Foreign firms to fund own takeovers

THE Indigenisation and Economic Empowerment Act gazetted last week has triggered fears of forced takeovers in the market. Some analysts said it’s a campaign gimmick while others insist that it is part of government’s plan to nationalise the economy. Business Editor, Shakeman Mugari spoke to Indigenisation minister, Paul Mangwana about the law.

Mugari:
What is the motivation of this new law?

Mangwana: We want the indigenous people of this country to own the means of production in this country. We want to do this by giving them 51% shareholding in foreign owned companies. To achieve this we believe the people need cheap funding and that is what we will provide. We cannot have a situation where a foreign company comes here and exploits our resources. Those days are gone.

Mugari: But some business organisations are saying this is part of the Zanu-PF campaign strategy. They are asking why the law was gazetted three weeks before the elections.

Mangwana: You are wrong and those people who are saying that are wrong too. This bill was passed by parliament in November last year and the Senate passed it in December. The president signed it on January 15. Those are the simple facts which you have to know. We started working on this bill in 2006. The law was debated well before the election date was announced. It’s mischievous to link the elections and this law. It might please you to know that this bill will be operationalised within the next two weeks. There is nothing that can stop this act.

Mugari: But the bill is vague in most areas. It is not clear which specific companies will be targeted. The market still does not know the size of the companies that will be targeted.

Mangwana: That is what my ministry is already working on at the moment. We have already started the roll out programme. In the next two weeks we will decide the specific targets of this act using turnover, size, workforce and sector. We will look at the nature of the businesses that we want to indigenise. We are also putting in place a special board for this purpose.

Mugari: The Act states that companies will contribute to a fund whose proceeds will be used to assist blacks to take over some businesses. It sounds like government is forcing companies to fund their own takeover.

Mangwana: The nature of a tax is that it is never fair. In any case where do you want blacks to get the money when they have been suppressed for centuries? It is fair for those who have benefited from a wrong system for centuries to at least help.

Mugari: Still it does not sound right for companies to fund their own takeover. Why can’t people just go to banks and borrow money to buy the shareholding?

Mangwana: I have told you that blacks have been suppressed for years. They need to be helped to empower themselves. Every fair minded person should see logic in this. As we speak the Ministry of Finance is already working on the modalities to ensure that this levy is established. They will be able to come up with the modalities of this whole levy issue because that is their role. This will be done through proper consultation.

Mugari: Who will pay this levy?

Mangwana: Every company will have to pay this levy. I mean every business operating on Zimbabwean soil.

Mugari: Does that include parastatals?

Mangwana: Of course they will be included because they are operating in Zimbabwe.

Mugari: The levy will raise Zimbabwean dollars but it requires foreign currency to buy the shareholding from foreign shareholders.

Mangwana: I admit that the levy will be in Zimbabwean dollars but I refuse to accept that there is no foreign currency in this country. Foreign currency is there somewhere.

Mugari: Are you serious?

Mangwana: Of course I am serious. In any case what does foreign currency mean? It just means money from another country. Kwachas are foreign currency.

Mugari: Minister you know what I am talking about when I say foreign currency. Zimbabwe is already struggling to raise enough to import fuel and pay for electricity yet you are talking about the Zambian Kwacha.

Mangwana: We are creating a law not for now but for posterity. There might be no foreign currency in this country but very soon there will be. Why do we have to stop what we want to do because there is no foreign currency?

Mugari: When do you think Zimbabweans will start seeing the impact of this law?

Mangwana: My belief is that within five years we will start seeing a clear change in the ownership structure of companies and the economy as a whole.

Mugari: We saw what happened during the land reform. There was a massive looting of farms and in some cases influential people helped themselves to more than one farm. Does the bill have checks and balances to ensure that there no abuse?

Mangwana: In every programme there will always be jackals. We know that there will be people who want to abuse the system. I can assure you that we will not give resources to such people.

Mugari: But they can still abuse the system even without getting resources from the fund. Are there any measures to deal with such people?

Mangwana: Those are the modalities that we are working on. We want to make sure that the system works properly.

Mugari: Given the trend in this country are we not likely to see the same people buying more companies because they have the money?

Mangwana: We only have control over those people who want our financial assistance. We cannot stop people who have their own money from buying what they want.

Mugari: From what I see this law covers all foreign owned companies including corner shops.

Mangwana: That is wrong. This bill will target specific companies in strategic sectors of the economy. We will soon issue a statutory instrument to specify those sectors that we want to indigenise. We will, therefore, not be chasing every small foreign owned business to comply.

Mugari: The law gives you the right to prescribe the partners that foreign owned companies can engage in the empowerment programme.

Mangwana: Again you are wrong. The law encourages the companies to identify their own partners. I will only come in when a company says it has failed to identify a partner. Only then can I be able to give them a list of potential partners from the database that the ministry will have. If they can’t get anyone from the list then I will prescribe.

Mugari: What guarantee is there that you will not abuse the role to push for your connections?

Mangwana: Now what kind of a question is that? I am a law abiding citizen. I am straight forward. I am a representative of the government and I am guided by its policies.

Mugari: There are genuine fears that this law will scare away investors at a time when the country is already struggling to attract foreign capital.

Mangwana: To the contrary I believe that this bill will actually increase foreign investor participation in this country. Every foreign company that comes here will have comfort in the fact that they will be working with locals who know the market.

Mugari: Who for instance is trying to come in here?

Mangwana: There are many and you will see them soon.

Mugari: What then is the fate of the mining bill in light of this new law?

Mangwana: This law applies to every business in the country including mines but there is nothing that can stop parliament from coming up with sector-specific laws.

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