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