Zimbabwe warns foreign firms against defying indigenization law

The Zimbabwean government on Monday warned foreign firms against defying an indigenization law that compels them to cede majority shareholding to locals.

The government last month gave the companies up to March 31 this year to submit indigenization compliance plans after missing the Jan. 2014 deadline.

The Indigenization and Economic Empowerment Act, which compels foreign firms to give 51 percent of their shares to local partners, was promulgated in 2007 with implementation starting in 2010 but compliance with the law has been slow.

The law has caused anxiety among foreign investors in the country and has been blamed for scaring away potential investors.

At a joint press conference Monday to unveil an "improved" framework for implementing the law, Indigenization Minister Patrick Zhuwawo said government would not accept companies that refuse to comply with the law in 2016.

"Now that we have clarified the position, we do not expect any affected companies to remain defiant and non-compliant," he said.

He said government emphasis was now on implementation of the law starting with submission of indigenization implementation plans "which every company affected should submit as soon as possible but no later than the 31 of March 2016".

The minister explained that the new framework provides for two possible pathways for companies to comply with the law, namely compliance through the provision of a lesser share of indigenization for the economic empowerment of indigenous Zimbabweans and compliance through an empowerment levy which takes into account the rebate scoring systems.

Speaking at the same occasion, Finance Minister Patrick Chinamasa said with the new framework, there were no any excuses for companies not to comply.

"There will be no more excuses either because there are loopholes in the law. We expect all the affected companies to comply," Chinamasa said.

He said government would also institute various measures to address bottlenecks hindering increased participation of indigenous Zimbabweans in the economy.

"Without high local participation we would have no economy," he said, adding the country, through the indigenization law, was aiming to increase to about 80 percent indigenous participation in the economy from the current levels of around 10 percent.

Reserve Bank of Zimbabwe Governor John Mangudya said the new indigenization framework will help to attract the much-needed foreign investment into the country.

"The frameworks are user friendly, they are very flexible and we would not expect any person to complain at the end of the day," he said. Endit