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Zimbabwe Indigenisation: Pressure mounts on foreign businesses

INDIGENOUS Zimbabweans will soon replace foreigners in economic sectors that are reserved for locals, a senior government official has said.


This comes after the Ministry of Youth, Indigenisation and Economic Empowerment published a statutory instrument (SI 66 of 2013) in May this year, ordering all businesses operating in the country to apply for indigenisation compliance certificates within six months.

Foreign companies trading in reserved sectors of the economy, such as retail and bakeries, have until January 2014 to comply with the laws.

Deputy Minister of Youth, Indigenisation and Economic Empowerment, Mathias Tongofa said the ministry was working with local authorities responsible for issuing licences on the matter.

“We have to deal with other ministries including industry and commerce, because without that linkage we will have difficulties in addressing this issue,” said Tongofa.

“Ultimately, we need to have only indigenous people in the retail sector, that’s the law but currently we are putting in place ways to address this issue. We are not saying we are not going to indigenise but our thrust is for broad-based empowerment using a phased approach,” he said.

The statutory instrument does not permit foreigners to invest in sectors reserved for indigenous Zimbabweans, such as grain milling, barber shops, tobacco processing, bakeries, and local transportation, among others.

“Any person who operates a business in the sectors prescribed under the third schedule without an indigenisation compliance certificate from January 1 2014 shall be guilty of an offence and liable to a fine not exceeding level four or to imprisonment for a period not exceeding three months, or to both such fine and such imprisonment,” a National Indigenisation and Economic Empowerment Board (Nieeb) statement issued earlier this month reads.

Government has previously expressed concern at the influx of foreign investors running small-sized businesses and banking most of the income in offshore accounts.
Government argues that foreign firms should rather streamline investment in large scale capital intensive projects such as infrastructure, energy and mining among others that have downstream local employment creation effects.

Zimbabwe’s Indigenisation and Economic Empowerment Act obliges foreign-owned companies operating in the country to cede at least a 51% controlling stakes to locals.

“Our indigenisation and empowerment should be broad based, it should cater for all who have dropped out of school and those who are marginalised in society so they can have something to do,” said Tongofa.

He said government was planning to support people with skills, especially those who graduate from vocational training centres and those coming from tertiary education sectors, so that they form groups and do sustainable businesses in such sectors.

Zimbabwe’s retail sector has witnessed a formidable presence of foreign nationals mainly Nigerian and Chinese.

They run tuckshops dotted across Harare’s urban landscape selling an assortment of retail products ranging from clothes, groceries, motor spares and electrical parts. Nightclubs and bottle stores are also widespread.

Proponents contend that subsisting legislation that permits foreign investors to participate in retail merchandising as provided for under the Zimbabwe Investment Authority Act should be aligned with the statutory instrument if local empowerment is to take effect.

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