The Sunday Mail
Kuda Bwititi – Chief Reporter
Zimbabwe’s indigenisation policy is clear and the country’s economic environment is conducive for large-scale investment, the International Monetary Fund has said.
This comes as the European Union has begun financing local initiatives under the US$270 million National Indicative Plan, with US$20 million having been released over the past few weeks.
The funds will mainly be chanelled towards food security, maternal health, Constitutional realignment and closer Parliament-public interaction.
Further, the European Investment Bank is pleased with Zimbabwe’s credit rating and is considering funding the private sector, including SMEs. In its latest report, the IMF says amendments to the indigenisation policy create an “environment that attracts investment”.
It also said Zimbabwe was committed to “stronger, more inclusive and lasting growth” as seen in various initiatives being pursued under Zim-Asset.
Part of the report reads, “Despite economic and financial difficulties, the Zimbabwean authorities have made progress in implementing their macro-economic and structural reform programmes, particularly regarding clarifying the indigenisation policy, restoring confidence and improving financial sector soundness, and strengthening public financial management.”
In January 2015, Government reviewed the Indigenisation and Economic Empowerment Act to enable line ministries to approve indigenisation plans, issue compliance certificates, and monitor implementation.
The ministries are required to define and publish parameters for sectors under their respective jurisdictions.
The Act only allowed the Minister of Indigenisation and Economic Empowerment, and the National Indigenisation and Economic Empowerment Board to handle indigenisation deals.
International investors were previously apprehensive about the policy, particularly the requirement for foreign-owned companies to cede at least 51 percent shareholding in concerns valued at US$500 000 or more to locals.
There were also reservations about deal approval responsibility reposing in one ministry.
However, Government has clarified that only resource-based deals are non-negotiable, while the rest can be discussed with line ministries.
To further clarify the policy, authorities plan to publish a simplified summary of the law on the Zimbabwe Investment Authority’s website.
In their letter of intent to the IMF recently, Finance and Economic Development Minister Patrick Chinamasa, and Reserve Bank of Zimbabwe Governor Dr John Mangudya said: “The Indigenisation and Economic Empowerment Act seeks to foster mutually beneficial partnerships between Zimbabwean and foreign investors. This law, however, continues to be perceived as an obstacle to foreign investment purportedly for lack of simplicity.
“We are committed to providing policy clarity and consistency with a view to improving Zimbabwe’s business climate and attracting much-needed capital flows.”
Economist Mr Brains Muchemwa said the positive steps by Government would improve Zimbabwe’s credit rating.
“The IMF report is encouraging from the perspective that Zimbabwe has instituted substantial reforms under the SMP (IMF staff monitored programme), a factor that, notwithstanding the slowdown in economic growth, will eventually boost confidence within the eyes of our major creditors and improve the country risk status.
“What is important, therefore, is for the policy-makers to remain consistent in the policy approach so as to avoid retrogressive policy reversals, more now that the temptations could be high in light of the current tight fiscal squeeze.” And evidence of increasing confidence has been seen in recent weeks with the EU channelling US$20 million to Zimbabwe under the NIP, with another US$10 million expected before month-end.
Cumulative disbursements for 2015 should be US$45 million.
Responding to inquiries from The Sunday Mail, EU Harare Press and information officer Ms Dorothe Grebe said: “Yes, the EU has already contracted EUR14,4 million out of the EUR234 million that has been allocated to Zimbabwe. In addition, EUR6,5 million will be contracted in the next weeks, bringing the total contracted to EUR20,9 million before the end of May.”
Figures released by the EU show that about US$3 million will be channelled towards Constitutional realignment, US$6 million to food security and US$12 million to maternal and child mortality programmes.
The disbursements will be on a pro-rata basis.
“This amount is broken down as follows: governance and institution building — EUR2.9 million in support of Constitutional realignment, access to justice and Parliament; resilience/food security — EUR6 million for rural smallholders; health — EUR12 million in order to reduce maternal and child mortality.
“The EU plans to have contracted over EUR45 million by the end of 2015. The amounts disbursed will be lower, as the activities contracted will be implemented over several years and disbursements are based on an initial pre-financing followed by additional disbursements following the rate of implementation.”
Ms Grebe said a European Investment Bank team that visited the country last month was open to the option of funding the private sector.
The funds will be allocated to the banking sector for onward lending.
She said: “The (EIB) mission noticed some favourable developments, notably some significant reforms in the financial sector and the start of token payments by the Government of Zimbabwe to the international financial institutions on its external debt arrears.
“This progress has been very much welcomed and the EIB is now envisaging the extension of a credit line to local banks for on-lending to the Zimbabwean SMEs for medium-term investment credit.
“The EIB, therefore, plans to send a more technical team over the next months to make a more in-depth assessment of the financial sector and a due diligence screening of some potential local banking partners.
“It is only on this basis that a final decision can be made by the end of 2015 or early 2016. It, therefore, remains too early to provide more detailed information on the amounts involved, the nature of the eligible projects or the pricing of the credit lines.”
Government and the EU signed a co-operation agreement for development assistance in February 2015, marking the first time the bloc had undertaken to channel funds through Treasury since 2002.
EIB officials subsequently visited Zimbabwe to explore possibilities of extending credit facilities to the financial services sector for onward-lending to industry and other sectors, resulting in the “fruitful” meetings.
In 2014, the EU lifted its 12-year suspension of direct financial aid to Government, and has been widely criticised for maintaining sanctions on President Mugabe and First Lady Dr Grace Mugabe, and Zimbabwe Defence Industries.
The NIP is the framework for implementing the co-operation agreement, while the European Development Fund is the main instrument for EU development co-operation with the African-Caribbean-Pacific bloc.
