Central bank governor John Mangudya says the liquidity constraints facing the economy are set to improve after government sought to move away from an aggressive implementation of its indigenisation law to shore up falling Foreign Direct Investment.
Zimbabwe registered a meagre $67 million in foreign direct investment in the first half of 2014, down from $165 million over the same period last year, a development blamed mainly on its muddled indigenisation law which demand that foreign companies valued at over $500 000 be majority owned by local blacks.
Finance minister Patrick Chinamasa in his 2015 budget presentation sought to move away from the straight jacket approach, saying the government would treat the empowerment policy on a case-by-case basis through line ministries and that the 51/49 mix will remain an aspiration but not cast in stone.
He said over 4 600 companies had closed shop since 2011, with nearly 64000 workers losing their jobs, prompting the policy shift.
Mangudya said that the policy shift would help set the economy on a growth trajectory.
“It’s a developmental budget encouraging foreign investment, which is critical for the country and to ensure that the liquidity constraints that the country is facing are minimized,” Mangudya said.
“Clarity on the indigenisation policy removes ambiguity within the processing system. Everyone is very clear and there is a relationship between the investor and the sector’s ministry. That is more of relationship management which was missing. It is now more sector specific and the ministry will now determine the compliance period for indigenisation.”
He said proposals made in the budget would also spur growth of the small to medium sector as well as micro finance institutions.
Chinamasa said Zimbabwe’s economy will grow by 3.2 percent next year with key sectors such as mining, tourism likely to register modest growth.
In a move designed to boost exports and reduce the trade deficit – which stood at $2.9 billion at October 30 – Chinamasa proposed to lower corporate tax to 15 percent for companies exporting at least 51 percent of their output.
He also proposed to defer export tax on un-beneficiated platinum to January 2017 when Zimplats expects to have commissioned its $200 million mineral base plant. Tax was scheduled to kick in January next year as part of moves to force mining companies to beneficiate local minerals.- The Source