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Cabinet decision economic suicide

INDIGENISATION minister Patrick Zhuwao’s threat yesterday that government will cancel operating licences of companies which have not complied with the country’s controversial empowerment laws after a cabinet resolution on Tuesday is a tragic move which will sound the death knell for the economy. It was tantamount to tolling the bell for economic destruction.

Zimbabwe Independent Comment

Zhuwao announced cabinet had resolved to enforce the law which provides for the cancellation of operating licences for non-compliant companies across all sectors of the economy.

“On Tuesday 22 March 2016, cabinet unanimously passed a resolution directing that from 1 April 2016, all line ministries proceed to issue orders to licensing authority to cancel licences of non-compliant businesses within their respective sectors of the economy,” he said. “Well, laws must be adhered to. We must never breed lawlessness as a nation. The failure to adhere to the laws of our land must attract immediate consequences that must be severe and dire enough to ensure that the law is respected and adhered to.

“It is re-assuring therefore to law-abiding Zimbabweans, whose aspiration is that they must own their economy through indigenisation and economic empowerment, that cabinet has boldly spoken against such lawlessness that has continued to deprive the indigenous majority ownership of their economy.”

Mugabe’s told the ruling Zanu PF’s party annual conference last December that indigenisation would be enforced even more vigorously.

“There are companies in this country that still refuse to accept our empowerment policy within the mining sector.

But certainly, come January 2016, that stubbornness and resistance should end in 2015,” he said.

Mugabe and his ministers can play to the gallery all they can, but their ill-advised move will only succeed in further damaging an already wrecked economy. Forcing foreign companies to close down will be economic suicide. It will have devastating consequences.

Of late Zimbabwe has been receiving investment delegations streaming in mainly from Europe, United States, Scandinavian states and African countries, but all of them complained about the indigenisation policy. Although there has been a variation of the policy over the years, investors’ fears have not been allayed. The latest volte face can only make things worse.

Only recently the International Monetary Fund advised Harare to comprehensively revise its indigenisation laws to attract foreign direct investment (FDI) and get new funding as part of its economic recovery process. All sensible people have been saying we need to improve our investment climate, the ease of doing business and remove a red tap to get investment.

At a time when government must be thinking of seriously of doing this, cabinet, the main policy-making body, decides to drive the final nail in the economy’s coffin by resolving to close companies which refuse to comply with a manifestly daft law.

The net effect of this decision — which endorses racketeering by regulation — will be grave economic destabilisation and sabotage on a huge scale. In fact, it is tantamount to official internal economic subversion or self-imposed sanctions. It’s simply catastrophic.

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