The Zimbabwean government has shown flexibility in implementing the Indigenization and Economic Empowerment Act by approving the acquisition of a controlling stake in one of its banks by two foreign investors.
The act, promulgated in 2007, prohibits foreigners from owning more than 49 percent of local investments. But the government had indicated from the onset that it would treat each investment case differently, with a possibility to bend the rules if need arose.
A German-based financial group, the African Development Corporation and KMG of Mauritius, recently bought a combined 54 percent equity in Zimbabwe's Premier Finance Group (PFG) in a deal worth 6 million U. S. dollars.
An indigenization and empowerment pressure group initially raised objections to the deal for undermining the Indigenization and Economic
Empowerment Act, but the group has since approved it after noting some positive elements.
"But after some deliberations with the PFG management, we realized that there are some sound principals of indigenization contained in the
agreement," said Supa Mandiwanzira, president of the Affirmative Action Group whose organization initially questioned the deal.
"There is an agreement that shareholders will buy back some shares within three to five years and considering that they exceeded (the maximum shareholding) with only five percent, we believe that is very achievable," he added.
However, Mandiwanzira urged the two foreign investors to honor their promise and cede part of their shareholding to locals.
Youth Development, Indigenization and Empowerment Minister Saviour Kasukuwere defended the transaction, saying it would boost the financial capacity of the nation.
"We will be positive on this one for the nation requires financial capacity," he was quoted as saying in the state- controlled Herald newspaper on Monday.
The minister said the deal was in the best interest of the financial services sector, currently in need of capital inflows.
PFG Chairman Sengi Mlambo said they considered empowerment of locals when they went into the deal.
According to the agreement between PFG management and the two investors, PFG would list on the Zimbabwe Stock Exchange in the next three
to five years.
Through public listing, foreign shareholders will reduce their stake by selling part of their equity to local investors.
If no listing takes place, part of the foreign shareholding would be sold to locals within the same period. The bank's management will also be dominated by locals.
The arrangement represents one of the few deals Zimbabwe has sealed in recent years since promulgation of the act.
The Zimbabwe National Chamber of Commerce applauded the transaction, saying it was in the interest of both Zimbabwe and investors.
It said it hoped the deal would open floodgates for foreign investors to come into Zimbabwe and help rebuild the country's economy that has been shattered by years of economic decline.
"We have always wanted a situation where investors can come in and have confidence to do business with us," ZNCC President Obert Sibanda told Xinhua.
"We believe the deal will create quite a lot of confidence among foreign investors."