HomeOpinionEmpowerment: Govt flip-flopping undoes economy

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IN 2007 Zimplats invited President Robert Mugabe to tour its Makwiro Platinum Mine at a time when the empowerment crusade was gathering momentum.

For the mining giant the visit was an opportunity to show off social investment –– roads and houses –– in and around the mine and get some time to engage with an unpredictable leader whose government has a habit of accusing foreign companies of salting away profits without investing in social services or threatening them with seizure.

The following day Mugabe praised Zimplats and Rio Tinto for investing back into the communities where they operate and promised government would cautiously implement its empowerment policy taking into account several factors, including empowerment credits.

In a bid to impress the government and head off threats of confiscations of their assets, mining companies were jostling to outdo each other in social spending.

Mine owners compiled an empowerment working paper where they agreed to Zimbabwean equity ownership, social and infrastructure spending, local procurement, assisting small scale miners, and to release ground or mineral rights.

Mugabe and then Mines minister Amos Midzi seemed to be in agreement with the Chamber of Mines’ proposals. Guided by that understanding and harmony of vision, the chamber proposed that a mining company “could also consider releasing some ground from its mining claims to the government or Zimbabwean investors. Any ground (mineral rights or claims) released in the past as part of a company’s indigenisation process shall also count towards its score in terms of this code.”

Such mineral reserves and “resources, or a similar code” would be used to calculate the deemed credit towards empowerment, the chamber said.

Zimplats gave up some of its platinum concessions worth over US$150 million in a bid to win 30% empowerment credits. By handing over the concessions, it was agreed that Zimplats had complied with empowerment policies. Essentially the move meant Zimplats had complied with empowerment and only needed to sell an additional 19%. Anglo also gave up its platinum claims in the Shurugwi area held by its subsidiary, Unki Mines.

Todal Mining, a joint venture between Zimbabwe Mining Development Corporation (ZMDC) and Camec, is now planning to mine at the Shurugwi concession.

The chamber argued that mining companies were often situated in remote areas where the level of infrastructure and other support to the Zimbabwean communities was limited saying there was need to encourage development.

“Mining companies shall be encouraged to make social and infrastructure investments particularly within the areas that they operate in, but not limited to these areas. Social and infrastructure expenditure by mining companies shall be converted into an equivalent empowerment score for the company,” the chamber says in its document.

The argument seemed reasonable then. Come implementation time, Mugabe is no longer impressed by promises of fancy infrastructure and schools in the various mining towns.

Even Reserve Bank of Zimbabwe (RBZ) chief Gideon Gono, sometimes a lone voice of reason in the midst of policy madness, cautioned government in 2007 on the need to address empowerment and attracting foreign direct investment. The following year, the Indigenisation Act was enacted.

“We (RBZ) fully support the noble objective of empowering the majority of Zimbabweans through the introduction of enabling statutes that expand wider involvement of the people in mainstream economy,” Gono said.

“Noble as this objective is, however, our well-considered advice to legislators and government in general is that a balance should be struck between the objectives of indigenisation and the need to attract foreign investment.”

Gono proposed that bigger projects worth US$500 million and above comply with empowerment laws after 11- 15 years. He said this would accord investors “escalated dividends that allow them to plough back their initial investment outlays”.

However, Gono’s views were ignored.

For investors with US$500 million, Gono had proposed that indigenous Zimbabweans have rights to at least 20% shareholding in or within the first five years, be possessing 45% equity in six to 10 years and then achieve 51% stakes in 11-15 years.

He also warned that there was need to ensure the programme did not only benefit fat cats and the politically connected few as happened in the land reform.

“We also call upon government to ensure that the empowerment drive is not derailed by a few well-connected cliques, some who are already making the most noise in ostensible support of this initiative, who would want to amass wealth to themselves in a starkly greedy but irresponsible manner, whilst the intended majority remain with nothing as happened in respect to government empowerment schemes such as the land reform programme,” Gono said.

At the height of affirmative action, Saviour Kasukuwere (now Indigenisation minister), Phillip Chiyangwa, Peter Pamire and others benefited immensely from empowerment deals buoyed by their activism credentials.

Across the border, ruling African National Congress officials –– Tokyo Sexwale, Cyril Ramaphosa, Mzilikazi Khumalo and others –– are some of the major beneficiaries of empowerment policies.

But the South African situation is different. Banks in South Africa could and can still fund empowerment deals.

Gono equated capital to a timid commodity that is always ready to jump ship at the slight inclination of attack “whether factual or perceived”.

After riding on the affirmative bandwagon, Kasukuwere is back again in a different jacket.

He has come up with indigenisation regulations which many fear will wreak havoc with the economy. Kasukuwere’s regulations demand: “Within the next five years from the date of operation these regulations, or within five years from the commencement of the business concerned, as the case may be, cede a controlling interest therein to indigenous Zimbabweans; unless, in order to achieve other socially or economically desirable objectives, a lesser share of indigenisation or a longer period within which to achieve it is justified.”

Last week, Kasukuwere told journalists that banks should lend more to locals or “ship out”. This was a new tone – a take it or leave it.

The Business Council of Zimbabwe want the word “cede” changed to “sell” arguing the former implies giving away shares.

Others within Zanu PF question the need for empowerment in some sectors. Tourism minister Walter Mzembi says over 80% of the country’s tourism sector is in the hands of blacks. The stock market, a good confidence yardstick, has been falling since the empowerment regulations were published.

While the indigenisation debate goes on, what is clear is that the government has no settled position on the issue despite sound advice from its own allies. It keeps on changing goal posts and the real casualty of that policy flip-flopping will be the economy. The tumbling of the stock market might be a harbinger of things to come –– only worse!


Chris Muronzi

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