HomeCommentEditor’s Memo: Zimplats grab may be a pyrrhic victory

Constitution process full of loopholes –– analysts

The move is likely to send shivers down the spines of foreign-owned companies currently under intense pressure to comply with the controversial indigenisation and empowerment policies which have resulted in massive capital flight, denting economic recovery and fuelling the current liquidity crunch.

Of course most companies are likely to stay on, as we are seeing in other parts of the world where resource nationalism is gaining ground, but new investors might keep away and economies suffer eventually.

After resisting threats of seizure or nationalisation, Implats ultimately yielded this week to the sustained campaign to force foreign-owned companies to give up their majority shareholding to the bankrupt, state-run National Indigenisation and Economic Empowerment Fund.

The deal may effectively amount to seizure because local shareholders, including the broke state fund, are likely to fail or refuse to pay for their equities.
Most people agree the principle of indigenisation — now fuelled by the winds of resource nationalism sweeping across different countries — is good, but the approach is bad.

This is what many said about land reform and were vindicated. The same thing might happen again unless government learns from its mistakes and wises up a bit.

Resource nationalism is a rising phenomenon in which governments of countries with vast reserves of natural resources are trying to gain greater economic benefit.

Whether it is in Zimbabwe, Central Africa, South East Asia, Russia or Mongolia, global mining companies are being forced to play by the rules of impatient governments, some well-intentioned and others not.

As the case of Zimplats clearly demonstrates, the notion that powerful multinational companies are able to resist expropriation is a myth. It is true in any country governments are sovereign and companies are subject, but then there are other factors that come into play.

The trouble with the indeginsation policy in Zimbabwe is not so much that the idea is bad but the motive and credibility of those behind it. In this case, Zanu PF’s agenda is to use indigenisation as a campaign tool; hence this has now become partisan and damaging.

It would have been much better if this programme was being driven by an ethical and purposeful leadership, charting the way forward on economic transformation. However, a bunch of corrupt and incompetent politicians who have demonstrated over the past three decades that they have no clue on how to run a modern economy are in charge — fumbling and looting.

Just like land reform, indigenisation may end up as a mere perversion of authority to serve party-political interests and parochial ends such as self-enrichment and tyranny.

On Zimplats, there can’t be any camouflage: It’s clear expropriation or at least something very close to it. This will almost certainly embolden and intensify calls for nationalisation — which has failed everywhere with disastrous consequences not just in Zimbabwe, but also across the region.
By entertaining the failed idea of nationalisation, however remotely, Zimbabwe, which suffered a decade of cumulative decline characterised by an economic meltdown and hyperinflation, may be inviting trouble again.

There is a downside to resource nationalism.  It carries serious risks, including that of outright nationalisation and expropriation as we are witnessing in Zimbabwe and we saw in moves against gold and oil industries by President Hugo Chávez in Venezuela; export freezes for geopolitical reasons, as enacted by Iran; or more commonly increases in taxes on revenues such as those seen in Australia and in the UK against energy companies operating in the North Sea.

Indonesia’s recent decision to shut the door on foreign control of its mines has gone down badly with global miners but none are yet threatening to quit the country.

The truth, as we saw in the case of Zimplats, is that mining companies are getting increasingly squeezed but are hanging in there because they no longer have any easy investment destinations to turn to, although this crusade might end up being a pyrrhic victory. The Zimplats story is likely to end that way.

 

dumisani@zimind.co.zw

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