When the rabbit chases the fox

Baffour Ankomah
It was the late Zimbabwean Minister of Information, Dr Tichaona Jokonya, who said in 2005: “What we are doing here is like a rabbit chasing fox.” He was talking about Zimbabwe’s “controversial” land reform that was creating even more controversies beyond the country’s boarders, and especially in the Western world. Dr Jokonya was a man of engaging prose. An ex-academic and ex-ambassador to the UN, he chose his words guardedly. Imagine a rabbit chasing a fox. It does not happen in nature. Rather, rabbits are used to the natural order of being chased by foxes — and being eaten if they are so unlucky as to be caught. But here we were, in Zimbabwe, where a rabbit was chasing a fox!

In most other countries, land forcibly taken by European colonialists does not return to the “natives” — it remains forever with the descendants of the settlers. But the Zimbabwean rabbit appeared not to have read the rule book; it was overturning the tables and chasing the colonial fox, instead of the other way round. Eight years have passed since Dr Jokonya uttered those memorable words. He has himself gone to join the ancestors — in 2006. But the Zimbabwean rabbit is still chasing the fox! And now even more intently! But this time not via land reform but through indigenisation and economic empowerment.

What is the DNA of this Southern African nation of 13 million people that makes it do things that go against the grain? Maybe it is because they fought a bitter liberation war for 15 years to free themselves from white domination. Maybe they love to play the sacrificial lamb in a region formerly dominated by minority white regimes whose oppression left scars on the psyche of the majority black people. Whatever it is, it is an age where every nation is chasing the investor’s dollar, and giving foreign cooperates “enticing packages”, “tax holidays” and “business-friendly environments” to lure them to come and invest, it seems like absolute madness for Zimbabwe to be doing the opposite.

In fact, from the outside looking in, what Zimbabwe is doing with its Indigenisation and Economic Empowerment Programme (IEEP) seems quite weird. But from the inside, one sees a clear method to the “madness”. Statistics show that 70 percent of Zimbabwe’s 13 million people live in rural areas and they have no part in the mainstream economy.

The same statistics show that 70 percent of the 13 million people are the youth aged between zero and 35, and they also have no part in the mainstream economy. And common sense says that no nation can afford to see 70 percent of its people shut out of the mainstream economy. Not only that: because of the mini-apartheid state that existed in Zimbabwe during colonial times, black areas then known as “tribal trust lands” or “communal areas” were neglected in terms of development by the white-run governments that ruled the country from 1890 to April 1980. The black areas were being perceived as reservoirs of cheap labour.

And it gets worse. Zimbabwe has heavy capital (some call it “resource”) endowments that are accessed, owned and controlled by multinational conglomerates and absentee non-indigenous shareholders. One statistic says Zimbabwe has 68 known minerals that can be exploited, and most are being exploited, commercially.

The Persian Gulf of Strategic Minerals
In his memoirs published in 1977, cantankerously titled, the Great Betrayal, Rhodesia’s last white prime minister, Ian Smith, talks about a report he received while still prime minister, from Rhodesia’s National Security Council, that said the US had been alerted to a “communist plot” to seize “the most richly mineralised parts of the world”, including Africa, with “South Africa as the ultimate target”. As a result, the US Congress Committee on Strategic Mineral and Mining had sent a mission to Africa to investigate.

“After visiting Zaire (now DR Congo), Zambia, Rhodesia (now Zimbabwe) and South Africa,” Smith says, “the Americans produced a commendable report and in the most expressive language termed the (Southern African) area ‘the Persian Gulf of strategic minerals of our earth’. Apart from the greatest world deposits of gold, diamonds, platinum and chrome they itemised a list of other strategic minerals in which many countries, including the US and Canada, are deficient. The only other country where one could find a similar conglomerate of these minerals was the USSR; if the Soviets could have gained control of this area, therefore, they would have a virtual world monopoly. The report warned the US Congress and the nation of this potential danger, and urged them to rouse themselves from their complacency.”

