial institutions Standard Bank and Ecobank, also have local operations.
Amplats and Implats have previously submitted empowerment plans.