Politicians have, over the past week, been hiding behind a finger. First, Prime Minister Morgan Tsvangirai told delegates to the Institute of Chartered Accountants of Zimbabwe that the same regulations were misunderstood, arguing that citizenship empowerment should not be a problem for foreign investors. He argued that the law and regulations can attract investment and achieve its empowerment objective at the same time.
“Nobody is going to be asked to part with any share without negotiating for the value of the share,” Tsvangirai said.
This is far from the truth. One only has to look at the ZSE to take a cue. The wariness of investors is evident in the fact that market capitalisation on the ZSE declined from close to US$4 billion to around US$3,2 million since February because of the regulations.
Against such a background it seems Mangoma and Tsvangirai have not taken time to go through the regulations. A quick glance would have revealed the ugly face of the state’s empowerment ambitions; that they carry mandatory and threatening clauses. Contrary to Mangoma’s opinion expressed at the meeting that companies are not obliged to sell 51% shareholding as required by the Indigenisation and Economic Empowerment Act, chapter 14:13, the opposite is true.
This is perhaps the most dangerous inference of the empowerment legislation that needs to be dealt with through amendments.
In order to sanitise the law and bring investors back on board, government could rephrase clauses and change certain words contained in both the regulations and the law itself.
For example, instead of phrases such as “government shall”, the words “government may”, can be used. This won’t be an entirely new exercise. Earlier this year business organisations raised concerns over the wording of economic empowerment regulations. In place of “cede”, “dispose” was found to be better sounding and connotes some kind of transaction, unlike the former which implies giving away for free or even surrendering.
The Chamber of Mines says government should also consider empowerment credits as a form of empowerment. This, the chamber feels, would encourage mines to make corporate social investments as they chase empowerment projects. Business feels the empowerment credits need to be captured in the enabling legislation and not in a ministerial instrument because a ministerial instrument cannot be used to alter enabling legislation.
Zimbabweans, who are the ultimate beneficiaries of such policies, recognise the importance of balancing investor interests and those of the communities in which the investors operate. As such, government must create new enterprises and empower small and medium scale enterprises into world class corporations but this should be done through mutual partnerships with existing businesses. If government does not steer away from its course of compulsory partnerships, economic growth will remain minimal.
Zimbabwe has already begun to witness through the ZSE the effects of the indigenisation policy in its current form where investors are sitting on the fence because of misconceptions arising from the legislation in question and its general implication for foreign investors.
The negative perceptions generated by the compulsory measures can only discourage much needed investment. Though the mines chamber sold the idea to government, the wheels of bureaucracy have been turning very slowly. Instead of narrowing its differences with business, government, through the National Indigenisation and Economic Empowerment Board, fired a key business representative from an advisory committee. This kind of lone gun attitude will deprive the exercise of open and frank dialogue and will be the Achilles heel of the policy.
In another instance, the world was shown how the empowerment law can be used to settle shareholder disputes between black and white shareholders where John Moxon, a Zimbabwean by birth, has been threatened with loss of his shareholding to banker Nigel Chanakira by President Robert Mugabe himself.
This once again demonstrates the threat posed to Zimbabweans of all hues. Foreigners will take a cue from the predicament of locals and stay away.
Common sense must prevail.