Zanu PF indigenization law will kill economy

Zapu calls on the Inclusive Government to urgently withdraw the Zanu-PF sponsored indigenization law. Within days of being effected, the law has had a serious negative impact on the country’s economy.

Zapu notes with concern that this comes at a time when the economy was on a recovery path. Dollarisation of the economy has seen companies grow from 10 to 35 percent capacity utilization as of December 2009.

Whether owned by blacks or whites, these companies need extra capital to grow, and this capital can only come from foreign investors in view of the obvious lack of liquidity in our banking systems as of now.

Zapu notes that there were some notable investment deals, such as Shoprite of SA negotiating to buy into OK Zimbabwe. OK Zimbabwe is a black controlled listed company. We have to ask ourselves if Ok Zimbabwe is better off without Shoprite SA.

Is Shoprite going to invest millions of Rand in Zimbabwe under an environment where laws are ad hoc and make investors minority shareholders, even where they have put in most, if not all the capital?

Ever since the Zimbabwe Stock Exchange (ZSE) started trading in US dollars in February last year, the market capitalization grew by over 118% to over $4.5 billion by December 2009.  That growth was driven by foreign investors, who foresaw growth and potential on the ZSE.  The money from foreign buyers found its way into treasury by way of taxes. 

A large percentage of US dollars in circulation right now came from Foreign Portfolio Investments, thereby benefiting our country.  Since the announcement of the latest indigenisation laws by Zanu-PF, activity on the ZSE has ground to a halt and the collapse of the ZSE can not be ruled out at this stage.

There is no country in Africa today with a larger percentage of indigenous enterprises than Zimbabwe. A look at our tourism, manufacturing, banking and mining confirms this. In Victoria Falls, two of the biggest players in hotel industry are Africa Sun and the Rainbow Tourism Group (RTG). Who owns them? It is indigenous Zimbabweans.

What those businesses need now is not more indigenization, but more capital to increase capacity and renovate the hotels.  Where are they going to get the capital from? Obviously from foreign investors who are now scared to come in because of the new law.

In Hwange, the two largest economic institutions are Hwange Colliery Company and the Zimbabwe Electricity Supply Authority (ZESA).  Everyone knows who owns them, and what has happened to them over the years.
In between Hwange and Bulawayo there is nothing worthwhile to talk about.

There used to be farms, conservancies and hunting safaris, which have all since been indigenised and run down through the chaotic land reform.
  In Bulawayo, one of the biggest companies, Tregers is 49 percent owned by Zanu-PF. The other big company, PPC is listed, leaving only Dunlop as the only company which could be said to be foreign-owned.

In Gweru, the largest employer and significant asset is ZimAlloys.  ZimAlloys was bought by two prominent Zimbabweans from Anglo American a few years ago and as we write this article, they are in negotiations with a South African based company to invest in their business.  Do they need the money?  Yes they do. They need to refurbish the furnaces, increase capacity and working capital. 

With the enactment of this legislation we do not know if the negotiations are going to yield anything.  Obviously, Zimbabwe would be the major loser if the deal does not succeed. In the Kwekwe area, we all know owns the three big companies.

The lack of vision displayed by Zanu-PF is alarming. It is baffling how a weak economy such as ours is expected to withstand pressures triggered by such destructive populist policies, which obviously are designed to preserve Zanu-PF from eventual demise at the next elections.

If not careful, the two MDCs may be guilty by association if they do not take practical steps to force Zanu-PF to abandon its indigenization policy. Press statements are not enough when dealing with the Zanu-PF establishment.

If the MDC-T was prepared to leave government over the personalities of Roy Bennett, Gideon Gono and Johannes Tomana, surely they should be prepared to do more for the millions of Zimbabweans who are at risk of yet another Zanu-PF-induced suffering.

The indigenization law has horrendous implications on economic growth, employment creation, government revenues, among other issues.
To demonstrate our point, our economic intelligence informs us that Zimbabwe lost more than US$3billion in potential investments over the past three weeks when it became clear that Zanu-PF would impose its will once more on its IG partners.

We are told a lot of money is leaving the country already. Zapu wants to make it clear that we support indigenisation but the ratios must be reasonable, and the timing right.  It is our view that the current ratios are unreasonable and the timing is not right, except may be for Zanu-PF who thrive under hunger and strife. This country needs serious investment and no serious investment comes under such conditions.  

There are no more than 15 profitable, non indigenous companies in Zimbabwe right now. They include Zimplats, Hippo Valley Estates, Mimosa and a few banks. There is no need to pass such a massive law to target these few companies.

In any case, what criteria are we going to use to qualify the indigenous partners? Obviously patronage based on party, ethnic, family and other affiliation will carry the day for the usual beneficiaries of the so-called indigenization policy.

Zapu calls on the IG to immediately withdraw the indigenization legislation before the country is taken centuries back into the Stone Age by clueless old men and women conniving with greedy opportunistic young men and women who want to reap where they did not sow.

Zanu-PF, and indeed the rest of us, must know that the world does not owe us anything. If investors are not happy, they will go to the next shop. It is as simple as that. We are a small factor in the global financial system to change international investment norms. We need to know how to negotiate. The take-it-or-leave-it mentality will make the majority of our people poorer.

It is just a few individuals who will benefit from company takeovers, as happened with farm takeovers, while the rest of the population sink further into poverty.

It is sad that Zanu-PF chefs are prepared to see us suffer more as long as they get what they want. They do not care what happens to the rest of the population because they have access to diamonds from Marange, and boast that they will sell them on the side-markets and make millions if they wish.

Such actions and sentiments only come from leaders who are drunk with power and wealth and do not reason properly anymore.

Thank you.

Methuseli Moyo
Director Marketing and Communication, Zapu

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