Indigenisation: a case of hypocritical manipulation?

A BILL is before the Parliament of Zimbabwe that will allow the government of Zimbabwe to compulsorily acquire a controlling interest in foreign-owned firms.
There has been much debate about the real agenda underpinning the legislation in as much as there was and continues to be debate about the land reform program.
The question that needs to be addressed is whether in fact the proposed indigenisation law is a case of hypocritical manipulation by a government that has run out of enemies to divert attention to or is a genuine attempt to prosecute and complete a national democratic revolution.
Independence in 1980 was expected to bring with it a comprehensive national democratic revolution encompassing civil and economic rights. At face value, indigenisation represents nothing but an attempt to democratise the economic space in as much as the liberation struggle sought to assert the rights of black and white citizens of Zimbabwe to determine their own destiny. Even the fiercest critics of Mugabe would concede that the economic empowerment of the majority is a necessary ingredient to ensure the stability of the country.
No-one can deny that the Rhodesian economy was race-based and the asset ownership architecture was racially defined. Blacks were alienated from their natural resources and some may argue that poverty of the African majority was racially induced and was not a product of market forces. In attempting to enact a law that seeks to indigenise the economy in terms of enterprise ownership, it may be argued that the government is making a significant concession that it has failed to address this enduring colonial question.
The critics of indigenisation are many and the arguments advanced play very well into the hands of any populist who can easily take advantage of the confused messages for political expediency. Some of the arguments advanced in 2007 are no different from the arguments that were advanced against the liberation movements.
In fact, even Mandela was considered a terrorist for participating in a struggle for economic and political justice and yet today his statue shares the same space in London as Churchill and Lincoln.
On the issue of land, it was argued that democratisation of ownership will necessarily lead to starvation and poverty. Equally, it is argued by many that indigenisation for a country that is in the intensive care unit is hardly the medicine required. In this argument is an allegation that black Africans cannot be trusted custodians of economic assets and, therefore, any policy that seeks to empower them is not in the national interest. The argument in its naked form is canon fodder for any politician under siege who depends for political survival on the ignorance of the poor.
The notion that the rich are in some way responsible for creating poverty is widely held not only among the poor but among intellectuals. There are many who also hold that view that workers should be in control of enterprises and entrepreneurship is necessarily a sin against the national interest. The poor are easily manipulated to believe that an exercise of transferring share certificates from the haves to the have knots will advance the cause of the national democratic revolution.
In 2007, Africa is much wiser and the world has fundamentally changed for anyone sensible to ask why the government thinks that indigenisation will cure the economic and political injury that confronts Zimbabwe. In addressing this key question that I seek to address in this article, I can only draw on my personal experience as the pioneer black entrepreneur to engage in large scale mining in Zimbabwe through the acquisition of a foreign owned company.
In 1996, I successfully negotiated the acquisition of the entire shareholding of Shabanie Mashaba Mines (Private) Limited (“SMM”) from a British-controlled company, T & N Plc. The assets were owned by a foreign private company and the transfer of ownership to a black African was a welcome development in advancing the cause of the national democratic revolution but barely ten years later, I have become a victim of not of imperialism but a government that now hypocritically wants to own the indigenisation and empowerment space.
I was the first to dare to intervene in the economy not as a micro, small or medium scale business owner but as a principal in the mainstream economy. It took 16 years from Zimbabwe’s independence for me to become a pioneer in the democratisation of the economic space. Notwithstanding the pressure from indigenisation pressure groups, the government has been unwilling to facilitate a genuine empowerment process.
For the first 10 years of independence, Zimbabwe was shunned by mining investors until the involvement of Delta Gold in the platinum industry. The lack of investment can be traced directly to the policy regime and the attitude of the government to investment.
Some will recall that the indigenisation movement only gathered steam 14 years after independence when many aspiring entrepreneurs came to the conclusion that the government was not committed to the democratizsation of the economic space.
No visible program was evident from the government regarding indigenisation. The government had in its wisdom accepted the notion that blacks could only play in the SMME space through loans and equity advances from state institutions such as SEDCO and IDC.
In some sense my acquisition of SMM was revolutionary in that it opened the flood gates for other people to think bigger. As Zimbabweans debate the need for or against indigenisation in 2007, it is important that they reflect on the actual experiences that some of us have gone through.
Firstly, President Mugabe has never been convinced that the black bourgeoisie can be trusted to prosecute the national democratic revolution. His views are no different from many former liberation heroes who believe that the state is a better custodian.
Based on this observation, it must be noted that the government had no program for empowering private black individuals and there is no evidence to demonstrate the government’s commitment to this cause in respect of its own assets. With the exception of Anthony Mandiwanza and Sylvester Nguni who inherited state-owned institutions when they were privatised, Telecel and Econet, I am not aware of any government initiative that resulted in blacks acquiring a significant stake in the enterprises on the back of a conscious effort to empower previously disadvantaged groups.
Secondly, Zanu PF has been involved in many private sector initiatives with partnerships. I am not aware of any serious attempt by the party to partner with blacks in economic activities. I am aware of President Mugabe’s close relationship to Messrs. O’Reilly, Cluff and other investors who were allowed to take advantage of opportunities in Zimbabwe as foreign players.
