Foreign Investment in Zimbabwe: Indigenisation Issues by HONOURABLE S. KASUKUWERE (MP)

Presentation by

HONOURABLE  S. KASUKUWERE (MP)

Minister of Youth Development, Indigenisation and Empowerment

at the Zimbabwe Capital Markets Symposium,

Sandton Convention Centre, Johannesburg,

4th November 2010

Presentation Title: Foreign Investment in Zimbabwe: Indigenisation Issues

Background

Colonial system: Dispossession, marginalisation & exclusion of indigenous Zimbabweans.

Since independence Government of Zimbabwe passed various legislation to rectify colonial injustices.

Notable achievements realised in land reform, social sectors & some professions like accounting, lawyers, management.

Little progress was achieved in terms of significant indigenous ownership in mining, manufacturing, construction, tourism & transport sectors .

Emergence of empowerment lobby groups to pressurize Government to speed-up the empowerment of indigenous Zimbabweans

Foreign Investment

Foreign investment presents our economy with opportunities for increased production, increased employment, development of infrastructure and new technologies.

Foreign Direct Investment is generally associated with improved standards of living for the residents of the recipient countries.

A development model anchored on foreign direct investment only and which does not include the meaningful involvement of local Zimbabweans, is socially, economically and politically unsustainable.

Our vision is characterised by partnerships between local Zimbabweans and foreign investors to guarantee participation by indigenous Zimbabweans, security of investment and establishment of up- and down-stream industries for the maximum benefit to the majority of the population.

Zimbabwe is not the only country with legislation for promoting participation by  the indigenous majority. Other countries like South Africa, Botswana, Zambia have similar laws.

Developed countries have achieved a significant participation in the economy by their nationals & foreign investment still plays a meaningful partnership role.

Fundamental principles

• Recognition of the universally accepted notion of equal opportunities for all as a matter of natural right & the need to eliminate ownership of wealth along racial lines.
• That indigenous Zimbabweans must own & benefit from the exploitation and utilization of their God given natural resources. 
• Commitment to underpin our political sovereignty through economic independence.
• The need for broad-based participation in the indigenisation process as opposed to the enrichment of a few individuals only.

Policy objectives

• To economically empower previously disadvantaged Zimbabweans.
• To create conditions that will enhance the economic status of disadvantaged Zimbabweans.
• To democratise ownership of productive assets of the country.
• To promote the development of a competitive domestic private sector that will spearhead economic growth and development.

Indigenisation & Economic Empowerment Legislative Framework

1. 1.       Indigenisation & Economic Empowerment Act (Chapter 14:33).
2. 2.       Indigenisation & Economic Empowerment (General) Regulations, 2010.
3. 3.       Indigenisation & Economic Empowerment (General) (Amendment) Regulations, 2010.

Indigenisation & Economic Empowerment Legislation

• Act sets 51% indigenous shareholding in all businesses with a net asset value of US$ 500 000 as the long term policy objective.
• All mergers, restructurings, unbundling of business, demergers, relinquishment of a controlling interest shall comply with the 51% indigenous ownership requirement.
• Promotes procurement of goods and services from indigenous businesses.
• Provides for the establishment of the National Indigenisation & Economic Empowerment Board to advise the Minister & manage the Fund.
• Provides for the establishment of the National Indigenisation & Economic Empowerment Fund to finance indigenisation and empowerment  transactions.
• Provides for financial instruments to assist local investors with funding from fiscus, levies & borrowings.
• The Minister shall approve all indigenisation arrangements.
• Businesses aggrieved by the Minister’s decision may appeal to the Administrative Court.
• The Indigenisation and Economic Empowerment (General) Regulations 2010 require existing businesses above the threshold of US $ 500 000 to declare their levels of indigenisation to the Minister and if not compliant, submit to the Minister their Provisional Indigenisation Implementation Plans.
• False declaration of information to the Minister regarding shareholding structures is an offence and liable to prosecution.
• New investments above the threshold of US $500 000, declare their levels of indigenisation to the Minister and if they are not compliant, they submit their Provisional Indigenisation Implementation Plans.
• Employee, Management & Community Share Ownership Schemes or Trusts are encouraged to be set-up as part of 51% indigenous shareholding to ensure broad based participation.

