Zimbabwe and Indigenisation: Clarification of Government policy?

Posted in Mining Agriculture

In the latter months of 2015, signals were given from Zimbabwe government circles to the effect that Zimbabwe’s indigenisation policy, and the manner of its implementation, would be clarified early in the New Year. It is widely acknowledged that this policy has, over the past several years, acted as a very substantial deterrent to foreign direct investment.

On 8 January 2016 the Minister responsible for indigenisation published General Notice 9 of 2016 which is titled, “Frameworks, Procedures and Guidelines for Implementing the Indigenisation and Economic Empowerment Act [Chapter 14:33]”.

This is a somewhat unusual document in that much of it is devoted to pronouncements - some of them rather chatty in form - from the President and from the Minister of Finance, expressing views on the subject of indigenisation.

The Notice then goes on to deal with Government policy in respect of indigenisation in the resources sector, the non-resources sector and “reserved sectors” and identifies areas to be addressed in subsequent legislation.

Resources sector

The aim of achieving a 51% equity holding in mining companies by what are to be regarded as “indigenous” entities is reiterated, as is the concept that to achieve thisend, non-compliant businesses are to dispose of the necessary equity to “designated entities”. These include employee and community share ownership trusts and a variety of quasi-governmental institutions. The Notice goes on to hint that models that allow for achieving Government policy “will be developed in consultation with the appropriate line ministries”.

Non-resource-based sector

The Notice is interesting in that it specifies with some clarity, for the first time, the fact that in various sectors of the economy what may be termed “indigenisation credits” may be earned towards a compliant 51% status. The nature of these credits vary from sector to sector.

Reserved sectors

Sixteen sectors of the economy are listed as being reserved for indigenous Zimbabweans. These cover a wide spectrum of business activities including agriculture, retail and wholesale, bakeries, advertising agencies, fuel retailing and grain milling.

The Notice specifies that no new non-indigenous businesses “will be allowed to invest in [a] reserved sector unless under special cases as determined by line ministries and approved by Cabinet”.

The Notice reiterates the concept, already appearing in the legislation, that the final decision as to the manner of implementation of Government policy will be made by the responsible “line minister”. So, for example, in respect of a mining business the responsible line minister will be the Minister of Mines.

Subsequent legislation

Finally, the Notice foreshadows two issues to be dealt with in subsequent legislation:

  • the Zimbabwe Investment Authority is to be given clearer responsibility when it comes to administering indigenisation issues in respect of new proposed investments, and
  • it is said that an indigenisation compliance and empowerment levy is to be introduced, which will be payable by non-compliant businesses. Apparently it will be calculated as a percentage of turnover, although that percentage is yet to be fixed.

It remains to be seen whether the publication of the Notice will be taken by potential investors as a meaningful clarification of Government policy. At first blush it seems to leave in place many areas where it will be left up to line ministers to apply Government policy on a case-by-case basis.

Inside Africa would like to thank our guest author Peter Carnegie Lloyd of Gill, Godlonton & Gerrans for his contributon.


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