Government says it has shelved its indigenisation legislation until “the local economy recovers” and will be selling least 10 parastatals to foreign investors, ceding controlling stakes way above the statutory ceiling of 49%.
The landmark policy climb-down comes as a shock to everybody who heard government officials swearing categorically and repeatedly at every public forum that the country would never recoil from the programme, treating it with the same sanctity they gave the fast-track land reform programme.
Finance minister Tendai Biti has disclosed government — which sold 54% of Ziscosteel to an Indian firm — is close to sealing another deal to dispose as much 60% of Agribank to a regional bank, amid plans to sell at least 50% of eight other parastatals to foreign “strategic partners” based on the “Zisco model”.
The list of state-owned enterprises (SOEs) being converted to foreign entities under the parastatals rationalisation programme include Air Zimbabwe, National Railways of Zimbabwe, Noczim, Agribank, Cold Storage Company, the Grain Marketing Board, NetOne and TelOne.
The first four reported an aggregate loss of $38,9 million in the first half of the year.
“We’re close to signing an equity deal for Agribank,” Biti said, adding the deal would also unlock a line of credit for the bank.
“I’m one of the people who believe that it’s better to own 10% of an elephant than 90% of a rat. Agribank is a rat at the moment.”
Under the parastatals rationalisation programme, the 10 SOEs will be sold to strategic partners “based on the Zisco model” which will see foreign entities grabbing at 50% of the public entities, in violation of the Indigenisation and Economic Empowerment Act.
The Act, which had been dormant since its promulgation in 2007 until government launched general regulations in January this year, prohibits foreigners from owning and controlling more than 49% of Zimbabwe-registered companies.
The statutory regulations currently under surgery obliged every firm with a net asset value of at least $500 000 to comply with the legislation.
In an interview, Industry and Commerce minister Welshman Ncube, whose ministry oversaw the Zisco deal, said Cabinet had agreed to waive the Indigenisation and Economic Empowerment Act for the time being and allow for flexibility in its application across sectors after noting its discouraging effect on foreign capital, considered critical for the economy’s recapitalisation and recovery.
“Until such a time when the economy recovers and rebuilds capacity, it’s not possible for every sector to achieve 51% (minimum indigenisation equity),” Ncube said.
“We need foreign investors with the balance sheet and the capacity. If locals had the capacity, would we struggle to build new power stations or to rebuild our railways and roads? But the capacity is not available locally. That’s why we have to engage foreign investors.”
The indigenisation legislation is widely blamed for soiling Zimbabwe’s investment profile and increasing country risk for one reason: no investor, local or foreign, would invest where board control is not guaranteed.
Asked if the indigenization equity waiver granted to SOEs would be extended to the rest of the economy, Ncube indirectly replied, “Yes”.
“The law does not say 51% is mandatory; it’s an endeavour. It’s a long-term aspiration. Obviously, it’s not realizable overnight.”
The policy climb-down started in May when government amended the indeginisation and economic empowerment general regulations and agreed to co-opt the Chamber of Mines’ proposal to allow for a mix of both equity and equity-equivalent empowerment credits.
The National Indigenisation and Economic Empowerment Board is already up in its brows drawing up sector-specific indigenisation equity thresholds for 13 sectors.