EARLY in the year, a high-powered South African business delegation visited Zimbabwe to assess opportunities following the formation of the unity government.
President Robert Mugabe dined them at the State House and assured them he respected the “sanctity” of property rights.
He smiled and waved goodbye to the billionaires keen on investing in Zimbabwe. But the business people needed it in black and white in the form of bilateral agreements. Nevertheless all looked very well.
Then came the Indeginisation and Economic Empowerment (General) Regulations of 2009, rules to expropriate ownership of foreign firms. The rules betrayed lack of commitment to attract investment on the part of government.
The South Africans and other prospective investors must be trying to figure out the implications of this document before getting out their chequebooks.
The proposal seeks to transfer a controlling shareholding in any foreign-owned business valued at US$500 000 or above to indigenous Zimbabweans in terms of the Indigenisation and Empowerment Act enacted in 2007.
The regulations spell out thresholds, time frames and the process of compliance.
“Any business that within the 60-day period referred to in Subsection (1) fails to enter into a transaction that results in fifty-one per centum or a controlling interest, as the case maybe, being held by indigenous Zimbabweans shall within the next thirty days submit a proposal within the next six months from the date of publication of these regulations on how it intends to achieve compliance with the Act,” reads the proposed regulations.
But economic analysts say Zimbabwe is not ready to pursue any empowerment policy given the poor liquidity situation in the country.
Mugabe has over the years issued threats to foreign businesses for allegedly sabotaging the economy but never followed them through.
A government economic advisor says government has picked the worst time to implement its empowerment policy given that banks cannot fund empowerment deals at the moment.
This unfortunately, theeconomist said,
leaves a handful of business people, politicians and individuals with political connections to participate in the empowerment programme if government goes ahead with it.
The economist who preferred anonymity said: “Banks cannot fund empowerment deals at the moment. The plan to seize businesses is not in the spirit and interest of the global political agreement. You could empower people through other things rather than forcing businesses to sell their shareholding to black people. Naturally an empowerment of this sort will benefit a handful of people and that is a narrow kind of empowerment. There is no right thinking Zimbabwean for instance, who will invest in Mozambique without control of the business. Why should Zimbabwe expect foreign investors with the kind of environment created by such legislation?”
He added that there was need for a well thought-out empowerment exercise as opposed to the one being proposed by government.
The economist said government should create the right economic environment to allow Zimbabweans to access long-term funding for capital.
Already over 60% of companies on the ZSE are either controlled or managed by blacks.
Unlike during the land reform days where individuals would get farms for free, this time the new shareholders would be compelled to pay cash for shares.
Mugabe and his ministers and senior officials, especially of the old order, behave rather strangely for a country keen to convince spooked investors that they could finally do business in the country.
This month alone Mugabe and his loyalists have been behaving rather strangely. A UN official was deported and now this empowerment proposal.
Mugabe often appears to be a crazy uncle holed up in the attic, who until he appears unexpectedly many choose to forget exists until he pulls a totally nutty stunt.
The empowerment regulations could widen already existing differences on key economic and foreign policies with government partners — Prime Minister Morgan Tsvangirai and Deputy Prime Minister Arthur Mutambara.
And government has not tried to sanitise its strange plans either.
None of the main sectors of business including mobile telephony, tourism, finance, transport, communication and construction will be spared as they are expected to attain empowerment within three years.
On adoption of these regulations, 30% shareholding must be immediately ceded to blacks in mines and telecoms.
Could this be another fast track reform?
“When one looks at the schedule, the impression one gets is that, for example, banks must in three years attain a minimum indigenisation and empowerment quota of 30% when in fact a bank should attain 51% by the end of the three years. 39% is supposed to be immediate, and the remaining 21% in three years,” a legal expert said last week.
The expert said the schedule was ambiguous and mum on numerous issues emanating from valuation of assets.
The expert questioned how valuations would be conducted and whether this would be arrived at using agreeable formulas.
He asked: “For example, will this (valuation) be done by asset value or cash value and who will be evaluating this? What of assets purchased through loans? Will this not cause confusion?”
The move to seize assets is not without precedent. A decade back villagers decided to correct historical imbalances on the farms and forced a white farmer off the land. Veterans of Zimbabwe’s guerrilla war got wind off it and headed the operation on a national scale. Agricultural output fell and the sector is not showing good recovery signs.
Some of Mugabe’s henchmen own more than one farm. Mugabe himself has been fingered as a multiple farm owner.
As a result investors who have been sitting on the fence will not risk investing a dime in the country.
Judging by the proposal, Mugabe and company say one thing and do another.
But can Zimbabwe afford to stick it to the world?