Maravi

Gono cautions Zimbabwean govt on indigenisation process

Gono cautions Zimbabwean govt on indigenisation process
By Kingsley Kaswende in Harare
Thursday October 04, 2007 [04:00]

Reserve Bank of Zimbabwe (RBZ) governor Dr Gideon Gono has cautioned the government to handle the indigenisation and empowerment process carefully. And Dr Gono has indicated that Zimbabwe will make changes to its currency, a move he said would catch the parallel market off-guard. Zimbabwe has passed the Indigenisation and Economic Empowerment Bill, which seeks to ensure that at least 51 per cent shares in all public-owned companies are taken over by indigenous black people.

The Bill, which now awaits presidential assent to become law, is part of the move by the government to take over a majority stake in firms believed to be economic saboteurs and being used by the West to perpetrate the economic situation in the country.

Dr Gono, however, said the government should handle the initiative carefully, as it risks scaring away the much-needed capital to turn around the economy.

“In the world of finance, it is a recognised fact that capital is a timid commodity, which always stands ready to jump ship at the slight inclination of attack whether factual or perceived,” he said while presenting the mid-year monetary policy statement on Monday afternoon. “We must therefore ensure that existing foreign capital in our economy acts as our ambassador for attraction of more investment inflows.”

He said while he supported the objective of empowering the majority of Zimbabweans, his well-considered advice to legislators and the government was that a fine balance should be struck between the objectives of indigenisation and the need to attract foreign investment.

He suggested gradual takeover of assets as opposed to “excitable but impractical overnight conversion events.”

Dr Gono suggested that firms worth below US$150 million should only be taken over within five years. Those between US $150 million and US $500 million, should only be acquired 30 per cent, with total compliance expected between six and 10 years.

For those beyond US $500 million the first five years should target only 20 per cent, 45 per cent between the sixth and 10 years with total compliance expected between the 11th and 15th year.

This gradual approach, he said, would promote fair valuation, reasonable return on initial investment outlays by investors, as well as smooth transition from old to new shareholders.

Dr Gono said the government should be wary of a few “well-connected cliques” that were supporting the initiative in order to amass wealth greedily whilst the intended majority remained with nothing, as did happen in the land reform programme.

The targeted firms are mainly in the mining, manufacturing, service and financial sector, but Dr Gono said there should be no attempts to forcibly push the envelop of indigenization into the delicate area of banking and finance.

Dr Gono has often criticised government policy and has come out in public, pointing out policy flaws.

Recently, he criticised the government price controls and predicted that they would cause shortages. Since June, Zimbabwe has faced a critical shortage of basic commodities directly linked to price controls.

Dr Gono is one of the few people in the country who are close, and have direct access to President Mugabe and is touted by some as the President’s choice as heir apparent.

He said politics in Zimbabwe were a huge factor in the current the Zimbabwe situation.

“I call on political players in this economy to behave and conduct themselves, mindful of the impact of their actions on the economy….It is the same voters we think we are fighting for who suffer like the proverbial grass, when two elephants fight,” he said.
Meanwhile, Dr Gono indicated that there would be changes to Zimbabwe’s currency prompted by habits of individuals and banks to take money out of the formal system.

He did not elaborate on the change but warned that it would surprise many parallel market dealers.

“I can confirm that this is coming and coming very soon. It could be a hurricane for those who keep cash outside the formal banking system. The cash and money barons who are in the habit of creating mini-central banks to compete with RBZ should take heed of this advice,” he said.

Labels: BEE, GIDEON GONO

posted by MrK @ 4:18 AM