HomeOpinionPitfalls of unguided indigenisation

Pitfalls of unguided indigenisation


Chris Goko

ZIMBABWE’S economic empowerment exercise, an often-contentious issue, has flip-flopped about a decade after it was set in motion by Africa Resources Ltd (ARL)’s acquisition of southern Shabanie-Mashava asbestos mines

from Turner & Newall.

As the country hurtles towards its 25th independence anniversary in April, debate over the successes and failure of this nascent, but crucial dispensation has once again surfaced on the back of continual failures in banking, mainly indigenous-owned entities.

Ironically, the country’s financial sector is one of the areas in which local businesspersons had seemingly excelled in the wake of deregulation of the industry by government in the mid-90s.
However, ugly charges of corruption have wracked the element of growth and success, with a number of founding shareholders of banks fleeing to foreign lands and some landing in jail.
And in the midst of mounting fears that Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono could be pursuing re-nationalisation of business, a closer analysis of the latest CFX Bank failure would provide evidence to assertions that a great deal of empowerment deals hinged on weak and patronage frameworks. There is justification in the CFX case to say some indigenous business owners were excessively greedy — by duping fellow Zimbabweans — and seemed to apply the unwritten principle that commerce, unlike government, has no obligation, not even moral, to apply best practice in earning money.

It is in that context of blighted black economic empowerment, that sections of Zimbabwe’s populace is delighted at the government-instigated banking shakeout, which it believes is the onset of fairness and restoration of prudent business conduct. A panicky minority, meanwhile, sees the anti-corruption crusade as an act of retribution by Gono and the government.

“One cannot expect the masses to admire economic empowerment and wealth-accumulation that was brazenly done at their disadvantage, and particularly huge amounts of money as in the CFX debacle,” said an analyst on Tuesday.
Part of the responsibility, he said, for the messy state of affairs in the indigenisation drive lies with the entrepreneurs themselves who “bribed their way into trouble”.

With the feeling of victimisation, some politicians and bad corporate elements have formed loose alliances, either railing against Gono for his own weaknesses or citing legislation, which is devoid of distinct official business functions and entrepreneurial concepts. Possible examples of patronage economics range from the Shabanie state takeover to the on again, off again platinum investments.

“Corrective measures in any form (in the Zimbabwean scenario) were always bound to bring conflict that has to be settled by force and not entirely by law,” added the analyst.
“It is dicey to look into history and perhaps one area, which required that element of scrutiny is the financial sector’s licensing regime.
“And in lieu of politicians hobnobbing with businesspeople, it is least surprising that the premise of Gono’s reform has been subjectively interpreted as a vengeful ploy to deliver private entities such as Shabanie and several banks into government-friendly hands. It compounds public sentiment,” he said. By implication, the analyst noted, government was also responsible for the chaos in indigenisation and its impact on economic performance.

While there may seem to be a preoccupation with banking whenever economic empowerment debate arises in Zimbabwe, its influence and that of big business on national development, and policies cannot be overemphasised.

It can also be noted that there is no other sector which witnessed such phenomenal growth or marked black-ownership as the financial sector.
In terms of manufacturing industry, there were no real big empowerment deals until five or six years ago when consortia — still linked to several indigenous banks — took over Murray & Roberts, Tedco, Tobacco Sales Floor, Zimbabwe Sugar Refineries and Zimplow to mention a few.
There are allegations that the business grouping received concessionary loans from indigenous banks to buy shareholding in listed companies. Some financial institutions which have closed shop were weighed down by non-performing loans advanced to cronies.

Some indigenous groups have gone a step further by buying into resource companies and these include Garmony Investments, which until recently had an interest in coal miner Hwange Colliery Company.

The most apt case of local empowerment groups which bought into mining involves Douglas Munatsi and Oliver Chidawu — key players at African Banking Corporation and investors in northern Zimbabwe nickel company Bindura Nickel Corporation. They form part of a broad pan-African investment company which took up resources titan Anglo American Corporation (Anglo)’s 52% stake in the local mining company.

Another black group, Mwana Africa consortium, led by Democratic Republic of Congo national Kalaa Mpinga, also made a huge statement when it bought into bullion producer Freda Rebecca, formerly owned by Ashanti of Ghana.
But surface analysis would conclude that Zimbabwe’s empowerment drive is fairly advanced, yet broadly it may turn out to be what South African President Thabo Mbeki calls “narrow empowerment” because only a few liquid individuals are benefiting from these empowerment initiatives.

