JAPANESE business leaders this week grilled President Robert Mugabe in Tokyo on the controversial indigenisation regulations that have unnerved investors, as his nephew Patrick Zhuwao, in charge of the empowerment ministry, was cracking down on foreign-owned companies back home.
With effect from today, foreign firms face closure if they do not comply with indigenisation regulations compelling them to surrender 51% stakes to locals, although Zhuwao yesterday seemed to be backtracking on his threats, saying line ministers would address the issue on a case-by-case basis.
Mugabe, who is currently on a five-day working visit to Japan, is on a roadshow to attract foreign direct investment (FDI) at a time the when economy is imploding due to his leadership and policy failures.
While Zimbabwe has a trade deficit with Japan, official figures show that the Asian country, which is the sixth largest import source market for the southern African nation, accounts for 2% of total imports.
Diplomatic sources in Tokyo said Mugabe met various business delegates, government officials and private companies that are keen on investing in Zimbabwe, but the issue of indigenisation took centre stage with the president at pains to explain and assure investors that their money would be safe.
“On Tuesday Mugabe met several Japanese corporates executives in Tokyo enquiring how best they can do business in Zimbabwe and Africa,” said the source.
Mugabe met company presidents of Fuji Film and NEC Corporation, an information and communication technology company.
He also met leaders of the Japan External Trade Organisation, Tokyo International Conference on African Development and Japan International Co-operation Agency who quizzed him on the controversial empowerment laws.
“Business executives besieged Mugabe with questions on issues to do with rule of law and property rights amid reports that Zhuwao has issued foreign-owned companies an ultimatum to comply by March 31 or risk businesses being closed down on April 1,” said the source.
“The president focused on the ease of doing business as well as clarifying the indigenisation policy. He urged Japanese companies to come as partners and since they own equipment, the government would then negotiate the threshold.”
Mugabe, sources said, who has been desperately trying to secure funding for the economy and investment, managed “to sign in principle agreements on the agricultural technology and infrastructure development, tourism, as well as forging partnerships in mining in the hope that something concrete will come up after some follow up meetings.”
The president told the Japanese investors: “Special conditions are also extended in our special economic zones and Japanese businesspeople are invited to take advantage of this. On the investment front, I am inviting Japanese companies to invest heavily in Zimbabwe, which carries the promise of handsome returns for the investor. We have abundant opportunities for investors and they should look forward to a mutually rewarding relationship with us.”
Since the enactment of the contentious Indigenisation Act in 2007, Zimbabwe has lost billions of potential investments due to the negative effects of the policy which continues to fuel capital flight and spook investors.
The law remains an albatross on the economy’s neck due to lack of clarity informed by a realistic economic agenda beyond the current legal framework.
Last week, cabinet issued an ultimatum to all foreign-owned companies that they face closure if they failed to comply by yesterday.
On several occasions, Mugabe’s cabinet ministers have clashed over contradictory pronouncements on indigenisation.
While Finance minister Patrick Chinamasa on one hand has urged government to review the law with the aim of amending it in order to attract foreign direct investment, Zhuwao, on the other hand, has vowed to pursue a hardline stance preferring to tighten screws on the few remaining foreign-owned companies by closing them down for no-compliance.
In January, Zhuwao had announced that he would introduce a compliance levy, but only to make an about turn and state this week that he would shut them down.
Zhuwao this week received condemnation both within and outside government structures over the ill-advised policy that has resulted in Zimbabwe lagging regional peers on FDI inflows. The resource-driven economy has been experiencing biting liquidity constraints due to weakening commodity prices on the international market, appreciation by the United States dollar and depreciating regional currencies.
State-owned broadcaster ZBC yesterday broke with tradition when it invited analysts and experts highly critical of indigenisation. It stated in its top story that Zimbabwe was in the habit of indicating left and turning right as is the case now when Mugabe is in Japan trying to attract foreign investment, while Zhuwao is threatening shut down companies.
Despite the visit of nearly 80 business delegations to the country last year, who all raised concerns on the indigenisation laws, very little has come out of it .
Early this month the Ministry of Macro-Economic Planning and Investment Promotion permanent secretary, Desire Sibanda, told the Zimbabwe Independent that that Zimbabwe had not benefitted much from the visits. He said his ministry was worried about the trend and was actively trying to address the situation. Sibanda said he hoped amendments made to the Indigenisation and Economic Empowerment Act had addressed concerns of investors.
“Last year we had close to 80 business delegations which is very high, but these have not translated to increase in investment and we are very concerned which is why in 2016 we have agreed on the Special Economic Zones Act,” said Sibanda.
The country’s hostile business environment is also reflected in the paltry foreign direct inflows which marginally grew from US$400 million in 2013 to US$545 million last year compared to billions which poured into neighbouring countries.
According to the latest United Nations Conference on Trade and Development World Investment Report 2015, Zimbabwe remains an economic backwater, with paltry FDI inflows.
Zimbabwe’s 2014 FDI inflows paled in comparison to neighbouring countries in the Sadc region such as Mozambique, which received US$4,9 billion, almost nine times more, South Africa (US$5,7 billion) and Zambia (US$2,4 billion).