The party managed over the years to conclude deals with the likes of Lonrho, Tregers, Fribrolite and others. If the party had a commitment to black economic empowerment, I am sure that it would have used its poor cadres as instruments but regrettably this has not happened.
Thirdly, in the context of mining, the government in 1983 enacted the Minerals Marketing Corporation of Zimbabwe Act (Chapter 21:04) that effectively nationalised the output of all mining companies in respect of exports. All mining companies were not allowed to export their minerals but were forced to sell such minerals through the MMCZ.
The rationale behind the establishment of MMCZ was that the government did not trust the mining companies. The MMCZ is now 24 years old and yet no one is asking what has been achieved by this institution. If the government is already in control of all mineral exports then how on earth can it justify the enactment of the indigenisation law on the basis that mining companies are externalising?
When I acquired SMM, the government had given a dispensation to the platinum industry to be exempt from marketing through the MMCZ. SMM’s exports were marketed through MMCZ.
However, in reality the MMCZ had delegated the entire marketing to three foreign agents who had a free reign. On the day I took control of the company, SMM was sitting with stocks valued at US$30 million and debtors of an equivalent amount. MMCZ was the sole debtor of the company. The average collection period was over 120 days and yet SMM had to pay its creditors in 30 days. SMM had no direct access to the market.
SMM had no clue about the actual prices paid to the agents. MMCZ’s interest was only in respect of commissions. The staff of the MMCZ was closely aligned to the agents who occasionally facilitated payments to them. The biggest opposition to my acquisition came from the staff of MMCZ who enjoyed the benefits of a system under which they were not accountable. My first assignment as Chairman of SMM was to change the debtors’ collection period to 30 days. Two of the agents agreed to the change but the third one who was more politically connected decided to fight. He had the full support of the RBZ and Ministry of Mines and I was threatened not to change the contract terms.
At the time, a Tom Shitto was the Deputy General Manager of MMCZ. He also was close to the agents and was not supportive of the acquisition. In the end, SMM was forced to terminate the marketing arrangement and the agent owed about US$5 million to MMCZ in respect of asbestos sold and delivered that has not been paid till today. MMCZ refused to take legal action against the agent and SMM was forced to institute legal action to recover the money.
When SMM put pressure on MMCZ to pay on time and reduce stocks, the institution was not capable of responding. The imposition of MMCZ in the value chain was just an extra cost but also presented funding challenges for SMM. With a thinly capitalised marketing agent, banks were reluctant to take a view of the debtors’ book of SMM and yet MMCZ could not come to the party to finance the book. The problems are more acute for non-tradable commodities like asbestos fibre because there is no reference price of the commodity on any exchange. Accordingly, one cannot take an informed view on the debtors’ book.
When confronted the government could not defend the role of the MMCZ and finally in 1997, SMM was allowed to market its own asbestos like the platinum mines. SMM managed to takeover the staff of MMCZ who was responsible for asbestos marketing with the exception of Tom Shitto. Shitto subsequently left the MMCZ and joined one of the agents of MMCZ where he is still working until today.
The irony is that when the government decided to terminate the marketing dispensation in April 2004, Shitto’s Jewish controlled company was appointed as the sole agent to takeover the markets previously handled by my company, SAS. The government has no problem trusting foreign investors or agents but has serious problems trusting black entrepreneurs.
If one believes that the government is serious on the indigenisation front, it is important to ask the question whether its attitude to black entrepreneurs has changed. The victims of externalisation allegations have largely been blacks confirming the widely held view that the proposed legislation has nothing to do with advancing any national interest.
Although established with the purpose of protecting national interest, my experience with the MMCZ’s operations suggests otherwise. I am not even sure that the government is convinced that MMCZ has discharged its mandate efficiently and effectively. The broader question remains regarding the need of a monster like MMCZ in the value chain. Can the existence of the MMCZ co-exist with the indigenisation of the mining industry? What are the implications on the future of MMCZ if the industry is indigenised?
Fourthly, President Mugabe has never trusted the market system in so far as determining the exchange rate. When one combines the MMCZ and the RBZ in the value chain of mining, it is apparent that the government is already in control of all the affairs of mining companies. How can indigenisation co-exist with market unfriendly policies? How would black entrepreneurs relate to an environment where the value of their exports is arbitrarily determined by the state? Can an arbitrarily determined exchange rate be a facilitator for indigenisation? If all blacks with access to foreign currency are accused of externalisation, how would such victimised class of people be expected to be reliable partners in a sector that requires foreign currency?
Will the attitude of the government to black wealth accumulation change with the passing of the indigenisation laws? If the government has not managed to come up with an empowerment framework in respect of procurement over the last 27 years, what confidence do citizens have that the government is serious about advancing the national interest? Would the localisation of foreign-owned companies result in an economic turnaround? How is such a turnaround going to be financed? Who is going to finance the beneficiaries of such empowerment?
The handling of the land issue has demonstrated the inherent problem that the government faces and the inability to make choices that advance the national interest. In advancing arguments against the proposed indigenisation laws, one has to be extremely careful to avoid using a language that plays into the hands of populists who are anxiously waiting for racially insensitive arguments.
President Mugabe has taken the role that many Africans are afraid to assume i.e. of challenging the hegemony of imperialism and its instruments in form of transnational corporations. However, some of these corporations were invited by the government and offered incentives only to find out that when the political heat intensifies their host has no loyalty.