Indigenisation will not feed us! Vince Musewe

via Indigenisation will not feed us! | The Zimbabwean by Vince Musewe 24.09.13

Food security, decent housing, health and access to clean water are more pressing issues than the ownership of shares.

Please make no mistake; I am not against the idea of indigenisation at all. Zimbabwe’s natural and mineral resources belong to all Zimbabweans regardless of race or political affiliation. We were endowed with such huge mineral riches so that we could use them to the benefit of all our citizens – not just a select group of greedy individuals.

These riches cannot be dominated by any single group of people at the expense of developing our country and eradicating poverty. Colonialism was wrong in that it accessed these riches to the benefit of the British. The same would apply where Zanu (PF) uses indigenisation as an enrichment process and treats these resources as theirs alone, as has been happening to date particularly with regard to diamonds. That is wrong and indefensible.

The process of the ownership of our resources will be a long and protracted one, if we do it correctly. I worry that unrealistic expectations have been formed in the minds of ordinary Zimbabweans by Zanu (PF)’s electioneering. That is not fair.

Of course we want to have Zimbabweans as owners of established entities, but this process must involve those who can actually add value to those entities. After all we wish to create sustainable business entities.

There should be no political entitlement or interference. In addition, those who are selling must have a choice in whom they wish to do business with and must sell at a fair value. The idea of “approved” empowerment partners brings in the scourge of patronage through the back door, while the idea of a free transfer kills entrepreneurship and the work ethic.

It is also important to note that these transactions involve high levels of debt and risk. They cannot be consummated at the behest of politicians but through sound business foresight. In addition, it will take some time for the new black shareholders to retire the debt that is mostly funded through future dividend flows.

It is important to appreciate that this type of indigenisation will not create cash in the medium to long term; Zimbabweans must not be fooled that benefits are immediate and new jobs will be created.

Where new companies are created from day one with indigenous partners aboard, what will be critical is that those partners have access to capital to invest in the new venture. This is high risk startup capital and means that this nation must become an attractive destination for new investors.

In addition the cost of capital being borrowed must be affordable. Again in such cases, the benefits are medium to long term and depend largely on the economic environment. Our task must, therefore, be to attract investors by creating a stable economic environment that respects the rule of law and private property ownership.

Now you will note that in all these instances, capital is required first. This means that indigenisation actually requires cash outlay first – because money has to be invested before it can be made; we can expect no cash windfalls in the short to medium term from this process.

Now, the argument promoted by President Mugabe is that Zimbabweans need not pay for their stakes in instances where land is part of the investment. Let us look at mining for example.

The idea here is that a foreign investor invests in a venture in partnership with indigenous investors where the contribution of the latter is the land from which the minerals will be extracted. The foreign investor must lay out cash for operations and capital for the technology to mine.

The question here is; who qualifies to participate as the indigenous investor? In other words when Mugabe says “we” own the land and the minerals underneath it, who is the “we”? Therein lies the catch.

Our experience through agriculture and indigenization deals to date is that the “we” is a very limited circle of politicians and their cronies. It excludes most ordinary folk especially those outside Zanu (PF). It is a partisan “we” and not a constitutional “we” and we the people must reject that thinking because it is of no benefit to us at all.

The other problem, of course, is how we value those minerals underneath so that we get the most value but do not make it onerous on potential investors. We must appreciate that, as long as those minerals lie underneath and unexplored, they are literally valueless. Clearly there cannot be a one size fits all approach. Even if we accepted this model as correct, it still does not create cash for the country in the short to medium term.

It requires long term investment and patience. We just can’t afford that right now. In my opinion, food security, housing, health and access to clean water are more pressing issues to ordinary folk than the mere ownership of shares. Indigenisation will not feed us. The expectations created by Zanu (PF) about the immediate benefits of indigenisation are false, misinformed and unachievable in the short term; we must not expect apples from a mango tree.

Indigenisation is so important that we need to be cautious and circumspect; unfortunately the people are waiting for results that are likely to come much later if at all. Another fantastic failure is in the offing. If I were President, I would focus more on reviving agriculture as the benefits will be immediate and more widespread.

