Update on Zimbabwean indigenisation
In January, the Zimbabwean Minister responsible for indigenisation published General Notice 9 of 2016, the “Frameworks, Procedures and Guidelines for Implementing the Indigenisation and Economic Empowerment Act”. See our previous blog on the topic here.
Citing “conflicting positions” in the interpretation of Zimbabwe’s indigenisation policy which have “caused confusion” and undermined market confidence, last month the President issued a Presidential Statement to clarify the Government’s position. While this Statement does not have the force of law, or amend any of the relevant legislation - indeed in some respects it is flatly contradictory - it is useful in hopefully giving an idea of how the authorities will approach this issue in the future.
The statement deals with considerations applicable to four distinct sectors of the economy:
The natural resources sector
For practical purposes this principally relates to the mining sector, where government or certain “designated entities” are required to hold equity stakes of 51 percent. For existing businesses where this threshold has not been reached, however, there is a requirement that the “local content” retained in Zimbabwe (by way of remuneration paid, taxation, community share ownership schemes and procurement and linkage programs) is not less than 75 percent. It remains to be seen how this requirement will be implemented in practice.
The non-resources sector
This covers all sectors outside of natural resources and other specific sectors dealt with below. Here the Statement recognises that empowerment credits can be earned in a variety of ways (among them the beneficiation of raw materials, technology transfer, employment creation and linkage programs); and it seems that there is a tacit acknowledgement that the previously existing requirement of 51 percent equity ownership by indigenous Zimbabweans is no longer applicable.
The financial services sector
This covers institutions regulated under the Banking Act and the Insurance Act. The Statement confirms that these institutions will fall under the auspices of their respective regulators (the Reserve Bank and the Commission responsible for insurance companies and pension funds); and again there seems to be a tacit acknowledgement that, so long as they are compliant with their sector specific legislation, they will not be subject to further pressure with respect to indigenous equity participation. There is an expectation, however, that they will contribute financing for “key economic sectors”.
The reserved sectors
These cover 11 named sectors of the economy including passenger transportation, the retail and wholesale trade, estate agencies, tobacco processing and others. Except for existing businesses “where a special dispensation has been granted”, these sectors are “reserved for Zimbabwean entrepreneurs”.
The Statement concludes by noting that the President has directed the legislation be amended so that it is consistent with the policy outlined in the Statement. No such amendments have yet been published.
Inside Africa would like to thank our guest author Peter Carnegie Lloyd of Gill, Godlonton & Gerrans for his contribution.