The National Indigenisation and Economic Empowerment Board (NIEEB) Tuesday said government may withdraw empowerment credits if technical committees appointed to recommend technical modalities for implementation fail to come up with acceptable equity-equivalent scores and weights.
The board has a two-pronged mandate to ensure that at least 51% of Zimbabwe’s economy is indigenised in five years and that empowerment vehicles for workers and communities are operational within the same timeline.
NIEEB’s 13 sectoral committees Tuesday commenced technical work on sector-specific terms of reference, setting the implementation of the Indigenisation and Economic Empowerment Act in motion.
The committees were set up after government agreed to waive the 51% local equity requirement, accepting a mix of both equity and equity-equivalent empowerment credits.
The credits include employee and community share ownership schemes, contributions to small to medium-size enterprise (SME) development, skills training and community infrastructure and social development projects such as schools and hospitals.
David Chapfika, NIEEB chairperson, said empowerment credits tended to present a subjective criterion of judging firms’ compliance with the country’s Indigenisation and Economic Empowerment Act, which creates technical complications.
“Maybe we may have to withdraw the system of empowerment credits like what South Africa did if we find it complicating or compromising the goals of indigenisation and economic empowerment,” Chapfika said.
“South Africa had to do away with empowerment credits after they realised that the system was causing challenges in assessing and assigning scores.
“For instance, for how long should empowerment credits for a road be considered as equivalent to equity? Can the weight assigned be permanent?
What will happen when it lapses? And should empowerment credits be for the total amount or just a part of it?”
Chapfika added that NIEEB would cautiously assess every empowerment credit recommendation by sectoral committees to ensure the system doesn’t complicate or run up against the fundamental goals of indeginisation.
“On this issue, sectoral committees must also distinguish between developments that are part of the business and those that develop the community,” he said.
The committees have until September 30 to consult around sector-specific recommendations and submit report to NIEEB.
In terms of Statutory Instrument (SI) 116/2010 that amended the general regulations promulgated in January, the sectoral committees have been mandated to recommend an upward or downward revision of the asset value threshold for companies, which must comply with indigenisation in their respective sectors.
Government had set the floor at $500 000. They have also been given the leeway to recommend lower or higher indigenisation equity thresholds for their various sectors, depending on their economic, financial and structural circumstances and development.
Government also expects the technical working groups to propose mechanisms for funding indigenisation and economic empowerment and any other sector-specific strategies.