Controversial ‘indigenisation’ law takes effect

By Tichaona Sibanda
1 March 2010

The controversial indigenisation law that forces foreign-owned companies to sell a majority stake in their businesses to indigenous people comes into effect on Monday.

The Indigenisation and Empowerment Bill was passed by Parliament in 2007 and signed by Mugabe in 2008 before the creation of an inclusive government. Among other things, the regulations demand that all foreign and locally owned companies hand over at least 51 percent ownership to black Zimbabweans.
The law requires every existing business, partnership, association or sole proprietorship with an asset value of US$500 000 or more to submit a report to Youth Development, Empowerment and Indigenisation Minister Saviour Kasukuwere by April 15. Defaulters might face a fine and/or imprisonment for up to five years.

Mugabe defended the new regulations on Saturday, saying they were meant to correct historical imbalances. He told hundreds of supporters at his 86th birthday celebrations in Bulawayo that the indigenisation policy, like the land reform programme, was meant to correct historical imbalances in the ownership of the country’s resources.

“This policy is not meant to nationalise companies but to broaden ownership of our resources. Yesterday, we were down trodden, there was slavery... Back home, the people were colonised and turned into slave and semi-slave to do work for masters who had colonised us. It was slavery in the colonies and that is what created the imbalances.” Mugabe said. Many analysts including Mugabe’s partner in government Morgan Tsvangirai have said the law is ‘bad for the country.’

Economic analyst Luke Zunga told us that the new law will make people think twice before investing in Zimbabwe, adding that it would also deter further badly-needed foreign investment.

“The level of industrialisation in Zimbabwe is very small and the introduction of this law will kill the little industry that is there. Nobody is going to allow someone to just grab their companies like that. It’s almost impossible to imagine,” Zunga said.

‘The worst thing about this law is the beneficiaries. All the companies will be given to party loyalists, people with no experience in big business. This is an exact replica of the land reform programme that killed off the country’s agriculture sector,’ Zunga added.

The move to target foreign-owned firms has further divided the inclusive government. While Mugabe has repeatedly defended the law, saying that foreign firms would be ‘foolish’ not to comply, Tsvangirai, in contrast has rejected it, saying it was published without due process.

The main trade union group, the Zimbabwe Congress of Trade Unions (ZCTU), has also warned that the new law could have negative consequences. ZCTU President Lovemore Matombo said while the principle of the law was good, he feared that this could lead to a creation of new minority blacks who will just replace the minority whites.

‘The law should have not been rushed; we are just coming out of a self-inflicted economic crisis. This law could create fears that the process could be chaotic, just like the land reform, which will affect the economic recovery of the country and we do not need this right now as we need investments,’ said Matombo.