DESPITE having been part of the national discourse since 2007 when Zanu PF first formally mulled the process, and more actively since 2010, the controversial indigenisation programme remains uncertain.
Report by Owen Gagare
Its architects and implementers now publicly differ on its framework, thrust and implementation matrix.
Of late rival camps clustered around Indigenisation minister Saviour Kasukuwere and Reserve Bank of Zimbabwe governor Gideon Gono have emerged, quarrelling over a whole range of issues, including the ideological foundations of the programme, conceptual basis, frameworks, implementation, consultations, valuation of companies, legislative issues, exchange rate approvals, consultation fees, and conditions precedent to agreements signed so far.
Kasukuwere’s group is basically campaigning for an equity-based model to transfer ownership of wealth to locals, while Gono argues a “one-size-fits-all” approach would not work.
He has suggested a supply-side model be applied in some sectors of the economy, enraging Kasukuwere’s allies.
Major indigenisation deals signed up to date include Portland Holdings, Unki Mine, Mimosa Mining Company and Zimplats, mostly brokered by Brainworks Capital Management, raising the issue of how the consultancy firm was chosen and amounts being paid to it.
Brainworks has brokered deals worth at least US$1,7 billion and stands to reap about US$25,8 million in commission at an average rate of 1,5% of the total transactions value.
A number of firms have been engaged on consultancy works, although it is unclear what criteria were followed. This has raised suspicions of political corruption, rent-seeking, extortion, bribery, cronyism and patronage.
Against this backdrop, the main question hovering over the indigenisation process has been: Is this a genuine empowerment programme or racketeering by regulation?
Its promoters say this is a genuine programme of empowerment premised on resource nationalism to lift up previously underprivileged Zimbabweans out of the depths of poverty to relative prosperity by leveraging mainly on the abundance of the country’s mineral wealth. They say the primary objective of the policy is to broaden Zimbabwe’s economic base by ensuring the majority effectively participate in economic affairs of the country.
However, critics argue that although indigenisation might be a good idea, it has degenerated into a racketeering. They say the way the programme is financed raises the spectre of a Ponzi scheme which will collapse with disastrous economic consequences.
Finance minister Tendai Biti, a lawyer by profession, has said the community share trusts aspect of the programme are “illegal”.
The promulgation of the Indigenisation and Economic Act (Chapter 14:33, as read with the Indigenisation and Economic Empowerment (General) Regulations 2010, Statutory Instrument 21/10 and supplemented by the General Notice 114 of 2011, requires foreign-owned companies to dispose 51% of their shares to locals at fair market value.
Many companies have reportedly submitted indigenisation plans, although some are resisting, risking punitive measures or seizure.
Disposals of shares to indigenous entities under empowerment transactions are being treated as purely commercial. The law does not allow expropriation or nationalisation.
Since indigenous people do not have capital to buy their 51% equities, a notional vendor financing scheme was chosen as the option.
Vendor financing is a loan finance method that facilitates disposal of equity interest in a business by existing shareholders to a new investor with the purchase price for the shares being settled by future dividends attributable to the buyer.
This method allows the purchaser to secure shares without upfront capital outlay or collateral and to settle the share acquisition costs using future dividends. However, it is very risky as companies in this case are lending money to people who are broke and may never repay.
Although President Robert Mugabe has drawn parallels between the land reform and indigenisation programmes, it appears the lure of unearned riches for a selected few under the cover of majority empowerment may be the biggest motive for politicians and their cronies even though this may well be the only way out for besieged foreign-owned companies.