Comment: Expediency muddles empowerment debate

PRESIDENT Robert Mugabe’s statements on the indigenisation and empowerment regulations after touring tobacco auction floors on Wednesday have shown that debate on the proposals is likely to be lost in political grandstanding.

Cabinet agreed on Tuesday to suspend the regulations to give room for wider consultation arousing excitement on the market with the benchmark industrial index gaining 1,9%, the biggest gain in three weeks on the back of the news.

 

Even the diplomatic community saw sense in the suspension of the regulations that forced foreign companies capitalised above US$500 000 to cede a 51% stake, to allow for wider consultation.
German Ambassador to Zimbabwe Albrecht Conze said the suspension would allow for “unexcited discussion about the best methods for constructive empowerment which creates new wealth for Zimbabweans instead of destroying existing assets”.

In the midst of this excitement and sanity, Mugabe “clarified” the issue, saying the empowerment laws were there to stay and the changes would only be to improve them and not change the substance.
Who was Mugabe talking to? Was this an address to the farmers or is it the government’s position on the issue?

Mugabe’s address to the tobacco farmers was not significantly different from what was said about the suspension of the regulations as agreed by cabinet on Tuesday. What Mugabe did was rather to play to the gallery, choosing to further complicate the debate by failing to explain what he meant by “there will not be any nullification of the regulations, but they have to be improved… this will not necessarily be an issue of changing their substance.”

It is contradictory to say the regulations have been shelved to allow further consultations and at the same time emphasise that nothing would be done to change the substance.

Then why should there be consultations? Is it another way of just legitimising a policy that is meant to benefit a few by hoodwinking Zimbabweans and investors into debate where nothing would be changed?
Any policy cycle, if it is to address a problem, should be open to changes even in substance, what scholars call incrementalism, not this cast-in-stone approach.

Two issues have stood out since the announcement of the new empowerment regulations: the process and the substance. Many across the political divide have argued that if the implementation of the indigenisation regulations was to take a haphazard manner, reminiscent of the land reform, then it would damage the economy more than it would benefit a few fat cats with connections to the ruling elite.

While Youth Development, Indigenisation and Empowerment minister, Saviour Kasukuwere is adamant that this is the right time for such a policy, the simple question is where is the money to buy the stakes?
If a company is capitalised to the tune of US$500 000, anyone taking 51% has to fork out US$255 000, and if this is a policy aimed at benefiting Zimbabweans, how many would be able to raise so much in an economy that is characterised by a debilitating liquidity crunch?

Besides the process, questions have also been raised on the substance, especially the unhelpful one-size-fits-all approach. There are varying dynamics underlying business operations and to say every company should cede 51% without looking at the specific nature is a recipe for disaster.

Reserve Bank of Zimbabwe governor Gideon Gono in October 2007 — when the Indigenisation and Empowerment Bill was still before parliament — suggested a gradual approach to profiling indigenisation depending on the capital intensity and technology complexity. This could be an appropriate starting point.

The substance of the indigenisation regulations, as Mugabe said, is cast in stone, but the question is: What processes informed this?

Another question is why are these regulations targeted at a specific group of people who are considered not indigenous, raising suspicion that this could be another case of reverse racism. When critics of the current indigenisation regulations call for broad-based consultations, they are aware that the regulations, a product of an inner circle within the ruling elite, may be well meaning on paper but benefit only a few.

A broad-based consultation would empower the intended beneficiaries as they will be aware of what is at stake and at the same time give an ear to the investors who are likely to be affected by this radical policy change.

Top down policy formulation and implementation have never worked for the intended beneficiaries and in the absence of clear information, it is only the elite who will benefit this time around.

Comparisons can be drawn with Russia when it opened up its economy in the 1990s. Those who were well informed would move around collecting empowerment vouchers in exchange for drinks and other goods.
Only a few Russians — mostly former apparatchiks — benefited from the opening of the economy. Zimbabwe should draw lessons from the disastrous distortions that followed.

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