Indigenising with a land reform hangover

One thing we ought to have learnt from the fast track land reform programme is that the ordinary person will always suffer the consequences of government policies.

We all know that the land reform programme did not achieve its objectives. A study conducted by the Business Council of Zimbabwe highlighted that it excluded social groups and left many unsatisfied. The study also states that land allocations were inclined towards the relatively well off and socially connected applicants and there were cases of multiple farm ownership.

Will we get it right?

The indigenised farmers were not empowered and this ultimately affected our agricultural production. The question remains: will we get it right this time?

Indigenisation is a very simple thing to achieve; it is just a transfer of ownership. What is difficult to achieve is the objective behind indigenisation – the creation of an environment that enhances the performance of economic activity. The government won’t be able to empower the beneficiaries of indigenisation and this failure will come at a huge cost.

Taking the manufacturing industry as an example, I will quote President Robert Mugabe: “We are fast turning into one huge warehouse, a dumping ground for all manner of imports. Our cities and towns are dying. Bulawayo, for a long time the industrial capital for Zimbabwe, has now become a sorry industrial scrapyard. We have become a net importer of finished goods, while also being a net exporter of raw materials”.

Serious challenges

Given the adverse state of our industries, indigenising manufacturing firms at this time would be catastrophic. The manufacturing sector is facing serious challenges, which indigenisation will simply worsen.

Players in the manufacturing sector are facing liquidity challenges leading to high borrowing costs, lack of competitiveness due to antiquated machinery, high power and water tariffs and inflexible labour laws. By indigenising, we are ceding these insurmountable challenges to the new indigenous owners who are not capable of tackling them.

We live in an economy with tight liquidity conditions. The banks have short-term money, which is available in dribs and drabs and at a high cost. The indigenous fellow will need a lot of money to recapitalise and improve competitiveness. That money is simply not within our territories. We certainly cannot get it from outside the country, with our debt overhang of $10.7 billion (representing 114 percent of our GDP). We also have one of the worst credit ratings in the world and are notorious for our lack of respect for property rights.

The jambanja way

We should not be myopic in the implementation of a policy of this magnitude. Capacity utilisation in the manufacturing sector fell by 13 percent last year and it’s falling again this year. The government has a looming budget and trade deficits and it is actually failing to implement the Industrial Development Policy, due to its financial handicaps.

When the regulations to guide the indigenisation of the manufacturing sector were initially gazetted, the word “cede” was used to refer to the transfer of shares, which can only point to the land reform ‘’bhabharazi’’ and the “jambanja” style of doing things. The word had to be changed to “sell,” following protests by players in the sector.

Top priority

The COMESA Customs Union, to be operationalised next year; the Tripartite Free Trade Area slated for 2015 and the Economic Partnership Agreement already in motion – will see us scrapping tariffs, thereby exposing our industry to the ferocious beasts from abroad. Let’s rethink our priorities. Our top priority right now should be the revival of our local industries.

Many foreign-owned companies have shelved their plans to expand, and have taken a wait and see attitude. Yes, our government can succeed in indigenising every foreign-owned company from Zambezi to Limpopo, but it will dismally fail to empower them, ultimately leading to the collapse of manufacturing.

We have also lost many skilled people who should be participating in the programme. During the decade of economic meltdown, there was a massive brain-drain and it is estimated that three million people are in the Diaspora.

These Diasporans don’t just have the skills, they have the money to participate in the programme.

Foreign investment

We should also seriously consider whether we are going to get foreign investment. This is very important, especially considering our inability to foster a domestic economic renaissance.

The outgoing minister of investment promotion, Tapiwa Mashakada, once said: “Investors are risk averse. They are generally not comfortable with the manner in which indigenisation is being carried out. Investors want to control their capital. Losing 51 percent is scaring away investors. The message is that the threshold ought to be rationalised downwards in a substantial manner”.

Why should the current threshold be allowed to scare away investors, when the objectives of indigenisation can still be achieved if the threshold is below 51 percent? The law has defined indigenisation as the deliberate involvement of indigenous people in the economic activities of the country, to which hitherto they had no access, so as to ensure the equitable ownership of the nation’s resources. Surely, this can be achieved without having to insist on 51 percent?

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