The committee, one of the 13 sector-specific committees of the National Indigenisation and Economic Empowerment Board (NIEEB), was tasked by Empowerment minister Saviour Kasukuwere to advise government on the appropriate net asset value threshold which banks should comply with as required by empowerment regulations and recommend sector specific indigenisation and economic empowerment strategies for consideration by the empowerment board.
According to a report in possession of businessdigest, the committee said the indigenisation regulations compelling foreign-owned companies valued at US$500 000 or more to dispose a controlling stake to black Zimbabweans should be financed through budgetary allocations, introduction of an indigenisation levy, debt finance and an equity fund.
Eight foreign-controlled banks are reportedly supposed to comply with empowerment laws.
The targeted banks are part of the 25 operating banking institutions in the country, comprising 15 commercial banks, five merchant banks, four building societies and one savings bank.
“When funding indigenisation, they are various types of finance mechanisms that can be explored to support and sustain the National Indigenisation and Economic Empowerment Fund (NIEEF),” reads the report. “These range from government budgetary allocation , introduction of levies and debt finance among others.”
The committee, however, believes the indigenisation levy should not be charged on bank deposits because funds held by banks are liabilities.
“Another constraint is that a number of banking institutions are still facing viability challenges. Twelve out of 25 institutions posted losses for the period ended 30 June 2010. The scrapping of statutory reserves requirements is a testimony of the challenges being faced by banking institutions,” reads the report.
On equity funding, the committee proposed that the fund would operate like an “investment arm” of government financed by “willing investors” at an interest. The investment proceeds would then be channelled towards indigenous people who are “willing” to form joint ventures with foreign companies or acquire shares. Funding empowerment deals through debt financing would, according to the report, entail a process of transferring assets from a foreign investor to the indigenous partner.
“Under this arrangement, the indigenous partner incurs a loan equivalent to the value of assets being transferred. The loan is then armortised from the cash flows generated by the company over a period of time,” the report reads.