Maravi

(HERALD) Local, foreign investment vital for Zim

Local, foreign investment vital for Zim

THE indigenisation of the Zimbabwean economy is vital. But it is necessary to note first that Zimbabwe is not intending to ban foreign businesses or foreign investment. Such investment will, in fact, be needed for a long time to come. So no one is suggesting mass nationalisation or total sale of assets. The final desired result is that at least 51 percent of business will be in the hands of indigenous Zimbabweans. But that leaves 49 percent.

The Indigenisation and Empowerment Bill, and the proposed amendments to the Mines and Minerals Act, do change the present rules and new ways will have to be sought to encourage necessary external investment while making it clear that majority ownership must eventually be in the hands of Zimbabweans.

For industry, there can be few better models than China.

Although half the world has its goods made there, there is very little foreign ownership of factories or businesses.

If a major computer company, for example, wants to have its machines made in China, it gets together with a Chinese-owned business in a smart partnership.

The Chinese partner provides the factories and workforce while the foreign partner provides the specifications, plans and necessary technology.

This is how so many American and Japanese brand-named products are made in China.

The technology transfers also allow Chinese manufacturers to create their brands.

In mining, we hope that the solution will be for a dramatic expansion in the Zimbabwean mining industry as new Zimbabwean capital is brought in, rather than just seeing existing mines sold off.

A foreign mining company should be encouraged to double production, doubling the number of mines it owns, using capital raised by selling shares to Zimbabweans.

Its total investment will remain unchanged, its dividend income will remain unchanged, but it will have Zimbabwean partners and the country will benefit both from increased output and from Zimbabwean participation.

For new investments, there can be, from the beginning, a partnership. While fancy equipment may have to be imported, and that will need a foreign investor in many cases, there is much investment in roads, housing, and the actual digging for which Zimbabwean funds are needed.

The dividend return on actual foreign investment will remain the same in both cases, except the foreign partner will have 49 percent of something twice the size of what they would own if there was no local contribution.

One problem might be in finding individual Zimbabweans with the necessary capital. We hope that pension funds, the traditional mobiliser of capital, will be allowed to participate in a major way.

Demographics suggest that the overwhelming majority of pension fund members are indigenous Zimbabweans, and that such funds are owned and controlled by indigenous Zimbabweans.

But if there is any doubt, it should be fairly easy to list members and obtain an "indigenous percentage" of each fund.

Most pension funds are always on the lookout for new investments, having taken ownership of most shares available on the Zimbabwe Stock Exchange and it should be possible to design investment vehicles that will allow them to move into new areas with their vast pooled funds.

In other words, we argue that the swiftest way of indigenising is not to take away or encourage disinvestment, but to expand mining, industry and the financial sector rapidly by mobilising Zimbabwean funds.

That way we win twice, once by doubling investment and once by seeing final control of the combined foreign and local investment being held by Zimbabwean hands.

Labels: FDI, ZIMBABWE

posted by MrK @ 6:42 AM