• Divestment must happen in annual 25% tranches, with compliance plans submitted to the Ministry of Industry and Commerce
• The policy aims to deepen indigenous participation and retain economic value locally
• However, it risks include discouraging reinvestment, accelerating closures, and expanding informal sector activity

Harare - Zimbabwe has ordered foreign-owned businesses operating in certain designated sectors to divest at least 75% of their equity to indigenous Zimbabweans within three years, according to the latest Statutory Instrument  215 of 2925 (SI 215 of 2025) gazetted in December last year.

The 75% ownership requirement is intended to protect local enterprises, expand indigenous participation in the economy and ensure that a greater share of economic value generated in Zimbabwe remains in local hands, particularly in sectors where foreign dominance has historically crowded out small and medium-sized businesses.

''Foreign nationals operating in the reserved sector shall, within a period of three years, divest a minimum of seventy-five per centum (75%) of their equity to Zimbabwean citizens,'' reads the gazette.

Under the regulations, affected firms are required to cede ownership in minimum annual tranches of 25%, submit regularisation plans to the Ministry of Industry and Commerce, and restructure their operations to comply with a newly introduced sector-based reservation model. Failure to comply exposes businesses to licence suspension or cancellation.

The designated industries as fully or preferentially reserved for Zimbabweans  include passenger transport services, bakeries, barber shops and beauty salons, employment agencies, advertising and estate agencies, pharmaceutical retailing, borehole drilling, artisanal mining, clearing and customs services, and local arts and crafts marketing, among others.

In these sectors, foreign participation is either prohibited outright or permitted only under narrow exemptions, reflecting government’s intention to shield low-capital, employment-intensive industries from external competition and limited carve-outs exist for international brands.

The immediate implication is that many existing foreign operators particularly SMEs and diaspora-backed ventures must either restructure ownership, identify local partners with sufficient capital, or exit the market.

On the upside, foreign participation is not entirely excluded; however, foreign investors are allowed to operate only if they meet high investment and employment thresholds, effectively steering capital toward large-scale, long-term projects.

Retail and wholesale trade now require a minimum US$20 million investment and 200 employees, grain milling US$25 million and 50 employees, haulage and logistics US$10 million and 100 employees, and shipping and forwarding US$1 million and 20 employees.

These thresholds materially reshape market dynamics, crowding out smaller foreign traders while favouring well-capitalised firms capable of absorbing higher compliance costs. The model reflects a clear policy preference for scale, employment creation and capital depth over broad-based foreign participation.

Under Zimbabwe’s earlier indigenisation framework, the 51% indigenous ownership threshold functioned as a blanket requirement across most sectors, serving as the legal benchmark for local equity participation.

One of the most prominent examples was the Blanket Gold Mine, operated by Caledonia Mining Corporation, which in 2012 ceded a controlling 51% stake to indigenous Zimbabweans to comply with the Indigenisation and Economic Empowerment Act.

The equity was distributed among the National Indigenisation and Empowerment Fund, employee and community trusts, and private local investors.

However, following reforms to the indigenisation law in 2018, which relaxed the universal ownership requirement, Caledonia increased its stake to 64% in 2020, reducing indigenous ownership to 36%. Beyond Zimbabwe, the 51% threshold is widely used internationally as a standard benchmark for defining indigenous or local ownership in public procurement frameworks, including in Canada and Australia, where majority local control is required for businesses to qualify for government set-aside contracts.

SI 215 does not revive that universal threshold , instead, it introduces a sector-specific control regime, under which ownership requirements are tied directly to the perceived strategic and economic characteristics of each industry.

While the policy could deepen genuine indigenous participation and improve local value retention, the mandatory 75% divestment risks discouraging reinvestment, accelerating business closures or pushing activity into informality especially in retail, transport and services where margins are thin.

There is also a risk of capital diversion, with investors redirecting funds to regional markets perceived as more stable, amplifying perception risks beyond the directly affected sectors.

Zimbabwe’s new indigenisation and economic empowerment framework comes at a time when the domestic business environment is already severely strained by high taxes, rising wages, currency volatility, tight liquidity, and weak foreign investment.

One particularly distortionary levy is the Intermediated Money Transfer Tax (IMTT), set at 2 % for foreign currency electronic transactions and 1.5 % for local Zimbabwe Gold (ZiG) transactions, which effectively taxes everyday business payments and further increases operating costs alongside a 15.5 % standard VAT and other transaction levies.

This heavy tax burden makes formal enterprise less competitive relative to informal trading and further suppresses profitability, investment and formal employment.

The mandatory 75 % divestment requirement in designated sectors risks compounding these pressures. While aimed at deepening indigenous participation, forcing foreign investors to cede majority ownership or exit can discourage reinvestment, accelerate closures and push activity into informal or unregulated channels.

Foreign investors typically offer not just capital, but management expertise, technology transfer and jobs ,excluding or restricting them in key sectors can reduce these positive spillovers and shrink the tax base further. The three‑year compliance window for divestment also fuels uncertainty and strategic withdrawal by firms.

This policy risk is already playing out in the market where several foreign‑affiliated companies have scaled back or exited operations due to the hostile economic conditions.

Botswana‑based retailer Choppies exited its Zimbabwe operations, citing currency instability, high costs and a shift of customers to the informal sector, after incurring losses and finding the business no longer sustainable.

Global professional services firms Deloitte and PricewaterhouseCoopers (PwC) have pulled out, with local partners rebranding or establishing new practices in their place, while consumer goods multinational Unilever also reduced its presence.

Even locally headquartered retail groups like OK Zimbabwe have closed branches and restructured in response to declining sales and distorted exchange rates.

The cumulative effect of regulatory uncertainty, high taxation, weak foreign exchange and forced localisation makes Zimbabwe’s formal economy increasingly fragile.

 Unless the government adopts a more balanced approach that retains investment, streamlines taxes, and supports local capacity building while still enabling foreign participation, the outlook points toward continued contraction in formal sectors, more closures or exits, and a deeper shift toward informality.

This could undermine job creation for the indigenous Zimbabwean who are being ‘’protected’’ , shrink the tax base and erode investor confidence, ultimately running counter to the policy’s original goals of sustainable indigenous economic empowerment.

Equity Axis News