ZANU PF pushes ahead with controversial law
(No Ratings Yet)
Loading ...
(No Ratings Yet) Loading ...By GETRUDE GUMEDE
Published: February 19, 2010
Related
Zimbabwe President Robert Mugabe and his allies are pushing ahead with plans to force foreign companies to sell majority stakes to locals, threatening a fragile political partnership with the country’s prime minister, who opposes such moves.
In meetings this week, Zimbabwe’s government failed to agree on whether to implement a controversial black-empowerment law. Under the law announced last month, foreign-owned firms have 45 days from March 1 to inform the government how they will achieve majority black shareholding within five years. Top executives at companies that refuse to cede majority shareholdingto locals could face jail.
Prime Minister Morgan Tsvangirai, until February 2009 an opposition leader, has ordered the law withdrawn, saying it will heighten Zimbabwe’s reputation as a risky investment destination. He and his partners have said the law was published without their consent.
Mr. Mugabe, 85 years old, and key ministers have dug in their heels. Speaking to reporters at an investment conference earlier this week, Mr. Mugabe, 85 years old, said foreign companies should be content with holdings of up to 49%. “It’s only foolish ones who will say no,” he told reporters. “Wise ones would take it up.”
The law is another sign of the cracks at the top of Zimbabwe’s so-called unity government. Although the prime minister and the president share power on paper, the latest row underscores how influence remains largely with Mr. Mugabe.
The European Union on Tuesday renewed sanctions against Zimbabwe for another year, citing unsatisfactory progress in implementing a government power-sharing pact. The sanctions, which target select individuals and companies in Zimbabwe, have weighed on an economy emerging from recession and hyperinflation.
Amid the uncertainty, some companies have liquidated holdings; others have held off on new investments. Some executives warn the new law, if enforced, will rekindle investor fears about the country’s shaky political situation and a capricious legal environment.”If this ends up being rammed through, it’s going to kill all new foreign investment,” said Andrew N. Cranswick, chief executive of African Consolidated Resources PLC, an exploration company in Zimbabwe.Some analysts say Mr. Mugabe and his supporters, facing an exit from power if new elections are held, could use this law to expropriate foreign-owned firms, as they did white-owned farms. “This is the last dash to amass wealth before they leave power,” said John Makumbe, a lecturer in the University of Zimbabwe’s Political Science.The new legislation would be applied across industries that are valued at more than $500,000. Executives overseeing operations in the country say it is still unclear how much equity they might need to sell, and to whom.
On Thursday, the chief executive of Impala Platinum Holdings Ltd., David Brown, told reporters and analysts that the company supports black empowerment. But, he added, “51% is not the right number.”
Zimbabwe’s indigenization and economic-empowerment minister, Saviour Kasukuwere, appointed by Mr. Mugabe, said the government was willing to consult with companies to guide implementation, but ruled out abandoning the law. “The assurance from our side is that this is not going to be a chaotic exercise,” the minister said. “It will be carefully managed.”