ZIMBABWE’S beleaguered indigenisation policy has been dealt several big blows in the last few days which include alleged corruption, arguments over deal fees, calls for a parliamentary probe — and to top it all, even President Robert Mugabe criticising the process.
Report by Irene Madongo
The controversial black empowerment policy, which forces foreign firms to divest 51% of equity to locals, is one of Mugabe and his party, Zanu PF’s key strategies. But is it falling apart?
In a dramatic turn last Friday Mugabe finally admitted that Saviour Kasukuwere, the Indigenisation minister, has blundered over the much-touted Zimplats deal announced in January.
Under the agreement, South Africa’s Impala Platinum (Implats) agreed to sell a majority stake in its Zimbabwe unit to local blacks for US$971 million.
The transaction was facilitated through vendor financing at an interest rate of 10% over an unspecified period.
Commenting on the deal, Mugabe said: “That is the problem; they gave us 51% saying that it is a loan that we are giving you, and we are paying for you in advance and then you can pay us back tomorrow.
“I think that is where our minister made a mistake. He did not quite understand what was happening, and yet our theory is that the resource is ours and that resource is our share, that is where the 51% comes from.”
It seems that it has finally dawned on Mugabe that the policy may on the surface be about empowering black people, but the reality is it has lumbered them with a vast bill.
Zimplats, now in a loss-making position, was also given a 30-day notice to appeal an order from Mugabe directing the firm give up 28 000 hectares of ground containing platinum reserves.
The company has become embroiled in another row — refusing to pay a US$17 million consultation fee slapped on it by Brainworks, an advisory company involved in the US$971 million Implats deal.
On Friday, Implats spokesperson Bob Gilmour told beyondbrics that “Brainworks was contracted by the NIEEB (National Indigenisation and Economic Empowerment Board), so that is for them, and Zimplats (Implats Zimbabwean unit) will not be paying the bill”.
Zimplats refused to pay the bill arguing it did not engage Brainworks to act as advisors to the government, hence it could not be expected to pay. Observers questioned the sense in Brainworks’ demand.
Masimba Kuchera, an economic analyst, said: “It’s like telling someone that they should pay the transfer costs of a house that you’ve forcibly taken away from them.”
Foreign companies are being forced to buy themselves out.
Other problems abound. In February Prime Minister Morgan Tsvangirai called for a parliamentary probe into alleged corruption in the handling of empowerment deals for several companies. And on Friday it was announced that the Anti-Corruption Commission has officially launched an investigation into the deals.
There have also been reports of wrangling over community share ownership trust funds, which are contributed by companies that have complied with indigenisation laws and are meant to benefit local communities.
The indigenisation authorities have denied the allegations. Finance minister Tendai Biti says the schemes are “illegal”.
Kasukuwere recently insisted the policy is working and benefiting Zimbabweans, stating two months ago the programme’s sovereign wealth fund stood at US$4 billion.
But Harare-based economic analyst John Robertson says: “The (US) dollars (claimed to be) in the fund are not dollars, they are shares that are said to have a market value of that much. Whether you would actually get that much if you put them on the market is a huge question, but it is not in the form of money.”
“Most of the claims that companies have complied with indigenisation demands are exaggerations propagated by the indigenisation ministry,” he added.
With all this going on, what is the fate of the beleaguered indigenisation policy? Zimbabwe holds a constitutional referendum in two weeks’ time and has an election coming up later in the year.
Mugabe is in no mood to back down on what is perceived to be one of his party’s key election strategies, and recently said he will stick to the policy.
UK-based Zimbabwe analyst Lance Mambondiani said: “As a model for economic growth, the indigenisation model is rooted in communist nostalgia.
“The assumption that in any economy anywhere in the world everyone and anyone can be an owner of a company is patently dishonest.”
Kuchera said: “In the short-term they will try and protect it, but won’t have those grandstand announcements. I think Zanu-PF has nothing else to offer and they will try to save at least the idea in the short-term”.
Tsvangirai’s MDC-T would ditch the policy, saying it deters badly-needed foreign investment for the cash-strapped country. It says it will review the policy if it wins the impending elections. But even this may not be easy.
“The policy is already law, it’s unlikely that it will be repealed even if the MDC were to come into power.
“In its economic policy, the party proposes a review of policy to make it a lot more consultative. Like the land policy, it is difficult to reverse the changes already done,” says Mambondiani.
Madongo is a Zimbabwean journalist based in London. She writes for the Financial Times.