HomeLocal NewsIndigenisation an economic albatross

Indigenisation an economic albatross

IN the aftermath of last year’s controversial general elections, Zimbabwe’s contentious indigenisation programme remains a millstone around the neck of the economy amid lack of a settled and progressive policy informed by a realistic economic agenda beyond the current legal framework.

Taurai Mangudhla

Although Zanu PF campaigned on the platform of indigenisation, it is becoming increasingly clear the party is unable to proceed after the polls with a programme continuously damaging the economy, fuelling capital flight and keeping investors at bay.

Analysts say the conception and approach was wrong from the start.

President Robert Mugabe himself encouraged a wrong mentality around the issue by drawing parallels between the land reform and the indigenisation programmes, creating a sense of entitlement among his supporters.

War veterans, for instance, were demanding a 20% share in all mining enterprises, in the same manner they did for land, before they realised this was a different ball-game altogether.

But the spectre of land invasions and tacit threats of seizure of businesses still hover constantly over indigenisation. This has probably been the single most alarming and important signal conveyed by the indigenisation regulations.

Despite indications the programme was flawed and going nowhere, tacit threats of confiscation have in some cases compelled compliance by fearful businesses.

Due to the poor conception and wrong implementation, the programme has failed to secure a national buy-in from citizens and businesses largely because the lure of unearned riches once again presents itself for a select few, not the common good.

While the Act was ostensibly promulgated to empower Zimbabweans economically by ensuring at least 51% of the shares of every public company and any other business shall be owned by indigenous people, the process has since degenerated into a farce amid indications of inconsistency and lack of transparency as well as allegations of greed and corruption.

The programme has been reduced to racketeering by regulation.

The clashes among government officials over the programme – highlighted by the fierce battles between former Reserve Bank governor Gideon Gono with ex-Indigenisation minister Saviour Kasukuwere – reflected deep structural and implementation problems around indigenisation.

Apart from structural and implementation issues, part of the problems stemmed from the opacity of the policy and reconciliation with other legal statutes, with Gono and others saying the banking sector was already indigenised anyway as the majority of the players were locals, while Kasukuwere insisted on bulldozing through.

The current liquidity crunch has not helped matters. In October last year, Indigenisation minister Francis Nhema raised concern over the default rate of around 70% on loans given to companies and individuals under the indigenisation programme.

Nhema said only 30% of the 4 000 individuals and companies that had accessed funding ranging between US$1 000 and US$25 000 had repaid their debts.

The loans were allegedly distributed on partisan grounds resulting in internal fights in Zanu PF in October 2012 when disgruntled party youths accused Kasukuwere of favouritism and lack of transparency in dishing out loans meant for empowerment.

The youths accused Kasukuwere of giving first preference to youths from his home province of Mashonaland Central.

As part of the process of relinquishing majority shareholding to locals, foreign companies in the extractive sector and those using natural resources are required to form community share trusts (CSTs), which were launched by Mugabe in Shurugwi in 2011 amid much publicity.

Under the CSTs companies can, as part of their indigenisation compliance, deposit shares into the trusts in part compliance with the 51% minimum indigenisation requirement.
However, latest reports indicate only 16 out of the registered 61 registered CSTs have been funded to date to the tune of US$30 million out of the pledged US$116m, bringing into sharp focus government’s shortcomings in implementing the much-hyped, controversial law.

National Indigenisation and Economic Empowerment board CEO Wilson Gwatiringa recently told parliament’s portfolio committee on indigenisation and empowerment that companies had failed to remit to the CSTs due to acute liquidity challenges but critics say the Zanu PF government has run out of steam after the elections.

When he launched the CST scheme for the Marange diamonds area in 2012 Mugabe showed off a large representative cheque for US$1,5 million which was to be deposited into an account for the trust but embarrassingly for him last week Chief Gilbert Marange told the parliamentary portfolio committee on indigenisation that the money was yet to be deposited.

Officials administering the MZCSOT have accused Zanu PF politicians of interfering with their work and stalling progress in the implementation of community development projects.

Lawyer Obert Gutu, who is a senior MDC-T official, said Zimbabweans were hoodwinked by Mugabe’s party during the election period as Zanu PF was not genuinely interested in a holistic and broad-based empowerment of historically disadvantaged people.

“The people of Zimbabwe were sold a dummy during the Zanu PF election campaign, suffice it to state that the prevailing reluctance to operationalise the indigenisation deals snugly fits into the ZanuPF political and socio-economic trajectory where they are comfortable with ruling and not leading the nation,” said Gutu, also a former Justice deputy minister.

“They are pretty happy to have more than 80% of the population living in abject poverty because that way they can continue to manipulate them through the use of political patronage,” he said, adding “as you are probably aware most, if not all dictatorships in the world, subsist and thrive on a pauperised and traumatised populace.”

Zimbabwe is ranked among the poorest countries in the world with poverty stalking 62% of the country’s estimated 13 million people, mostly in rural areas and high-density suburbs, according to a 2013 Zimbabwe National Statistics Agency poverty analysis report.

Econometer GlobalCapital (Econometer) head of research Takunda Mugaga said Zanu PF has been forced to swallow its pride and take a laid back approach towards implementation of the indigenisation policy by the urgent need for an economic rescue package and investment to revive the economy.

“The government is very aware of its broke state and it wouldn’t want to jump from the frying pan into the fire through expediting the indigenisation policy,” Mugaga said. “Zimbabwe is currently a beggar who can’t be calling the shots.”

Mugaga said apart from the current economic crisis, government is unable to lead a credible empowerment programme given the high levels of graft indebtedness of state-run institutions. “The current expose of corrupt tendencies by senior officials is a barometer of how untenable and difficult it will be to implement the indigenisation policy,” Mugaga said.

“The noble intention to empower locals has been privatised by a select few individuals so to think of spearheading the indigenisation process when part of the presidium still believes the expose of corruption is a political gimmick makes the whole exercise a nightmare. It’s becoming clearer to Zanu PF officials that indigenising companies is tantamount to turning well-run enterprises into pseudo-parastatals.”

However, top independent economist John Robertson argued Zanu PF had not softened on the indigenisation programme as the National Indigenisation and Economic Empowerment Board recently said it was going to ensure banks comply with the law.

“The only slowdown perhaps is on the issue of reserved sectors where they said they will not register new companies that are not compliant,” Robertson said.

The sectors reserved for locals are agriculture (primary production of food and cash crops), transportation, retail and wholesale trade, barbershops, hairdressing and beauty salons, employment and estate agencies and grain milling as well as bakeries, tobacco grading and packaging, tobacco processing, advertising agencies, milk processing and provision of local arts and crafts, marketing and distribution.

Zanu-PF director of indigenisation and economic empowerment Kurai Masenyama recently said parliament should ring-fence the policy with a view to align or remove some of the more than 144 pieces of legislation in disharmony with it.

“This move is very critical and decisive because the indigenisation of the country’s natural assets will only make sense to the common man and woman if some of the assets are converted into cash for the immediate benefit of Zimbabweans in terms of business project financing, agriculture financing and infrastructural development,” Masenyama said.

But Robertson insisted the programme is problematic. “Indigenisation is a huge problem and it’s not going away but if we want recovery and growth we need to change course,” he said.

“We cannot create employment under these conditions. Over 300 000 students have just left school and they will not find jobs anywhere in the country. They will start competing with those from last year and the year before with no luck so we end up creating generations of unemployed people and more social problems.”

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