Reserved sectors for indigenous  Zimbabweans:

•  primary production of food & cash crops
•  retail & wholesale trade
•  barber shops, hairdressing & beauty saloons
•  employment agencies, estate agencies
•  valet services
•  grain milling, bakeries
•  tobacco grading, packaging & processing
•  advertising agencies
•  milk processing
•  provision of local arts & craft
•  marketing & distribution.

Indigenisation & Economic Empowerment Legislation (Cont’d)

• Establishment of Sector Committees for the purpose of assisting the Minister to come up with sector specific implementation frameworks, with respect to the appropriate minimum net asset value threshold above which a business in the sector or sub-sector concerned is required to comply with the regulations,
• … the lesser shares, maximum periods and weightings to be assigned to socially and economically desirable objectives & policies to overcome specified barriers and challenges to indigenisation in any sector of the economy.
• Sector Committees concluding their work & recommendations to be considered by Government before gazetting of the sector specific implementation frameworks.
• Government will review all licensing procedures to ensure compliance with I& EE legislation.
• Notable Indigenisation proposals approved to date: Schweppes (Pvt) Ltd, Old Mutual.

What indigenisation is not about

Immediate compliance: Phased compliance for both existing and new investments. New investors are free to come and invest on condition that they submit their plan, setting out how they intend to comply over 5 year period.

Investment prerequisite:. The 51% indigenous shareholding is not an investment pre-requisite.

Imposition of indigenous partners: The Government will not impose indigenous partners on foreign companies or businesses. Existing and/or new companies or businesses identify their own partners and negotiate the details of their joint venture agreements among themselves without any involvement of the Government.

Expropriation or nationalisation of businesses: The indigenisation process does not entail expropriation or nationalisation of companies or businesses. Indigenous Zimbabweans pay for any stake they take-up in an indigenisation transaction.

Conclusion

Our indigenisation & empowerment laws are not intended to stifle foreign investment, but rather guarantee security of investment through indigenous participation.

The indigenisation and economic empowerment laws are premised on the need to forge mutually beneficial partnerships between local and foreign investors.

Our indigenisation & empowerment laws have created certainty in Zimbabwe’s economy since investment requirements are now enshrined in the law and not subject to speculation.

Our Indigenisation & empowerment legislation ensures broad-based participation by indigenous  Zimbabweans to guarantee a stable investment environment.

Thank you!

Hon S Kasukuwere (M.P)

Minister of Youth, Indigenisation and Empowerment

ZIMBABWE`S POSITION PAPER ON YOUTH DEVELOPMENT

PAPER PRESENTED BY THE MINISTER OF YOUTH DEVELOPMENT, INDIGENISATION AND EMPOWERMENT, HON. SAVIOUR KASUKUWERE AT THE GOVERNMENT FORUM OF THE WORLD YOUTH CONFERENCE: LEON, MEXICO: 25 AUGUST 2010

Chairperson

Esteemed Guests

Ladies and gentlemen

On behalf of my country and President of the Republic of Zimbabwe, I would like to start by congratulating the Government and people of the Republic of Mexico for successfully hosting this 2010 World Youth Conference. As a country,   Zimbabwe,  we wish to associate ourselves with as well as  congratulate the people of  Mexico on their anniversary of 200 years of independence. My country is  now 30 years old and continues to transform the economy to become more inclusive.

Due to their energy, and their numbers, young people the world over contribute the most to the social, economic and political development of their countries and communities. They are central to the reform of national economies.  In much of Africa they were in the fore front in the fight for independence.

