Patrick Chinamasa gets President Mugabe backing
PRESIDENT Robert Mugabe has significantly softened Youth, Indigenisation and Economic Empowerment Minister, Patrick Zhuwao’s hard-line stance with regards to the interpretation of the controversial indigenisation law.
Zhuwao, who is also President Mugabe’s nephew, had in the past few months been vigorously pushing for closure of foreign-owned companies, including banks.
But he courted resistance from key players and openly clashed with Finance Minister, Patrick Chinamasa and Reverse Bank of Zimbabwe (RBZ) governor, John Mangudya, over the implementation of the law in the financial sector.
Now, President Mugabe, seemingly in a desperate attempt to lure offshore capital required to revive the country’s ailing economy which has suffered from widespread company closures and job losses witnessed in the past few years, on Tuesday last week, backed Chinamasa and Mangudya’s stance on the interpretation of the populist law for the financial services sector.
President Mugabe’s heavy shelling on Zhuwao, who is believed to be a member of Generation 40 (G40), a faction that is involved in brutal ZANU-PF infighting against Team Lacoste, which is believed to be led by Vice President Emmerson Mnangagwa, has left him with his tail between his legs.
G40 is opposed to Mnangagwa succeeding the Head of State and the ruling on indigenisation appears to have rekindled Mnangagwa’s slim hopes in the battle for dominance.
The ruling ZANU-PF had indigenisation and empowerment as the centrepiece of its election manifesto in 2013 and by the same token, its economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, aimed at reviving the economy, has indigenisation and empowerment at the centre of it.
Zimbabwe is grappling with a worsening liquidity crunch and an International Monetary Fund (IMF) report last year said the country’s external position remained precarious because of debt distress. The country last year presented a debt arrears clearance plan to the World Bank, IMF and African Development Bank.
The arrears amounted to US$1,8 billion.
President Mugabe’s comments also followed former RBZ governor, Gideon Gono, who went toe to toe with the then indigenisation minister, Saviour Kasukuwere, arguing that the banking sector was too sensitive and that while the law was noble, there simply could not be a one size fits all approach to indigenisation.
Foreign owned banks operating in the country, which include Barclays Bank, Ecobank, BancABC, Standard Chartered Bank and MBCA, had been given an ultimatum by Zhuwao to comply with the controversial law which compels foreign-owned companies to cede, donate or sell 51 percent of their shareholding in locally based companies to blacks or entities designated by government, by the end of last month.
The contentious indigenisation policy, which gained traction following the promulgation of the Indigenisation and Economic Empowerment Act in 2008, has been widely blamed for the country’s failure to attract foreign direct investment, amid sagging economic fortunes.
Re-affirming Chinamasa and Mangudya’s statements, President Mugabe said all foreign-owned banks must continue to be under the auspices of the Banking Act which is superior to the indigenisation law. His comments put to rest squabbles between Zhuwao on the one hand and Chinamasa and Mangudya on the other pertaining to the financial sector.
The confusion and the public spat between Cabinet ministers over the law, President Mugabe said undermined market confidence and increased cost of doing business while weakening the country’s competitiveness.
Sources within the Executive said President Mugabe was now convinced the contentious policy had to be softened in order to pull the country’s economy from the brink of collapse.
The contentious law, President Mugabe admitted, scared away foreign investors and makes it difficult for the country to access international capital.
Last week, President Mugabe, reinforced Chinamasa and Mangudya’s position saying banks can retain control of their institutions, seemingly under pressure from tightening fiscal pressures and the need to re-engage international financiers.
He said: “The banking sector shall continue to be under the auspices of the Banking Act which is regulated by the Reserve Bank of Zimbabwe (RBZ) and the insurance sector under the auspices of the Provident and Insurance Act.
“This policy position is essential for the promotion of financial sector stability, confidence and financial inclusion.
“These institutions will nonetheless, be expected to make their contributions by way of financing facilities for key economic sectors and projects, employee share ownership schemes, linkage programmes and such other financial empowerment facilities as may be introduced by the RBZ, from time to time.”
President Mugabe admitted, the conflicting positions over the indigenisation laws undermined confidence among existing and potential investors.
“Conflicting positions in the interpretation of the indigenisation, economic empowerment policy have arisen of late,” said President Mugabe.
“This has caused confusion among Zimbabweans, the business community, current and potential investors, thereby undermining market confidence. This situation has also led to the increase in the cost of doing business, thus further weakening the country’s economic competitiveness.”
President Mugabe said government will continue to insist on 51 percent ownership of mines for new business.
He said on the natural resources sector “government has, therefore, a sacrosanct duty to ensure that such resources are exploited in a manner that safeguards the best interests of the country’s current and future generations”.
“Government and its designated entities will hold a 51 percent stake in businesses in the natural resources sector, with the remaining 49 percent belonging to the partnering investors. The need for investors in this sector to comply with the prescribed indigenisation obligations is therefore non-negotiable,” he said.
However, existing mines may continue to operate if they retain 75 percent of their earnings in Zimbabwe.
The clarification limits the role of the Youth, Indigenisation and Economic Empowerment Ministry by allowing line ministers to come up with models of compliance.
The President said the ministry’s role was to coordinate activities of line ministries in the implementation of the indigenisation policy through a Cabinet committee chaired by its minister.
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