The regulations will require every existing business, partnership, association or sole proprietorship with an asset value of US$500,000 or more to submit a six-page form to Indigenisation and Economic Empowerment Minister Saviour Kasukuwere by April 15. The form will detail their plans for ensuring that they will be owned or controlled by indigenous people within five years. Failure to submit the form after a further 30 days reminder could lead to a fine or up to five years imprisonment for the owner of the business or every director. Prospective foreign or domestic investors will also need to submit the six-page form. Merged, restructured or unbundled businesses have a different form but the same deadlines.
The regulations, which were published in a government gazette last Friday, are expected to come into force on March 1. The same measures will also make it mandatory for all government departments and parastatals to only procure goods and services from indigenous Zimbabweans. Failure to do so could lead to up to five years in prison, a fine or both. There will be similar penalties for persons found guilty of acting as fronts for foreign businesses. The minister will be empowered to appoint his own valuators if he suspects that a companys balance sheet has been tampered with to show assets of less than US$500,000 in an attempt to avoid the new indigenisation requirements. But the new regulations have not been unanimously welcomed. Analysts warn they will affect Zimbabwes drive to attract foreign investors, who have shunned the country because of the unstable economy and appalling track record on property rights.
The indigenisation regulations promulgated on Friday in Harare show no changes from the draft we saw several months ago and which came under severe criticism, said one analyst.
They provide for any company that is worth over $500,000 to take on an indigenous partner with 26 per cent ceded to the State and 25 per cent to be paid for on the never-never by profits from the operation itself. This is tantamount to nationalisation and will result in the investor losing control of his investment. Like the Mulungushi Declaration by Kaunda in Zambia nearly 50 years ago, this will halt all foreign and local investment by existing companies and halt any new investment from outside the country, he said.
It will completely undermine the fragile recovery that has been underway since February last year and throws all plans for recovery out of the window. Others are concerned that Mugabe will use the promise of shares in foreign companies to lure people to Zanu and away from his opponents. Some of the foreign companies still active in Zimbabwe include platinum miners Impala Platinum, Anglo American Platinum (Angloplat), Aquarius Platinum, Britains Barclays Plc and Standard Chartered.
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