adminTHE subject of indigenisation and economic empowerment has been a key issue of discussion over the past few years with critics of the programme saying it is designed to benefit only a few individuals at the expense of the majority of Zimbabweans. Herald Business (HB) caught up with Gilbert Muponda (GM) (pictured below), one of the proponents of the indigenisation crusade to share his insights on the programme. Here are some of the excerpts of the interview:
HB: What is your understanding of the term indigenisation?
GM: It is the economic upliftment and empowerment of all indigenous people who were previously disadvantaged and systematically excluded from the mainstream economy. Indigenisation is achieved through diverse but integrated political-socio-economic strategies which include increasing the number of indigenous people who manage, own and control enterprises and productive assets; enabling ownership and management of enterprises and product assets by local communities and workers.
It is also designed to increase human capital and skills development of local citizens to equip them to own, manage and control the economy.
While the programme seeks to correct historical imbalances, new wealth creation should be the focus of the programme. There is need to be cautious on certain sectors which require huge capital outlays and as such, the model deployed should be sensitive to sector needs and avoid a one-size-fits-all approach.
The programme recognises the need of foreign capital partnership and resources and that is why it is 51 percent and not 100 percent ownership requirement.
HB: Is this something unique to Zimbabwe?
GM: This policy is not unique to Zimbabwe, it is common across the globe, what varies is the degree of indigenisation and the model used. Most countries have set aside certain sectors and quotas of the economy for their citizens and foreign ownership is restricted. Examples include the Philippines, Iceland, Mexico, South Korea, Botswana, Japan, the EU and Canada.
HB: Whose interests does this policy serve?
GM: The policy gives back indigenous people hope and dignity through ownership of meaningful stakes in the economy not just breadcrumbs, so to speak. The policy serves the interests of the people of Zimbabwe by promoting economic growth and transformation in order to enable meaningful participation of indigenous people in the economy; achieving a significant transformation in the racial composition of ownership and management structures and in the skilled occupations of existing and new businesses: The programme seeks to increase beneficiaries by expanding the extent to which communities, staff, local management own and manage existing and new enterprises and increasing their access to main stream economic activities, infrastructure and skills advancement.
HB: There is a general belief that the implementation of the policy in Zimbabwe is designed to only benefit a few individuals. What is your take on this?
GM: This is a valid concern. So the authorities have to ensure that empowerment is broad-based and we do not have the same individuals benefiting. Once an individual is empowered, he should make way for others to benefit from opportunities arising out of indigenisation. This impression has to be corrected so that people can have confidence in the process and it remains credible.
Ordinary Zimbabweans, youths and women should be seen graduating into the mainstream economy not to just relegate them to vendors and sources of cheap labour in their own country.
Several leading firms such as Stanbic, Old Mutual, CABS and Meikles have availed funds to the Youth Empowerment Fund which has been offering loans of US$2 000, US$5 000 and US$20 000. The programme has been transforming lives and more has to be done to spread visible beneficiaries so that when we say its “broad based” it’s not just lip service.
HB: Introduction of community share ownership trusts and employee share ownership trusts appeared to be the initial phases of the empowerment thrust in this country can you give more details on this?
GM: At the international level, the United Nations General Assembly adopted Resolution 1803 (XVII) on the “Permanent Sovereignty over Natural Resources” on December 14 1962 by 87 votes in favour to two against, with 12 abstentions. Resolution 1803 (XVII) provides that states and international organisations shall strictly and conscientiously respect the sovereignty of local communities, peoples and nations over their natural wealth and resources in accordance with the Charter of the United Nations and the principles contained in the resolution.
In compliance with the “Permanent Sovereignty over Natural Resources” Section 14 of the Indigenisation and Economic Empowerment Act provides for the establishment of Community Share Ownership Trusts which hold shares in qualifying businesses on behalf of their respective communities.
The Community Share Ownership Trust enables local communities to benefit from God-given resources found in their communities. This makes natural sense because foreign shareholders cannot hope for stability when they become an island of prosperity surrounded by poverty in the communities in which they operate.
In the long run CSOTs will broaden the country’s economic base by involving locals in the mainstream economy.
HB: Questions have been raised against the issue of ownership (of shares) and benefits to the ordinary people. Is there any value in this?
GM: Indigenisation and economic empowerment is a multi-stage and multi-strategy long term effort so at level this model is ideal. A total of 50 CSOTs have been formed around the country. Firms have started contributing with notable examples being Unki Mine which released US$10 million.
