Zimbabwe Indigenisation Policy

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April 22, 2012
Zimbabwe’s Indigenisation Policy
Africa possesses vast mineral resources, from diamonds to platinum, which remain untapped. Recently discovered ore deposits and soaring commodity prices are attracting miners from around the world to Africa. This has led to “resource nationalism”, as African countries are looking for ways to maximize their share of the profits from the mining. All over Africa countries are increasing taxes and royalties on mining companies in an effort to maximize those profits but none go as far as Zimbabwe, which is employing an “Indigenisation Policy” that requires foreign companies to be 51% owned by indigenous Zimbabweans within five years. Indigenisation policies have existed in Zimbabwe since it won its independence in 1980, although the Indigenisation and Economic Empowerment Act, introduced in February 2010, is the first Act to include the word “indigenisation” in its name. The government claimed that it is a way to empower the indigenous population for a “truly independent Zimbabwe, whose resources and economy will be controlled by the Zimbabweans” (Ministry of Youth Development Indigenisation & Empowerment). The Ministry also claims that giving ownership to the indigenous population will reverse the dependency on foreign aid and allow the locals to participate as not just labourers but also as shareholders. The result, according to the Ministry, will be sustainable growth as opposed to the unsustainable growth that results from relying on foreign aid without meaningful involvement from the local population. The Ministry also cites that owning majority shares in a company will allow it to exert control over what the company can or cannot do, but the laws and regulations of the country should already serve these purposes. However, this is not the first case of the Zimbabwe government attempting to transfer ownership of assets from foreigners to indigenous Zimbabweans. In 1995, President Mugabe introduced a land reform that seized land from white commercial farmers and reallocated that land to black locals, which led to disastrous results as Zimbabwe went from a net exporter to a net importer of food. Combined with the “indigenisation” of foreign companies in other sectors and widespread corruption, Zimbabwe’s economy steadily deteriorated over the next two decades. Output levels suffered and the government eventually resorted to simply printing more money to pay off its debts, which in turn led to hyperinflation. At its worst in 2006, the value of the Zimbabwean dollar was cut in half once every 32 hours. Zimbabwe’s indigenisation policies have been criticized as retaliation for past imperialism and as a political tool for the President Mugabe to gain popularity among the local population. Zimbabwe’s indigenisation policies have proved ineffective in terms of its stated aim of empowering the population, as diluting 51% of shares among thousands of shareholders has harmed businesses while failing to amount to any significant empowerment (Robertson Economic Information Services). Also noteworthy is Finance Minister Tendai Biti’s criticisms that the Indigenisation policies were really only transferring wealth from a few rich foreigners to a few wealthy indigenous Zimbabweans and not resulting in any real empowerment for the general population.

Zimbabwe’s Indigenisation and Economic Empowerment Act, originally dismissed as another political ploy when introduced in 2010, recently garnered attention as it aggressively pushed its indigenisation policy on mining companies. At the forefront was Zimplats, a division of platinum giant Impala Platinum and the largest mining company currently operating in Zimbabwe. Zimplats and other mining companies were faced with threats of seizure or having their business licenses withdrawn for not complying with the indigenisation laws. After over a month of negotiations, a deal was eventually reached where 20% of Zimplats would be sold to the...
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