Zimbabwe amends racist and anti-growth aspects of its indigenous laws

One of the most controversial laws introduced in Zimbabwe during the last decade of Robert Mugabe’s presidency was the Indigenisation and Economic Empowerment Act (« the Act »), passed into law in 2008. Amidst staggering inflation, land redistribution reform which upset the agriculture industry and rising poverty, the Act put a nail in the coffin of Zimbabwe’s economy.

The main objective of the Act was to empower black entrepreneurs to invest in the local economy by requiring all companies in the country to be at least 51% owned by indigenous Zimbabweans. Prior to the Act, there was already a similarly aimed law requiring 60% of all listed companies in Zimbabwe to be black owned. However, the appetite for investment from both locals and foreigners has been suppressed over the last decade due to many political and economic issues, leading Zimbabwe to become heavily dependent on exports and creating a black market for inaccessible products that most citizens could not afford anyway.

Since the ousting of Mugabe back in 2017, the government under the leadership of Emmerson Mnangagwa published amendments to the Act in its gazette dated 14 March 2018 as part of Mnangagwa’s new mantra that Zimbabwe is now « open for business ». The amendments practically repeal the 51% requirement meaning that any local or foreign person is free to invest in, form, operate and acquire the ownership or control of any Zimbabwean business without restriction, except for the platinum and diamond industry where this rule still applies.

Furthermore, the previous Act was criticised as being racist due to the restriction of twelve ‘reserved sectors’ to only indigenous Zambians, including passenger transportation, retail and wholesale trade, and tobacco grading and packing. The new amendments now permit business owners in these ‘reserved sectors’ to be any Zimbabwean citizen irrespective of race, provided they hold Zimbabwean citizenship.

Despite being a step in the right direction, the government recognised that economic growth would be slow particularly considering that many Zimbabwean citizens currently do not have sufficient financial clout. Therefore, the amendments also permit foreigners who have been operating in reserved sectors prior to 1 January 2018, to continue to do so subject to registering themselves with the Zimbabwe Revenue Authority and the National Indigenisation and Economic Empowerment Unit, as well as, opening a local bank account, before 1 July 2018.

Moreover, new foreign companies who wish to enter the reserved sectors will be allowed to do so following government permission but will have to present a plan to commit to significant employment creation, skills transfer and the creation of sustainable value chains.

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