Investors Should Not Fear Controversial Zimbabwe Law: Minister
Zimbabwe's controversial indigenization policy, which requires foreign firms to transfer 51 percent of the assets they hold in Zimbabwe to local companies, should not be a concern for foreign investors because the government will be flexible in implementing the measure, the country's Minister of Economic Planning and Investment Promotion said on Wednesday.
Speaking to CNBC Asia's"Squawk Box",Tapiwa Mashakada said that while Zimbabwe is encouraging local participation in joint ventures with foreign investors, the government would be "very flexible" and could revisit thresholds for investment if it is deemed to be in a strategic or critical sector of the economy.
The comments come as Zimbabwe tries to soothe foreign investors who are growing more concerned about the implications of the indigenization policy for foreign investment in Zimbabwe, especially in the mining sector.
"The policy is very flexible, investors need not fear, there's no nationalization taking place, there will be no appropriation of private assets," he said.
Foreign direct investment (FDI) is crucial to the economy which is slowing after 2 years of rapid growth. The International Monetary Fund expects Zimbabwe's economy to grow 5 percent this year, a sharp slowdown from growth of 9.4 percent in 2011, and 9.6 percent in 2010.
According to the United Nations Development Program World Investment Report 2012, foreign direct investment in Zimbabwe more than doubled to
$387 million last year from $166 million in 2010, but remains well below levels seen in other African states.
Mashakada dismissed concerns about the level of foreign investment in Zimbabwe, saying that foreign money continues to flow into the country.
"Although our FDI has been very low, it's been trickling into the country... we have an open door policy to FDI from all four corners of the globe," he said.
The IMF, which visits Zimbabwe next month to assess the country's progress, has warned that the country's debt overhang is a barrier to growth and its medium-term financial sustainability.
Zimbabwe, which is recovering from a decade of recession and hyperinflation, has racked up a massive external debt burden which the IMF estimates stood at $10.7 billion, or 113 percent of GDP at the end of 2011, of which 67 percent is in arrears.
Mashakada told CNBC that Zimbabwe is looking to engage its international creditors to help find a solution to the problem.
"Zimbabwe has developed a comprehensive debt and arrears clearance strategy to re-engage the international community with a view to retire our debt, to cause the rescheduling of our debt, and if need be the cancellation of our debt," he said.