Harare - There is a new sheriff in town for South African companies operating in Zimbabwe.
He walks with a spring in his step, and admits to enjoying the ministerial honours that come with the new job, such as having the door to his car opened for him.
Meet Patrick Zhuwawo, President Robert Mugabe’s nephew and Zimbabwe’s new indigenisation minister.
He comes across as the jovial guy next door, at least until he starts talking and raising issues such as being mandated by Mugabe to spearhead economic empowerment at whatever cost.
Raising the stakes
And for South African companies – Impala Platinum, Aquarius Platinum, Anglo American, as well as Tongaat Hulett and Pick n Pay – the stakes may just have been raised.
He is using a carrot-and-stick approach and there is a feeling that he may be out to prove a point to Mugabe: that he is a competent nephew that can be relied upon to deliver, especially as positioning for the succession of his maternal uncle intensifies.
Foreign-owned companies are required to cede 51 percent shares into the hands of black Zimbabwean groups.
The government is also reversing empowerment deals signed with South African platinum groups in Zimbabwe in the past few years.
The empowerment policy has been criticised and blamed for driving away investors in an economy that is in urgent need of capital.
Zimbabwe is faced with 1.5 percent economic growth this year amid declining productivity in mining, manufacturing and other key sectors.
There have been mixed signals regarding the implementation of the policy, but Zhuwawo is not mincing his words.
He wants all foreign-owned companies to be compliant and has threatened to impose a 10 percent empowerment levy on those companies that are not locally owned, proposing to raise this to 12.5 percent in 2017. This will collect about $93 million (R1.2 billion) for the empowerment fund in 2016 and cajole foreign firms to speedily cede majority shares into the hands of Zimbabwean groups.
However, companies such as Impala and Anglo American Platinum are digging in, saying that they want the government to pay compensation for the shares to be ceded under financing schemes that include vendor funding.
“Lets be clear. Indigenisation requires that all entities be at least 51 percent indigenous owned. The longer they take to comply, the more money we will have to fund the empowerment fund through the empowerment levy,” Zhuwawo said.
Economists in Zimbabwe say the government should clarify the controversial policy to enable businesses and investors to plan ahead and commit to investments.
Uncertainty
Executives told Business Report that a significant number of companies were halting expansion and further investment plans in Zimbabwe because of the rising uncertainty in the country.
“Investors are no longer certain because there is always a shift in policy positions. Every new minister that comes (in) wants to do things differently, and tries to push through compliance in a different manner, and this is disrupting planning and investment provisioning,” an executive said.
Following the collapse of indigenisation deals signed between the government and South African platinum mining groups in Zimbabwe in 2013, Mimosa Mining, jointly held by Impala and Aquarius, is renegotiating a new indigenisation compliance deal. Aquarius said last week that “in the period under review, no agreements or definitive terms were agreed between Mimosa and the Ministry of Indigenisation”.
BUSINESS REPORT