Roundup: Zimbabwe says not to "abruptly" shut down foreign firms over controversial ownership law

The Zimbabwean government will neither abruptly shut down nor nationalize foreign companies, not in compliance with a controversial ownership law that requires the foreign investors to cede a controlling interest to local Zimbabweans, a cabinet minister has said.

Youth, Indigenization and Economic Empowerment Minister Patrick Zhuwao last week issued an ultimatum to companies to submit a plan for implementing the indigenization law by April 1 or face closure. The decision, he said, had been endorsed by a cabinet meeting prior to his announcement.

In an interview with Xinhua Tuesday, two days before the deadline, Zhuao defended the decision, saying it was not "drastic" as foreign companies had more than five years to comply and those which failed to do so should face consequence of flouting the law.

The government promulgated the Indigenization and Economic Empowerment Act in 2007 and three years later issued a statutory instrument, giving foreign-owned firms five years to comply.

Businesses in almost every sector of the economy with assets over 500,000 U.S. dollars will need to cede a controlling interest, usually 51 percent of the shares, to local black Zimbabweans. Foreign investors can be exempted or allowed to cede a lesser interest of 51 percent if they apply for considerations.

The foreign companies in the country's vital agriculture and mining sectors were the first targets but overall the compliance was slow in the past five years. The law and the government's flip-flop attitude in enforcement were criticized for causing confusion to the potential foreign investors.

To avoid causing shocks to the already fragile economy, Zhuwao said the government had not, however, intended to "nationalize" foreign companies, and that even in closure, the assets would remain in the hands of their foreign owners.

He explained that the closure of non-compliant companies would be carried out in stages instead of abruptly.

Meanwhile, the National Indigenization and Economic Empowerment Board (NIEEB), which issues compliance certificates, said there was a rush by companies to beat the March 31 deadline.

"The process of submission of indigenization compliance plans is moving very well. It's going on smoothly and there are a lot of companies coming through with their indigenization plans," said NIEEB chief executive Wilson Gwatiringa.

He said his organization will know the exact number of compliant and non-compliant companies after the deadline.

According to Zimbabwe laws, foreign firms in mining, finance, energy, agriculture, communication, construction and manufacturing are expected to comply with the indigenization law while several sub-sectors including primary production of food and cash crops, milk processing, grain milling, retail and wholesale trade and cigarette manufacturing are reserved exclusively for the locals.

Foreign firms that are expected to comply with the law include some of the world's largest platinum miners like Zimplats, owned by Impala Platinum (Implats) of South Africa, Unki which is owned by Anglo American Platinum (Amplats), and Mimosa which is jointly owned by Implats and Aquarius Platinum.

Banking subsidiaries of major international financial institutes such as Standard Chartered and Barclays are also not to be spared.

Zimbabwean president Robert Mugabe, a key backer of the indigenization, has repeatedly defended the measure as necessary to avoid the land's indigenous black inhabitants being exploited by foreign investors and being left out from benefiting from the development.

But the country has suffered a major dip in foreign direct investment (FDI) in recent years, which critics blame on policy inconsistence, especially concerning the indigenization implementation process.

Zimbabwe's attracted just 600 million U.S. dollars FDI last year, ranking low among its rich and emerging neighbors such as South Africa, Botswana, Zambia, and Mozambique. Endit