However, despite their energy and potential, young people remain economically marginalized. Most of them remain impoverished, are unemployed or under employed. They lack the opportunities to participate meaningfully in the economic development of their nations. They are the most vulnerable to HIV, AIDS and other health risks as well as other forms of abuse, especially the girl child. In my country Zimbabwe the illegal economic sanctions imposed by some Western countries have affected the successful implementation of some of the youth development programmes.

In Zimbabwe youth empowerment is considered to be key to youth development. There is need to   create equal opportunities for meaningful youth participation in the social, economic and political development of the nation. The future of any nation lies with its youth.  The youth should thus be placed at the centre of any development strategies and opportunities should be created for them to play a leading role in poverty reduction and economic development.

As a way to economically empower the indigenous people of Zimbabwe and reverse the unequal land ownership system, the Government embarked on a Land Reform and resettlement programme that resulted in more than 400 000 families being allocated land. Many young people benefited from this successful programme. The nation is beginning to see the positive results of the programme with increases in production such as in tobacco.

Furthermore, young people are set to benefit from the Indigenisation and Economic Empowerment Regulations that the Government of Zimbabwe has put in place.  In terms of the Regulations, indigenous people must own at least 51% shareholding of any company operating in Zimbabwe.  This indigenization programme thus has created opportunities for young people to take ownership and enter such sectors as mining, tourism, manufacturing, and agriculture. This programme will also go a long way in addressing the problems of youth unemployment and under employment.   Zimbabwe has vast mineral resources which must be used for the benefit of its young people. 

 Following the establishment of the Government of national Unity, young people of different political persuasions are  now working together under the umbrella of the National Youth Council. Through the Youth Council, youth are afforded the opportunity to participate through such forums as the Children`s Parliament and Junior Councils.

To enhance access to finance, the Government established the Youth Development Fund through which young people are able to access soft loans to support their projects. The Funds are accessed through participating banks.

Skills training is a critical component of the government`s youth development and employment creation programme. Through the vocational skills training centres and the community based Integrated Skills Outreach Programme (ISOP), many young people are accorded the opportunity to acquire technical skills to enable them to start their own projects and thus create employment for themselves and others. The Government supports these young entrepreneurs to acquire the basic start-up kits through the Youth Development Fund.

To facilitate a more coordinated approach to youth development efforts as well as to ensure that the current youth needs are addressed, the current National Youth Policy is being reviewed.  All stakeholders including young people themselves will be engaged in this process. In addition, the National Employment Policy has been developed.

Young people must be considered as assets and strategic partners in national development. They must be placed at the centre of socio-economic development strategies and they must be allowed to determine their own destiny for, as the young people themselves often say`, ``anything for them without them is against them``. Governments must thus create opportunities for young people to participate meaningfully in the social, political and economic development of their communities and nations by creating and putting in place the necessary enabling conditions, policies and legislative framework.

Developing nations must open up their massive resources for the benefit of their youths for it is the young people who are the engine of growth. Fellow ministers, we must design strategies that place the youth as the solution to the development problems countries are facing.

Development Partners and the Private sector must complement governments `efforts by channeling more resources towards supporting youth development programmes especially in the African continent.  They should not ´´think for us´´.  Undermining governments is counterproductive. They should not provide funding to youths to work against their governments.

Hon S Kasukuwere (M.P)

Minister of Youth, Indigenisation and Empowerment

Interview with Hon Minister Saviour Kasukuwere on Indigenisation & Empowerment

The Indigenisation and Economic Empowerment legislation which came into effect last week provides the rules and regulations that guide the economic empowerment of the communities and other special and disadvantaged groups such as youths, women, workers and war veterans. Among other things, the Indigenisation and Economic agenda seeks to have a 51 per cent indigenous shareholding in major and strategic companies and develop a broad-based domestic private sector which is critical to economic growth and development. To get clarity on aspects of this agenda, Anthony Jongwe (AJ) caught up with the custodian of the indigenisation and economic empowerment agenda in the inclusive government Minister Saviour Kasukuwere (SK) and the following is their discussion.

