Published by the government of Zimbabwe
Walter Muchinguri
14 September 2007
Harare — Participants at a half-day workshop on the Economic Empowerment and Indigenisation Bill 2007 yesterday affirmed their support for economic empowerment but were quick to point out that its timing was "inappropriate".
The participants said the country was economically and legally not ready for the Bill and that there were a number of grey areas that needed clarification. Among the bones of contention was the definition of the term "indigenous", which participants said, was open to different interpretations.
According to businessman and former ZNCC president Mr Ted Makoni, the definition as contained in the Bill referred to previously disadvantaged groups prior to 1980 and as such it should be clearly spelt out that the indigenous people should be blacks because they were the only non-whites and referred to as natives. Mr Makoni drew comparisons between the local legislation and South Africa's broad-based Black Economic Empowerment Act which clearly stipulates that the beneficiaries of BEE should be black South Africans, although it was later modified to include Indians and Coloureds.
Legal expert Mr Brian Vito, who simplified the Bill, called for a major overhaul if it was to be compliant.
Areas that needed attention included the enormous powers vested in the minister and ambiguity on which minister was being referred to as well as the actual beneficiaries of the empowerment legislation. Others contentious issues were the composition of the board tasked with administering the funds collected for the empowerment process and the position of the minister as chair, a situation that he said was open to abuse and a factor that would see those with political connections benefiting ahead of others.
On the chairmanship of the board, Head of the Economics Department at the University of Zimbabwe, Dr Innocent Matshe said he preferred a scenario similar to that obtaining in South Africa where the head of state chaired the board.
He said the President was a benevolent person who would ensure that all people benefited rather than a minister who was susceptible to corruption and also because the President had the final say on all national matters.
He also said there was need for the composition of the board to be widened rather than be confined to civil servants. Dr matshe recommended that it include academics, business people, labour, banks and other financial institutions who would give sound business advice. On the economic side, he said there was need to focus on economic revival rather than dwelling on "who gets what" in the foreign-owned companies.
"There are basically three classes that will benefit from the Bill - those that have made it, those that have the potential but don't have the capacity, and those that are poor and struggling to keep afloat, who comprise the majority. "If the majority are the ones who will benefit the most, will it mean much to them if we are to give them stock in a company as things are when they are struggling to make ends meet and looking for basic commodities?
"It will make more sense for those people if we boost production and ensure that basic commodities are available in the shops and over time empower them," he said. In this regard, he said there was need to draw lessons from the experiences of black Zimbabweans who have made it in business, such as Mr Nigel Chanakira and Mr Strive Masiyiwa, to capacitate those Zimbabweans who have businesses that have potential but need capacity.
"We have a lot of companies that have closed down yet they have a lot of potential we need to focus on these and provide resources for their resuscitation because we need to focus on employment creation," he said.
In addition, he said people valued something that they got through their own sweat rather than something that was just thrust into their laps. Dr Matshe said if the Bill was passed into law it might signal the death knell for some companies, which are already reeling from the effects of price controls and a challenging operating environment without having to pay levies to fund the operations of the Indigenisation Fund, which is provided for in the Bill. He said research had shown that the net effect of implementing the new legislation in its current form would be a 30 percent slump in Foreign Direct Investment, a 5 percent decline in Gross Domestic Product and a 3 percent rise in employment levels. He added that some of the beneficiaries could inherit empty shells since most of the foreign owners could be plotting ways of disinvesting from their companies.
"What is there to stop some of the owners and directors from declaring huge dividends for themselves and externalise their money?
"We run the risk of inheriting empty shells that will amount to nothing," said one participant. The levies to be paid out by the companies to capacitate the Indigenisation Fund would add 9,11 percent to the rate of inflation. Other participants, however, argued that the Bill should be passed into law notwithstanding the birth pangs, citing the land reform programme as a process that had to be carried out for the national good.
Other participants said that instead of levying companies and the overburdened taxpayer Government should start by privatising State enterprises and reserve 51 percent for locals and sell off the remaining 49 percent to foreign investors then use the proceeds to recapitalise the enterprises. "These enterprises have been a burden on the fiscus, why not start with them and use the proceeds from their sale to finance empowerment of our people?" said a participant.
If implemented, the Bill was likely to scuttle the country's potential during the implementation of the Sadc and Comesa free trade areas and other impending regional economic reforms. They said emphasis should be on expansion and growth of the existing businesses rather than compromise their growth by parcelling out shares in existing companies. The participants, who drew comparisons between the Zimbabwean and South African legislations, said there was also need to set parameters to ensure that everyone benefited and not just the few black elite.
"We do not want a repeat of the Affirmative Action Group and Indigenous Business Development Council where the leaders personalised initiatives that were meant to benefit the majority of Zimba-bweans," said another participant.
Other concerns raised on the economic aspects included the need for an audit to look at the companies that were being targeted and also to clear the air on what would happen to those companies whose operations were governed by special laws such as the Export Processing Zone facility.
In addition the participants also felt that there should be a time frame for the proposed takeovers and also a reprieve for companies that opted for employee ownership schemes. Dr Matshe said that in the event that the Bill becomes law there was need for specific details on how the empowerment would be implemented and he proposed the Japanese model whereby stocks in large corporate are held by people who already have an interest in the company.
These included the corporate's bankers, the employees, management, suppliers and customers. He said this would ensure continuity in the sense that the people running the company would have a vested interest in its success. ZNCC president Mrs Marah Hativagone said there was need for the Government and private sector to work together and do away with mutual suspicion for the good of the economy.
She said there was need to identify common goals and for the two to work towards achieving those goals. She cited India where Government and business was working together to ensure that their economy becomes the third largest after USA and China by the year 2020. The senator for Chipinge and Chimani-mani, Senator Tobias Zephania Matanga, who spoke on behalf of parliamentarians from different portfolio committees who attended the meeting, hailed the efforts by ZNCC and called on other organisations to follow suit.
On their part, he said, the portfolio committees would hold a public hearing on Monday on the Bill and would take the meetings around the country before tabling a report in both Houses of Parliament.
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