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Investor Fears of Zimbabwe's Empowerment Law Choke Off Capital Flows

  • Gibbs Dube

China, once described by President Robert Mugabe as an all-weather friend, invested US$200 billion in Africa last year but has put only US$150 million into the Southern African country so far this year

Zimbabwean Investment Minister Tapiwa Mashakada says foreign direct investment is drying up with potential investors - including those from China - withholding capital due to apprehension over Zimbabwe’s black economic empowerment program.

Mashakada said investors who might like to put money to work in the country's mining sector are currently unwilling to commit funds because of the government’s demand that foreign companies transfer a 51 percent equity stake to local black investors.

He said China, once described by President Robert Mugabe as an all-weather friend, invested US$200 billion in Africa last year but has put only US$150 million into the Southern African country so far this year.

Mashakada told VOA reporter Blessing Zulu that the indigenization program is seriously hindering Zimbabwe’s efforts to attract meaningful foreign direct investment.

Economic commentator Walter Mbongolwane said foreign investors will remain sidelined until the country's Indigenization and Economic Empowerment Act is revised.

Elsewhere, South African Ambassador to Zimbabwe Vusi Mavimbela met with Prime Minister Morgan Tsvangirai on Thursday to express concern over the indigenization drive and the displacement of South African citizens whose farms were taken over by supporters of Mr. Mugabe's ZANU-PF party, destituting them.

Tsvangirai spokesman Luke Tamborinyoka quoted Mavimbela as saying his country is not happy with the way South African businesses are being targeted despite a bilateral investment promotion and protection agreement in place since 2009.

Tamborinyoka said Mavimbela believes South African businesses operating in Zimbabwe are threatened by indigenization. He said Mr. Tsvangirai promised to "vigorously pursue" the issue given the concerns outlined by Pretoria's ambassador in Harare.

Economist and former Confederation of Zimbabwe Industries chief Calisto Jokonya said dialogue is needed between Harare and Pretoria to resolve such issues.

Mr. Mugabe this week launched a community share ownership trust in Mhondoro-Ngezi, Mashonaland West province, that is to receive a 10 percent stake in Zimbabwe Platinum Holdings or Zimplats, controlled by South Africa’s Impala Platinum Holdings.

Based on recent estimates of Zimplats's value, that stake is worth some US$97 million. Its market capitalization plummeted this year as investors realized the Harare government intended to take a 51 percent stake on uncertain compensation terms.

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