Felex Share Senior Reporter—
Government’s new indigenisation framework and clarity on the policy is a positive development that eliminates investors’ worries and reduces the risk premium attached to Zimbabwe, industrialists and economists said yesterday. They described the move as a “breath of fresh air” that would set the tone for dynamic and economically progressive policies. Youth, Indigenisation and Economic Empowerment Minister Patrick Zhuwao and Finance and Economic Development Minister Patrick Chinamasa, on Monday unveiled a new framework for the indigenisation and empowerment policy containing measures expected to complement other initiatives to attract foreign direct investment.
Also present was the Reserve Bank of Zimbabwe Governor Dr John Mangudya. The two ministers last week differed on the policy but found common ground this week and unveiled a framework that is in line with the aspirations of Zim-Asset and the 10-Point Plan enunciated by President Mugabe in his State of the Nation Address last year.
Confederation of Zimbabwe Industries (CZI) president Mr Busisa Moyo said there was no doubt that the development would bring FDI into the country.
“This will promote FDI and there is now sectorial clarity and workable horizons to comply with provisions for extensions on a case by case basis. The creation of a fund to support indigenous entrepreneurs is also welcome. This should be modelled along Botswana’s Citizens Entrepreneurship Development Agency (CEDA),” said Mr Moyo.
Botswana established CEDA to provide financial and technical support for business development to promote viable and sustainable citizen-owned business enterprises. Mr Moyo said more clarity was needed on the indigenisation compliance and empowerment levy, which he believed needed to ‘be on a profit basis or an absolute amount payable quarterly or monthly’.
Under the new framework, an indigenisation compliance and empowerment levy at a rate to be prescribed shall be levied on all businesses. Companies that comply will benefit from an indigenisation rebate.
A standard formula based on a prescribed rate, that is linked to the annual gross turnover of the business entities will be determined in establishing the extent to which the individual entities are supporting socially and economically desirable objectives.
The levy is subject to reduction by the Compliance and Empowerment Rebate score earned by any business. Economist Mr Brains Muchemwa said doing away with discord in Government would promote investment.
“Discord in Government over the course which indigenisation should take has been a stumbling block in the implementation of the policy and in luring foreign direct investment,” he said. “The discord created more uncertainty and has had the potential of scaring away investment in Zimbabwe.
“The clarification therefore should be applauded because the biggest challenge for any investor is to invest where Government will be disagreeing on a key issue, which increased the country’s risk profile. Bringing closure to this mistrust is a great achievement on the indigenisation front that should pave way for a better perception about Zimbabwe.”
Said another economic analyst, Mr Prosper Chitambara: “It is a positive move which will eliminate the concerns some investors had all along. “Once there is clarity it reduces the risk premium attached to investing in Zimbabwe and it also reduces transaction cost, which is good for any investor because it improves the rate of return on investment.”
Zimbabwe Congress of Trade Unions secretary general Mr Japhet Moyo said there was nothing wrong with a Government that intended to empower its people but officials should speak with one voice as is now the case.
“There are many countries that have taken this route, although there are differences on the models. What has been a challenge has been interpretation of the policy and over the years, the same people have benefited over the past years, which made it to lose its value. We now hope for the best and that the majority will benefit,” he said.
According to the new framework, a raft of measures will be introduced and they include “invoking Section 17 of the Act albeit in a manner that recognises businesses that are complying with the legislation through the provision of indigenisation legislation compliance rebates, indigenous shareholding rebates and rebates for achieving socially and economically desirable objectives.”
In the resource-based sector, Government designated entities shall continue acquiring 51 percent equity in businesses exploiting natural resources at no monetary consideration serve for the contribution of the resource being exploited.
In the non-resource based sector, General Notices (459 of 2011 and 280 of 2012) which were developed by sector specific committees taking into consideration the strategic direction of those sectors will continue being operational.
No new non-indigenous business will be allowed to invest in the reserved sector unless, “under special cases as determined by line ministries and approved by Cabinet.”