The International Monetary Fund (IMF) on Tuesday urged Zimbabwe to respect private property rights as it implements a new law forcing foreign companies to sell majority shares to locals.
“Alignment of indigenisation and empowerment objectives with respect for private property rights and the need to attract domestic and foreign investment … would be essential to strengthen the business climate and boost economic growth,” an IMF delegation said after a mission to Harare.
Zimbabwe’s controversial Indigenisation and Economic Empowerment Act requires all foreign firms valued at more than $500Â 000 to sell a 51% stake to locals.
Last month, the government published new rules expanding the law to all foreign-owned mines.
Analysts say the new rules are the latest attempt by the government to squeeze cash out of the mining industry after hiking exploration fees by 2Â 000% to $1-million in February.
Financing gap
The IMF also said the Southern African country, which is recovering from a decade-long economic and political crisis, still faced a large financing gap this year despite a favourable economic climate.
“Despite historically high commodity prices … and impressive progress in revenue mobilisation, a relatively sizable fiscal financing gap would emerge in 2011,” it warned.
The IMF official who led the delegation to Harare said the government needed to crack down on corruption and tighten its spending.
“The fiscal gap could be eliminated through the removal of ‘ghost workers’ from the payroll, reinforced controls on employment levels and a reduction in low-priority transfers to state-owned enterprises,” said Vitaliy Kramarenko, IMF mission chief to Zimbabwe.
The global lender also called on the country to make its labour laws more flexible and improve its governance of the diamond sector, which was banned from exporting in 2009 over concerns about human rights abuses at mines.
Finance Minister Tendai Biti has predicted Zimbabwe’s economy will grow 8% to 15% in 2011 on the back of increased tobacco production and mining output.
But he warned the anticipated growth could be derailed if the country proceeds with plans to hold elections later this year, ending a power-sharing government between veteran President Robert Mugabe and long-time rival Morgan Tsvangirai that has been credited with restoring stability. — AFP