AJ: Good morning minister. The Indigenisation and Economic Empowerment Act is now operational. Could you please shed some light on how the processes (indigenisation and economic empowerment) will unravel going forward?

SK: Good morning Jongwe. As you have rightly pointed, the implementation of the legislation has started. Within the next 45 days, companies will be expected to complete the relevant forms. As a Ministry, we are putting in place adequate measures to ensure that these forms are readily available and that includes the option of downloading them from our website. The forms seek to elicit information pertaining to the current set-up obtaining in each relevant company. It is hoped that the information obtained will reflect the correct level of ownership. As a ministry, we intend to use the information to come up with comprehensive sector-by-sector plans on how best to enhance empowerment. The whole purpose of this initiative is to broaden the national cake by bringing more people into national economic participation and development.

AJ: But there are serious concerns about the timing of the whole process, minister.
SK: It is the same old argument used when we introduced the highly successful land reform programme

AJ: Another school of thought is arguing that this legislation is largely motivated by ZANU- PF’s need to have a strong bargaining weapon in the on-going sanctions issue since there was no unanimity on the need for the legislation in the inclusive government.

SK: It’s all nonsensical. Our approach to indigenisation is not a new phenomenon. We have always been clear on the need to empower the sons and daughters of Zimbabwe in the face of irrefutable historical imbalances created by colonialism. Almost three decades after the attainment of independence, the ownership of resources in most key sectors of the economy is still skewed in favour of foreigners, with indigenous Zimbabweans mainly employed as managers and workers. Recent assessment studies on the levels of indigenisation of the economy by Government reveal that critical sectors of the economy, notably manufacturing, mining, tourism, energy, financial, construction, transport and media production are still dominated by foreigners. This state of affairs is detrimental to the overall development of the economy and prosperity of indigenous Zimbabweans

AJ: Indigenisation and empowerment programmes are not new in Southern Africa. What is unique about Zimbabwe’s approach?

SK: You are correct Jongwe. Indeed, South Africa, Namibia and Botswana have all adopted and implemented indigenisation programmes. Our approach to indigenisation is based on the notion of broad-based participation by our people in indigenisation arrangements. As a resource-based economy, we need to use indigenisation to fight poverty and create more jobs. Our indigenisation and empowerment are anchored on the conviction that indigenous Zimbabweans must own and primarily benefit from the exploitation and utilization of their God given natural resources. This is a fundamental pre-requisite for sustainable economic growth, social and political stability and overall national development

AJ: How will these broad-based participation arrangements be funded?

SK: There are various structures critical to the successful implantation of the indigenisation and economic empowerment agenda. The National Indigenisation and Economic Empowerment Fund (arising from the transformation of the National Investment Trust) will provide loans for acquisition of shares, business start-up, rehabilitation and expansion. Another route will be listing on the Zimbabwe Stock Exchange. Listing on the bourse enables ordinary black Zimbabweans to acquire shareholding in listed companies.

AJ: How can employees participate in the indigenisation programme?
SK: Workers will be able to do so through Employee Share Ownership Programmes (ESOPS). These programmes shall enable employees of a company, through a Trust, to acquire, hold and manage a prescribed level of shares of the company concerned and receive dividends or incoming arising there from. Significantly, ESOPS will result in increased productivity, improved industrial relations and employee welfare, retirement security, and foster responsibility and commitment to the company by employees and reduce demand on social responsibility. In conclusion, let me say that the difference between rich and poor is opportunity. These broad-based participation arrangements give an opportunity to all Zimbabweans, including those in the Diaspora to create wealth for themselves, families and nation.

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Anthony is principal consultant at Global Workforce Solutions (Pvt) Ltd- a management and human resources consulting company. For feedback/enquiries, send e-mail to: consultgws@gmail.com or phone/sms on 073 3 306 193


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