OF late Zimbabwe has been receiving investment delegations streaming in mainly from Europe to assess the local business environment for opportunities as relations between Harare and the international community thaw, but one huge stumbling block stood in their way: indigenisation policy.
The Zimbabwe Independent
All the delegations which recently visited Zimbabwe raised serious concerns about it, fuelling a crescendo of criticism and uproar over the law which requires that foreign investors surrender 51% of their equities to locals in their businesses ostensibly at fair value.
Although there has been a variation of the policy to say any indigenisation plan would take into account the circumstances prevailing in the relevant sector or sub-sector, and it is now the responsibility of the line ministry to make the assessment on the investment concerning compliance, investors’ fears have not been allayed and will not because the current tinkering doesn’t fundamentally change anything.
Instead of overhauling the law and policy to ensure substantive change in substance and essence, cosmetic variations were made in the hope investors would bite the bait. However, they haven’t fallen for it. Only this week the International Monetary Fund (IMF) has advised Harare to comprehensively revise its indigenisation laws to attract foreign direct investment and pay off its arrears.
The IMF ruled out further funding for Zimbabwe, which owes it and World Bank US$124 million and US$1 billion respectively, besides the US$10 billion debt, unless it first paid up arrears.
“Improve the investment climate so that it becomes favourable to the private sector. How? By clarifying the contents of the indigenisation laws,” IMF head of mission Domenico Fanizza told a press briefing on Monday evening in Harare.
Time has now come for government to seriously revisit and review its damaging indigenisation policy which has not only led to capital flight and kept investors at bay but also reinforced the negative perception and worsened the ease of doing business in the country.
The net effect of the futile policy — which amounts to racketeering by regulation — has been grave economic destabilisation and sabotage on a huge scale. In fact, it is tantamount to official internal subversion and self-imposed sanctions.
Authorities must now sit down and apply their minds to it, not populist emotions. They need to put aside political calculations and look at the economic rationale of it.
Actually, President Robert and his government must take a step back and honestly ask themselves hard questions, not take the easy way out by blaming everybody except themselves for this mess. Why is Zimbabwe’s economy in ruins and its population wallowing in dire poverty given that in 1980 it was relatively thriving? What are the root causes of this economic failure? What is to be done about it?
These are some of the questions Mugabe and his policymakers, particularly ministers, must ask themselves and find answers to. There are some bright minds among them to help not just answer the questions but also find practical solutions.
The bold and sustainable starting point should be reforming the empowerment policy by repealing the ruinous indigenisation law — a huge barrier to investment.