Sunday Times STLive By ZOLI MANGENA, 2010-11-07

State assets hurt by BEE

Listed state-owned companies and enterprises in which government has a significant shareholding have been hard hit by President Robert Mugabe's controversial indigenisation law, which will be regazetted this month after being withdrawn for panelbeating.

A report compiled last month by the State Enterprises Restructuring Agency (Sera), which falls under the Ministry of State Enterprises and Parastatals, says about 10 listed companies in which government has huge interests were affected by the indigenisation legislation, which was wreaking havoc in the economy, particularly in the stock and financial markets.

Some of the listed companies in which government has significant interests include: Astra Industries, Cairns Holdings, CBZ Holdings, Hwange Colliery, Rainbow Tourism Group, Tractive Power Holdings, Zimre Holdings and newspaper group, Zimpapers.

The SERA report says there was need to clarify and amend the indigenisation law to reassure investors and to restore confidence in the economy. It also says sorting out the indigenisation regulations was particularly necessary to bring back confidence in the stock and financial markets.

"The market value of government portfolio in listed companies closed the third quarter at $55997.124 from a $46468.299 recorded at the close of the second quarter. This increase in value is wholly attributed to a surge by the Hwange Colliery Company counter, which added an impressive $12835 634.22 to close the third quarter at $27 022 387.20," the report says.

"However, the rest of the counters in the portfolio recorded losses, but their combined losses were outweighed by the gains in Hwange counter. The downward movement in the rest of government's portfolio mirrored events on the local bourse, where bearish sentiments have been sustained into the third quarter running."

The Ministry of State Enterprises prepares quarterly reports on the performance of share prices of listed companies in which government has some shareholding as part of its mandate to monitor the performance of state-owned enterprises. The current report is for the third quarter, which covers the period from July 1 to September 30. The report says the widely criticised indigensation laws have had a negative impact on the economy, mainly the stock market.

"Activity on the local bourse has remained subdued due to a number of challenges faced by the economy. The challenges have been attributed to lack of liquidity, prohibitive lending rates by banks, low investor confidence due to perceived country risk, low incomes and lack of lines of credit.

"Lending capacity of banks is not likely to immediately improve due to other considerations, including the need to meet minimum capital thresholds by commercial banks, building societies and asset management companies," the report says.

Zimbabwe's parliament passed the Indigenisation and Economic Empowerment Act in 2007, although the law formally came into operation in April 2008. The Act was reinforced by the controversial indigenisation and economic empowerment general regulations, which were published in March.

The regulations were later withdrawn for panel-beating following complaints by political, business and the diplomatic community, which said they amounted to a back-door attempt at nationalisation and expropriation of foreign-owned companies.

Youth Development, Indigenisation and Economic Empowerment Minister Saviour Kasukuwere told an investment conference on Zimbabwe at Sandton, Johannesburg, this week the new regulations would be published to restore certainty in the economy.

The regulations demand that foreign-owned companies worth over $500 000 must sell 51% of their shareholdings to indigenous Zimbabweans.