Zimbabwe Economy: Indigenisation Not the Key

Published on 31st March 2008

A white-owned farm that has since been redistributed to black peasant farmers
Although the Indigenisation and Empowerment bill has been assented to by Zimbabwe’s head of state and now constitutes one of the laws of the land, the construct of the indigenisation law is a paradox to the broader aspirations of independence. The law is an equivalent of a legalised expropriation of assets owned by private interests since it compels that all businesses and companies cede 51% shareholding to indigenous black interests.

Cede 51% to whom? When we are fully aware that the economic crisis has demobilised the capacity for the poor to mobilise resources for participation in equity ownership. Who will be the beneficiaries of this legislation? The histrionic cabals of the Zimbabwean leadership are at it again to amass company equity on top of seized land. Zimbabwe is one of the rare countries where a cabal of individuals discovers wealth overnight without hard work and serious planning. Will our poor mothers in the rural areas sell off their chicken and goats so as to pool resources in order to acquire equity? Will the histrionic cabal forces that benefited from the farm seizures benefit again? The latter seems likely considering the economic dearth of the middle class and the alienation of the Diaspora who in normal democratic value driven societies are supposed to be the integral beneficiaries of any true indigenisation and empowerment programme.

Most successful companies have a strategic fit and alignment of the mission, vision, goals, strategy, programmes, policies and objectives. The founders of the company project their vision so that it consequently underpins the strategic fit. How will foreign entrepreneurs in Zimbabwe enjoy and celebrate the power and self-esteem component in entrepreneurship when they have a mandatory 49% maximum equity? The unconditional takeover of the 51% equity will derail the strategic fit and give birth to confusion as founders are controlled by people with other interests.

The law is silent about what will happen to listed entities. How will trade on the local bourse be regulated? Will it have a racial trading aspect? Trading on the stock exchange is usually on a first come first buy or sell basis yet the indigenisation law is silent about how this racial component will be instituted in order to achieve the 51% indigenisation target. Mutumwa Mawere, a seasoned Zimbabwean entrepreneur in his article Does Indigenisation Threaten the Law of Succession? argues that “In the case of Zimbabwe, where race has now been elevated to the most significant national question, it is not evident what will happen to black Zimbabweans married to whites who may qualify as beneficiaries of indigenisation. Would their successors who may well be white be eligible to keep the rights and transfer them in line with succession laws with no risk of the state seeking to negotiate such rights on account of race?”  

Farm land near Harare
This highlights the deficiencies in the long-term sustainability of the indigenisation law as a viable and non-conflicting state intervention.  Mawere further goes in-depth to suggest that “The decisions that are made by our generation have an enduring impact on the future of our continent and yet little or no thought is applied to the unintended consequences of policy instruments that may have conflicting and multiple objectives.”

If Zimbabwe continues to further this path, indigenous black people will inherit factory and industrial shells after the founders of the company have moved their movable factors of production. The capacity of the companies to mobilise local and offshore funding will be severely constrained given the sudden changes in ownership. Worse still, banks have already indicated reluctance to fund the indigenisation programme; this will drive an already injured economy to an economic hell.

Coercive redistribution of wealth is not a solution for enriching historically disadvantaged indigenous people. Entrepreneurship has a psycho-social element; discovering or re-allocating assets does not guarantee that the assets will be put to good use or that beneficiaries will improve their welfare. What people need is a stable economic environment that allows them to work hard for their wealth not to ululate after being given grabbed assets.

Indigenisation forms part of the necessary state interventions designed to liberalise and democratise the economy but indigenisation of a magnitude of as high as 51% will produce unintended consequences and is self-defeating. An indigenisation of such levels undermines the African brand; it posits Africans as practicing reverse racism, seizing and expropriating assets since the indigenisation law has a racial tone. Investors will be left to wonder if their assets are really secure in Africa given that evidence has shown that most occurrences in postcolonial African states do occur or reappear in other postcolonial states.If the government is serious about its citizen participating in the economy, it must privatise some of the loss making parastatals.

After the failure of development aid as a remedy to poverty, foreign direct investments (FDI) have emerged as better vehicles for poverty eradication. Zimbabwe should encourage foreign investors who are critical in providing the much needed foreign currency to import critical raw materials, fuel and electricity for production purposes. To turn-around Zimbabwe’s economy, we need to go back to the basics-and indeed it needs not an internationally acclaimed consultant but simple men in the street.


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