I am still waiting for a counter argument on the immediate benefits of indigenization, especially given that the country faces serious starvation and joblessness. I will not hold my breath.

Vince Musewe is an economist based in Harare. You may contact him on



  • comment-avatar
    ZimJim 11 years ago

    Excellent article! Vince, I salute you, sir.

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    Tjingababili 11 years ago


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    Mzilikazi Khumalo 11 years ago

    Farting against the wind.Let them eat indigenization.China will not provide food aid. Then we can be left with clever shonas.The not so clever ones will follow mugwabwe to his grave….

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    Dale Doré 11 years ago

    Dear Vince,

    You make the important point the minerals are valueless while they are still in the ground. It takes capital and labour to create that value. The state captures its share of the value through royalties and taxes, and preserves the extracted capital (mineral wealth) through creating a sovereign wealth fund for future generations. Norway’s sovereign wealth fund from its oil revenues now stands at $760 billion. This is for a small country of just 4 million people.

    What you don’t address in your article is the source of capital. These are the international investors with the capital and expertise to add value to minerals. The state gets its share from royalties and taxes (both corporate and from wages); Zimbabweans receive wages from all the mining jobs created; and the country gains through earning desperately needed foreign exchange. The companies themselves earn interest on their capital and dividends from profits. This is the fair return that investors earn for their capital investment and the risk they take.

    Since Zimbabwe and Zimbabweans would benefit so much from foreign investment, why do you still go along with ZANU(PF)’s “resource nationalism”, saying that Zimbabweans must own the mines and industries that create the value. Where will the capital come from? And why to do go along with bashing the British, a hallmark of ZANU(PF)? Your throw-away line that ‘Colonialism was wrong in that it accessed these riches to the benefit of the British,’ is careless and flawed. How do you think Zimbabwe at independence was considered the ‘Jewel of Africa’, by none other than Julius Nyerere? Why do you think Zimbabwe was considered ‘over-industrialised’ at independence by Tony Hawkins? And why do you think that Zimbabwe had the highest literacy rate and the best education in Africa at independence? Even while Robert Mugabe uses the most intemperate language to denigrate Britain, Britain has contributed about $100 million as part of DFID’s Protracted Relief Programme in the last 5 years to support the most needy Zimbabweans.

    As “we” Zimbabweans will be bombarded by ZANU(PF)’s relentless and self-serving economic propaganda on indigenisation, it becomes all the more important for us to think with greater intellectual clarity and rigour about economic policy issues.

    Kind regards,

    Dale Doré

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      Well said Dale. I think Vince fails to see that this whole exercise is not Indigenisation, it is Nationalisation in disguise. It is outright theft as was the taking of land from farmers who purchased their farms after 1980 with the blessing of government. Mine owners paid for mining rights, invested heavily, took risk and much more. The government has found a nice way to take back a vehicle they sold with no compensation.
      I remember when the farms were taken, we were told the government would pay for them, then they would pay for improvements. Nothing was paid. When industry was first talked about, we heard once again “we will pay for it”. Even Saviour believed (stupidly) this and signed the contracts with the Platinum mines. He lost his job for that and the contracts were torn up. Now it is understood there will be no payment and this will apply throughout this exercise. Foreign Banks and companied would do better to up roots and leave. Better to take the loss than to deal with dishonest governments and dishonest people.

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    khabo 11 years ago

    It might be nationalisation or indeginasation what so ever i don’t care , but the fact is that we can not just give away our natural resources and benefit those individuals while people on the ground suffers , sharing is the best as long as the government will fight against corruption and deliver the needed services to the people.

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    Nyoni 11 years ago

    Vince has made valid points concerning the Indigenisation process. My status on this is for the whole process to work , a feasability study by experts on how to implement any strategy should be done first. At the present time there is no plan . By just saying Investors are allowed to come in this becomes a question of what type of investor are we looking for. Africa in general is allowing crooks to enter into deals with corrupt politicians. This must be the first problem to be dealt with. An investigative body to interview a prospective investor must be formed. Being hard up to attract any investor is one thing but by selling our resources short is another. Let us be aware before we become the dumping ground for any crook internally or externally.

