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Zimbabwe clarifies nationalization legislation
Tony Hawkins, Financial Times
March 11, 2008

Following fierce international and local criticism of its new nationalization legislation, Paul Mangwana, indigenisation minister, insisted that not all foreign-owned firms would be forced to sell 51 per cent of their shares to indigenous Zimbabweans.

Mr Mangwana said: "Not every business would be forced to have 51 per cent indigenous ownership. The Minister will prescribe on the basis of capital (investment) and employment levels".

Although some businessmen here have been quick to interpret his remarks as a climbdown, the reality is that the legislation is full of discretionary provisions. Critics say this is deliberate, as the main aim is to enable ministers to "cherrypick" firms for takeover rather than a blanket provision that the state could not afford to finance anyway.

One businessman who cannot be named for fear of attracting unwelcome government attention to his business, said: "The minister has hit the nail on the head. He, or the Cabinet, will choose which firms to take over, and if the businesses do not comply, then they will be told to whom they must sell their shares and, probably at what price".

Although the main media focus on the nationalization act has been its implications for foreign owners, it applies to domestic non-indigenous owners as well. Although it is not phrased in overtly racial terms, because this would contravene Zimbabwe's constitution, an indigenous person is defined as one who was disadvantaged under the pre-independence regime. The decision of who was disadvantaged is left to the government, highlighting the discretionary, rather than rule-based, content of the law.

In his response, the president of Zimbabwe's Chamber of Mines, Mr Jack Murehwa insisted that the minister's clarification had not helped. "A different explanation outside the law cannot allay fears" he said. "The most important thing is the form and content of the act."

Some managers of non-indigenous and foreign-owned firms are already seeking to exploit the situation by suggesting to owners and head offices that it might be better to "sell" shares, usually at a substantial discount, to people they know rather than risk having a partner thrust upon them by the government, as threatened by Mr Mangwana.

It is unclear how the issue is playing in the election campaign because while President Mugabe is using the law to demonstrate his determination to ensure that "Zimbabwe is for Zimbabweans," Mr Simba Makoni, the president's challenger from within his ruling Zanu-PF party is keeping quiet in public, partly because he is anxious to portray himself as a supporter of the indigenisation strategy.

The main opposition party, the Movement for Democratic Change, which strongly opposed the bill in parliament, launched its policy manifesto in Harare on Tuesday. It favors more foreign investment, promising to build "a strong economy, using market principles with strong redistributive characteristics and carefully-targeted state-intervention policies to promote economic and social justice".

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