Zimbabwe’s government has eased restrictions on foreign ownership of companies listed on the local stock exchange, in an effort to stimulate an economic recovery.
Foreign investors will be allowed to own up to 49% of companies listed on the Zimbabwe Stock Exchange, following an announcement by the governor of the country’s central bank.
Delivering the Reserve Bank of Zimbabwe’s January monetary policy statement on 4 February, the bank’s governor, John Mangudya, said the limit on foreign ownership would be increased from the current threshold of 40%, while other measures would be introduced to stem the flow of foreign currency out of the country, improve the production of natural resources and tackle illicit activity.
According to the monetary policy statement, the 40% mark was reviewed and increased to 49% “in order to align the Exchange Control threshold of 40% to the indigenisation policy framework”.
The statement said the monetary policy was designed to: “Transform the economy through rebalancing it away from being a consumptive or supermarket economy to a productive one; and away from the high incidence of capital flight characterised by the externalisation of export sales proceeds to one that safeguards its hard earned foreign exchange resources. This is necessary in order to give impetus to effectively deal with the negative inflation (or deflation) environment besetting the economy.”
The bank also unveiled measures to tackle illicit financial flows, which drain money from government revenues; improve liquidity; reduced the cost of funding and improve productivity by enforcing the guidelines for lower interest rates; and enhancing gold and diamond production.
The report said: “Zimbabwe needs to plug the leakages of foreign exchange for the economy to undergo durable and robust transformation.”
However, the World Bank has forecast only 1.5% of growth for the country this year, thanks to a stagnating economy stifled by ongoing drought, which has affected the agricultural sector. Zimbabwe’s ‘liquidity crunch’ continues to cause problems, although the difficult economic sector has had the side benefit of stimulating its legal disputes market.
The new indigenisation policy framework was also unveiled by finance and economic development minister Patrick Chinamasa, and youth, indigenisation and economic empowerment minister Patrick Zhuwao. The ministers were previously believed to disagree over the plan, but presented a united front at the press conference.
The framework seeks “51% indigenisation” in the economy – among other measures, state-owned companies will acquire 51% of businesses that are involved in exploiting natural resources.
There are some glimmers of hope for the Zimbabwean economy, however, with recent legislation opening the door for further investment in transport infrastructure, which combined with the increased ownership stake available to foreign investors, may encourage some investment from overseas.
