Zimbabwe’s new nationalisation law: the end of private ICT sector or a BEE-style programme?

Mergers, Acquisitions and Financial Results

Zimbabwean president Robert Mugabe's signature on the country's new nationalisation law has international business in a panic. However, South African companies with a Zimbabwean presence are staying on how they will be affected.

The new nationalisation law stipulates that at least 51% of a foreign company's shareholding should be locally-owned. While South African IT companies only have a small presence in the neighbouring country, they too will have re-negotiate local investments.

According to Dobek Pater, managing member of Africa Analysis Team, mining firms have more of a vested interest in Zimbabwe's new empowerment policy. However, companies such as MWeb and MultiChoice may be forced to hand over a percentage of their shares to local investors.

MultiChoice in Africa runs on a franchise model and says its African branches are all owned by locals living in those areas. The company says “should the need arise, the South African government will act to protect its citizens and its interests in any country where these are threatened”.

Pater says South African companies should have already made provision for identifying potential local investors. “However, the nationalism law amounts to daylight robbery and has been largely proved to fail the world over, as with the farm reclamations seen a few years ago.”

The impact to companies like MWeb and MultiChoice with African operations may be less harmful than expected. “In the greater scheme of their African – or global – operations it is going to have very little impact. It depends entirely on the operational business model they follow,” he says. “They may be operating through partners and distributors without de facto direct presence in Zimbabwe.”

According to Econometrix Treasury Management economist Russell Lamberti, there is no way to tell whether the legislation is a good or bad thing. “It is, however, coming from a devastating context: a ruined economy, a practically defunct monetary system and a virtually non-existent telecommunications infrastructure.”

He says this policy can hardly make the situation in the struggling country any worse. “For foreign investment perspective, the law is coming from a government that has previously proved itself incompetent, that can't be a good thing.”

Several economic and business analysts have stopped watching the situation, saying it is no longer an area worth looking at.

ITWeb tried to interview companies that appear to have Zimbabwean operations; however, several denied the fact and would not disclose when or why they left the country. Others, such as MWeb, with confirmed operations, did not respond by the time of publication.

A large organisation, with an IT presence in Zimbabwe, agreed to comment, provided it remained anonymous for various reasons. “I understand why many companies are not discussing the issue – it is particularly sensitive,” says a spokesman from the firm.

However, the company says the legislation is being taken well by the man-on-the-ground. “I don't see the nationalisation law as a bad thing. It is in effect another empowerment policy. The panic stirred in many of the international companies and the media is definitely fuelled by the fact that it is coming from Robert Mugabe.”

According to the spokesperson, Zimbabwe has a mass of underutilised ICT skills that could be used to the benefit of the country. “They are the ones building software in international companies and being innovative, why not allow them to have an opportunity locally?”

After a general media frenzy lambasting the law, Zimbabwean government responded saying it will not force black partners on foreign companies and not all these firms would be forced to sell a majority stake to black Zimbabweans.

The Zimbabwean minister for indigenisation and empowerment is expected to prescribe the levels of employment and investment capital that needs to be met by international organisations.