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    khabo 11 years ago

    Nyoni huuu, uyaphapha sibili , strategic planning is an obligation of the top management like directors of the company it can not be a simple topic to the public , so who told you that indigenisation is not properly strategised ,please understand that even if you are opposers ,it is important that we must have facts on other issues ,don’t simple generalises and assume issues . We have got educated Zims and business people who will be able to guide indigenisation , sharing 51% -49% is the way forward , why do we have to give away our natural resources .

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    masvukupete 11 years ago

    I have always used this model for explaining indegenisation:
    Zisco can produce steel worth $1billion a year. Most companies make about 10-20 percent after tax profit. Therefore the 100% shareholders or owners of the company will “make” $200million a year. They will therefore “put” into their pocket $200mil. Where will the other $800million go? Most of the $800 million will be shared amongst workers, utilities, Hwange, BIMCO, Kwekwe municiplaities, transporters, NRZ etc. The most part of the $800million will be distributed amongst Zimbabweans depending on how they contribute in making the $1billion possible for the Zisco. The country will be making a net profit of $600-$700 million more than what is happening at present. If we can entice 3-5 ($3.5 billion) of these kind of foreign owned $1billion dollar companies then our economy will be on the mend in no time at all. We can give the companies that prefer not to give up 51% a condition for public scrutiny in order to ensure their dealings are above board and they are doing that which they declare they are making. We can make legislation that compels those who want to keep their majority shareholding to the same laws as public listed companies, independent auditors (Zimbabwean owned auditors etc.) Actually that should be the rule for all companies with certain threshold annual revenues. This will prevent shareholders who cling to companies like they are only responsible for themselves. Laws should be put in place that if a company that employs more than say 50 people should go into forced liquidation, in agreement with the workers, if they cannot pay their workers for at least 2 months. This will help ensuring that “owners” who do not want to sell their companies are forced to sell when things are still manageable. These are just my simple thoughts. I am sure there are a lot of ideas in the bank of ideas out there.

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      Macon Pane 11 years ago

      Pardon me, but what is your source of information that company profits are 10-20% after taxes? I’d dearly love to invest in such a corporation. I always wanted to be wealthy.

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      Zimbo 11 years ago

      And simple thoughts they are shamwari…… simple thoughts. If you have not realised, the world is a global village. By your thinking, every Zimbo in the diaspora who ownes a company, should then share his company 49 / 51 with a citizen of said country that he is in…. Seriously, wake up and smell the coffee.

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    masvukupete 11 years ago

    Another business that can produce $1billion a year is coal gasification. We need 1billion litres of fuel every year. Our coal can produce that much fuel every year (SASOL does it in SA). Obviously our coal needs to be analysed for quality but it is possible if we want it to happen. This will be a double edged sword, reduce the fuel import bill at the same time increasing job creation. The downstream jobs created by coal gasification are more than 10 times the actual jobs that are employed in the gasification industry.

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    Macon Pane 11 years ago

    The major concern here seems to be with holding companies and investors accountable, so the Zim economy as a whole benefits. Interesting ideas presented. How about some ideas to protect the Zim coffers from the sticky fingers of politicians, so the economy actually benefits? Consider how much has already been stolen, explain how things now are suddenly different, and tell what steps are to be taken to hold government leadership accountable? What steps do you propose to protect those foreign companies and investors from the taking of their equity? The Zim leadership’s record discourages taking such chances, and stockholders in those foreign businesses don’t take kindly to insane gambling with their investment. What’s your plan there? Perhaps an interest bearing escrow account, held by a third party, to match a company’s capital investment? Zim is in desperate need of jobs, otherwise the economy will continue its monumental collapse. The number of jobs needed will come only from foreign involvement. You smart guys get together and figure it out.

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    Chivula Mapoti 11 years ago

    “Zimbabwe has lost a cumulative US$12 billion in the last three decades through illegal financial outflows ranging from secret financial deals, tax avoidance and illegal commercial activities, a new report jointly produced by the African Development Bank (AfDB) and Washington-based US think tank Global Financial Integrity has shown”, that’s $952 for every man, wpman and child in Zimbabwe. Over the past 33 years! Go Mugger and Dis-Grace!