Thursday 18 February 2010

BROADCAST: February 12 2010

VIOLET GONDA: Last week the government passed a new regulation which requires businesses to hand over at least 51 percent ownership to indigenous Zimbabweans. It is said the Indigenisation and Economic Empowerment regulation is meant to benefit ‘indigenous’ Zimbabweans who were disadvantaged before independence in 1980 but there have been mixed reactions about this. Some have said it may give marginalised groups a chance in the competitive job market but others say the move sends a very wrong message to much needed potential investors and could lead to chaos similar to the seizure of white commercial farms in Zimbabwe. Furthermore, Prime Minister Morgan Tsvangirai revealed the move had been made without his knowledge, even though he is in charge of all policy formulations by Cabinet. To discuss these latest developments my guests on the programme Hot Seat are Supa Mandiwanzira the president of the Affirmative Action Group, businessman Mutumwa Mawere, economist Daniel Ndlela and journalist Peta Thornycroft. Let me start by getting your views on this new law, let’s start with Supa.

SUPA MANDIWANZIRA: Well my views are that this is the most exciting development that has taken place in Zimbabwe. In fact when the regulations were gazetted last Friday you could just equate the excitement to that of 18 April 1980.

GONDA: Mutumwa Mawere?

MUTUMWA MAWERE I think if you are blind, anything is exciting but if you recognise what time it is and what is required to advance the country’s interest and what has made other countries progress and if you are looking at social and economic change then you have to pause and reflect and actually try to locate what is required to move forward.

GONDA: Daniel Ndlela?

DANIEL NDLELA: Well to me this law in fact, is not exciting at all because at this stage Zimbabwe is the one that needs investors. The existing investors and those investors that are still coming and given the fact that the law is actually saying that Zimbabwe is not a favourable destination on Earth, is not an attractive destination on Earth, it is not going to be exciting to the majority of Zimbabweans. It might actually be exciting to a few who can actually get their share of where they have not sown.

GONDA: Right, and Peta?

PETA THORNYCROFT: My first reaction was good, this is a jolly good story, I’m going to make some money today and then I started phoning people and I spoke to Dr Ndlela first and he gave me such a great quote. And then I phoned around and I then was landed up being of the opinion that this is an appalling set of regulations which are way in advance in their effect from regulations that what was in the regulations should have been included in the Act in Parliament.

GONDA: Let me go back to Supa who has said that he was so excited when he heard about this but according to the general feeling on this panel; it’s an appalling set of regulations which could drive away investors. What can you say about this Supa?

MANDIWANZIRA: I think that with all due respect to the other panellists, I think that there’s a complete misunderstanding of the intentions and what the objectives of these regulations are. First and foremost, a law was passed in the Parliament of Zimbabwe, in a parliament that was represented by ZANU PF, the MDC and others, what has now taken place are moves or steps towards implementation of that law – because if you put together a law, the next thing, it must be implemented, so this is the whole process that was started a long time ago that people shouldn’t be surprised about. But if people are also honest, all investors have been sitting on the fence looking at Zimbabwe because the argument has been ‘we’re not sure where Zimbabwe is going, we’re not sure what the Indigenisation laws are, we’re not sure whether if we come in with our money it’s not going to be expropriated and things like that’. What this does is actually manna for the investors because it clarifies the situation, so any investor sitting in South Africa, London, New York or Japan will now know what is on the table and make a decision, corporate decision to say I’m not putting my money there or I’m putting my money there because things have been put on the table and they have been clarified.

GONDA: Mr Mawere, do you agree with this, that investors have been sitting on the fence and this will actually help investors decide on what they need to do on the issue of investing in Zimbabwe?

MAWERE: Not necessarily, I think nation building is an enterprise that has its own foundational principles. If you were to locate a Zimbabwean and say this is a previously disadvantaged, you are after 30 years of Independence, how do you proceed on that enterprise? Who would be included, who would not be included? If I am white, I came in to Zimbabwe when the flag was raised in 1980 and I invested, I made my money, how can you distinguish me with somebody who was born in the country, maybe on the same day that I was born and then you build a foundation on that basis.

Yes Zimbabwe has an ugly past, but how best can it be resolved? Through shared transfer of schemes and to what benefit? So if a bad law doesn’t become a good law because instruments have been gazetted, a bad law has to stand on its own and a good law can stand on its own. If Zimbabwe were to speak, would it speak in the voice of Supa and who would be Supa representing? That is a question that he can answer but to develop a country, it’s really an idea and Zimbabwe can advance its course if it is welcoming other people. And those who do nothing, the minerals are where God left them. I can’t say because I was born in Zimbabwe the minerals belong to me merely because I was born. Then I’d be playing God myself.

