President Robert Mugabe has approved the closure of all foreign-owned firms that have reportedly defied the indigenisation directive compelling them to cede at least 51% of their ownership by April 1, a move likely to trigger massive job carnage, further cripple the economy and attract international condemnation.
Mugabe’s nephew, Youth, Indigenisation and Economic Empowerment minister Patrick Zhuwao, told journalists in Harare yesterday that Cabinet, on Tuesday, endorsed the decision to close all non-compliant firms.
“On Tuesday March 22, 2016, Cabinet unanimously passed a resolution directing that from April 1, 2016, all line ministries proceed to issue orders to licensing authorities to cancel licences of non-compliant businesses within their respective sectors of the economy,” he said.
The order affects foreign-owned banks,mines and the few remaining firms in the manufacturing sector.
Mugabe’s decision has raised the spectre of massive job losses, but Zhuwao said it was the duty of the affected workers to ensure that their employers were compliant with the country’s laws or else they would lose their jobs, as the government was not going back on the matter.
“For workers, they need to be clear that compliance relies with the managers. Workers, who know that their companies are not compliant, should tell them (managers) to comply,” he said.
“We must never breed lawlessness as a nation. The failure to adhere to the laws of our land must attract immediate consequences that must be severe and dire enough to ensure that the law is respected and adhered to.
“Failure of which, the line minister will proceed to notify third parties likely to be affected by the cancellation of the licence that the licensing authority shall, without notice, cancel licences of businesses that remain non-compliant after 30 days of having been given the room to comply.”
Zimbabwe has been experiencing continued closure of companies due to economic hardships, causing massive job losses.
This evokes memories of the July 17, 2015 Supreme Court ruling, which triggered over 22 000 job losses within a month after employers had been given the green light to terminate workers’ contracts on short notice, without retrenchment packages.
Zimbabwe enacted the indigenisation law to compel all foreign-owned entities to cede at least 51% of their stake to locals, but the law has faced resistance and been blamed for low foreign direct investment.
Initially, government had proposed to impose a 10% levy on non-complaint firms, where it targeted to raise $93 million, but Zhuwao said this had been set aside, with authorities now preferring company closures. This was after non-compliant foreign firms spurned the 10% empowerment levy offer, which could have seen them cede 10% of their annual earnings to the levy.
However, opposition parties and economic analysts have blamed the law for foreign capital flight, as they claim the move instilled fear in foreign investors.
Economic analyst, Tony Hawkins said the announcement by Zhuwao showed the level of disunity within the Zanu PF government, as some ministers were lobbying for foreign direct investment, which was likely to be affected by Mugabe’s order.
“The fact he expects line ministries to do the job looks like an excuse for him when it does not happen,” he said.
University of Zimbabwe political science lecturer, Eldred Masunungure said although, legally, government was correct in closing down companies that have not complied with the law, it was, however, immoral, as it would make thousands jobless and send a negative picture of the country’s investment climate to the international community.
“Legally, he (Mugabe) might be correct to do so, but some of these things go beyond legality, it is a matter of life and death for many Zimbabweans,” he said.
“I believe this government is shooting itself in the foot. While at law what he is doing seems correct, but what the country needs at the moment is any economic activity to sustain its people. I know that there are so many companies that have not yet complied with the law yet they employ thousands and this will definitely affect the people.
“The state of our economy is so bad that this government needs to protect even a tuckshop that is employing one person because our government is failing to create a single job. It is an ill-advised move that will scare potential investors, both local and foreign.”
Academic, Ibbo Mandaza said he doubted whether the order would be carried out, as it seemed impossible.
“I will only believe it when it happens because it does not sound real,” he said.