Mugabe’s new threat to SA firms

Plan to force firms to hand over 51% of their equity to Zanu-pf

NEWS that President Robert Mugabe will continue for a seventh term has left investors white in the face — not exactly a useful colour in Zimbabwe right now.

Mugabe will target the remaining 1 138 white- and foreign-owned companies left in the country, as well as local banks with foreign interests, to hand over 51% of their businesses to the Zanu-PF government.

Zanu-PF this week ran full-page advertisements in local papers saying that its crushing, more than twothirds, election win was an endorsement of its “indigenisation” plans that will see all foreign-owned companies forced to give up 51% of their equity to black Zimbabweans.

“Over the next five years, Zimbabwe is going to witness a unique wealth transfer model that will see ordinary people take charge of the economy,” the adverts read.

Saviour Kusukwere, one of Mugabe’s ministers, revealed that the country planned to seize 51% of foreign-owned mines — worth an estimated $7-billion — without any compensation.

The Zanu-PF government warned that mines that refused to surrender more than half of their assets would lose their licences.

This is likely to scare some big South African companies with assets in Zimbabwe that now stand to be partly expropriated, including Aquarius Platinum, Standard Bank, Old Mutual, cement company PPC and SABMiller which owns Delta, the country’s largest beverage supplier.

Dzika Dhana of Renaissance Capital in Harare said the country’s black empowerment policy, or “indigenisation”, had been part of Zimbabwean policy for three months before the election.

However, Dhana said that investors had hoped, before the election, that the policy would be dropped in a bid to increase foreign direct investment (FDI) into the country — regardless of which party came out on top.

FDI in Zimbabwe has dropped 76% compared with the same point last year. The country has managed to attract only $33-million in FDI in 2013, despite its wealth of resources. This is unfortunate as Zimbabwe managed to attract more FDI during the previous five years, growing from $52-million in 2008 to $400-million last year.

Dhana pointed out that Mugabe’s plan to take 51% of mines without compensation would go against the country’s laws. “Currently, we are working on the willing-seller, willingbuyer principle, which means the new Zanu-PF government would have to change the laws,” he said.

Over the next five years, Zimbabwe is going to witness a unique wealth transfer model

This would not be a difficult task as Zanu-PF won the election by 61%, giving it enough control to alter the country’s brand-new constitution that came into effect in April.

Zimplats, which is 87% owned by South Africa’s Impala Platinum, was previously offered $900-million for a 51% stake in its mines — but Mugabe’s newest plans would see them get not a cent. Implats refused to comment. The Zimbabwean Stock Exchange has taken quite a beating in the past week as those who can try to run.

On Monday, the first trading day after the announcement that Mugabe would continue his reign of 33 years, the market fell 11%. The next day it fell a further 2%, and then more than 1% a day up until Friday.

This represented the largest stock market drop since 2009, when the market came to a halt, and the country had to switch to the US dollar.