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The deadline of April 1 had been set earlier in March in accordance with the controversial indigenization law requiring foreign companies to submit plans for such indigenization or face the risk of closure.
While China has generally tried to dispel the image of the indigenization being targeted at China, it has clearly voiced its displeasure, especially in the case of the diamond mining industry.
Furthermore, dissatisfaction is rampant among many in China, who question the solidity and future of the special friendship between the two countries. Among all African destinations for Chinese investment, Zimbabwe has ranked among top three in the past three years. According to official Chinese media , currently there are more than 10, Chinese nationals living and working in Zimbabwe. Many Chinese companies in Zimbabwe are actively engaged in contractor services, including telecommunications, irrigation, power, and construction.
Criticism and opposition to the indigenization plan have been widespread. Many people are skeptical that the locals do not have the financial resources to purchase the 51 percent share from foreign investors. A conceivable economic explanation is that the economic difficulties Zimbabwe has run into due to the sluggish commodity prices have motivated Harare to tighten its control domestically. In comparison, an interesting political deconstruction was offered by former Chinese Economic Counsellor in Zimbabwe, who traced the policy to the revolutionary tradition and the political principles of the ruling party.
The government later recognized that the campaign was a disaster. Given that China has been the largest investor in the past few years, many naturally speculated that the indigenization is aimed at China, but Beijing is eager to correct that impression. The current economic counsellor in Zimbabwe made it sufficiently clear in his statement that the indigenization invariably applies to all foreign investors. However, such a light-hearted tone hardly covers the breadth and depth of the impact over Chinese businesses.
Many of them had to come up with creative ways to manage the ownership issue and revenue drop. More strikingly, Chinese investment in the diamond mining industry seems to have taken the worst hit. The two Chinese diamond companies, Anjin and Jinan, began their mining operations in Marange in , reportedly with the Zimbabwean partner holding 51 percent of the share. In contrast to efforts to downplay the impact of the indigenization plan, the Chinese have been vocal where it really hurts.
The displeasure over the diamond mine disputes was voiced directly by the Chinese vice foreign minister directly to the Zimbabwean foreign affairs permanent secretary at their bilateral consultation last week. The Chinese ambassador to Zimbabwe has protested multiple times in media interviews and via a public statement , calling for Harare to observe a bilateral agreement on the encouragement and reciprocal protection of investment between China and Zimbabwe and to protect the investment and safety of Chinese companies.
The agreement requires that the nationalization not affect Chinese investment as well as demands legal processes and reasonable compensation. Targeted at China or not, the indigenization policy raises serious questions about the quality, genuineness, and future of the Sino-Zimbabwe friendship.
In , China vetoed a draft U. President Mugabe and President Xi just exchanged state visits in and —an unusual gesture of political solidarity. While the result of these commercial disputes is pending, displeasure in China brews. Now the April 1 deadline has passed, how accommodating the Zimbabwean government will be toward non-compliant foreign companies remains to be seen. Some Chinese companies are hoping for leniency or at the minimum some industry-specific flexibility in the implementation process.
However, as long as Harare is determined to pursue the indigenization, its impact over Chinese investors is only question of time and scale. As China pushes forward with its regional development and infrastructure projects under the Belt and Road initiative and in Africa, more challenges of this kind will emerge. Many Chinese companies take a hit Given that China has been the largest investor in the past few years, many naturally speculated that the indigenization is aimed at China, but Beijing is eager to correct that impression.
Related Books. Fateful Triangle By Tanvi Madan. McArthur , and Izumi Ohno. Post was not sent - check your email addresses! Sorry, your blog cannot share posts by email.
Zimbabwe government officially amends indigenization law
Zimbabwe: Diamond firms comply with indigenization law
The law will give Zimbabweans the right to take over and control many foreign-owned companies in Zimbabwe. Specifically, over 51 per cent of all the businesses in the country will be transferred into local African hands. The law does not specify whether or not the transfer of ownership would simply apply to mergers and restructurings in the future, or if it applies to all current companies. This is not a new idea because there have been proposals for similar transfer actions, but have all come up fruitless. President Mugabe administration had already redistributed the commercial farms owned by non-black-African farmers to poor native Zimbabweans.
Indigenisation and Economic Empowerment Act
The amendments, contained in the Finance Act, which was published in a March 14 Government Gazette Extraordinary, also extend ownership of businesses in the 12 reserved sectors to "citizens of Zimbabwe" as opposed to "indigenous citizens. Non-citizens who commenced business before Jan. The new fund will be housed within the designated ministry and staffed entirely by members of the civil service. It replaces the former National Indigenization and Economic Empowerment Board, which functioned as an autonomous body outside the civil service framework. In addition, the continued operation of businesses by non-citizens in designated areas will be subject to them opening and maintaining bank accounts in accordance with the law. Veritas Zimbabwe, an organization that provides information on the work of the Parliament of Zimbabwe and laws of the country, applauded the amendments. The organization noted that any person is now free to invest in, form, operate and acquire ownership or control of any other business outside the reserved ones.
China’s pains over Zimbabwe’s indigenization plan
Presenting the budget, Minister of Finance Patrick Chinamasa said reviving Zimbabwe's economy would not be easy. The government must take steps to restore confidence in Zimbabwe's public finances and institutions, he told parliament. Chinamasa said revising the "indigenization" law would be one way to bring back foreign investment. The law, which requires Zimbabweans to hold a majority stake in any business, is blamed for driving away potential investors.