Zimbabwe radically amends Indigenisation Law
The Finance Act 1 of 2018 published earlier this month introduced wholesale changes to the law governing the indigenisation of businesses in Zimbabwe.
The law has for the last eight years acted as a powerful disincentive to investment, particularly FDI, into Zimbabwe. It imposed a blanket requirement that all businesses be owned at least 51% by “indigenous Zimbabweans”. The situation was compounded by the publication of a large number of regulations, notices and statements which were often muddled, and sometimes contradictory, relating to the implementation of this requirement.
At a stroke, most of this has been swept away as part of the new government’s efforts to attract FDI, and to re-engage with the international community. From now on indigenisation requirements will only apply in two areas of the economy:
- The requirement to have 51% ownership will continue to apply in the platinum and diamond mining sectors, in which it seems government wishes to retain a strategic interest. Such ownership is envisaged as being held by various government owned or controlled entities; and
- Various miscellaneous sectors of the economy, which are called “reserved sectors”, have been and remain reserved for investment by Zimbabweans. Whereas previously such investment was required to be by “indigenous Zimbabweans”, now it also includes all Zimbabwean citizens, regardless of race. The reserved sectors cover businesses as diverse as passenger transport, retail and wholesale, estate agencies, grain millers and bakers, and artisanal miners, as well as a number of others. Mechanisms exist, however, in terms of which approval may be sought for non-Zimbabwean citizens to invest in these sectors.
The importance of this change in the law cannot be overestimated, and investment in large tracts of the economy has been rendered a substantially more attractive proposition.