President Robert Mugabe’s cabinet has ordered all foreign-owned companies operating in Zimbabwe to close shop on April 1st if they do not comply with the country’s indigenization regulations requiring them to transfer at least 51% of their shares to black Zimbabweans.
The cabinet decision made this decision today, which was announced by Indigenization Minister Patrick Zhuwao.
Zhuwao told a news conference that the cabinet decision would ensure that the indigenization law was complied with, adding that this provides support measures for the empowerment of black Zimbabweans.
“This is a decision that affects all sectors, it’s a decision which says, look, abide by the law and if you don't abide by the law, it’s really companies that make their own decisions here, we are leaving this to companies to decide here, they must decide whether they are going to abide by the law or not … and if I am shareholder of a company I would now be asking the management to say, look Mr. MD, I would asking the chairman of the board, why are we not abiding by the law.”
Some economists have argued that potential investors are shunning Zimbabwe because of its scary policies such as the black empowerment regulations.
However, Zhuwao told Studio 7 after the news conference that the country does not require any foreign direct investment.
“Foreign direct investment is not the solution to this economy; it’s not the only solution to this economy and this argument that the country crying out for foreign direct investment is not true. Yes, foreign direct investment but what is actually required more in this economy is efficiency, productivity and higher production levels especially if you look at the fact that we have got $540 million that came in as foreign direct investment and yet we had a trade deficit of $2.9 billion. That is the issue.”
The cabinet’s decision announced by Zhuwao was criticized by former chief economist in the finance ministry, Masimba Manyanya, who said it was surprising that the government had taken such a decision at a time when the International Monetary Fund has just completed a Staff Monitored Program in the country.
He added that most black Zimbabweans do not have the capital to venture into top businesses owing to the country’s economic meltdown.
He said this move would cripple the Zimbabwe’s ailing economy. Efforts to get a comment from the Confederation of Zimbabwe Industries and the Zimbabwe National Chamber of Commerce were fruitless.
The decision to force foreign-owned companies to close shop by April 1st if they do not meet the nation’s empowerment regulations also come at a time when government also ordered all diamond firms that were operating in the Chiadzwa area in Manicaland province to seize operations, rendering thousands of workers jobless.
The government said the companies were not properly registered while some of them were refusing to join a state entity designed to take care of diamond mining activities.