Parliament resumes sitting tomorrow with its main business being considering the Finance Bill that was gazetted by Finance and Economic Development Minister, Patrick Chinamasa late last year.
Parliamentarians will discuss the 2018 budget proposals that the minister spelt out in his budget statement on December 7 last year. The statement marked a new trajectory that the Government is taking with huge austerity measures and proposals to amend key laws that militated against national economic recovery and growth.
We expect legislators to pass the Finance Bill with little, actually no, conflict given that the proposed budget has already been widely welcomed for the new path it seeks to chart for our economy.
Key among the issues to be debated is sweeping propositions by the minister to relax some clauses in the Indigenisation and Economic Empowerment Act that scared away potential foreign investors from our country. Section 3 of the Indigenisation Act says all foreigners seeking to invest $500 000 or more in the local extractive sectors must set aside 51 percent of the companies’ shareholding to indigenous blacks.
If Parliament approves Minister Chinamasa’s proposals, the foregoing requirement will fall away in all sections of the extractive sector except for foreign investment into diamonds and platinum. This means that foreigners will be free to invest alone without mandatory local participation in the exploitation of other minerals – gold, coal, chrome, tantalite, lithium, methane and so on.
Another important relevant proposal that will be debated as Parliament reconvenes relates to participation of foreigners in the reserved sectors of the economy. Reserved sectors are those exclusively set aside for operation by indigenous Zimbabweans and include transport, retail and wholesale trade, barber shops, hairdressing and beauty salons, employment agencies, estate agencies, valet services, grain milling, bakeries, tobacco grading and packaging, advertising agencies and artisanal mining.
Under the existing Indigenisation and Economic Empowerment Act, foreigners must relinquish their holding of such businesses because they are operating in a sector that must be exclusively for indigenous blacks.
However, Minister Chinamasa proposes in the Finance Bill to have such foreigners regularise their operations by applying to the relevant minister, and thereafter continue operating alone if they choose. The proposed law, however, says businesses in the sectors that fail to register by the end of next month would be liable for prosecution.
The Finance Bill reads, in part, “Objectives and measures in pursuance of indigenisation and economic empowerment:
“(i) The State shall, by this Act, or through regulations under this Act or any other law, secure that at least fifty-one per centum of the shares or other ownership interest of every designated extractive business, that is to say a company, entity or business involved in the extraction of -
“(a) diamonds; or (b) platinum; or (c) any other mineral or natural resource declared by the Minister by statutory instrument to be a strategic mineral or strategic natural resource; shall be owned through an appropriately designated entity (with or without the participation of a community share ownership scheme or employee share ownership scheme or trust, or both).”
We note that the promulgation of the Indigenisation and Economic Empowerment Act in 2008 dealt a massive blow to economic recovery efforts.
Foreigners felt threatened, unhappy that they were compelled to sell majority shareholding in their firms to indigenous blacks. Although former President, Robert Mugabe explained later that the proposals only affected businesses in the extractive sector, and not in others like finance, manufacturing and so on, that was not enough to convince foreign investors to troop in.
We are optimistic that Parliament would expeditiously approve the proposed amendments to the Act without undoing the executive’s investor-friendly stance.
The new proposals which, read together with other changes unveiled since November 24, 2017, are further evidence that President Emmerson Mnangagwa’s Government is committed to facilitating economic recovery and growth, we expect foreigners to now begin to view our country as a worthwhile destination for their investment.
It is trite to say that capital only flows to countries where it is treated fairly and where it stands a fair chance of realising a return soon enough. Capital will not flow into a country where, before operations begin, its owners would need to find someone indigenous to partner with.
It is likely that if the Finance Bill is approved as it is, more foreigners will put their money into the gold mining sector which offers limitless potential, the same for chrome, coal, agriculture and other extractive sub-sectors.
By the same token foreign investors who are contributing to the growth of the reserved sectors of the economy should overcome their jitters occasioned by the existing Indigenisation Act which bans their participation in the area.
We recognise the presence of Nigerians, Chinese and other foreign nationals in the local retail industry. They are bringing new ideas, new products and services and important competition which will only enrich that sector for their benefit, that of consumers and the entire economy at large.
Government must not be an impediment to the free flow of foreign investment; it must create an environment that is favourable for investment to flow into the economy, particularly ours that has been on its knees for 18 years and is only beginning to look up now.
Therefore, an amended Indigenisation and Economic Empowerment Act will be integral in national efforts to attain the New Economic Order that Minister Chinamasa pitched on December 7.