Eric Bloch Column: Empowerment threatens economy

THE Minister of Youth Development, Indeginisation and Economic Empowerment, Saviour Kasukuwere, continues his determined pursuit to destroy Zimbabwe’s economy.

He does so with absolute disregard for irrefutable facts and authoritative advice he has been given. He is fixated that policies he conceived prior to his ministerial appointment are incontrovertibly correct and immutable. He is convinced that the policies must be rigidly implemented without modification or variation, and that any criticism of the policies is malicious, baseless and racialistic.
For more than a century, untenable racial discrimination prevailed in the economy, and that radical transformation was needed to accord most Zimbabweans the opportunity to be economically empowered. However, no one can credibly contend that such discriminatory practices should be eliminated and reversed by pursuit of alternative discriminatory practices against those whose ancestors were guilty of such practices in the past.

 

This creates not only reverse forms of discrimination, but also alienates critical international investment, acquisition of state-of-the-art technology, access to essential funding and to substantial foreign markets. By myopically implementing racial policies as those applied in the pre-Independence era, meaningful economic empowerment of the majority of Zimbabweans has not only been minuscule, but poverty has been intensified and the country’s economic recovery further retarded.
The devastation of the economy created by government in general, and by Kasukuwere in particular, since the enactment of the indigenisation legislation by parliament in 2007, but only belatedly receiving presidential assent in March 2008, has been immense. Most foreign investment, attendant technology transfer and access to international markets ceased, unemployment increased and economic development receded. However, such masochistic consequences have not satisfied Kasukuwere. On June 29 he prescribed yet further economic destruction.
Spuriously alleging authority to do so by citing Section 5(4) of the Indigenisation and Economic Empowerment (General) Regulations; 2010, Kasukuwere initiated the gazetting of “prescribed” regulations in respect of the finance, tourism, education and sport, arts, entertainment and culture, engineering and construction, energy, services, telecommunications, transport and motor industry sectors. The regulations sought to prescribe the minimum net asset values above which the relevant businesses would be required to comply with the principal regulations contained in the Indigenisation and Economic Empowerment Act, the minimum percentage shareholdings in such businesses that must be vested in indigenous shareholders, and the maximum period of time within which the indigenisation of such investments must be implemented.
In so prescribing, Kasukuwere had no qualms at interpreting the powers vested in him by the legislation with contemptuous disregard for the realities of such powers and their limitations. There was no consideration of the negative consequences to the economy and therefore, to the well-being of Zimbabweans, that would be inevitable. Many experienced and highly qualified legal practitioners have already stated convincingly that the minister has availed himself of powers with which he is not vested by parliament and the indigenisation legislation, and has irrefutably acted in breach of the constitution.
The consequential damage is immense. The financial sector in general, and the banking sector in particular, have been weakened for more than four years. The sector was emasculated in 2008 when Zimbabwe experienced the greatest hyperinflation ever. Almost all banks became highly undercapitalised, depositors were recurrently unable to effect timeous withdrawal of their funds, and public confidence in the banks was so dissipated that businesses in general and the populace at large lost confidence in them. The consequential lack of deposits further eroded the stability and efficacy of the banks, with several being liquidated and others placed under curatorship (albeit the ills of some of the banks were exacerbated and intensified by gross mismanagement).
Recovery of the banking sector is a prerequisite for significant recovery of Zimbabwe’s troubled economy, over and above numerous other developments. Foremost in achieving the sector’s recovery are:

 

  • Recapitalisation of several under-capitalised banks which necessitates major investment. However, most of the indigenous population does not have sufficient resources to effect such investment, let alone the will to do so. But Kasukuwere’s determination to vest absolute control of the institutions in the hands of the indigenous, thereby depriving investors of any meaningful control and authority over their investments, is an insurmountable deterrent to obtaining the investment.
  • Considerable international lines of credit and loans. But no financiers will grant such facilities to institutions in circumstances that ownership and control will change, the identity, credit-worthiness, good governance capabilities and policies of the new controlling shareholders being wholly unknown, and such future shareholders having little or no knowledge of banking sector operations.
  • Customer confidence in banks, and therefore the services of the banks being fully used by commerce and industry and other economic sectors. Without such confidence, few are willing to deposit their funds in the banks considering their wallsafes, mattresses, back pockets and handbags as more secure havens for their hard-earned monies. Absence of such deposits severely restricts the extent to which banks can operate.(These investors’ concerns have been markedly emphasised and strengthened by the number of Zimbabwean banks and other financial institutions that have irredeemably collapsed, with immense losses for depositors).

The other sectors addressed in Kasukuwere’s regulations are similarly negatively impacted upon by those regulations, and hence the struggling economy will be further weakened. As serious as the economic consequences of Gukurahundi in 1985 were, so too are the foolhardy regulations of Kasukuwere, compounding the economic harm created by previous policies.