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Taking From Peter To Pay Paul?

Taking From Peter To Pay Paul?
  • PublishedDecember 2, 2011

Last February Zimbabwe launched an indigenisation and economic empowerment programme, which seeks to give a 51% stake in large foreign companies to “indigenous” Zimbabweans. But as, Tichaona Zindoga reports from Harare, nearly a year on the programme has not quite flown because of resistance from foreign companies and (not suprisingly) Prime Minister Tsvangirai’s MDC-T party.

Zimbabwe’s indigenisation and economic empowerment programme, through which the government seeks to give “indigenous” people majority stakes in big foreign-owned companies and the economy in general, has encountered a mixture of excitement, cynicism, and resistance.

Resistance has by far been the biggest threat because of fears that a few “fat cats” might end up as the main beneficiaries. Concerns have also been expressed that investors might develop cold feet and take their money elsewhere.

Still unresolved is how the cash-strapped “indigenous” people will pay for a 51% stake in the foreign companies as they will not be getting shares for free.

However, the programme was given a boost in October when community share ownership trusts were launched by the government to encourage the country’s major mining companies to release some $2bn to the communities in which they operate.

The mining giant Zimplats, a subsidiary of South Africa’s Impala Platinum, was the first to give equity to locals. Over the years, communities hosting mining companies have seen their resources exploited and their lands degraded but have had nothing in return. Zimplats offered a 10% shareholding to the Chegutu-Mhondoro-Ngezi-Zvimba Community Share Ownership Trust in the Mashonaland West province. The company also offered $10m to the community, which will be disbursed in the next three years. Twenty other mining companies will each invest between $100m and $150m in their respective communities. Proceeds from the equity will go into social and economic infrastructure.

Launching the Zimplats share ownership scheme, President Mugabe said “this happy event is evidence of the government’s movement towards implementing the policy of empowering our people so that they derive greater benefit from the resources of their land as espoused under the Indigenisation and Economic Empowerment Act,” passed in 2007.

The president told Zimplats’ CEO David Brown: “Go tell your shareholders that we do not intend to take over. Mugabe is not very much of a saint in some circles in South Africa. He is quite a devil in Europe and America. But we are only saying what is in Zimbabwe is what God gave us. It’s ours, and that is what Mugabe is saying.”

The president made it clear that foreign companies were free to come into Zimbabwe and form joint ventures with locals: “To make a fortune, come into the country with your equipment and join us. We like partnerships. You have your share and we have our share. In our own country we are owners of our natural resources, and that position must be respected in economic terms and indeed in political terms.”

The Ministry of Youth Development and Economic Empowerment, headed by the youthful minister, Saviour Kasukuwere, administers the Indigenisation and Economic Empowerment Act.

Apart from communities, the indigenisation programme will also benefit employees of large foreign-owned companies. Under the Employee Share Trusts, companies are required to set aside between 5 and 28% equity for their employees.

Already the beverage manufacturer Schweppes, the energy giants BP and Engen, and the jack-of-all trades, Old Mutual have launched programmes to empower their workers. On its part, the government has set up a Sovereign Wealth Fund to act as a passive investor and an underwriter to the indigenisation process. The Fund will also act as an “equaliser” to uplift communities which have no mining resources.

According to Minister Kasukuwere, all transactions on indigenisation will be transparent. “Each deal will be open and nothing will be done under the table,” he has assured the nation. “We want to ensure responsibility and transparency.”

In all, indigenisation will cover 12 “clusters”, including mining, manufacturing, financial services, agriculture and agro-processing, energy, transport and communications, ICT, construction, trade, arts and entertainment, education, sport, and services. The government has said that there will not be a one-size-fits-all approach. As such, indigenisation will be implemented on a sector-by-sector basis. So far, the banking sector, populated by a host of foreign-owned banks such as Barclays and Standard Chartered, has been treated with utmost sensitivity.

In August, when Kasukuwere threatened to cancel the licences of non-compliant banks and mining companies, Zimbabwe’s central bank governor Gideon Gono warned against “verbal gunpowder” and “irrational exuberance in these times of necessary soberness”.

“To this end,” Gono said, “tendencies towards firing [off] harmful verbal economic gunpowder must be minimised by all stakeholders in the interest of the economy.” According to him, “Any actions on our part which are read as precipitous or calamitous to the point of causing financial sector instability in the country or in the region, however justified, will not find favour with governors of central banks in the region, let alone the Reserve Bank of Zimbabwe”.

As it has turned out, the banking sector has been the most resistant to indigenisation. Kasukuwere has now intimated that he will focus more on “corrective behaviour”, and said he looked forward to foreign banks giving credit to locals. So far, the banks have not been very supportive of black businesses and farming.

However, critics of the programme such as Dr Eric Bloch, a white Zimbabwean economist, say it is on the implementation side that they differ with the exponents of indigenisation. Bloch concedes that indigenisation is necessary to eliminate poverty and to ensure a win-win situation in the economy, but he fears that it will lead to job losses, just as happened during the country’s land reform programme (which began in 2000) in which an estimated 300,000 workers lost their jobs. “No investor wants to take their money where there is no security and they are not guaranteed fair and reasonable treatment. Our problem is the 51% threshold,” Bloch says.

But indigenisation could well win or lose next year’s national elections. Already President Mugabe’s Zanu-PF party has been accused of using the programme as an election gimmick. But the party’s supporters say indigenisation should be seen in the same light as the land reform programme that benefitted hundreds of thousands of families previously condemned to arid land by the Rhodesian settlers.

However, Prime Minister Morgan Tsvangirai’s MDC-T party, which also opposed land reform, says it has developed a parallel programme that seeks to lure foreign investment and create jobs, instead of taking away 51% stakes in foreign-owned companies. “We are totally opposed to this [indigenisation] programme…Ours is a job plan. We cannot have a society where 90% of our children are not employed,” Tsvangirai said when announcing his plans.

“Our plan [will create] jobs by encouraging investment. Our plan is not to take from Peter to pay Paul,” Tsvangirai said. “We cannot have another situation like what happened with land reform, taking away from a few whites and giving to a few blacks.”

The debate continues.

Written By
New African

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