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CEEC warns foreign investors against using locals as 'fronts'

CEEC warns foreign investors against using locals as 'fronts'
By Chiwoyu Sinyangwe
Monday January 14, 2008 [03:00]

Citizen Economic Empowerment Commission (CEEC) chairman Jacob Sikazwe has said the commission will not allow foreign investors to use local entrepreneurs as “fronts” in establishing a fourth mobile service company. Fronting is a false representation of the business’ true equity status in terms of employment equity, ownership, the degree of management participation by indigenous people and the degree of preferential procurement.

This is put into practice by appointing indigenous people on the basis of ‘tokenism’, which is placing them in positions of leadership with no subsequent intention of affording them the authority that traditionally accompanies these positions.

Commenting on the announcement by Communications Authority of Zambia (CAZ) that issuance of the fourth mobile service licence was intended to promote government policy of economic empowerment of citizens, Sikazwe cautioned that under the citizen’s economic empowerment Act, fronting was illegal.

He said CEEC would use all relevant legal instruments within the framework of the empowering Act to block the registration of the company if fronting was proved.

Sikazwe further cautioned locals not to go into fronting on behalf of foreign investors but instead seek meaningful partnerships that would help realise the dream of empowering local citizens.

“We would investigate all cases of suspected fronting in establishing of fourth mobile provider by indigenous people, but the problem is that even Zambians sometimes want go to these foreign investors so that they could be used as fronts, but they must be careful because we will not allow this facility to be abused,” Sikazwe said.

“What we want to see are local people to go into partnerships in terms of shareholding, equity as well as forming joint ventures,” Sikazwe said.

And Sikazwe said working capital should not be seen as a hindrance for local people to set up the fourth mobile company.

“Capital assets should not be an issue. Zambians can go into consortiums, joint ventures or partnerships with foreign investors so that they help to go into this field,” said Sikazwe.”

And Zambia Chamber of Commerce and Industry (ZACCI) chief executive officer, Justine Chisulo, has said there will be need for responsible partnerships between foreign investors and Zambians in the establishment of the fourth mobile company.
Chisulo said while it was unavoidable for foreign companies to get an edge in partnerships with local entrepreneurs because of capital, it was important that indigenous businessmen put the interest of the country first.

“It is unavoidable for foreigners to get an edge over local businessmen because of the advantages they come with. However, people that are going to go into partnerships with foreign entrepreneurs need to put the interest of the country at heart,” said Chisulo.

“In the heads agreement, they should agree to say on how much they should declare as dividends, how much they were going to reinvest into growing the company…so it is about our people having a heart for the country.”

Labels: CEE

posted by MrK @ 3:31 AM