By Valentina Pasquali
After targeting the lucrative mining sector, Zimbabwe's indigenization minister Saviour Kasukuwere is now ramping up pressure on foreign banks operating in the country to hand over 51% of their shareholdings to indigenous Zimbabweans as part of a controversial government program.
Kasukuwere stands firm on unpopular indigenization policy
Photo Credit: REUTERS/SIPHIWE SIBEKO
"Many experts view the indigenization policy as little more than a campaign of expropriation and rent-seeking," says Anne Fruhauf, an analyst with the Eurasia Group. The framework of the program is often criticized as opaque and too easy to manipulate in a way that serves private interests.
Foreign banks in Zimbabwe, which include Barclays, Stanbic, Standard Chartered and BancABC, have said they are willing to comply but have stalled attempts at moving the program forward, in the hope that the politics behind it might change. "The banking sector will probably follow a similar approach as other foreign-owned businesses here: Maintain operations (and comply with indigenization thresholds) but no significant investment will be forthcoming," says Thea Fourie, an economist with IHS-Global Insight.
If the indigenization of banks were to be fully carried out, many fear it would be another blow to the country's financial sector, which has already been hit by hyperinflation and dollarization. As a result, the Zimbabwean economy as a whole would also suffer.
The market has had a hard time digesting this initiative. "The Zimbabwe Stock Exchange has been on a downward spiral for the past few years, hampered by the negative connotation of these policies," Fourie says. As for the future, she adds: "The biggest constraint to the economy will be lackluster investment spending, a crucial ingredient to increasing the country's growth and addressing bottlenecks on the production side."
Even officials within Zimbabwe, including central bank governor Gideon Gono, oppose the indigenization program. They support a gradual approach, saying that the country's banking sector is already indigenized enough. In a sign of divisions within the ruling coalition, finance minister Tendai Biti has also made his disagreement with Kasukuwere known. But the indigenization minister has a history of standing up to higher-ranking government officials. "Far from incompetent, he is an extremely skilled political operator and has defended his agenda against opposition, including senior figures within his own party," says Fruhauf.