Making economic empowerment work

By Alex Tawanda Magaisa

IN the 1990s Zimbabwe witnessed the emergence and growth of various initiatives aimed at economically empowering the previously marginalised black majority.


<
FONT face=”Verdana, Arial, Helvetica, sans-serif”>These developments saw the birth of organisations such as the Indigenous Business Development Centre (IBDC), the Affirmative Action group (AAG) and the Indigenous Business Women’s Organisation (IBWO) whose agenda was to help blacks and women become key players in the economy.


Ranging from dialogue to open confrontation, their agenda drew the attention of government which began to take various initiatives to support their cause.


A number of figures became synonymous with the fight for indigenisation. These include Ben Mucheche, Phillip Chiyangwa, Jane Mutasa and the late Peter Pamire.


While indigenisationwas generally accepted, the execution and outcomes raised more questions about its efficacy as far as the empowerment of the majority was concerned.


Despite its benign background, Black Economic Empowerment (Bee) has largely failed to achieve its objectives of empowering the majority. With the exception of a minority of individuals who were well-placed and took advantage of the policy, the majority remains on the margins.


I suggest an alternative model for making Bee work for the majority in the country.


Political businessmen


The notion of Bee is not unique to Zimbabwe. It is a version of the affirmative action policies that have been applied in different parts of the world where it became necessary to propel previously sidelined groups into positions where they could enjoy benefits enjoyed by the previously privileged groups.


It has been applied in countries such as the USA, Australia, South Africa and Canada with varying degrees of success. It also remains a highly-debated issue in various circles.


It is generally accepted that access to political independence is not enough to empower the majority but it is necessary to enable them to access and control the means of production. Clearly, Bee is not an event but a process that can be achieved in various ways.


The most common way is to create space for blacks in the business sector by reserving quotas of corporate ownership for them.


The Zimbabwean government used similar methods by setting standards that require foreign investors to share ownership with the local people. Similarly, in South Africa, the law requires that companies that wish to bid for government tenders must have a minimum stake owned by blacks.


The allocation of stakes fulfils the legal obligations while also satisfying the needs of political correctness.


Most major companies in SA and Zimbabwe have in the last decade been appointing black businesspersons onto their boards whilst also ceding some ownership to black partners.


Unfortunately, the process has so far enabled only a minority of individuals within the black communities. In a bid to present an acceptable profile, companies have been absorbing the same few individuals into their boards.

The emerging business moguls often get the support of the state through loans and guarantees to enable their participation in the major projects. The result has been the rise of a clique comprising of persons who have one leg in business and another in politics.


It is not surprising that those that have benefited from Bee are largely from the ruling class or alternatively try as much as possible to get into politics.

Politics is the easiest means of accessing and controlling economic power. In most cases the individuals at the head of the campaign for Bee become millionaires overnight.


Problems of bee


There are three key problems that have arisen as a result of the Bee policies:

*They have enabled a very limited class of blacks to access and accumulate wealth. It has enabled the transfer of wealth from the whites to a small portion of the population leaving the majority in whose name Bee is often carried out on the sidelines.


There emerges a deep gap between the new black elite and the rest of the population that creates conditions for sustained opposition and discontent among the majority. Unfortunately, the creation of this elite black middle class does not solve the colonial legacy – it only cements it except that the problem is no longer one defined by race but by class.


As Arthur Mutambara recently stated at the Confederation of Zimbabwe Industries (CZI) annual congress in Victoria Falls, the unequal distribution of wealth creates conditions for a social revolution. At some point, the majority will see beyond the colour barrier and realise that the real problems arise from the class divisions;


*The political businesspersons depend not so much on their business acumen or skill but their political contacts to succeed. This creates fertile ground for the proliferation of corrupt tendencies in business. The clamour for wealth and personal competition for the trappings of luxury only fuels the pursuit of selfish ends within the black middle class; and


With a few exceptions – most indigenous businesspersons are confined to the service industry. Even in major production industries such as mining and manufacturing, they largely perform marketing roles.


In the 1990s the financial sector was the most common route to penetrate the corporate world. There is nothing wrong with the service industry since a firm foundation in that sector could be a means of assisting others entering the productive sectors.


However, most blacks seemed to be keen to join the financial services industry to the detriment of productive sectors like agriculture, mining and manufacturing which call for more energy, capital injection, patience and technical skill.


Those who did, jumped onto sinking ships where they engaged in asset-stripping fuelled by the desire to make quick riches.


Alternative


In light of these and other shortcomings, it is suggested that alternative ways of empowering the majority be explored. The key is to move away from the current approach that centres on the individual or small group, to one that takes into account the wider community. They key question is to enquire into areas of collective interest for development purposes.


Addressing the keyaspects such as housing, clean water, sanitation, roads and electricity, etc are crucial to the development needs of communities in different parts of the country.


Most of these areas are largely left to the state but because of limited capacity and other shortfalls, it has not been able to deliver to most communities.


The idea of this alternative approach is to create instruments that enable communities to become stakeholders in companies that are involved in the exploitation of resources.


In theory, it would require the creation of Special Purpose Vehicles (SPVs) that are allocated stakes in companies on behalf of the community.

The basic idea is that the proceeds of the stake held by SPVs would be channelled to the development needs of the constituents for whom the SPV is created. It means that the stakes in companies are not parcelled out to individuals but through the SPV would be spread over a wider cross-section of the community.


As an example, one can apply it to the Matabeleland Zambezi Water Project (MZWP) Trust which has been raising funds and logistical support for the project drawing water from the Zambezi River to of Matabeleland. That huge project has the capacity to positively influence and fulfil the development needs of the millions of people of that drought-prone region.


In this case, instead of supporting a sole individual to become a key stakeholder in a gold mining project, why can’t the MZWP Trust be assisted to acquire that stake and use the revenues to fund the MZWP project?


The MZWP Trust can appoint individuals to represent the stakeholders on the corporate board. The creation of similar SPVs to hold stakes in different companies and cater for different projects and communities would go a long way towards transferring wealth to the majority compared to the present system which privileges the well-placed individuals.


This alternative approach may not solve all limitations of the current Bee policy but go some way towards mitigating the present effects which only create a small black middle class. It would in turn reduce the burden of provision of development services on the state.


Bee has so far not worked for the majority because the policy is too narrow and easily manipulated by a few individuals.


I have made a modest suggestion based on the use of SPVs that hold stakes and whose proceeds would be used to meet the development needs of communities. That way, the economic cake is spread across the nation. It is by no means a unique or faultless proposal, but one that is offered to get us thinking about alternative models to address the current shortcomings.


As Angloplats faces the requirement for 49% of its ownership to be indigenous, we must think seriously whether it should go to the same old hands or we can create mechanisms that enable a wider section to benefit and have control over the means of production.


*Alex Tawanda Magaisa is Baker & McKenzie Lecturer in Corporate & Commercial Law at the University of Nottingham. Contact:alex.magais@nottingham.ac.uk

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