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Youth, Indigenisation and Economic Empowerment Minister Patrick Zhuwao

Joram Nyathi Spectrum
CONFEDERATION of Zimbabwe Industries president Busisa Moyo has pleaded with Government to exercise maximum restraint in dealing with foreign companies which for the past five years have defied the country’s 51/49 indigenisation law. Moyo’s plea came ahead of today’s deadline by which

Government has threatened to revoke the licences of non-compliant companies.

Moyo told The Sunday Mail last week that only 15 percent of industries which existed at Zimbabwe’s economic peak remain now. That is in part attested by the high unemployment rate in the country and the burgeoning of the “new economy”, the informal sector. Hence Government must tread carefully.

That said, when everything is added together, today’s deadline and ultimatum would not have been necessary had the companies concerned been committed to operating in Zimbabwe, wanted to abide by the law, were transparent and acting in good faith, and were not openly defiant in calling Government’s bluff.

The indigenisation law came into force in 2010. It was the second year into the Inclusive Government comprising Zanu-PF and the two MDC formations, inaugurated in February 2009.

The Indigenisation and Economic Empowerment Act was itself part of a broader policy thrust by the Zanu-PF Government to indigenise the economy, which began in earnest with the fast-track land reform programme in 2001.

The fast-track land reform programme was adopted after it became evident that the willing seller, willing buyer approach adopted at independence in 1980 had failed to meet demand for land by the indigenous black majority. Whatever was availed voluntarily on the market was either unsuitable for agriculture, or it was too expensive for Government. In short, the market forces which were unleashed to determine the price of farms were meant to ensure Government got as little land as possible, in short, to ensure the policy failed.

Those who “owned” the farms believed it was impossible for Government to seize “their” farms without paying adequate compensation within a reasonable period, so if they stood out long enough, the policy would be abandoned.

That’s how the Land Acquisition Act became a necessity. Under that Act, Government made clear it would now pay only for improvements on the farms. Land would be taken without paying compensation at all.

Needless to say there was spirited resistance to this law by white commercial farmers in the local courts and beyond. They managed to enlist the support of local opposition political parties, civic society organisations and the “international community”. The result were the crippling sanctions which have partly been blamed for the parlous state of Zimbabwe’s economy today.

This is the context in which we must locate the current resistance by foreign companies to Zimbabwe’s indigenisation and economic empowerment law. It is the same forces and the same spirit which prevailed under the fast-track land reform programme. At the centre of that resistance are our own people, whether as fronts or active agents. The gospel is the same: we need foreign investors more than ownership and control over our resources.

Beside self-serving propaganda, there is a significant difference between the fast-track land reform programme and the indigenisation law as it applies to companies. The law requires companies with a value of $500 000 and above to sell 51 percent ownership to indigenous people. Over time this 51/49 percent ratio has been relaxed. It now applies only to the resource sector, particularly mining, in which President Mugabe has stated that ownership of the natural resources constitute Zimbabwe’s 51 percent while the foreign investor brings in capital and technology for a 49 percent shareholding.

This is what is being resisted as unfair, and an artificial dilemma is being created: to shut or not to shut down non-compliant companies? There are risks on both sides.

Companies fear losing their operating licences. On the other hand Government would be loath to shut down the 15 percent struggling industries and throw the few employees still in the formal economy on to the streets. The risk of brinksmanship to save face in the light of today’s ultimatum also looms large.

But there is also a bigger dilemma where Government is being held to ransom in the name of saving jobs by being induced to tolerate illegality and a deliberate violation of the law.

The Indigenisation and Economic Empowerment Act provides sanctions for non-compliance. Section 5 of the Act states: “(2) Subject to this Section and Section 20, the minister may issue a written order to the licensing authority of any non-compliant business, ordering that the licensing authority concerned decline to renew the licence, registration or other authority to operate the business concerned, or where the licence, registration or other authority is granted for an indefinite term, ordering that the licence, registration or other authority concerned be terminated no later than six months from the date when the minister issued the order to the licensing authority concerned.”

The companies concerned are obviously aware of this provision. They had five years from 2010 to comply with the law. Some complied. Others have ignored the law. Still others have prevaricated, complaining clumsily about lack of clarity or inconsistencies in the application of the law.

It is easy for such companies to accuse Youth, Indigenisation and Economic Empowerment Minister Patrick Zhuwao of populism in pushing for the revocation of their operating licences. To that it can be retorted by Minister Zhuwao that the affected foreign-owned companies have played to the populist political gallery in refusing to abide by the law, knowing the state of the economy and the level of unemployment in the country.

What is being downplayed here is that Zhuwao, on his appointment as minister, took an oath of office to obey and abide by the laws of the country. He cannot act in wilful violation of the law to protect the interests of companies which wilfully violate the law.

The point being made here is that the foreign-owned companies which have refused to submit their indigenisation plans have not challenged the constitutionality of the Indigenisation and Economic Empowerment Act, whether as racist or inapplicable. Besides trying to use opposition political parties to push their case, there have been no sustained efforts to directly engage Government on the objectionable parts of the Act. That suggests unwillingness to obey the law because it is the popular thing to do.

This is completely different to the course taken by white former commercial farmers who made a strong case against the seizure of “their” farms although Justice Patel eventually ruled that reversing the land reform would be against public policy, and all GNU partners signed the Global Political Agreement in September 2008, one of whose key clauses was that the land reform was “irreversible”.

On the face of it, the companies which have refused to comply with the indigenisation law have no legal leg to stand on. The strength of their case rests on their support by opposition political parties, civic society organisations and their governments back home which support the looting of African resources to sustain their own economies.

Finally, there is a sinister moral blackmail; that the Zanu-PF Government cannot be so heartless and callous as to render its own people jobless by shutting down foreign-owned companies for minor, pardonable infringements of the law. But the truth is that if the indigenisation law were deemed too irrational to be obeyed or to be enforceable, that should have been tested in a court of law. The CZI’s Moyo is right to appeal for restraint yet Government is being pushed into a corner to suffer defiant illegality.

It’s a sticky messy.