Eric Bloch: Death sentence for economy

GOVERNMENT (or, to be more specific, the Minister of Indigenisation and Economic Empowerment, undoubtedly instructed by his political masters) has enacted a demonic death sentence upon the Zimbabwean economy. 

In one fell swoop the positive initiatives of 2009 towards the long-awaited economic recovery have been nullified.

Instead, a lethal suicide pill has been force-fed into the economy, totally reversing the significant upturn that has been progressively developing over the past year.

With callous disregard for the distressed circumstances of more than 80% of Zimbabwe’s poverty-stricken population, the economy has now been set upon total decimation.

Zimbabwe’s people, with the exception of the very few, self-enriched and usually politically well-connected, have been sentenced to even more poverty, malnutrition and starvation.

The disastrous act of setting the Zimbabwean economy upon a path of total collapse was the enactment of Statutory Instrument 21 of 2010, comprising the Indigenisation and Economic Empowerment (General) Regulations, 2010.

That statutory instrument is as evil, racist and discriminatory and economically destructive as was the abominable Land Apportionment Act of 1930 — long before Zimbabwe’s Independence.

It is as unjust and pernicious as was legislation during the abysmal UDI era.  It is as iniquitous and contrary to the best interests of Zimbabwe and its people as was the ill-conceived, counter-effective Land Acquisition Act of two decades ago, devastatingly implemented since the turn of the century.

And yet again it is in blatant conflict with the diverse Bilateral Investment Promotion and Protection Agreements (Bippas).

For over 50 years this columnist has argued, urged and pressed for dynamic, positive, vigorous policies to achieve wide-ranging, extensive economic empowerment for the Zimbabwean people.

But the Zanu PF government has never done so.  Instead, it has continuously espoused a distorted version of the Robin Hood philosophy.

It has unequivocally pursued an intention of expropriating from the perceived rich, in order to render them poor, so as to enrich a selected few (generally unduly and unaccountably wealthy), whilst intensifying the poverty of the majority.

In pursuit of these objectives, and after many years of confrontational policy statements, parliament and the senate, in late 2007, passed the Indigenisation and Economic Empowerment Act, 2007.

Constitutionally belatedly, in 2008 the legislation was accorded presidential assent (coincidentally shortly before the March 2008 parliamentary and presidential election), and was gazetted on March 7 2008.

That legislation was a masterpiece of legislative vagary.

Save for the stated objective that government should “endeavour to secure that at least 51% of the shares of every public company and any other business shall be owned by indigenous Zimbabweans”, and shall prioritise sourcing of goods and services by government and the private sector from such businesses, the legislation to all intents and purposes vested a “blank cheque” in the hands of the minister.

It empowered him (virtually without limitation) to prescribe and enforce all such regulations as he deems fit to achieve the prescribed objective.  The minister has now encashed that blank cheque!

Within 45 day of March 1 2010, every business (and not, as misunderstood by some, only those with assets exceeding US$500 000) is obliged to lodge a Form of Notification of Extent of Indigenisation, and encompassing an Indigenisation Implementation Plan (ie by April 14 2010) with the minister, and any business commenced in the future must do likewise within 60 days of commencement of business.

That Indigenous Implementation Plan must be such as will result in not less than 51% of the controlling interests in the business vesting beneficially in indigenous Zimbabweans, save and except to such extent as the minister may agree that, for a period of time, a lesser percentage may apply (primarily determined having to the magnitude of investment, the extent of associated technology transfer, and the extent of the business’s contribution to the wellbeing of society).

The legislation defines “indigenous Zimbabwean” as being “any person who, before April 18 1980, was disadvantaged by unfair discrimination on the grounds of his or her race, and any descendant of such person, and includes any company, association, syndicate or partnership of which indigenous Zimbabweans form the majority of the members or hold the controlling interest”.

The regulations also reserve, against foreign investment, in favour of indigenous Zimbabweans, all operations in agriculture (primary production of food and cash crops), transportation services encompassing passenger buses, taxis and car hire, retail and wholesale trade, barber shops, hairdressing and beauty salons, employment agencies, estate agencies, valet services, grain milling, bakeries, tobacco grading and packaging, advertising agencies, milk processing, and provision of local arts and craft, and marketing and distribution thereof.

The immediate results of the Machiavellian enactment of the regulations was disastrous, bringing to an instantaneous halt Zimbabwe’s economic recovery, and knocking a very solid nail in the coffin of critical foreign direct investment and domestic investment.

It closed potential access to essential lines of credit to restore substance to the money market, recapitalise commerce and industry, and rehabilitate infrastructure.

It has fuelled the abrupt loss of all confidence within the business community, which is a prerequisite for economic wellbeing and growth, and has once again destroyed prospects of reconciliation and positive and constructive interaction with the international community.  Once again, Zimbabwe demonstrates complete contempt for Bippas.

No investors, providers of technology-transfer and of access to their markets, can realistically be expected to subjugate themselves to being junior partners, devoid of authority in the investment ventures.

With such an expectation in the hands of government, the markedly increased interest in investment that has progressively been developing has now been annihilated.

Already, within less than a fortnight of the gazetting of the economic death sentence, investors who had planned on hundreds of millions of dollars of investment, and upon employment creation for considerable numbers, have peremptorily withdrawn, and now seek opportunities elsewhere.

Concurrently, innumerable established enterprises are now seriously contemplating closure of their businesses, and disposal of the underlying assets.   Instead of employment creation, Zimbabwe now faces considerably increased unemployment.

Zimbabwe is now confronted with imminent economic contraction.  That which government has done oblivious to consequences, is more catastrophic than the Haitian earthquakes, the New Orleans hurricanes and typhoons, the tsunamis that devastated several Far East countries, and other natural devastating catastrophes.

Zimbabwe will soon rank as the world’s most impoverished country, in worse circumstances than Darfur!
Although past track record is not suggestive that government will do so, if it genuinely cares for Zimbabwe, instead of itself, it will repeal the regulations, providing convincing assurances of non-recurrence thereof, and will work rapidly to achieve genuine, beneficial, economic empowerment.

 

Eric Bloch

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