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Economists Clash Over Indigenization of Zimbabwe Economy

Cement manufacturing in Zimbabwe
According to the 2012 World Investment Report compiled by United Nations Development Programme (UNDP), Zimbabwe’s foreign direct investment inflows in 2011 doubled to $387 million from $166 million in 2010.

The UNDP report indicates that foreign direct investment in the country was lower than other nations in the Southern African Development Community region. For example, Mozambique registered FDI inflows of over $2 billion in the same period.

The 2012 World Bank ‘Doing Business Report’, attributes the low FDI inflows in Zimbabwe to some challenges being faced by the country such as the 49 days it takes to start a new business, tough regulations in the granting of licences and permits and lack of clear policies for protecting investors.

The report indicates that it normally takes at least five days or less in some nations to set up a business.

Some economists say the country’s indigenization program has forced most potential investors to withold their funds because of the government’s law compelling foreign-owned companies to transfer a 51 percent equity stake to local blacks.

Independent economist Eric Bloch of Bulawayo claims that Zimbabwe has lost over $3 billion in potential investment in the past two years, mainly due to fears over the indigenization program.

Mr. Bloch adds that the situation is expected to persist until Zimbabwe has a democratically-elected government.

Economist Rejoice Ngwenya of the Liberal Market Solutions agrees, saying that the country has lost billions of dollars in potential investment following the launch of the black economic empowerment program.

For businessman, Bulisani Ncube, foreign and local investors remain uncertain about the indigenization scheme and will withold their funds until the political situation improves in the country.

“It is difficult to measure the total negative economic impact of the program in the country though indications are that Zimbabwe has not attracted a lot of investment in the past two years due to the indigenization law,” said Ncube.

According to former finance minister Simba Makoni, who is also the leader of Mavambo-Kusile-Dawn party, there is no empirical evidence linking Zimbabwe’s lost investment opportunities to the indigenization program.

Mr. Makoni further argues that there are other nations with a high risk profile compared to Zimbabwe where businesses are booming.

Some foreign-owned companies have forged partnerships with workers in order to comply with the black economic empowerment law.

Indigenization Minister Saviour Kasukuwere says such partnerships have boosted production and improved relations between management and workers in companies like soft-drink manufacturer, Schweppes Private Limited.
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Over 200 foreign-owned companies have so far submitted indigenization plans and some of them have not yet been granted permission by the government to implement their proposals.

The banking sector is also resisting such moves with Finance Minister Tendai Biti opposing the rolling out of the program in this sector.

But Zanu-PF-aligned political analst Psychology Maziwisa says banks should not be exempted from the indigenization program as Zimbabwe can no longer run an economy with a key sector in the hands of foreigners.

A lot is at stake as Zimbabwe prepares, once again, for a constitutional referendum and crucial general elections this year.