Zhuwao backs off foreign firm closure threat

Analysts have cast doubt on the government’s ability to carry out its threat to close firms it deems to be non-compliant with the indigenization act.

Legal expert Derek Matyszak of the Research and Advocacy Unit says the clause cited by Zhuwao only refers to firms which have undertaken corporate actions such as mergers, demergers or unbundling which do not produce a shareholding structure that is “acceptably indigenous.”

“Section 5(2) of the Act provides for the non-renewal or termination on six months notice of the licences of “non-compliant” companies. However, “non-compliant” companies are not, as Minister Zhuwao…suggests, all companies that have failed to indigenise. “Non-compliant” companies are specifically defined by section 5(1) of the Act,” Matyszak wrote in a comment on an article which appeared in the private Zimbabwe Independent last Thursday.

“They are ONLY those companies which have engaged in transactions referred to in sections 3(1)(b), (c), (d) or (e) of the Act. These subsections refer to companies which have undertaken restructuring, unbundling, de-mergers, relinquishment of a controlling share or new investments for which an Investment Licence is required – and have done so without an acceptably indigenous resultant shareholding. Any cancellation of a licence of a business falling outside of this group is a violation of the law. So much for Mr. Zhuwao’s claims about the rule of law and compliance with the legislation.”

 Zhuwao said there would be consultation with the firms involved, before any licence cancellation.

“The legal processes themselves actually require at least two formal engagements with the institutions. We will follow the letter of the law,” Zhuwao said.

The pugnacious indigenization minister, who is Mugabe’s nephew, also expressed frustration with some line ministers and licencing authorities, whom he said would answer to the president if they chose not to implement the cabinet decision to cancel licences of non-compliant firms.

Zhuwao accused Reserve Bank of Zimbabwe (RBZ) governor John Mangudya, in particular, of misunderstanding the indigenisation act and misleading banks, which the minister said had chosen to ignore the local ownership law.

The state-controlled Herald newspaper today quoted Mangudya saying the financial sector had largely complied with the indigenization law.

“Banks are complying and we are satisfied with the level of compliance,” Mangudya was quoted saying in the Herald.

In response, Zhuwao said he had written “an extensive letter” to the central bank head, who, along with Finance Minister Patrick Chinamasa, has frequently clashed with the indigenization minister over implementation of the local ownership policy.

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