Zimbabwe's clock is ticking for foreign firms to be locally owned

Foreign-owned companies' time is running out as Mugabe's government orders them to create plans that transfer 51 per cent stakes to locals.
"Anglo American, Rio Tinto; you must transform and become Zimbabwean," Mr. Mugabe said at a rally last week. Reuters
"Anglo American, Rio Tinto; you must transform and become Zimbabwean," Mr. Mugabe said at a rally last week. Reuters

With most white farmers evicted from their land and replaced by black Zimbabweans, the Harare government has now turned its sights on foreign-owned firms.

The government of Robert Mugabe has given foreign-owned companies a two-week deadline to submit "acceptable" plans to transfer 51 per cent stakes to locals.

The move would effectively force companies to hand over control to Zimbabwean businessmen, inevitably those with connections to the ruling ZanuPF party.

Some 400 British, European, South African and US firms will be affected. These include: Rio Tinto and Anglo American, the mining giants; manufacturers such as British American Tobacco and Nestle; as well as local units of the British banks Standard Chartered and Barclays.

The policy, called "indigenisation" has been hanging over companies for some time, but with elections likely next year and questions around the 87-year-old president's health, it has been given new impetus.

"Anglo American, Rio Tinto; you must transform and become Zimbabwean," Mr. Mugabe said at a rally last week. "If you have companies which would want to work in our mining sector, they are welcome to come and join us, but we must have our people as the major shareholders."

This week the indigenisation minister, Saviour Kasukuwere, warned that banking licences to Standard Chartered and Barclays could be withdrawn unless they begin ownership transfer. "The act will be implemented without fear or favour," Mr Kasukuwere told the state-run Herald newspaper. He implied special attention would be paid to corporations domiciled in countries opposed to Mr Mugabe's rule.

"We will not be deterred from implementing the laws of the land and those foreign banks whose parentage in any case continue to attack and affect our people with illegal sanctions cannot be defended by any logical Zimbabwean," he said.

Doing business in Zimbabwe has always been tricky. Sanctions against Zimbabwe's leaders have not extended to doing business in the country, but for those operating there, navigating local politics with international sentiment has been difficult, as Nestle, the Swiss food manufacturer, found to its cost.

Three years ago it was revealed that Nestle's Zimbabwean unit was buying up to 15 per cent of its local milk supplies from Gushungo Dairy Estate.

The farm, the largest dairy producer in Zimbabwe, had been sold by its white owner to the president's wife, Grace Mugabe, after a long campaign of intimidation.

Nestle dropped its contract with Gushungo following the international outcry it caused, and after threats of a worldwide boycott. But in dumping Mrs Mugabe's dairy, the Swiss multinational earned the enmity of the president.

Managers have been harassed by security police, and were forced to accept tank-loads of milk from Gushungo. Nestle briefly closed its operations in protest. It has since resumed production, but its name comes up regularly whenever senior government officials talk of indigenisation. The uncertainty caused by indigenisation has weighed on a moribund economy.

The Confederation of Zimbabwe Industries says factories on average are operating at 30 per cent capacity. Outdated machinery is not being replaced because parent companies are reluctant to invest, and banks are withholding loans for capital upgrades.

"Virtually all foreign companies have stopped major funding for their Zimbabwe operations because of the uncertainty and confusion," said Welshman Ncube, Zimbabwe's minister of industry and commerce.

Mr Ncube, although a cabinet minister, is powerless to intervene: he is also a senior member of the opposition Movement for Democratic Change (MDC). Since 2008, the MDC has theoretically been an equal partner in ruling Zimbabwe in an uncomfortable alliance with ZanuPF.

In reality, the MDC is frozen out of critical decision-making, which is usually carried out behind closed doors, by Mr Mugabe's inner circle.

The MDC's members, meanwhile, are subject to beatings, kidnap and torture by the feared Central Intelligence Organisation - Zimbabwe's secret police, which has propped up Mr Mugabe's rule over the past 31 years.

Chinese companies, meanwhile, are exempt from the ownership transfers, Mr Kasukuwere has said. China is a significant investor in Zimbabwe and its companies have fanned out through Zimbabwe's economy, even as western competitors called it quits.

business@thenational.ae

Published: August 30, 2011 04:00 AM

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