PRESIDENT Robert Mugabe’s attempt to end protracted disagreements between Indigenisation and Finance ministers on the implementation of the empowerment policy in the financial services sectors brings more confusion than clarity, analysts say.
On Tuesday, Mugabe issued a statement through Information minister Chris Mushohwe seeking to clarify the indigenisation policy after conflicting positions in the interpretation of the law had arisen.
Recently, Finance minister Patrick Chinamasa and Indigenisation minister Patrick Zhuwao publicly clashed over the implementation of the Indiginisation and Economic Empowerment Act with Zhuwao pushing for foreign owned banks to relinquish at least 51% shareholding to Zimbabwean locals as stipulated by the law and threatening to withdraw their licences on grounds they were non-compliant with the law while the Finance minister argued banks had submitted satisfactory plans.
The clash between Chinamasa and Zhuwao is a continuation of the public spats between former indigenisation minister Saviour Kasukuwere and ex-Reserve Bank of Zimbabwe governor Gideon Gono and former finance minister Tendai Biti.
Kasukuwere was pushing for a one-size-fits-all implementation of the law while Gono argued the financial services sector was delicate and needed to be handled with kid gloves.
Foreign banks in Zimbabwe include MBCA Bank and Stanbic Bank, Standard Chartered, Barclays Bank, Ecobank and CABS.
Mugabe pointed out that the disagreements dealt a heavy blow to the country’s attempts to attract investment.
“However, conflicting positions in the interpretation of the indigenisation and economic empowerment policy have arisen of late. This has caused confusion among Zimbabweans, the business community, current and potential investors, thereby undermining market confidence.
“This situation has also led to the increase in the cost of doing business, thus further weakening the country’s economic competitiveness,” Mugabe said, before listing his points of clarifications.
“The banking sector shall continue to be under the auspices of the Banking Act, which is regulated by the RBZ, and the insurance sector under the auspices of the Provident and Insurance Act. This policy position is essential for the promotion of financial sector stability, confidence and financial inclusion.
“These institutions will nonetheless, be expected to make their contributions by way of financing facilities for key economic sectors and projects, employee share ownership schemes, linkage programmes and such other financial empowerment facilities as may be introduced by the RBZ, from time to time.”
However, Harare lawyer and MDC-T spokesperson Obert Gutu said instead of clarifying the issue, Mugabe’s statement actually added to the confusion and policy inconsistencies.
“The bottom line is the Indigenisation Act and all the regulations and/or statements made thereunder need a thorough and complete overhaul,” Gutu said, adding the government should consider repealing the Act.
“The starting point should be to repeal this Act in its totality. The Act is wholly unnecessary and it is also confused and confusing.”
He said both domestic and foreign investors needed clarity on the investment policies. He said Zimbabwe could no longer afford to duck and dive.
“Capital is a coward. It doesn’t flow where it is threatened and bullied,” said Gutu.
He also said Mugabe’s statement was “dodgy” and should be viewed with suspicion.
“It shouldn’t be trusted and believed at all. He is simply trying to hoodwink and mislead the international community, particularly the Bretton Woods institutions. The long and short of it is that a leopard never changes its spots. Both President Mugabe and his nephew Zhuwao are die-hard populists,” Gutu said.
Former economic planning minister Tapiwa Mashakada said government should abandon the indigenisation exercise as it does more harm than good to an economy already suffering from tight liquidity and lack of foreign capital to retool industry and revamp productivity.
“Indigenisation has failed. It does not work in a capital thirsty economy like Zimbabwe. Give me only 20 companies that were successfully indigenised and tell me the political identities of the local shareholders? I bet you, none of those local partners have followed their rights by putting their equity into the business,” Mashakada said. He added Zimbabwe needed new investment in order to generate jobs and growth.
“No new investor can come and lose controlling interest,” he said.
Economist Vince Musewe said while Mugabe’s intentions were noble, his execution was appalling and needs to be completed with other structural changes in policy and governance.
“Clarifying the policy and boosting investor confidence is critical, but investors will only come when they see compensation of farmers, the protection of private property and stable leadership. There is just too much uncertainty in the short term especially with regard to succession so expect no sudden inflows at this juncture,” Musewe said.
Dutch ambassador to Zimbabwe Gera Snellar said investors from her country were watching closely developments on indigenisation with a keen interest on consistency and clarity.
“I was actually in the Netherlands when the news about the March 31 compliance deadline broke and it was on the front page of some Dutch newspapers.
This goes to show that there is interest on what is being said here by government, Snellar said on the sidelines of the Zimtrade and Pum signing ceremony on Wednesday.
“It is important for the government to give a consistent message because if the message on Monday is different from the message on Tuesday and again different with the message that of Friday it scares away investors. Dutch investors are very willing to take commercial risk as part of their business plan, but when it is political risk they feel we are not welcome,” she said, echoing what other diplomats have said.