October 5, 2007

Parliament passes law to 'indigenize' foreign companies

The Zimbabwe government said it was pressing ahead with legislation to seize a controlling share of foreign-owned mining interests in the country, the official media reported. Indigenisation and Empowerment Bill will allow the government to force foreign-owned companies to give up 51 percent shareholding to blacks or the government. Those new laws were rushed through the legislature in less than a month, but have still to be signed by President Robert Mugabe before being enacted. Mining, one of the biggest earners of hard currency, has been dominated by international conglomerates with the necessary capital and expertise. Mining production, however, has declined because of shortages of equipment, spare parts, gasoline and other materials.
However, differences over the contentious Indigenisation and Empowerment Bill have emerged. Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono cautioned the government against planned seizures, accusing top politicians of ganging up to take up prime assets. The indigenisation will affect all sectors of the economy including international banks, manufacturing companies and mines. Indigenisation and Economic Empowerment Minister Paul Mangwana has been pushing through the controversial bill while President Robert Mugabe vowed to press ahead with the seizure of mines. But Gono has cautioned the government against hasty and disruptive seizures, saying the government could be rushing to prescribe medicines to perhaps non-existent ailments. The central bank boss described calls to indigenise the country's banking sector as careless, uninformed and with the potential risk of destabilising an otherwise stable sector. "As someone who personally led the turnaround and experienced the pain of resuscitating the collapsed BCCI Bank, now CBZ and second largest bank in the country, I urge those advocating for what seems to be unguided interference with ownership structures in this industry to consult widely and take heed of the advice of experts in this sector before rushing to push through what could end up being viewed as counter productive legislation likely to yield worse unintended consequences than what we saw with the recent price controls," Gono said. While embracing the empowerment drive, which he said would expand involvement of people in the mainstream economy, he warned the government to strike a balance between the objectives of indigenisation and the need to harness foreign direct investment, which has been drying up in recent years. The central bank chief advised against schemes that create perceptions of instant gratification "through grab, take and run" and which would benefit "a few well connected cliques". (sapa)


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