On Monday, as Zimbabwe’s tough new indigenisation measures came into effect, the electronic board at the country’s stock exchange was all red.
Ten straight days of losses in the previous week had taken their toll and only a few brokers were taking new buy orders as the investors, who had, for the past year, made the Zimbabwe Stock Exchange one of the world’s most fast-rising markets, stayed away.
“We had been coasting along quite nicely. The news hit us quite badly,” broker Fred Ndebele told the Mail & Guardian, watching what looked like yet another losing session early on Wednesday.
Emmanuel Munyukwi, chief executive of the stock exchange, said trade plummeted from a daily average US$2-million to US$500 000 since the indigenisation laws were published. It’s a gauge of just how the law has been viewed by investors inside and outside the country and shows how far back the country’s recovery efforts have been taken as President Robert Mugabe pursues his latest “empowerment” crusade.
The regulations were set to be top of the agenda at a meeting of a council of ministers, chaired by Prime Minister Morgan Tsvangirai, on Thursday, but Empowerment Minister Saviour Kasukuwere, a wealthy businessman and a hardline Mugabe loyalist, said there would be “no going back”.
The country’s main business groups and unions are worried economic recovery will now stall and fear that the exercise could be a repeat of the land reform process where top Mugabe loyalists helped themselves to plum farms.
There is much to lose for large foreign investors in Zimbabwe.
Zimplats, majority-owned by South Africa’s Implats, sits on the world’s second-largest platinum resources. It is now withholding US$500-million in new investment. Angloplats and Rio Zimbabwe are also freezing new investment at their mines.
But Patrice Motsepe’s African Rainbow Minerals (ARM) still plans to spend US$300-million in ZimÂbabwe. Mines Minister Obert Mpofu confirmed talks with ARM chief executive Dan Simelane. Although Mpofu gave no details, ARM is reportedly taking over claims surrendered by Zimplats.
It is likely Motsepe’s assets will be among those for whom “exceptions” will be made.
For years large corporations had anticipated the new laws, taking steps to bring in locals. Zimplats spent close to a decade trying to sell a 15% share to locals, but none could afford the stake. A fresh agreement was reached with the government, giving Zimplats “indigenisation credits” in exchange for social investment and unused claims.
In 2007 Old Mutual announced it would sell 20% its shares to staff, hoping that would protect it from the full requirements of the regulations. Old Mutual is the largest investor on the stock exchange, and the largest property owner.
It is a frequent target of radical empowerment groups, which accuse it of racism and exploiting pensioners and tenants.
The law
Indigenisation laws have been on the cards since 2003, when Zimbabwe abandoned a plan to force companies to sell 49% to locals. But the Indigenisation and Economic Development Act that was passed in 2007, forcing companies to sell 51%, finally came into effect on Monday.
Any business valued at over $500 000 must sell 51% to “indigenous” Zimbabweans, but the law does not say how such valuations will be made.
The Act defines “indigenous Zimbabwean” as anyone who was racially discriminated against before independence in 1980. Robert Mugabe is clearer: whites, he said, are “not indigenous, even though they were born here. They are the offspring of settlers.”
Businesses must report to the minister on their shareholding by April 15, companies have five years to comply fully.