(Updates with economist comment from seventh paragraph.)
May 29 (Bloomberg) -- Zimbabwe’s cabinet has approved amending laws that compel foreign and white-owned companies to sell or cede control to black Zimbabweans, the country’s finance minister said.
Cabinet directed indigenization minister Francis Nhema to “take up the issue” of aligning investment and indigenization laws with the ruling Zimbabwe African National Union-Patriotic Front party’s politburo before taking amendments to parliament, Finance Minister Patrick Chinamasa told lawmakers in the capital, Harare.
Under Zimbabwean law, foreign and white-owned companies with assets over $500,000 must be 51 percent owned by black Zimbabweans or the country’s National Economic Empowerment Board. Chinamasa said April 23 that the southern African nation will soften regulations that discourage investors.
“We recognize that investors who come here are not philanthropists, but we’re also saying as they come to make money from our resources, we want to reap the benefits of exploitation of those assets,” Chinamasa said in parliament yesterday.
Information Minister Jonathan Moyo told Zimbabwe’s state- controlled Sunday Mail newspaper May 26 that investors will be able to recoup their investments before being asked to implement empowerment programs.
Chinamasa’s statement today marks the first official sign that the government will take legal steps to change indigenization laws.
“It’s a positive move, providing there won’t be any conflicting statements from fellow politicians, which normally causes a crisis,” Christopher Mugaga, an economist with Harare- based Econometer Global Capital, said by phone today.
The impact of the proposed amendments will be difficult to judge until the detail is published, according to University of Zimbabwe economist Tony Hawkins. Investors are wary of government intervention in any form, he said.
“There’s not much difference between telling investors that they must provide locals with 51 percent of a company and telling them they must give locals 51 percent of production; either way it’s still state interference,” he said by phone.
Five years after Zimbabwe emerged from recession, ended hyperinflation by abandoning its local currency and spurred farming production, the economy is at risk of contraction again. Foreign currency needed to pay wages and buy imports has dried up and factories are operating at just 40 percent of capacity.
Miners such as Anglo American Platinum Ltd. and Impala Platinum Holdings Ltd. have already had indigenization plans accepted by the government, while bankers including Barclays Plc, Standard Chartered Plc and Standard Bank Group Ltd. haven’t yet been told by government how much of their businesses they’ll have to offer to black Zimbabweans.
President Robert Mugabe, in power since 1980, won re- election last year and ZANU-PF captured two thirds of parliamentary seats, ending a power-sharing arrangement with the Movement for Democratic Change that had been in place since 2009.