Mugabe's nephew threatens Foreign firms with closure

Foreign companies resisting Zimbabwe's indigenisation programme will not be required to pay non-compliance (empowerment) levies and will instead be shut down come April 1, 2016, a Cabinet minister has said.

The Confederation of Zimbabwe Industries and economists have reacted by urging companies to comply with the law, while also counselling Government to be cautious so as to protect the economy.

In December 2015, President Mugabe said non-compliant companies would not be allowed to operate from 2016.

Youth, Indigenisation and Economic Empowerment Minister Patrick Zhuwao then followed up with a non-compliance levy and a March 31, 2016 deadline.

However, only 50 established firms submitted their indigenisation plans to the Zimbabwe Investment Authority, with the remainder maintaining indifference.

None appeared disposed to paying non-compliance penalties either.

The Indigenisation and Economic Empowerment Act requires shareholding of 51/49 percent weighted in favour of locals  in all companies with a minimum value of US$500 000. Certain sectors are wholly reserved for indigenous businesspersons.

The law provides support measures for indigenising the economy and empowering indigenes historically disadvantaged by colonialism.

Section 5 of the Act prescribes action against deviants: "(2)Subject to this Section and Section 20, the minister may issue a written order to the licencing authority of any non-compliant business, ordering that the licensing authority concerned decline to renew the licence, registration or other authority to operate of the business concerned, or, where the licence, registration or other authority concerned is granted for an indefinite term, ordering that the licence, registration or other authority concerned be terminated no later than six months from the date when the Minister issued the order to the licensing authority concerned."

In an interview with The Sunday Mail, Minister Zhuwao said many companies had demonstrated "total disregard for the law" by failing to submit indigenisation plans.

Though the Indigenisation Ministry, he said, tried to simplify requirements, the firms remained nonchalant and even thumbed their noses at non-compliance penalties.

"We will now, instead, put in place appropriate measures to invoke Section 5 of the Act which calls for cancellation of licences of non-compliant companies. In attempting to make the companies comply, we had initially come up with the idea of a levy that could be moderated by the extent of compliance.

"However, on further reflection and consultation, we realised that such a levy would be payment for companies to continue disregarding the law. I, as minister, would have been complicit in committing an illegal act, and enabling companies to break the law is contrary to the spirit and intent of a constitutional democracy like Zimbabwe."

On managing investor perceptions, Minister Zhuwao said the law should always be laid down, moreso where investment is concerned.

"The message we should send investors is that Zimbabwe believes in the rule of law. Companies that operate illegally must stop operating. This is not policy inconsistency; I have always said that I am proposing the levy to ensure compliance. The levy was never imposed. It was a proposal, and a proposal — by its very nature — is open to discussion.

"My message to the companies is in two parts. Firstly, they had five years to comply. Secondly, after those five years, they got an additional year. They were given an ultimatum by the President of the Republic.

"It is rather unfortunate that I did not adhere to that ultimatum and extended the deadline by three months.

''And it is on the back of that extension that we should not give further leeway to companies that are so contemptuous of our nation."

CZI president Mr Busisa Moyo implored deviant companies to comply and backed scrapping of the non-compliance levy.

"We have always encouraged companies to comply and hope those that have not done so can use the remaining days up to March 31 to put their houses in order.

"As industry, we had also taken the position that the empowerment levy was a tough option for us because our profit margins are low; we could not afford to pay levies of up to 10 percent. At the end of the day, companies are free moral engines, so we cannot dictate to them what to do."

Mr Moyo also urged caution: "We only have 15 percent of the industries that were there when Zimbabwe's economy was at its peak. This 15 percent is very precious. Inasmuch as I understand where Government is coming from, they also have to be cautious and not destroy the little industry left in the country."

Economist Dr Gift Mugano added: "Zimbabwe is struggling to bring in investors, which is crucial to achieving the long-sought economic take off. It is not a secret that we desperately need foreign investors to achieve economic growth. Closing companies is not the way to go for Government as this will have a negative impact on the economy.

"First of all, we need to understand that because we use foreign currency, our need for FDI is very high, especially at a time when we are not receiving much international financial support due to the debt overhang.

''So, anything that puts a dent on attracting FDI should be seriously reviewed for our benefit as a country."