Zimbabwe: Financial Sector

By Alois Xaba

A renowned economist in Zimbabwe, Dr Erich Bloch says the country’s financial sector has missed out on $6,3 billion worth of lines of credit from international banks due to uncertainty posed by the black empowerment on program.

Two major foreign banks withdrew their intent to lend money to local financial institutions last year when Indigenization minister Saviour Kasukuwere announced he was targeting banks, in implementing the Indigenisation, Bloch said to a seminar on indigenization.

The Indigenisation Act compels all foreign owned firms to cede at least 51 percent shareholding to Zimbabweans.

“I can’t tell you the names of the banks because I was told in confidence. I am sorry I can’t do that, but it is true they wanted to give the country $6,3 billion lines of credit last year,” he said.

Bloch also said a mining company lost investment to the tune of $6,3 million from foreign investors in the same period as implementation of the empowerment laws in the mining sector commenced.

“I can’t expose the miner’s name for the same reasons,” he added.

Addressing an investment conference in South Africa last week, Prime Minister Morgan Tsvangirai said Zimbabwe’s demand for foreign companies to turnover majority stakes to locals is being driven by upcoming elections and it scares away investors.

Mining firms, banks and retailers have grown increasingly worried about the law, pushed by Tsvangirai’s rival and coalition partner, President Robert Mugabe.

“It is political rhetoric. The indigenisation law as it currently is — there is no talk of nationalisation. There is no talk of grabbing property” he said.

Tsvangirai said politicians can make promises of bringing riches to the masses, but the law states market prices must be paid for the stakes in foreign firms and there is not enough money in private hands to make that happen.

“Our people do not have the necessary resources to buy the equity that is currently existing in the economy,” he said.

Zimbabwe’s economy was a basket case, with inflation running at astronomical levels, before a coalition was formed between Mugabe and his long-time foe Tsvangirai after a disputed election in 2008.

The deal helped stabilise the economy and reverse a decade of steep decline but progress could be dashed by national elections required by next year under the power-sharing agreement.

Tsvangirai said his coalition partners “have twisted a very noble cause” of empowering poor blacks.

“This is a price that we are paying as a coalition government of no shared vision and no shared values,” he said, adding that the mixed message was “a proper recipe for turning away investors”.

Mining firms risk losing their claims in the country with the world’s second-largest platinum reserves if they do not comply. Many are waiting for a future government more amenable to international investment before they increase production.

Impala Platinum, the world’s second-largest platinum producer, has offered to hand over between 25 percent and 30 percent in equity and make up the balance through “credits” it hoped to receive in exchange for giving up some of its land five years ago.

But the minister in charge of the black empowerment drive, Saviour Kasukuwere, has rejected part of the Implats proposal and has given the company until Wednesday next week to hand over 29.5 percent of its Zimplats operation.

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