Zimbabwe’s Indigenisation Minister Patrick Zhuwao today backed off threats to take precipitous action and close foreign firms deemed to be non-compliant with the country’s local ownership law, but accused the central bank of misleading foreign banks over the regulations.
Last week, Zhuwao announced that President Robert Mugabe’s cabinet had given a March 31 ultimatum for the cancellation of licences for all foreign firms that have not complied with Zimbabwe’s empowerment law, which requires the transfer of majority control in all major businesses to local blacks.
Legal experts have, however, said the law does not empower government to cancel business licences over non-compliance with the law.
On deadline day today, Zhuwao told reporters that non-compliant firms would be subjected to a process before their licences were cancelled. Even then, Zhuwao seemed to change tack, hinting at exerting pressure on foreign-listed firms on their respective bourses.
“That process is very exhaustive; it’s a fair and thorough process. It is a process which starts with a line minister satisfying himself or herself that there is no serious intention to comply. Then the line minister will notify the non-compliant business that they have not complied and that if they continue to defy, the minister has the intention of withdrawing the licence,” Zhuawo said.
“The minister will also give the non-compliant company an opportunity to show just cause, to explain why they are not complying with the law. If the non-compliant company doesn’t show just cause for not complying, then the minister will direct the non-compliant company to comply. Should the non-compliant company not comply; the line minister will notify relevant third parties.”
Zhuwao said one such third party would be the foreign stock exchange where the non-compliant business is listed.
“Here now it becomes very important and here I want to be able to communicate this to companies listed on foreign stock exchanges and they need to be very clear and very aware of the implications of the line minister notifying relevant third parties.
“One such relevant third party is the foreign stock exchange where that particular company is listed. The implications on the share price of those particular entities is going to be astronomical and catastrophic not only to their operations in Zimbabwe but also to their operations in other territories where they are operating. So companies that are listed on foreign stock exchanges need to be aware that if they don’t comply they are actually putting the value of their shareholders at significant risk. When the value falls, it will fall so significantly to a point where the cost of non-compliance will be so big that these companies will wish they had simply given away 100 percent of that share to indigenous Zimbabweans.”
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