But the minerals are there, somebody has to apply his or her mind, put capital to uplift the minerals where they are and convey them to a marketplace. Minerals in the ground are God’s creation and on what basis would then I come in and say because I’m in this generation, my neighbour has found a way to extract the minerals and makes money in it out of an exchange of a mineral metal into cash, but if the market collapses, that person also can collapse. There’s no guarantee that what you uplift you will be able to convey to market profitably. But if you do so, you have to spend money in Zimbabwe and Zimbabwe benefits in that enterprise so it requires a much more careful consideration than just say oh this is an extension of something that was approved by parliament or the Act exists. It is important that we do reflect on Zimbabwe the person that requires the investment.

GONDA: Let me go back to Supa and find out from him to what extent this law discriminates against whites. Does it discriminate against whites? Is this a racially targeted manoeuvre to completely clear out white people from Zimbabwe? What are your thoughts on this?

MANDIWANZIRA: I think that the interpretation of this Law and the Regulations as an attempt by government to disempower the whites in Zimbabwe is obviously being driven by people who have an agenda against Zimbabwe and its readmission into the community of nations, so we can do business with others. Because there’s nowhere in the law where it says that whites are not allowed to own businesses, that this law is targeting whites. I would challenge everybody on the panel to please highlight the section that talks about white Zimbabweans being excluded.

I hear Mr Mawere’s argument that we must look at the interests of Zimbabwe and we must welcome anyone who wants to bring in their money into Zimbabwe. Indeed this law is welcoming anyone who wants to bring in money into Zimbabwe but it is giving them the expectation of the Zimbabwean people – that within five years of your investment you must achieve a certain ownership that is indigenous, but if you cannot do so in five years, tell us and we will give you more time but ultimately we would like you to achieve this. The law is very clear, it does not discriminate against white people.

The law is simply saying we are aware the indigenous population was discriminated against prior to Independence in 1980 and to give them a leap forward so they can catch up with those that perpetrated this disadvantage, let’s give them also these advantages. So I would like to hear from those on the panel who feel that this is discriminatory to explain where they were before 1980 when the majority was discriminated against.

MAWERE: But Supa, your definition of indigenous means what?

MANDIWANZIRA: My definition of indigenous is the legal definition of indigenous here in Zimbabwe which is anyone who was disadvantaged before Independence in 1980. So whether you are Indian, you are white, you are coloured, you are any other colour, as long as you were disadvantaged before Independence in 1980 you qualify. You just have to prove that you . . .

MAWERE: So if I set up my business in 1980, I should give up my shares?

MANDIWANZIRA: Well I think . . .

MAWERE: Is that what you are saying?

MANDIWANZIRA: There is no-one who is saying give up. People are simply saying find an investor who is Zimbabwean who was disadvantaged before Independence who will buy your shares at an agreed price, government is not determining the price.

GONDA: Let me ask Peta Thornycroft for her thoughts on this. To your understanding, does this law discriminate against white people first of all?

THORNYCROFT: Well I think there are so few white people left in Zimbabwe that it really makes little difference, any issue about race. Section Nine of the regulation does exclude 14 sectors of the economy for previously disadvantaged people and certainly black people were previously disadvantaged before 1980 so I think that has an element in it that someone could go to the Constitutional Court in Zimbabwe and challenge that.

It’s not about white people per se, it’s about reaping where you have not sown and therefore as you have seen with the Black Economic Empowerment in South Africa, and I’ve been away from South Africa for 10 years so I haven’t followed its ins and outs, but what I know is that those investments that took place, people paid for them. They didn’t get 51 percent, they negotiated the percentage and that they were done with, some of it with great thought and care. What worries me with these regulations is that they are in the hands of Saviour Kasukuwere, a ZANU PF MP, a ZANU PF person, who might say ‘OK we’re actually going collecting for the February 21st Movement at the moment and if we don’t get a donation from you I’m afraid that’s your 51 percent’. And it’s no good saying people don’t behave like that, we all know ahead of ZANU PF congresses over many years, businessmen have been forced to invest in the ZANU PF congress for fear of their business, they’ve done it to protect themselves. And I could give you a string of names if I had permission in advance to demonstrate this. These regulations give far too much power to the Minister, his discretion is absolutely enormous.

GONDA: Would you not agree though with those who argue that this law seeks to enable previously disadvantaged people to enter business and not simply as workers but as owners?

