Major multinational companies like BAT and several others have already submitted their plans for approval, with others choosing a wait-and-see attitude. The general notice set out the minimum net asset value with which a business is required to comply, with the principal regulations at $100,000 initially, and later reviewed upwards to $500,000.
The minimum indigenisation and empowerment quota was put at 26% for the first year, progressing to 51% in four years.
The Confederation of Zimbabwe Industries has encouraged its members to cooperate, while raising some salient points in a position paper on the issue. For a start, they recommend a timeframe of at least 10 years and argued that indigenisation should be part of government’s investment promotion strategy, as right now these two are not correlated.
It is therefore incumbent upon government to compromise and find ways to reconcile indigenisation with investment promotion.
CZI pointed out that companies have not been able to recapitalise for more than a decade and are operating with obsolete equipment and tools. There is need for huge amounts of money for sustainable capacity building. Locals are not adequately capitalised and cannot meet the 51%% requirement for the indigenous stake.
The use of the term “cede” in the regulations, with reference to the process of changing the controlling interest in companies, also scares manufacturers, who think that it might mean jambanja, a chaotic and coercive process.
CZI has therefore suggested that the term “sell” be used, as it portrays an exchange of cash for shares. To add to the confusion, the regulations are silent on how the indigenous players are to pay for their shareholding.
CZI also thinks that the powers of the minister should be reviewed. At a National Economic Consultative Forum meeting held in 2010, Minister Saviour Kasukuwere is said to have accepted that the powers vested in the minister by the Act are excessive.
This potential for abuse or misuse must be curtailed. CZI believes there should be minimal room for discretion by the minister.
Currently, companies aggrieved by the indigenisation process can seek justice through the legal system. This arrangement is not ideal for CZI, which has since recommended that an appeals board be created, composed of business, labour and relevant representatives of civic society.
An appeals board can deal with i matters more quickly, and, given its composition, it is likely that there would be some form of flexibility on areas of concern in implementation.
Another concern revolves around the prescription of asset values. Having a prescribed figure could lead investors to break up their businesses into pieces just to fit in categories that require low asset values. To that end, CZI suggested that if a minimum net asset value should be prescribed, it should be at least $2 million.
Post published in: Business