HomeLettersEric Bloch Column: Foreign retail ban: Yet another howler from govt

Eric Bloch Column: Foreign retail ban: Yet another howler from govt

Last week there was once again evidence of such obtuse, adverse, pursuit of economic instructions. The state-controlled newspapers reported that Youth Development, Indigenisation and Economic Empowerment minister, Saviour Kasukuwere, had directed that local authorities and municipalities had to forthwith discontinue the granting or renewal of trading licences for any enterprises engaged in retail that were wholly or partially owned by foreigners (including Chinese and Nigerian traders), and that the retail sector of the economy should be the exclusive domain of indigenous Zimbabweans. 


The consequences of such an ill-considered, racist and discriminatory policy will be negative in diverse ways, including not only  being yet another deterrent to any foreign investment but also potentially a major trigger for future escalating inflation.

In recent years Zimbabwe has steadfastly discouraged very necessary inflows of foreign investments to such an extent that although the Zimbabwe Investment Authority  (ZIA) last year approved investment projects encompassing foreign investments of US$6,6 billion, less than four percent of that investment has materialised. 

The interest of foreign investors in the immense and very varied investment opportunities in Zimbabwe is considerable, but is counterbalanced by concerns as to the security of any investments embarked upon.  The investor –– with very rare exception –– is understandably unwilling to transfer funds, technological know-how and access to his or her markets whilst having no control or authority over the operations of the entity into which the investment is made. 


Similarly, an investor fears the security and the retention of ongoing value if the environment in which the outlay is made is characterised by substantial political and economic instability, abuse and disregard for international and domestic law, and intense over-regulation and bureaucracy.

Almost all investors are very willing to have indigenous partners and co-investors in such enterprises as they wish to establish or invest in, but not to be subordinates devoid of any authority or control over that which they have invested.  In determined disregard –– verging on contempt –– for such investor expectations and requirements, Zimbabwe persists in demanding that a majority interest, of at least 51%, must vest in indigenous Zimbabweans.


As a result they reduce the foreign investor to the status of an economically powerless junior associate, bound by the dictates of the majority equity-holders.  Moreover, some of that majority are not even at the selection of the investor who is providing the substance of the investment resource, but are selected by government or its agencies such as the yet to be established Sovereign Wealth Fund, the Youth Development Fund, and Community Share Trusts.

The latest reported dictate from Kasukuwere, in respect of retail enterprises, is a further nail in the foreign investment coffin.  It will apply not only to small grocers, clothing and other shops, but also to major supermarkets, several of which are already significantly indigenously-owned but also have as shareholders and investors some of South Africa’s largest retail supermarkets and other enterprises. 

Non-renewal of the trading licences of such trading ventures will either force their closure or the foreigners will divest themselves in favour of indigenous Zimbabweans.  This will result in grievous under-capitalisation of the businesses, placing the continuance of their operations and survival at very great risk.

Furthermore, the existing linkages between some Zimbabwean chain-stores with South African businesses enables combined sourcing of trading stocks, yielding the significant benefits of economies of scale for the purchasing of bulk quantities of goods at invariably much more favourable prices.
Inevitably, the result of the increased cost of sourcing products will be markedly greater selling prices, triggering a return to the catastrophically great inflation by which Zimbabweans were victimised and impoverished in 2008.

The non-renewal of trading licences will inevitably result in the closure of many stores and not, as the minister undoubtedly imagines, mere transfer of ownership to indigenous Zimbabweans. There are very few of the latter with the resources to acquire such ownership, or are even able to source necessary operational funding.

The consequential lesser market competitiveness will be yet another catalyst for raising inflation.  Concurrently, that closure of the businesses will exacerbate Zimbabwe’s already very pronounced unemployment, and further intensifying the endemic poverty in the country.  It will also significantly diminish demand for locally-manufactured products, placing yet greater risks of intensified industrial closures, with all concomitant negative downstream economic effects.

Moreover, it is very doubtful that the minister is empowered to give direction to local authorities and municipalities to withhold trading licences. There is no provision in the Indigenisation and Economic Empowerment Act, or in its underlying regulations, vesting such power in the minister.  The only ministry wielding clear authority over the local authorities and municipalities is that of Local Government, Urban and Rural Development, although it is questionable as to whether or not even that ministry could issue such a directive.

It is long overdue for many of those in government to recognise, albeit belatedly, the concurrent need for foreign investment alongside facilitation of indigenous economic empowerment, instead of steadfastly and obdurately pursuing measures which dissuade potential foreign investors from considering Zimbabwe as a desirable investment destination. 


On the one hand, Zimbabwe has an Economic Planning and Investment Promotion ministry, which diligently strives to promote investment. On the other hand, the country has a Youth Development, Indigenisation and Economic Empowerment ministry which endlessly pursues policies which are devoid of benefit to the economy and the populace and substantially negates the promotional efforts of its fellow ministry. At the same time it resorts to one action after another which further decimates the embattled economy.

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