Broke Zimbabwe Government in a humiliating climb down on Indigenisation

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Jonathan Moyo

In a major climb-down, the Government is in the process of reviewing the indigenisation and empowerment policy to facilitate sector-specific implementation. The developments will be viewed as an apparent victory for policy moderates like Dr Gideon Gono who was a vocal dissenter during his time at the Reserve Bank against indiscriminate implementation of the policy in the banking sector.

Ultimately, the review will allow investors to recover initial capital investment, receive an appropriate return on investment and recoup operational costs.

Information, Media and Broadcasting Services Minister Professor Jonathan Moyo told The Sunday Mail in an interview that the Production Sharing Model (PSM) and the Joint Empowerment Investment Model (JEIM) have been identified as the foremost vehicles through which the indigenisation policy will now be implemented.

PSM is a broad cover for an assortment of production sharing agreements signed between governments and extraction companies concerning how much of a resource extracted from the country each will receive.

The agreements are popular in the oil-rich Middle East.
Following this model, Zimbabweans would retain 100 percent ownership of mineral resources and agricultural land.

Investors will be allowed to recover their initial capital investment, an appropriate return on investment and operational costs before the sharing of production outputs or profits.

Under the JEIM, outside mining, agriculture and particular tourism investments, locals will be encouraged to enter joint ventures as a way of generating capital to build wholly Zimbabwean-owned enterprises.

The proposed amendments to the Indigenisation and Economic Empowerment Act are a significant departure from the previous Government position which insisted on a blanket approach in which foreign companies would have controlling stakes to indigenous Zimbabweans, regardless of sector.

Regarding the new approach, Prof Moyo said: “There’s been quite some debate in Government about this important implementation issue since the adoption of Zim Asset and that debate is continuing as it should.“There is a growing if not a decided consensus that the model with the best possibility or chance of meeting the ideological, legal and policy necessities of indigenisation and empowerment are the Production Sharing Model (PSM) and the Joint Empowerment Investment Model (JEIM).

Asked whether the new model did not amount to abandoning the initial policy, he said: “Not at all. I don’t know or understand where that suggestion is coming from. It would be sheer folly for anybody to imagine that we would abandon or ditch a policy or programme that was overwhelmingly endorsed by the electorate in unprecedented numbers as recently as 31 July 2013.

“We are reviewing and tightening the indigenisation and empowerment policy by being pragmatic without being dogmatic about it. In any event, the record should show that we did acknowledge in our election manifesto — you can find that on Page 35 — that, while the law is clear that at least 51 percent of the shares or ownership of every public company and any other business shall be owned by indigenous Zimbabweans, there has been some confusion and misunderstanding over the modalities for achieving this threshold.

“Consequently, we pointed out that, going forward there is a need to review, tighten and strengthen both the law and policy to, among other things, clarify the fact that the indigenous Zimbabweans cannot be expected or required to buy back their God-given natural or economic resources.

“This is why we have been having this review and tightening process under Zim Asset.”
In 2008, Government introduced the Indigenisation and Empowerment Act, which requires all foreign-owned businesses operating in the country to cede 51 percent shareholding to Zimbabweans.

The requirement has, however, remained at the centre of debate with moderates advocating flexibility.
Former Reserve Bank of Zimbabwe governor Dr Gideon Gono was among those who advised the authorities to exempt the financial services sector.

There has been growing speculation that Government would move to amend the policy after President Robert Mugabe said the 51 percent model would only work in the mining sector, remarks that were read as suggesting a softening of policy in non-resource sectors of the economy.