That was Ian Smith, the man who famously promised himself that black majority rule would never happen in Rhodesia; “not in a thousand years”, and certainly not in his lifetime. What a bad prophet he was! It so happens that Rhodesia, now Zimbabwe, was located right at the heart of this “Persian Gulf of strategic minerals of our earth.” The country is thus sitting on most of these “strategic minerals.”

In 2006, from nowhere, high quality diamonds started appearing almost on the surface of the earth in the eastern parts of Zimbabwe (in the Marange area), which has now made the country the fourth largest custodian of diamonds in the world.  Could the “strategic minerals” be why indigenous Zimbabweans were prevented by the white dominated governments of Rhodesia from taking part in the mainstream economy of their country? Could it be why, for a good 90 years black people were discriminated against and deprived of the privileges and advantages given to white Rhodesians by the colonial government?

In justifying the current big thing in Zimbabwe the Indigenisation and Economic Empowerment Programme (IEEP) — the government looks back at the colonial era and says “the majority of our people live in conditions of extreme poverty due to limited opportunities to participate in the mainstream economy as a result of the colonial system, which was based on the systematic exclusion of indigenous Zimbabweans from the mainstream economy.”

The IEEP thus seeks to provide for the broad-based indigenous participation and inclusion of black Zimbabweans, especially those in rural areas, in the mainstream economy through appropriate socio-economic infrastructure such as schools, clinics, roads, dams, irrigation schemes, rural electrification and equity holding in businesses exploiting their natural resources.

“The ultimate objective,” says Zimbabwe’s Minister of Youth Development, Indigenisation and Economic Empowerment, Saviour Kasukuwere, “is to establish a socio-economic and political system that will serve to improve the standard of living of the broad masses of the country. It is, therefore, a policy imperative that the government’s development strategy should be anchored on further integrating the majority and enabling them to be key players in the economy and thereby create ‘a national economy’.”

The nitty gritty
And how is this being done? Against what orthodox economists and received wisdom describe as “going against the current global trends”, Zimbabwe, under the IEEP, is asking businesses owned by non indigenous Zimbabweans (note — the key phrase here is not “foreign-owned” as wrongly reported by the world media, but “non indigenously owned”) to cede 51 percent of their equity of shareholding to the previously disadvantaged “indigenous” Zimbabweans, not as individuals but as a collective, to enable them to participate in the mainstream economy. The Act of parliament (yes, the legislation setting up the IEEP was approved by parliament) defines an “indigenous Zimbabwean” pithily as — “any person who before 18 April 1980 (the Zimbabwe independence day), was disadvantaged by unfair discrimination on the grounds of his or her race and any descendant of such person and includes any company association, syndicate or partnership of which indigenous Zimbabweans form the majority of the members holding the controlling interest. For the avoidance of doubt, this refers to the indigenous black Zimbabweans.”

Some commentators have said this definition, which intends to right the racist wrongs of the colonial past is itself racist, as it excludes white Zimbabweans from the discourse. But, according to Minister Kasukuwere, “this charge flies in the face of the historical context, and historical facts”.  He puts a special stress on “historical facts”. Before April 18, 1980, he recalls Zimbabwe was known as Rhodesia (or Southern Rhodesia in another by gone era), and the country was run for 90 years from 1890 as a mini-apartheid state by minority white Rhodesians who used skin colour as the deciding factor to give advantages and privileges to themselves and their progeny, while denying the same to the majority black population.

At a certain point in the colonial era, black people were not even allowed in supermarkets. They could buy food and other items in the supermarket all right, but they were not allowed to enter the premises proper.

