Zimbabwe Reviews Reserved Economic Sectors

As part of its indigenization drive, in 2008, the Zimbabwean government decided to reserve specific sectors of the economy for local entrepreneurs only, meaning locals could only have 100% ownership of businesses in these sectors, while the rest of the economic sectors could have 51% local ownership.

Why the government reserved specific economic sectors

The policy was carried out using a section of the Indigenisation and Economic Empowerment Act. The motivation was to reduce competition for Zimbabwean owned small businesses by restricting the entrance of usually better-resourced foreigners. The move was also designed to channel foreign direct investment into more strategic and resource-intensive sectors of the economy, which local Zimbabweans were not able to exploit.

The government was frustrated by foreigners coming into Zimbabwe to open small businesses. This did not fit its goal or media announcements of enormous investment coming into the country. Furthermore, foreigners were muscling out locals usually because they had better resources. This created animosity from local businesses as they lost money and sometimes had to shut down. The loss in business and employment went against the government's stated objective of indigenization, and economic freedom promised to the populace. 

Impact of reserve economic sector policy

The directive was to be carried out by all licensing authorities in the country. The foreign businesses that were already in those sectors could continue doing business, but they had to pay an empowerment levy.

Unfortunately, the indigenization drive harmed Zimbabwe's investment outlook. The larger Indigenisation and Economic Empowerment Act was deemed too blunt and unworkable. The Act was further pushed hard on blue-chip companies by eager politicians, and this created a bad investment environment. Eventually, investments dried up as the country was seen as a high risk.

The end of the reserved economic sectors policy

The reserved sector directive was scrapped as part of Zimbabwe's policy to open itself up to investment. It included the scrapping of the Indigenisation and Economic Empowerment Act, under which the reserved sectors directive was held.

The 12 reserved sectors were;

    • Transportation

    • Retail and wholesale trade

    • Barbershops, hairdressing, and beauty salons

    • Employment agencies

    • Estate agencies

    • Valet services

    • Grain milling

    • Bakeries

    • Tobacco grading and packaging

    • Advertising agencies

    • Provision of local arts and crafts and their marketing and distribution

    • Artisanal mining

The government continues to try and reform the Zimbabwean economy. Its success will primarily be based on attracting foreign direct investment while at the same time growing small indigenous businesses.

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