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Eric Bloch: Indigenisation at Expense of Empowerment

AT a Zimbabwean investment appraisal summit last week, the former Indigenisation and Economic Empowerment minister Munyaradzi Mangwana, addressed a gathering of influential potential foreign investors contemplating investment in Zimbabwe.

In doing so, he reiterated statements made previously, and at the same event, diverse other speakers from within the Zimbabwean political environment, on the critical need for substantive Foreign Direct Investment (FDI), as one of the prerequisites for a substantive economic recovery.   
The “inclusive” government has, over recent months, been very emphatic that one of the most essential catalysts of Zimbabwe’s muchneeded, very long overdue, economic recovery is that it attracts significant foreign investment, concurrently with extensive domestic investment.  Such investment is desperately required as a source of employment generation, technology, transport, foreign exchange inflows (by way of investment and export proceeds), downstream economic growth, and fiscal inflows, in addition to diverse other positive economic yields.  
However, concurrently, Mangwana also emphasised that an absolute requirement for Zimbabwe is that there be meaningful economic empowerment for a significant portion of the Zimbabwean population, most of whom have been economically marginalised for generations, and that implicit in achieving that objective is that there be emphatic “indigenisation” of the Zimbabwean economy.  He was especially qualified to address this key policy issue for he had, whilst in office as minister, been  the primary architect of Zimbabwe’s Indigenisation and Economic Empowerment Act, which legislation was enactmented by parliament and Senate in 2007, and then belatedly bulldozed through Presidential Assent and enactment very shortly before the 2008 Presidential and Parliamentary elections.
Almost without exception, his audience readily accepted and agreed the need for indigenisation and economic empowerment as an essential element of Zimbabwean society and its economy.  Not only is a vigorous pursuit of these objectives and indisputable need for substantial and ongoing economic development, growth and wellbeing, and very necessary as a measure to eradicate progressively the inordinate poverty that affects the majority of Zimbabweans, but they are also necessary on grounds of morality and justice, for the economic constraints and hindrances that impeded most Zimbabweans for a century or more must become history, reversed and remedied. But doing so should not (Nay, must not!) be in ways that :
lFail to attain real economic recovery, merely benefiting the poor ;
lAre as unjust, immoral, unequitable, inhumane, and economically disastrous as were the indigenisation and economic empowerment barriers of the past;
lRender Zimbabwe an unattractive investment destination, thereby discouraging and alienating the much –– needed FDI, and precluding attainment of the considerable benefits which would flow from FDI.
Mangwana emphasised that it is Zimbabwe’s right to control its own economy, instead of such control being in the hands of non-Zimbabweans.  It cannot be credibly denied that any and every country’s rights of sovereignty include economic control, but such control must be practical and realistic, nationally beneficial, and compliant with internationally accepted norms.  Economic control does not require domination.  It requires fair and constructive legislation, and implementation thereof, to protect national interests of security, of moral and health wellbeing, to ensure compliance with law and good economic practice. For example legislation and enforcement should contain corruption, labour abuse, and compliance with taxation and like laws).
However, the currently prevailing Indigenisation and Economic Empowerment Act seeks to do far more than that.  It prescribes that not less than 51% of all economic entities, all businesses, all enterprises, must be owned by indigenous Zimbabweans. Thus, any foreign investor, and any Zimbabwean resident who is not a Zimbabwean citizen — even if permanently resident — is required to be subordinated to one or more indigenous Zimbabwean co-investors.  Effectively, therefore they are told that their investment is not as a partner, as equitable joint venture participation.  Instead they are implicitly expected to provide investment wealth, expertise, access to markets, usage of intellectual properties, and so forth, whilst being wholly or substantially subjected to others controlling and directing the investments and their operations.  Admittedly, Mangwana did disclose that exemptions from the 51% rule can be granted by the responsible minister, although he intimated that such exemptions would not be in imperpetuity, but only for such periods of time as he determines be it three, five, 10 or 15 years.
Unsurprisingly, these advices did not inspire the potential investors to dig rapidly into their wallets and embark upon Zimbabwean investment. Instead, they were disconcerted, discouraged, and reserved as to the desirability or otherwise of progressing any such investment.  All were apparently very receptive to participative investment between themselves and appropriate Zimbabwean co-investors, with equitable pro rata investment of capital, skills and other resources, but not to being compelled to be silent, dominated, junior partners. There was also a very great awareness of the magnitude of disparity between Zimbabwe’s economic empowerment and indigenisation intents and those of South Africa –– with its Black Economic Empowerment (BEE) policies –– those of Zambia –– with its Citizens Economic Empowerment (CEE) policies –– and those of innumerable countries in Africa, Asia, South America, and Eastern Europe.    
The concerns of possible investors are exacerbated and intensified by the magnitude of the generalities, instead of specifics, contained in the legislation.
To all intents and purposes other than establishing an Indigenisation and Economic Empowerment Investment fund, all that the legislation presents is the obligation for Zimbabwean majority ownership of everything.  Beyond that, the legislation gives the responsible minister a virtual “blank cheque” to dictate by statutory instrument, whatever he may from time to time deem fit in order to achieve the legislation’s objectives. This intensifies further the sense of insecurity for non-indigenous investors.


Eric Bloch

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