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Economists Speak On Policy Review

May 27, 2014

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Government's review of the indigenisation and economic empowerment policy to facilitate sector-specific implementation is a major breakthrough as it ensures that Zimbabweans own 100 percent of their resources and investors get fair equity and return on their investments, top economists and business leaders have said..

Government is clarifying the indigenisation law so that there is no blanket approach to the different economic sectors and the levels of investment they require.

This dovetails with a lobby for Zimbabwe to indigenise its resources instead of seeking to merely indigenise foreign-owned companies.

Information, Media and Broadcasting Services Minister Professor Jonathan Moyo told The Sunday Mail at the weekend that Government would soon recalibrate the indigenisation and empowerment policy, shifting from its blanket approach to sector-specific implementation.

Through it all, however, Government maintains that Zimbabweans should totally own their natural resources, while investors can own equity in firms that is attractive and fair to them.

Investors will get a return on their investment to recover costs incurred before sharing production or profit with the owners of the resources.

The review and strengthening of indigenisation laws, Western diplomats and captains of industry said yesterday, would increase investor confidence and attract more FDI into Zimbabwe.

Observers yesterday said the recalibration had a "multiplier effect" that would "unlock" investment barriers.

Former World Bank representative in Zimbabwe Dr Nginya Mungai Lenneiye of Kenya said Zimbabwe was in the right direction.

"That is fantastic and the way to go," he said. "Clarifying the indigenisation and empowerment laws is what the world was waiting for. What is good to note is that Production Sharing Agreements are being implemented the world over and this is a step in the right direction for the Zimbabwean Government."

Prominent investment banker and Brainworks Capital Management chief executive Mr George Manyere said the changes would bring clarity to foreign investors.

"This approach was initially announced under the Government of National Unity and sector-specific committees were set up but there has not been official communication of the recommendations and or refinement of the indigenisation law to incorporate the sector-specific recommendations," he said.

"Lack of clarity had compounded the confusion that investors had on the law negatively affecting FDI flows."

Mr Manyere said foreign investors largely operated in countries rich in sub-soil assets using similar models.

"With regards to sub-soil assets, it has been proven in various countries across the world, which are resource-rich, that a policy that stimulates production and equitably distributes the extracted resource between the State and foreign investors tasked with extracting the resource, is the best.

"Hence consideration by Government of a production sharing model to complement other instruments being used to empower locals makes sense and not only does it stimulate extraction of sub-soil assets but it also has a significant multiplier effect on the economy, for instance growth in much needed FDI and employment creation," he said.

The Indigenisation and Empowerment Act of 2008 requires all foreign-owned businesses worth at least US$500 000 to cede a 51 percent shareholding to indigenous Zimbabweans.

European Union Head of Mission in Zimbabwe Ambassador Aldo Dell'Ariccia, described the changes as "good news" and that the bloc was "taking note" of the developments.

He, however, suggested that the proposals go through Cabinet and be gazetted.

"It is important that Zimbabwe creates a positive environment for foreign direct investment as it is important in reactivating the economy," Ambassador Dell'Ariccia said.

He said Zimbabwe had "huge potentialities" and "whatever creates a proper environment for these FDIs is welcome".

"Government simply has to balance between national interest and the need for FDI. Within that, the process is going in the right direction," he said.

An economist from the EU who declined to be named for professional reasons added: "This is what most people have been asking for. Tell the people the specifics and then they choose the route they want to follow."

Economist Mr Witness Chinyama said the move would nurture local financial capacity and that investors needed confidence.

"This addresses some of the concerns that foreign investors had," Mr Chinyama said. "It is a win-win situation that does not scare away anyone with the genuine intentions of investing. Within years, if we handle the policy carefully, we would have built our capacity."

Confederation of Zimbabwe Industries president Mr Charles Msipa said it was clear that resuscitation of industries was gaining momentum.

"When we visited Europe with other business leaders early this year we were openly told the indigenisation was a barrier to investment and the pronouncements . . . would create an enabling environment for investors," he said.

"This is a positive step because we are not the only country in need of investors therefore the onus is on us to create an attractive environment."

Political analyst Dr Nhamo Mhiripiri said Government was not backtracking but adapting to the situation.

"It is more of prudence than backtracking because our long-term vision of empowering the majority, nurturing our own businesspeople, remains in place," he said.

Chairman of Parliament's Budget and Finance Portfolio Committee Cde David Chapfika (Zanu-PF) said a cautious approach was needed.

"This is a policy that was in our manifesto and it should be treated cautiously with extensive consultations being done such that if we made mistakes in the past, we avoid making other blunders too. Through the consultations, Zimbabweans will choose what is best for them."

Zimbabwe Congress of Trade Unions secretary-general Mr Japhet Moyo went on: "The concept of indigenisation and empowerment is noble but it was crafted in a way that does not assist the investor as they saw themselves as being double-taxed.

"Government should create an environment that benefits locals and foreigners and we do not want a situation whereby foreigners end up repatriating all the profits. The suggestions by Government are welcome as long as they address the fundamentals we have been talking about all along."

At the weekend, Prof Moyo pointed out that the recalibration was in line with the ruling party's 2013 election manifesto, which clearly stated that indigenisation and empowerment would remain part of core policy but would be fine-tuned to derive more benefits for locals and for investors.

This will spur the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, whose four clusters - Food Security and Nutrition, Social Services and Poverty Eradication, Infrastructure and Utilities, and Value Addition and Beneficiation - demand massive funding.

Zim-Asset is Government's economic blueprint for the five years from 2013 to 2018 and is synthesised from ZANU-PF's winning election manifesto for last year's harmonised elections, President Mugabe's inauguration address and his speech during the opening of the First Session of the Eighth Parliament..

The amended policy will be implemented through two models: the Production Sharing Model (PSM), and the Joint Empowerment Investment Model (JEIM).

PSM will see Zimbabweans retaining 100 percent ownership of mineral resources and agricultural land, while sharing production would either be fixed or based on a sliding scale depending on the specific mineral or agricultural product and could be linked to profitability.

Under the model, investors would be allowed to recover their initial capital investment and operational costs before the sharing of production outputs or profits.

With JEIM, Zimbabweans - outside mining, agriculture and some investments in tourism - would enter into join ventures to generate capital to build enterprises they wholly own.


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Source: AllAfrica


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