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STAKES ARE HIGH

Mugabe wants to kick out foreign businesses that won’t give control to black Zimbabweans

Reuters/Philimon Bulawayo
Zimbabwe’s Mugabe has lost patience with foreign companies.
By Tinashe Mushakavanhu
Published Last updated This article is more than 2 years old.

This is no April fool’s joke.

Robert Mugabe’s government is pressing ahead with a controversial law to force foreign owned businesses to give up majority control to black Zimbabweans. It has set an April 1 deadline for all foreign-owned companies to comply or close shop. Household names like Standard Chartered, British American Tobacco, Anglo American Platinum and Nestlé, who have operated in the country for decades, could be affected.

Mugabe’s nephew, Patrick Zhuwao, minister responsible for youth, indigenization and economic empowerment issued the directive last week. He warned failure to comply will result in licenses being revoked and there is no room for negotiation. ‘I’m not here to discuss whether indigenization is good. It’s the law of the land, a fact,’ he said.

And where companies do not cede control, the Zimbabwe government has vowed to go for the assets of directors whose companies fail to submit indigenization plans in order to protect employees who may lose their jobs in the process.

The Indigenization and Empowerment Act was introduced in 2008 and only came into effect in 2010. It requires foreign companies valued at more than $500,000 to transfer% of their ownership to local entities or individuals. The transfers were originally supposed to be voluntary, but the ZANU PF-led government, impatient at the slow pace of change, have now resorted to state power to speed up the process.

Addressing party members in December 2015 at the ZANU PF Annual People’s Congress, Mugabe emphasized: ‘In 2016 we will not accept a company which refuses and rejects our policy of indigenization and empowerment in the manner we inscribed it.’

Critics like Giannina A. Murphy have argued that the requirement to cut in black Zimbabweans is a mechanism by the ruling politicos to transfer wealth to themselves. In such deals, political connections often matter more than business skills. Most Zimbabweans have very little prospect of gaining these ownership deals, management posts, or preferential tenders that a preserve of the elites.

Though the act and political rhetoric refers to ‘black Zimbabweans’ it is notable that there are fewer than 30,000 white Zimbabweans in a population of 14 million people. The populist rhetoric is similar to one which Mugabe introduced in 2000 on land reform laws to reclaim land from white farmers and ultimately led to the collapse of the economy over the last decade.

Zimbabwe remains dramatically unequal. The unemployment rate is hovering above 80%, turning most graduates into street vendors.

The opposition MDC have accused the government of playing ‘Russian roulette with the country and its citizens’ economic welfare’ by chasing away foreign investors instead of embracing them, at a time the country is in desperate need of foreign direct investment.

While seeking re-election for a seventh term in office in 2013, Mugabe promised to create 2,2 million jobs under an obscure policy called Zimbabwe Agenda for Socio-Economic Transformation (ZimAsset) (pdf). As a reaction to the growing frustration and disillusionment in Zimbabwe’s poor communities, ZANU PF have decided to expedite the indigenization program to appease the masses with economic upliftment.

But the country’s problems are often put down to its leadership. Mugabe 92, has refused to appoint a successor and now runs a ‘kitchen cabinet’ with his wife Grace, and cronies rewarded for their loyalty.

Until last year, there has been a drop in foreign investment in Zimbabwe over recent years due to the unpredictable politics and unfriendly investment policies. China has been Zimbabwe’s major investor in recent years with more than 100 Chinese enterprises operating in the country. The Chinese have registered displeasure on the pronouncements by their hosts: ‘This policy is extremely unfair to foreign investors, and will cause losses for them. It also undermines the credibility of the Zimbabwean government and raises flags to foreign investors.’

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