Zimbabwe: Indigenisation Policy - More Questions Than Answers

WITH essential issues still on the table as the September deadline for the submission of indigenisation proposals approaches, the Youth Development, Indigenisation and Economic Empowerment ministry is yet to give a clear outline on the implementation of the policy, particularly on the composition of the thresholds and the Sovereign Wealth Fund (SWF).

At the Indigenisation Indaba held recently, minister Saviour Kasukuwere said government would take a minimum 51% shareholding, which would be directed towards three beneficiaries that will gain from the empowerment of the mining sector. Under the plan, the community where the resource is found will get 10%, the workers 10% while the remainder will be put into the Sovereign Wealth Fund, which would be the national reservoir of resources.

And this is all based on the valuations of the minerals in a particular location. According to Kasukuwere, the private sector will be left out as there is need to avoid white-owned companies using black people as fronts as happened in South Africa.

The government said it will target all companies with net asset values of one US dollar or more, and where the investment is less than the value of the asset government will end up owning, for instance as in areas like Chiadzwa.

To date no further information has been given about how this SWF will be set up and how it will be aligned to the nation's fiscal system, save for the examples that the funds have been successful in some countries where they have been implemented, such as China.

SWFs are defined as a special purpose investment fund or arrangement, owned by the general government. Created by the government for macroeconomic purposes, SWFs hold, manage, or administer financial assets to achieve financial objectives, and employ a set of investment strategies.

Based on the source of funds there are two objectives that the minister can follow in setting up an SWF in Zimbabwe. Firstly, as a reserve investment that aims to enhance returns on reserves, and secondly, as a development fund which uses returns to invest for development purposes. Whatever route is followed, it is important that it has to be consistent with the overall macroeconomic framework of the country.

Appropriate coordination between the SWF and the fiscal and monetary authorities is critical to achieve a country's overall policy objectives in the context of which an SWF is established. It has to go beyond a PowerPoint presentation at some conference and move over to implementation. The ministers of Economic Planning and Finance left it out in their policy reviews.

There has to be a properly laid out plan and structure of the SWF as an entity. Will it be set up as a unit under the Reserve Bank of Zimbabwe, the ministries of Finance, Mines, Youth Development, Indigenisation and Economic Empowerment, or maybe will it run as a separate legal entity?

However they are going to set it up it will be complicated. Regardless of any governance framework that they will lay down for it to conduct its work independently, it will be prone to political influence or interference. Globally, the majority of governments have been known to fan corruption and raise unemployment levels, thereby stopping the continuity of income.

There is currently a lot of debate on whether this fund then will only benefit government. The most vocal of the empowerment groups, the Affirmative Action Group (AAG), has openly said (assuming they want to be the immediate beneficiaries) that government should not benefit at all from the system, but rather the people should. Government cannot be creator of wealth; it can only be at best a facilitator, an enabler.

The focus should be on the development of an enabling economic environment that is conducive for the development of local entrepreneurs and that also channels the Essars and other foreign direct investors into Zimbabwe.

According to Monitor.com, globally SWFs are worth roughly around US$2,704 trillion, with Norway having the most successful at US$560,5 billion. The sources of most of these funds are commodities, particularly oil. It could work in Zimbabwe, but to date even the minister concerned has been inconsistent in his proclamations.

What has also not been clearly laid out is how the communities will benefit from the 10% stake. Statutory Instrument 134 lays out how communities will participate in the programme and how they will draw down benefits. According to Kasukuwere, traditional chiefs and the rural district councils will be involved and take the central role. What has not been pointed out is how this will benefit the whole community.

Firstly, there has to be a fund which should be created to provide an opportunity for the people to directly and indirectly acquire shares, with equal access being granted to all. Those with central roles will get board representation, the aim being to make them decision makers. Overall, the policy must directly impact on the lives of those purposefully and systematically left out of the economy and not just a random selection of those known in the community.

Attempting to paint the indigenisation policy as a people-centred strategy in word has already created a lot of debate and the key is to handle it carefully. The fluid nature of capital should guide policy makers and they should take note of the contributions from the Reserve Bank of Zimbabwe, Chamber of Mines and other proactive business people and scholars. For Zimbabwe, the challenge is to facilitate the sustainable transfer of wealth through a transformative, rather than a destructive policy. But already there are proclamations by Zanu PF members that the whole programme is a party policy just like the BEE is an ANC policy.

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