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WHILST the rest of the African continent is coming up with policies that seek to lure the much-needed foreign investment, the Zimbabwean government has opted for a different route. The country’s empowerment laws compel all foreign-owned companies to give up at least 51% of their equity to locals as part of measures aimed at empowering the economically marginalised black majority.
The enactment of the law has brought, with it, dire consequences for the country. Potential investors are now looking for alternative investment destinations. So the question that remains unanswered is; why would a country that is in dire need of foreign direct investment enact a law that seeks to scare them away?
Investors are people with their money and are seeking to increase it through doing business. These people want environments that are conducive where their investments are not threatened. They need to be certain of what will come of their investment. They need control over their investment.
This does not forfeit the fact that investors should adhere to laws of the land but the laws should produce a win-win scenario.
The law is said to be in place to empower the indigenous Zimbabweans and correct the imbalances that existed during the colonial era. This cannot be denied because it is a noble and welcome motive of the law. According to the act an indigenous person refers to anyone who has been discriminated against before Independence in 1980.
This law came at a time Zimbabweans were optimistic that their economy had engaged in the driving gear of growth.
The fragile economy was now recovering from the economic crisis, which had seen inflation going to unprecedented levels of million percent which brought massive unemployment and increased poverty. This recovery path seems to have received a strong blow.
When the law came into effect, trade on the Zimbabwe Stock Exchange (ZSE) plummeted from an average of US$2 million daily to an average of US$500 000. Some of the foreign-owned companies, among them Zimplats, Angloplats and Rio Zimbabwe, have decided to freeze new investments. The ZSE was bullish up to the last quarter of 2010, but trading was mixed after the empowerment regulations were announced.
The law indeed negatively affected trading on the local bourse. At the end of 2011, the ZSE closed with a mixed bag of performances with 43 companies in the red, recording two digit losses, whilst 30 counters recorded gains with some having single digit gains.
The mining index closes the year 49,75% down with all stock in the red. This is due to capitalisation challenges and indigenisation issues which haunted the sector for the larger part of 2011.
Besides the shortcomings of the indigenisation law in the business sector, the fears are that this policy is meant to benefit the elite. The Zimbabwe Congress of Trade Unions has voiced that whilst the law is good, this law will merely replace a white minority with a black minority.
This means that the rich will become richer and the poor becomes poorer hence the gap between these two widens. Instead of correcting imbalances and empowering people, the law is in place to perpetuate those imbalances and empowering the already empowered. So where are the poor and unemployed in the whole equation?
This renders the indigenisation law to be more like a political gimmick rather than a genuine empowerment and emancipation policy. This call for the government of Zimbabwe to have a political will to look into these shortcomings of its policy and fine-tune it so that it can achieve the intended goals rather than using the poor to advance policies that are meant to benefit the rich.
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