Indigenization and Economic Empowerment Bill

On March 9, 2008, Zimbabwe's President, Robert Mugabe signed the Indigenization and Economic Empowerment Bill into law. The bill was passed through parliament in September of 2007 by President Mugabe’s party, Zimbabwe African National Union – Patriotic Front (ZANU-PF), in spite of resistance by the opposition party, Movement for Democratic Change (MDC).

Description

The law will give Zimbabweans the right to take over and control many foreign owned companies in Zimbabwe. Specifically, over 50 percent of all the businesses in the country will be transferred into local black African hands. The bill defines an indigenous Zimbabwean as “any person who before the 18th of April 1980 was disadvantaged by unfair discrimination on the grounds of his or her race, and any descendant of such person.”"Blackening the Economy." The Economist. 13 Sep. 2007. 29 Apr. 2008 http://www.economist.com/world/africa/displaystory.cfm?story_id=9804332.]

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.Fact|date=May 2008 The minister for indigenization and empowerment would have the power to allow some companies to be exempt of the transfer law for some time. This is not a new idea because there have been proposals for similar transfer actions, but have all come up fruitless.Fact|date=May 2008 The Zimbabwean government has promised the foreign owned companies that are soon to be taken over that authorities would help the businesses set timetables for the transfer of business shares to local black Zimbabweans. Even before the bill became law, it has had repercussions on investors and foreign companies such as Orascom Telecom, a mobile phone company.Clarifyme|date=May 2008

Context

President Mugabe administration had already redistributed the commercial farms owned by non-African farmers to poor native Zimbabweans. This policy ended up chasing some white farmers out of the country, leading to a lack of any new investment and a huge decline in farm output.Fact|date=May 2008 In a short time, Zimbabwe went from a net exporter of food to a net importer. This led to a rise in food prices because less food was being grown and harvested. Because the prices of food were too high for most people to afford, the president then set price controls on many products, discouraging production of the products. Many of these same items were available on the black market which led to an increasing inflation rate.Schiller, Bradley R. "Zimbabwe's Economic Collapse. The Economy Today: textbook supplement". McGraw Hill, 2007. page numbers???]

Impact

After details of the law became public:
*The company Heinz is said to be closing operations in Zimbabwe.Fact|date=May 2008
*Old Mutual, a financial institution, sold 20 percent of its company in Zimbabwe to local staff.Fact|date=May 2008

Criticisms

The MDC had claimed that the bill was simply a ploy by Mugabe’s parties to win votes in the elections. Other critics argued that the bill would only bring money to a few elite Zimbabweans instead of the mass amounts of impoverished locals that were promised to benefit from the bill.citation|last1=Bosch| first1= Marius|first2= Matthew |last2=Jones |chapter=Mugabe Approves Zimbabwe Nationalization Law | title=Reuters|date= March 9, 2008 |url= http://www.reuters.com/article/businessNews/idUSL0930161120080309 |accessdate=2008-05-01.] Many economists worry that this new law will be the end of Zimbabwe's already rapidly failing economy.Fact|date=May 2008 Zimbabwe currently has the world’s highest inflation rate at more than 165,000 per cent.citation|chapter=Morgan Beats Mugabe But Runoff Looms| url=http://news.sky.com/skynews/article/0,,30200-1314580,00.html |title=Sky News |date=April 30, 2008 |accessdate=2008-05-01.] Many Zimbabweans worry that the Indigenization and Economic Empowerment Bill is too late to do anything at this point.Fact|date=May 2008 Zimbabwe once had many prosperous growth centers, shopping centers built in rural areas as a way to bring in urban facilities to people who would have had to travel miles to get to a city. Now, these rural areas have completed regressed back to poverty, because the government has no funds to take care of the centers or build new ones. As the years went by fewer and fewer people were buying things because their purchasing power was being worn away by inflation.Fact|date=May 2008 Rural construction was becoming less of a necessity and more of a luxury. Shops used to be fully stocked with many commodities, but today shelves are sparsely filled or in some case completely bare. ["Zimbabwe: 'Economic Weather' Closes Down Rural Areas." IRIN. 30 Oct. 2007. UN Office for the Coordination of Humanitarian Affairs. 28 Apr. 2008 .]

Conclusion

Because of recent election disputes, between the incumbent President Mugabe and the opposition leader, Morgan Tsvangirai, concerns for this new law will be put aside until the threats of post-election violence have subsided.Fact|date=May 2008

Notes