It is this legacy — where to this day white Zimbabwean and white South African — owned companies and other western multinationals dominate the Zimbabwean economy-that the IEEP seeks to overturn. And anybody who has a problem with this had not looked at the “historical facts.” In the midst of the domination by non-indigenously — owned companies, which are growing ever fatter on the economy-the over 12 million black people of Zimbabwe especially the majority 70 percent who live in rural areas have become poorer and poorer as the years go by. The main challenge of President Mugabe’s Government since independence, has been to remove the barriers and limitations imposed by the racist colonial laws so that the disadvantaged black Zimbabweans can enter the mainstream economy. It has been a hard, and sometimes frustrating struggle.

The Indigenisation and Economic Empowerment Act has thus become the enabling legislation that seeks to achieve 51 percent indigenous shareholding in all businesses with a gross value of US$1 million or more. The Government is at pains to emphasise that this is not nationalisation. It calls it partnership, and explains this way. The non-indigenous investor comes with his money and equipment to do business in Zimbabwe. The Zimbabwean State, which owns the natural resources in the country will meet him half way by offering the natural resources that the investor is interested in, as its part of the bargaining to acquire 51 percent of the partnership. At the end of the day, it is a win-win for all. The IEEP legislation defines “natural resources” in a most radical way, and the definition makes perfect sense if you have an open mind. Natural resources to the Zimbabwean state, include (a) “the air, soil, waters and mineral resources of Zimbabwe,” (b) “the mammal birds, fish and other animal life of Zimbabwe,” (c) “the trees, grasses and other vegetation of Zimbabwe” (d) “the springs, vleis, sponges, reed beds, marshes, swamps and public streams of Zimbabwe” (e) “any landscape, scenery or site having aesthetic appeal or scenic value or historic or archaeological interests.”

Mugabe’s passion
Coming in the evening of his rule, the IEEP has become one of the passions of Zimbabwe’s veteran liberation fighter, President Mugabe. In 2008, he told an election rally while explaining the then nascent IEEP: “We are tired of being workers, workers, workers! We want to be owners, owners, owners also”. In 2011, speaking at an IEEP event the President explained it thus: “the indigenisation and economic empowerment programme is a focused response to the previous exclusion of our people from mainstream economic activities by the settlers. The policy seeks to broaden the economic base by involving the majority of Zimbabweans in meaningful and gainful activities, thus giving greater meaning to our independence and self determination”. He may have been in power for 33 years already, but after land reform (which is now done and dusted), indigenisation and economic empowerment of the majority poor and the youth is now the biggest thing the veteran fighter and President of the Republic wants to see succeed in his lifetime while he may not be in power when the chickens finally come home to roost, the very least he wants to do is push the IEEP as far as he can while still in office.

The core tenets
The initial fog that shrouded the IEEP having now cleared, the core tenets remains as follows:  Zimbabwe’s natural resources are being exploited by multinational and non-indigenously owned companies  without the involvement of the local communities where the resources  are found and, as such, very little or nothing is accruing to the communities. To make the communities benefit from their areas (now technically called the “qualifying company or companies” will henceforth go directly to the communities.) The 10 percent, which forms part of the 51 percent indigenisation and economic empowerment quota of a qualifying company, will be held on behalf of the communities by Community Share Ownership Schemes/Trusts (CSOTs) that have been formed in all 59 districts of the country.

The main objectives of the CSOTs are to: (a) enable communities to benefit from their given resources; (b) involve the rural communities in the mainstream economy; (c) reinforce the role of communities in economic development by enabling them to make decisions on their development priorities; and (d) hold equity in qualifying businesses. The CSOTs will use, and are using, the monetary value of 10 percent shareholding to provide, operate, and maintain schools, clinics, hospitals, roads, dipping tanks, water and sanitation facilities, dams, gully reclamation, bore-hole drilling machines, and other operations related to soil conservation and prevention of erosion in their areas.