Mbeki, a zealous pan-African and empowerment activist who is quite eager to improve his kinsmen’s lives, has been puzzled by Pretoria’s current economic empowerment model, dominated by Cyril Ramaphosa, Mzi Khumalo, Saki Macozoma, Tokyo Sexwale and lately Patrice Motsepe.
It is also in that vein the SA president, an idealist with a penchant for new dispensations such as the New Partnership for Africa’s Development, has sought to redraw the empowerment issue, saying the gains of SA’s empowerment process — carried out in just under 10 years — have not been filtering through to the “second economy”.
According to him, the second economy is the masses, who should benefit from mining and other big empowerment deals as well.
It is, therefore, in that spirit that Mbeki’s government has not been so keen on former top civil servant Andile Ngcaba’s 7 billion rand takeover of Thintana’s 15% stake in State-owned Telkom.

His rationale is that it is not only improper for five or seven people to benefit from the disposal of a key national asset, but also grey in that the financing is coming from the Public Investments Commission, pooling government pensions and other state-company earnings. Just as the Zimbabwe government had initially ruled on the 15% Zimbabwe Platinum Mines Ltd (Zimplats) empowerment subscription that it be taken by the National Investment Trust (NIT), SA is arguing that it would be more beneficial if broadly-based groups such as the Women’s Investment Portfolio — also interested in the Telkom share — were to take centre stage.
In essence, what Zimbabwe had done and now Mbeki, is a realisation that unguided empowerment, in other words enrichment of a few, has serious future implications and horrors reminiscent of the privatisation saga in modern-day Russia, where President Vladimir Putin is deposing oligarchs who acquired state assets for a song.

Zimbabwe has its fair share of examples similar to the Ngcaba/Telkom saga, where a connected few looted National Social Security Authority funds to buy private businesses and others covertly wriggled into public enterprises and asserted their authority under the guise of empowerment.
Had former Finance minister Simba Makoni not kept his head, Harare could have lost the profitable Astra Holdings group to narrow empowerment groups, particularly UkubambanaKubatana Investments.

Chemist Siziba, a founder of the Indigenous Business Development Centre (IBDC), says empowerment milestones in Zimbabwe have been posted and enhanced by good education and skills base, but material gain and achievement has suffered due to a number of reasons. An arch opponent of privatisation, Siziba says selfishness on the part of some individuals and those who should facilitate ample growth of locally-owned businesses and enterprise had eaten up the noble ideas of economic empowerment. The former Cosmos boss says it would be imperative for Zimbabwe to look across to Botswana, where state corporations efficiently mine key natural resources such as diamonds with competent partners such as De Beers and the proceeds from such operations ploughed into community projects.

Siziba, who emphasises that most indigenous projects were born out of individual effort and not state benevolence, says the NIT/Zimplats arrangement was “more than correct” to preserve natural resources and, therefore, the RBZ’s suggested reluctance to okay little-known NkululekoRusununguko’s 15% bid for the platinum miner falls within that thinking.

He feels the biggest letdown in Zimbabwe’s and indeed, the broader global platform’s empowerment policies is licensed business, which he said is subject to bribery and manoeuvring.
While there is an evident clash of ideologies between private business interests and regulatory authority advisors, many see everything wrong in cosmetic empowerment enabled through “selections of partners” as is the case with Khumalo’s 30% offer of Metallon Gold to Manyame Consortium, Motsepe’s Har-
mony investment and Ramaphosa’s buy into former Anglo companies.

A revisit of Khumalo’s 30% sale would show that he sold the stake for US$9 million and put in a clause where John Mkushi’s group would perpetually forfeit its dividends to make up for the US$8 million shortfall from its minute down payment.

Again, Zimbabwean indigenous consortia’s 15% buy into Zimplats was crafted in such a way that funders, in the form of Amalgamated Bank of South Africa and Stanbic Bank, would hold up to two-thirds of the shares on condition that they would release the “entire scrip allotment” upon full payment of the US$45 million loan.
It is known, in the meantime, that loan repayment would hinge on company performance and issues such as dynamism in the global economy.
It would make sense, therefore, that empowerment be seen in the model of big corporations such as Anglo expanding their outsourcing initiatives, as opposed to window-dressing equity partnership. Inevitably, what passes for “good and celebrated empowerment deals” in Zimbabwe and elsewhere in Africa may turn out to be less than that.

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