Eric Bloch Column

Constructive empowerment needed

By Eric Bloch

FEW can credibly deny that the majority of the Zimbabwean population has never been economically empowered. Until shortly before Independence, most were

effectively barred from any substantive economic activity, other than employment as labour. The black population could not own land in rural areas, and therefore could only engage in agricultural activities, on a subsistence basis, on state-owned communal lands. In like vein, conduct of commercial and industrial operations in most urban areas, by blacks, was not permitted, save and except to some minimal extent in designated high-density areas which were the only urban in which blacks could reside, other than for domestic servants residing on employers’ properties.

Until the late 1950s, few blacks could receive secondary school education beyond Form II, let alone tertiary education, unless amongst the extraordinarily few who were able to access education outside the country. Even when the education constraints progressively eased, the majority could not fund tertiary education and, therefore, had no opportunity of entry into any economic activity founded upon tertiary skills. Moreover, it was exceptional in the extreme for blacks to be able to borrow working capital from the financial sector, in part because of pronounced racial prejudice, and in part due to being devoid of any substantial assets which could be offered as collateral security.

Very slowly, mainly during the latter part of the Rhodesian Unilateral Declaration of Independence (UDI) period of 1965 to 1980, there was some change in the enablement of black participation within the economy. The abhorrent, extremely discriminatory Land Apportionment Act (which should never have been enacted), was belatedly repealed, enabling blacks to engaged in self-owned agricultural operations, albeit still subject to severe working capital constraints in most instances, to establish commercial operations, and some other economic activities. A few forward-looking companies initiated share participation schemes and in-house executive training opportunities but, until after Independence, these were generally exceptions to the rule. After Independence, the constraints upon economic participation by blacks as prevailed in law wholly ceased, but an overwhelming majority could not avail themselves of the new environment, being without the necessary capital resources.

Over 26 years there have, of course, been notable exceptions. The majority of Zimbabwe’s banks and other financial institutions are significantly owned by blacks, as are many of the companies listed on the Zimbabwe Stock Exchange. There are numerous retail businesses, industries, transport enterprises, tourism operations, and other economically engaged entities that are now wholly, or substantially, black-owned or managed. There are thousands of blacks engaged in informal sector economic ventures. But of Zimbabwe’s estimated 11,4 million people, it is improbable that more than, at the most, 200 000 are economically-independent, and it could well be a markedly lesser number.

Some may challenge the credibility of that estimate, but as it is widely believed that about 80% of Zimbabweans live below the Poverty Datum Line (PDL), which would equate to about 9,1 million people, and as the remaining 2,3 million include workers, old aged, and children, even 200 000 economically-independent is potentially an overly-optimistic projection. Such wealth as has been created in black lands is not exclusively, but to a very major extent, in the hands of the politically hierarchy and the politically well-connected, but there is little spread across the populace of real economic empowerment.

Government has long undertaken to ensure meaningful economic empowerment, and to a minimal degree has taken some actions, including the establishment of the Small Enterprises Development Corporation (Sedco) and the National Investment Trust (NIT) and, somewhat more recently, the very necessary creation of the Ministry of Small & Medium Enterprises. However, that virtually sums up its effective steps towards economic empowerment of the black indigenous population. In contradistinction, government has so devastated the economy as did exist, including its essential agriculturally foundation, that the overwhelming majority of the population has never been subject to as much economic distress as is presently the case. As a result, belatedly sensitive to growing dissatisfaction and, therefore, its own potential insecurity, government is now talking more than ever of the need for “indigenisation”, meaning black economic empowerment. It is “better late than never”, but pointless if it is not pursued constructively and effectively.

Government is making three critical errors in its alleged policies towards economic empowerment. Firstly, it is placing great emphasis upon transferral of existing economic enterprise from non-blacks to blacks. When an economy is so emaciated that it cannot support even a material fraction of the population, the Robin Hood stance of “taking from the rich to give to the poor” does not enhance the economy, does not create employment or greater economic activity. It is surely more constructive and beneficial, and especially so in the medium to long-term, to stimulate, facilitate and motivate economic development, which can encompass black participation or entrepreneurship. A mere conversion of ownership, whether total or partial, does nothing towards economic recovery, which is Zimbabwe’s greatest need.

Secondly, government persists in a belief that if government owns any enterprise, in whole or in part, that represents black economic empowerment. That perception is founded upon the facts that government is black, and is in the main elected by blacks. But state-ownership does not accord any in the populace, other than perhaps a few highly governmentally favoured, any improvement in their economic circumstance, or status in life and, therefore, there is no genuine black economic empowerment. Currently, in pursuing the “indigenisation” of the mining sector, government is contemplating partial state-ownership, which can benefit none but government and its chosen few. Moreover, with a track record of gross mismanagement of most parastatals, there are no grounds to expect government to be any more effective in mining enterprises, and very understandably there
are extremely few who are desirous of being co-owners with government.

Of equal, or even greater, gravity is the inconsistency of government’s policy statements, destroying any possibility of any potential investors according any credibility to government, its statements, assurances, and alleged policies. The president has addressed parliament on a number of occasions on the issue of mining sector indigenisation, stating on at least two of such occasions that at least 51% of all mines of gold, strategic and previous metals will be acquired by the state and not less than 49% of all other mines would be similarly acquired. In March the Minister of Mines and Mining Development made a statement on the contemplated basis of such acquisitions, the terms and conditions being so inequitable as to alienate all in the mining sector, and destroy any investor confidence (not only in mining, but in any Zimbabwean enterprise, the international stance being that “First they took the land, now they’re taking the mines, and thereafter will take all else!”).

Almost immediately the president made placatory comments, suggestive that final policies were yet to be formulated, and would be just and equitable. In May, government issued an investment promotion brochure, detailing diverse investment opportunities. That document states that foreign investment in agriculture was restricted to 70% of equity, but foreigners could acquire up to 100% in other sector enterprises’ equity. Only two months later, the Ministry of Mines and Mining Development has issued a “Proposed Shareholding Scorecard for Foreign Investors in the Mining Sector”, restricting foreign investment to 49% of mining equity, save where up to an additional 11% can be held by virtue of “Investment Credits” gained by the investor funding the construction of dams, roads, clinics, schools and other infrastructure.

It is little wonder, therefore, that possible foreign investors are sceptical in the extreme as to government’s agenda, the genuineness of its undertakings and assurances, the security of any investment that would be made, and therefore the desirability of investment in Zimbabwe. Similarly, it is unsurprising that existing mining sector investors feel very insecure and ill-disposed to enhance their investments.

Government would achieve much more, benefiting the economy and the populace, if it would encourage and incentivise, instead of dictate, partial disinvestment within the mining sector, in favour of black investors, and would create a genuinely welcoming, conducive investment environment, key elements thereof being policy consistency, equity, reasonable deregulation, and unqualified adherence to undertakings given. Then black economic empowerment would be constructive and attainable.