The CSOTs are also mandated to provide youth employment and poverty alleviation projects in their areas. The Ministry of Youth Development, Indigenisation and Empowerment in liaison with the Ministry of Local Government, Rural and Urban Development have been given the responsibility of monitoring the operations of the CSOTs. To start them off, some qualifying companies have provided “seed money” to the CSOTs (some as much as $10m), to kickstart their operations. At last count, over $107m had been pledged by 12 non-indigenously-owned mining companies as seed money to the CSOTs, and to date $22.3m has been paid. Already, substantial progress has been made by CSOTs in the Shurugwi, Zvishavane, Gwanda, Mhondoro-Ngezi, Chegutu, Zvimba and Bindura districts. They have built new schools, irrigation projects, community boreholes, mortuaries, and maternity wards.

They have also repaired dams, bought drilling machines, and road-making/ repair equipment.
Besides the CSOTs, the IEEP legislation also makes room for the Employee Share Ownership Schemes/Trusts (WSOTs), which will hold at least 5 percent ( and in some cases as much as 28 percent) shareholding in qualifying companies they work for. The objective of the WSOTs is to enhance workers’ livelihoods financially by empowering them to earn extra income by way of periodic dividends on top of their salaries. They may also receive a lump sum when they dispose of their shareholding upon retirement from a qualifying company. The 5 percent of the WSOTs comes out of the 51 percent shareholding taken by the state from qualifying companies. But companies are allowed to give more, between 5 and 28 percent, shareholding to their workers. Some companies, like Schweppes, have even gone beyond the recommended maximum of 28 percent and given 51 percent shareholding to their workers. Meikles, another dominant company in the country, has given 20 percent shareholding to its employees.

In summary
Taking the CSOTs’ 10 percent and the WSOTs’ 5 percent together from the State’s 51 percent equity share in qualifying companies, a good 36 percent remains in State hands, and the monetary value of this goes into a National Indigenisation and Economic Empowerment Fund (NIEEF) which will later be turned into a Sovereign Wealth Fund for the country. The IEEP legislation provides for the establishment of a National Indigenisation and Economic Empowerment Board (NIEEB), which is responsible for the management of the NIEEF. It also provides advice to the minister on the Government’s indigenisation and economic empowerment strategies, and also oversees compliance of the National Indigenisation and Economic Empowerment Charter.

In summary, and for the avoidance of doubt, here is how the IEEP percentages work. The state takes 51 percent of equity shares in qualifying companies. Out of the 51 percent, 10 percent goes to CSTOS, another 5 percent goes to WSOTs, and 36 percent goes to into the NIEEEB Fund. Proceeds from this fund will be used for national development overall, especially in resource-poor areas which may not have qualifying companies operating there. But as it happens, Zimbabwe’s natural resources, especially in mining, are fairly spread out across all the 59 districts of the country and as such, there is no district without a qualifying business operating there.

Thus, when fully in operation in the coming years, the Sovereign Wealth Fund will have enough resources to speed up a broad-based development of the country. From the above, it is abundantly clear that Zimbabwe’s IEEP is totally different from South Africa’s Black Economic Empowerment policy that has made a few people millionaires while the vast majority of the population still wallow in poverty. It follows from the above that Zimbabwe’s IEEP is not elitist or benefitting an elite as has been widely and inaccurately reported by the local opposition, and the world’s media. The chief beneficiary  is the nation itself as a collective, not individuals.

It also deserves to be repeated that the IEEP does not entail nationalisation at all. Instead, as Minister Kasukuwere puts it: “It is an affirmative action programme, requiring that no investor with a gross company value of $1 million  can conduct business in Zimbabwe without partnering with indigenous Zimbabweans. The IEEP legislative framework is anchored on the need to foster mutually beneficial partnerships between indigenous Zimbabweans and non- indigenous investors.”

However, Kasukuwere cautions: “We should be a wiser people given our experience of the liberation war and the land reform programme, and appreciate the merits of non-racial partnerships on the economic front. But the Government is not going to compromise on the principle of indigenization of the economy and economic empowerment of the majority of the people.”  — New African.