Zimbabwe needs to amend Indigenisation Act - Eric Broch

BULAWAYO - Zimbabwe's needs to urgently create a stable investment climate by amending the Indigenisation Act, economist Eric Bloch has said.

In an interview, Bloch told Businessdaily that the country had the potential to achieve the anticipated economic growth, but said policy issues were some of the stumbling blocks militating against the country achieving its full potential.

Bloch said the indigenisation policy, which compels foreign-owned companies operating in the country to transfer 51 percent of their ownership to black Zimbabweans, was impeding investment.

Finance minister Tendai Biti has projected a 9,4 percent economic growth rate this year.

"For the country to achieve real economic growth, we need to have substantial foreign direct investment. Currently, the banks do not have the money to lend the private sector. Most companies in the country are under-capitalised and we need to see money coming into the industry by way of investments," said Bloch.

The economist said the conditions of the indigenisation and empowerment programme were the major obstacles in attracting the much-needed foreign investment.

"Almost every investor and financial institution supports the principle of indigenisation but not the situation where they are going to be reduced to be minority," he said.

"Investors do not want to put their capital, expertise and technology into a company that they have no control over. They end up investing elsewhere where the conditions are favourable," said Bloch.

He said there was need for the law to be substantially modified.

"We must not repeal it but modify it so that it becomes constructive and effective," he said.

Bloch also said economic growth would also depend on how the country is going to conduct the elections.

He reiterated that investors were holding on to their plans until the elections where held.

Although Finance minister Tendai Biti said Zimbabwe's economy is likely to continue its strong recovery in 2012, from a decade of decline, to grow by 9,4 percent, Bloch predicted that the economy would perform much better particularly in the first six to nine months of the year.

"I actually think for the whole year the economy is going to grow by about 11-12 percent above what that government had focused.

"This because of the improvement in the agriculture, tourism and mining sectors," said Bloch.

"We must anticipate economic growth in the first six to nine months of the year as a result of slight improvement in agriculture subject to a better climatic condition. A small growth will also be expected from the improvement performance in the mining and tourism sector," he said.

"However, that is going to be partially offset by the contraction that is being experienced by the manufacturing sector over the last two years and which is going on.

However, we expect the sector to stabilise particularly in the clothing and manufacturing sector following the new regulation by the ministry of Finance that is set to marginally reduce unfair import competition," he said.

He added that the economic growth would not change the crisis that is bedeviling the country.

"We are working on a small economic base so the growth of economy by 10 percent will be insignificant as it will not be able address the problem of over eight million people who are poverty-stricken.

"The nine or 10 percent growth is also not going to address the unemployment challenge that the country is facing," he said.