Zimplats pledged US$10 million and availed half the amount, Mimosa pledged US$10 million and released US$3 million and Murowa released US$300 000 of the US$500 000 pledged. PPC pledged US$2 million and has so far released US$1 million, Blanket Mine had pledged US$5 million and US$3 million has been released and Jessie Mine gave the US$250 000 it had pledged. Marange, Anjin and Mbada Diamonds have pledged a combined US$50 million.
Communities are benefiting from the programme as they have embarked on several projects such as the rehabilitation of irrigation schemes, construction of clinics and refurbishment of schools, roads and bridges supported by companies which are exploiting resources in those communities.
HB: What about other ordinary Zimbabweans whose origins are not necessarily endowed with mineral resources?
GM: The Indigenisation and Economic Empowerment Act provides for the setting up of a Sovereign Wealth Fund or similar investment vehicle which is empowered to hold shares, assets and resources on a national scale accrued from Zimbabwe’s natural resources. The purpose of this fund is to act as an enabler of resources to be channeled to other Zimbabweans irrespective of their community of origin.
Future generations can also benefit from the Sovereign Wealth Fund as it invests proceeds from Zimbabwe’s Mineral Wealth.
HB: Indigenisation was the bedrock of the Zanu PF election manifesto, was this merely an election gimmick or a realistic approach to empower the majority of Zimbabweans?
GM: Indigenisation is not a gimmick, it is real and irreversible. The policy was initiated by Zanu PF and the opposition MDC also bought into this policy and supported it (I am sure you saw the MDC leadership studying the Zanu PF Manifesto). If you are a Zimbabwean, why would you oppose being empowered?
It is now national policy and the people do not expect lip service but delivery. This has been captured in the previous constitution and the new constitution which had support of both parties. Companies are complying with the 51 percent requirement, Community Share Ownership Trusts have taken off and Employee Share Ownership Schemes have been implemented by several companies.
Those claiming that Indigenisation is a gimmick are in denial of reality.
HB: Are there any cases you may cite where Indigenisation has worked elsewhere in the world?
GM: In certain sectors South Korea, Philippines, Mexico, China, Botswana and South Africa have used similar policy structures. Most successful economies in the world have deployed policies very similar to indigenisation but It’s done subtly. What has been different are the names and models.
The Japanese control the Japanese economy, the Germans control their economy, The Americans control their economy and so do the British; so why can’t Zimbabweans control their economy? How can you be a tenant in your own house?
It is imperative for Zimbabweans to control the economy because you cannot expect foreigners to develop the country for us.
HB: Funding the Indigenisation programme has been an issue, how will locals buy off foreigners?
GM: Yes, the funding challenges remain but it is not impossible to fund this programme from local resources leveraging on the country’s natural resources. Zimbabwe’s diamond reserves are estimated to be worth at least US$800 billion so there is nothing that can stop the country from setting up an asset-backed securitisation structure based on a small portion of its mineral wealth and raise billions of dollars.
In addition there is need to put a proper financial package and infrastructure to support the programme. A starting point would be the formation of an Empowerment Bank. The Empowerment Bank would be focused entirely on provision of financial services for empowerment transactions and provide loans to entrepreneurs wishing to exploit advantages offered by Indigenisation.
Obviously the current banks have tried but are stretched and lack the resources to provide required long term funding.
HB: Are there any specific sectors or areas which the indigenisation programme should prioritise?
GM: Yes, there are some areas which need immediate attention and these include closed companies and operations which add value to raw materials being exported. An enabling environment and entrepreneurial infrastructure should be provided to allow capable entrepreneurs to take over closed and distressed companies and revive them.
Revival of closed or distressed firms would create job and increase industry capacity utilisation from the current 43.6 percent. In addition deliberate support should be given to value adding operations by locals so that Zimbabwe increases the value of its exports to narrow the trade deficit.
HB: Looking into the future, where do you see the subject of Indigenisation and empowerment leading the youth and women in the economic transformation of this country?
GM: Economic empowerment and indigenisation is not an event but a prolonged process which will cross into future generations. Practical steps are required to equip budding Entrepreneurs with the necessary skills to set up and successfully run businesses. I think setting up an Entrepreneurship University is a critical step in terms of arming youths and women with relevant skills and resources to give practical skills.
While the country has many universities a majority of them focuses on churning out graduates who are ready for and programmed to seek jobs and not create them. We need a university that focuses on churning out entrepreneurs who can create jobs.
Online Reporter