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Indigenisation affects investment in Zimbabwe

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In this final part of the interview NewsDay (ND) Editor Constantine Chimakure had with Australian Ambassador to Zimbabwe Matthew Neuhaus (MN) last week, the envoy speaks out on indigenisation, development aid to the country, among other issues.

ND: What are the negatives Zimbabwe should address?

MN: The biggest negative is the so-called policy of indigenisation. That is the policy that is preventing foreign direct investment coming into the country. The rhetoric around it is of major concern.

Of course we want to see Zimbabweans empowered, Zimbabwean people owning their own enterprises. Zimbabwe must also be very careful against racial discrimination in business. The country is multiracial, just like Australia.

What the country needs more than anything, is a lot of investment from outside. But when there is so much confusion on what indigenisation means, when there are threats to banks, mining companies, you are discouraging investors from bringing their money into the country. Investors will not come if they are not sure of what is going to happen and they end up saying let’s go to Zambia, Mozambique, Kenya and so on.

What we need is a clear policy on empowerment coming from a united government, from Cabinet, that will really encourage foreign investment and guarantee protection. The money you put in is what you own. If you put in 80% of the cost of a company, naturally you own 80% of the company. You do not put a 100% investment and somehow the government or someone else ends up owning 51%.

ND: Are you saying indigenisation and empowerment as a concept is wrong? What kind of a policy should Zimbabwe have then?

MN: Indigenisation and empowerment should mean that Zimbabweans should be involved in the management of their economy. That is why Australia has announced a Mining for Development programme for Africa – to help with genuine skills transfer, knowledge and empowerment.

Look at a country like Australia — it is a wealthy country and has done well by getting foreign investment. We are the world’s 12th largest economy. Yet even we did not have money to develop our mining industry.

So we went to China, the United States, Britain and the European Union and anywhere where there was money, so that it could be invested and said if you put in 50% you own 50%. You get back what you put in.

The government said we also want a fair share of the returns. We have come up with taxes on mining, in effect a super profit taxes, which we call the resources rent tax. That is the way you empower your people and encourage economic activity. Your indigenisation policy in contrast discourages start-up.

There is also far too much bureaucracy in this country. There are too many places you have to be registered before starting a business. So you should go to countries like Ghana where there is one stop-shop for mining.

In Zimbabwe they said they had introduced a one-stop shop for investment. Look at the Essar deal, the Ministry of Industry is involved; the Ministry of Mines is involved and so on. That sends a bad signal to investors when the right hand doesn’t know what the left is doing. This sort of confusion is seen internationally and doesn’t build trust.

Countries around you like Zambia and Mozambique have had significant investments because of their clear economic policies, especially on foreign investment. Zimbabwe has had no meaningful foreign investment for over a dozen years. You need to catch up and to catch up you need to be more attractive.

ND: Australia now has a permanent embassy at the African Union. What is it meant for?

MN: We opened that embassy three years ago in Addis Ababa. We are very committed to the Africa Union because we think that is where Africa comes together. It is very important to have an embassy at the headquarters of the African Union. It’s helping our engagement on a whole range of issues, including development and peace keeping. We even have a defence attaché there as we have growing co-operation on peace and conflict resolution with the African Union.

ND: There was a probe in 2010 on how Australia should engage Africa. What was the outcome?

MN: I was involved in that policy development. I was the head of a taskforce that came up with recommendations for increasing our engagement with Africa. We did recommend the opening up of more missions in Africa — and since then we have opened in Addis Ababa and announced we will open in Dakar, Senegal —and we increased staff at our existing embassies throughout the continent.

Some three years ago, we were only giving about 150 scholarships to Africa a year and we recommended doing more on this. We are now giving 1 000 scholarships a year. We call them Australian awards.

We have launched the mining for development programme which is open to all African countries with mining interests to help them develop their own capacities to manage their mineral resources. That has also been extended to Zimbabwe.

In Zimbabwe, we have a special programme which started off as humanitarian three years ago, but it’s now developmental. It focuses on water and sanitation and agriculture rehabilitation and economic governance like assisting Zimra. I am pleased that there is an increasing number of visits from Australia to Africa and vice versa.

ND: How much has gone into the Zimbabwe programmes?

MN: In total over the last three years we have now provided nearly $180 million.

ND: What kind of assistance have you provided to Zimra?

MN: It’s actually training in revenue collection and systems and technical assistance and it is to improve the efficiency in revenue collection in Zimbabwe.

Zimra has to continuously find sources of revenue to broaden its collection. I mean, Zimbabwe should be a rich country, it should pay its way, it should not be dependent on international aid. Zimra has an important role in ensuring that.

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