Zimbabwe’s terrible new business law
Today, in Zimbabwe, a highly controversial new law requiring businesses to be majority-owned by indigenous Zimbabwean citizens comes into effect. Within the next 45 days, every company with an asset value over $500,000 needs to submit paperwork detailing the racial background of its shareholders. If the company has a majority of white or foreign shareholders, ...
new law requiring businesses to be majority-owned by indigenous Zimbabwean citizens comes into effect.Today, in Zimbabwe, a highly controversial
Within the next 45 days, every company with an asset value over $500,000 needs to submit paperwork detailing the racial background of its shareholders. If the company has a majority of white or foreign shareholders, the Indigenization and Economic Empowerment Act — brainchild of President Robert Mugabe, whose catastrophic land reform act caused hyperinflation and famine — requires it to transfer shares to indigenous Zimbabweans.
The goal of the law — “a deliberate involvement of indigenous Zimbabweans in the economic activities of the country, to which hitherto they had no access, so as to ensure the equitable ownership of the nation’s resources” — is a noble one. But the law is a calamity that promises to drive away foreign dollars and further the impoverishment of average Zimbabweans.
Facing the law, which Prime Minister Morgan Tsvangirai lobbied against and which many believed would never actually be enacted, uncounted companies are simply pulling out. 51 percent is a controlling stake. That means that if you’re the head of, say, a South African soda company’s Zimbabwean unit, in 45 days, you have a new boss — shareholders appointed by a branch of Mugabe’s government. Foreign direct investment, so vital to the economic growth of low-income countries, has already fallen off and will continue to crater.
Plus, the law, which creates an agency to help distribute shares to indigenous Zimbabweans, will likely only benefit a tiny handful of elites. “We fear that this could lead to a creation of new minority blacks who will just replace the minority whites,” Lovemore Matombo, the head of Zimbabwe’s Congress of Trade Unions, told AFP.
And how does Mugabe’s government determine who qualifies as an “indigenous Zimbabwean” anyway? What about people of mixed race, naturalized citizens, or citizens by marriage? The law says the category includes “any person who before the 18th April 1980” — when Zimbabwe was officially founded — “was disadvantaged by unfair discrimination on the grounds of his or her race.” That means the new law inverts the guidelines of the racist Rhodesian government, which as a foundational principle discriminated against black and mixed-race people.