Roundup: Zimbabwe's Mugabe says indigenization law to be amended amid economic challenges

Zimbabwean President Robert Mugabe said Thursday the controversial indigenization and economic empowerment law will be amended to incorporate previous changes he made to the law.

In April this year, Mugabe moved to clarify the law by suggesting that its implementation would be reasonable and sector-based.

This followed conflicting positions by his ministers over implementation of the law and after indigenization minister and his nephew, Patrick Zhuwao, had threatened to close shops of non-compliance foreign companies by a deadline set on March 31, 2016.

Mugabe acknowledged that the conflicting positions had caused confusion among Zimbabweans, the business community, current and potential investors, thereby undermining market confidence.

The law, enacted in 2008, requires foreign businesses to cede controlling interest to local black Zimbabweans. A follow-up guideline issued in 2010 provides that the process should be completed in five years.

Over the years, the transfer of shares has been slow and focused on the mining sector, as ministers in different ministries held varied views on whether to force foreign companies under their watch to sell 51 percent of the shares to local buyers.

In his clarifying statement in April, Mugabe said the government would insist on 51 percent ownership of new mining companies while the existing miners would be allowed to stay once they retain 75 percent of the "gross value of the exploited resources" in the country, in terms of taxes, wages, community benefits and procurement.

"The natural resources sector, non-resources sector and the reserved sector are to be approached differently," Mugabe said then, adding that companies outside the natural resources sector, including manufacturing, telecommunications, energy and banking, will negotiate empowerment credits or quotas with appropriate ministries.

Retail and wholesale trade, beauty salons, estate agencies, grain milling, bakeries, tobacco processing and provision of local arts and crafts are reserved for strictly locals.

In a speech to open the fourth session of the eighth parliament on Thursday, Mugabe said the law would be amended in the current session to reflect the new policy changes.

"It will be recalled that I issued a statement to clarify government's position regarding the Indigenization and Economic Empowerment Policy on April 11, 2016. The relevant act will thus be amended to bring it into consonance with the enunciated policy position," Mugabe said.

Mugabe's remarks in parliament comes as the International Monetary Fund this week projected Zimbabwe's economy to record negative growth of -0.3 percent in 2016 and -2.5 percent in 2017.

The projected negative growth for 2016 marks the first time that Zimbabwe slides back into recession after seven years of positive growth from a decade-long recession.

The government, however, is projecting a slim growth of 1.2 percent this year after a devastating drought that has left a quarter of the rural population in need of food aid.

Zimbabwe is experiencing severe economic challenges that have been compounded by a devastating drought, tight liquidity conditions and negative inflation.

Currently, the country is facing acute bank note shortages which the central bank plans to address through issuance of bond notes at the end of this month.

State revenues have also significantly dropped, with government wage bill consuming 97 percent of state revenue. Endit