Zimbabwe in major policy climb down

In a surprise move, Information minister Jonathan Moyo said the government was in the process of reviewing indigenization laws, which compel foreign businesses to hand over 51 percent of the shareholding to black Zimbabweans, as the country hopes this will trigger a positive response from increasingly reluctant and skeptical investors.

“We are reviewing and tightening the indigenization and empowerment policy by being pragmatic without being dogmatic about,” Moyo said ambiguously.  He then advised state media, “Foreign investors will be allowed to recover initial capital investment, an appropriate return on investment and operational costs before the sharing of production outputs or profits.”

Mugabe had made the indigenization policy a centerpiece of his 2013 re-election campaign, but an increasingly ailing economy, characterized by liquidity problems and stagnation, may have forced a rethink.  However, some government officials, in a show of bravado, are trying to sugarcoat the policy review, claiming it is not a climb down, but rather a clarification of the implementation of the law.

Despite the denial, Zimbabwe is in the throes of an economic slowdown, which analysts say can only be remedied by clarity on policies such as the indigenization laws.  The World Bank recently revised down economic growth prospects for the southern African country from 4.2 percent to 3 percent.

A former advisor to MDC-T leader, Morgan Tsvangirai, Alex Magaisa, said the unprecedented policy reversal showed Mugabe was in a fix as far as reversing the economic downturn.  He then said, “This is really what it is, a major climb-down.  And rightly so because as some of us have said many times before, the existing policy and law is a poison pill for the economy.  Perhaps our screams are not in vain.”

He then said, “That is fantastic and the way to go.  Clarifying the indigenization and empowerment laws is what the world was waiting for.”  Investment banker and Brainworks Capital Management chief executive, George Manyere said the changes would bring clarity to foreign investors.

He went on to say, “This approach was initially announced under the government of national unity and sector-specific committees were set up, but there has not been official communication of the recommendations and or refinement of the indigenisation law to incorporate the sector-specific recommendations.”   Furthermore, he concluded, “Lack of clarity had compounded the confusion that investors had on the law negatively affecting FDI flows.”