Thursday, April 29, 2010

Indigenisation law scares away German investors

Zimbabwe Business Media
Bulawayo, Zimbabwe

27 April 2010 - The German Africa Business Association (Afrika-Verein) says Zimbabwe's controversial Indigenisation and Economic Empowerment Act is making it very difficult to motivate German business to invest in Zimbabwe and has forced them to adopt a wait-and-see attitude towards investing in the country.

In an interview at the just ended Zimbabwe International Trade Fair in Bulawayo, Afrika Verein representative to the Southern Africa Development Community Hienz Hoehmann said the law, which requires foreign companies to cede 51 per cent of their shareholding to indigenous Zimbabweans, is causing confusion and investor shyness among the 800 German businesses operating across Africa and those back home wishing to venture out.

"This laws is creating real confusion, and naturally, businesses that were willing to enter the Zimbabwean scene before are no longer willing to risk their way in now. We are finding it difficult to motivate German businesses to invest here. Maybe that will change butI do no think it will do so before there is clarity around this whole indigenisation business," Hohemann told

However, Hoehmann said the business association, which facilitates business interactions and partnerships between African and German businesses, remains committed to doing business in Zimbabwe despite the contentions around indigenisation.

"Zimbabwe retains a great potential which can be built up easily. There are plenty of business opportunities whose utilization depends on the capability of the companies and the availability of a rewarding market. But for now the indigenisation law is holding investment back.

"The opinion among German business is that they don't do business where the environment is not conducive, and they do not take their investment to such destinations," Hoehmann said. Germany is one of the European Union countries which have taken the lead in criticising the
indigenisation law whichj has rattled local and foreign business interests alike.

Critics say the law amounts to a grab, particularly the phrase that says firms should 'cede' their shareholding to locals, which some believe implies forfeiture with the possibility of non-payment of the value of shares taken. The law has also divided the government with ZANU PF ministers defending it as necessary for local empowerment while MDC formations say the law will kill foreign direct investment.

Although the law remains deeply unpopular with local and international businesses, more than 400 companies have already complied with the government deadline for the submission of indigenisation plans to be implemented within the next five years.

Zimbabwe Business Media 2010

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