THORNYCROFT: What worries me about anyone going into any business is that will they know anything about that business when they go in, so if you’ve suddenly got a guy who’s got 51 percent shareholding and he can appoint directors, how do we know he’s going to appoint directors that are going to contribute to the company’s wellbeing? So let’s go back to the land, because I know a lot about that. What . . . (interrupted)

MANDIWANZIRA: Violet, Violet, we need to be fair to this law . . .

GONDA: Hold on, hold on Supa. Sorry Peta, go on.

THORNYCROFT: OK, let’s take the issue of land and try and take the race out of it. What you had there was about 4 500 mostly not all, but mostly extremely efficient and productive farmers who produced 40 percent of foreign currency. Maybe they made it look too easy. When that land has been taken over and handed to people who had no experience in commercial farming and who didn’t have title deeds to raise money to grow their crops – and of course Agritex by this stage has virtually collapsed – but what you have had is a catastrophic collapse of the economy because land was handed to people who didn’t know how to make the best of it and why would this not happen with the companies? If you are going to have people who know nothing about heavy engineering, there’s one heavy engineering company left in Zimbabwe, in Bulawayo. If you go into that company, it’s an extraordinary place and why would that company want to have somebody on their, with 51 percent owning who may appoint a board of directors who know nothing about that company? We’re just going to see those companies collapse as we saw the farms collapse, not all of the farms but most of the farms.

GONDA: Before I get a reaction from Supa, let me go to Daniel. First of all, as an economist, what will be the real impact of this and how different are these guidelines from the land reform programme?

NDLELA: Thank you very much. The point here is, let me go back a little bit and say who in fact are these ‘indigenous Zimbabweans’ that will benefit from this law? The letter of the law simply says that the people who registered their names with the Minister and there will be an allocation procedure. Definitely this is patronage, it is a continuation of patronage as we have seen it in Zimbabwe and that those who will benefit are people in the gravy train in the patronage system. This letter of the law is quite clear that if you don’t comply, five years in prison, if you don’t do this, five years in prison. The issue here from an economist’s point of view is if you want investments from your own country, existing investments or/and new investments out there, you are not going to threaten people that come here, invest but if you don’t comply you are going into prison for five years. From an economist’s point of view, you’ll not have any investors coming into this country.

The spirit of the law itself, not the letter of the law, the spirit of the law itself has a morality element that does not really auger well with all investments internationally because you really don’t have a situation where there’s an allocation of your shares via a Minister at this point in time. In other words, from an economic point of view, the existing investors will lose interest in their businesses. They will run down the businesses in the five years so that by the five years actually you are taking on something that is no longer at its best, they are not going to invest in the five years, during this period and the enterprises that will be there will be enterprises that are really down. The new investors will not be persuaded to bring in their technologies, bring in their money here. Supa says that the people out there now will know the rules of the game, if they don’t want, they are not going to come, and if they want they are going to come. I want to ask Supa himself that if he has a million dollars will he go to a country where he will actually end up in five years with a share value of $49 000. He would be very benevolent indeed . . .

MANDIWANZIRA: Let me take the opportunity to respond there . . .

NDLELA: . . . because I’ll not do that, I’ll not actually go to a country where they want my 100 dollars and then tell me at the end of the day, you are going to remain with 49, the 51 will go to the locals, so I will stay in my own place.

GONDA: Supa, can you respond?

MANDIWANZIRA: Well unfortunately it appears that both Daniel and Peta are scaremongering. I am not sure to what extent they have gone through both the Law and the Regulation because what they are basically saying does not exist in the Law and does not exist in the Regulation. They are scaring people unnecessarily and they must begin to be honest with themselves and honest with your listeners that what they are saying is actually not true.

You cannot draw parallels of this Indigenisation Economic Empowerment Act and the Regulations to the Land Reform Programme. The Land Reform Programme started with the Svosve people occupying land outside any structured way by government. Here is something that is being done legally, lawfully by starting to promulgate the law in parliament, debating it, and then approving it and now implementation of the Regulations. So there’s a difference with the Land Reform Bill so you cannot draw parallels to that process.

The second important thing, Peta makes this argument that if people are going to be allowed to buy 51 percent they will run down those companies and they will appoint the wrong people and, listen, let’s be very clear, the Law simply says if you do not qualify to be indigenous, please find yourself some partners, those partners do not come and take your shares for free and there’s no stupid investor who will buy 51 percent of a business and put the wrong people to run that business, you will be silly to do that. Anyone who buys 51 percent must create and get value out of that 51 percent and it is completely disrespectful of the indigenous people if that is the suggestion these guys are putting on the table – that the indigenous people will spend money to buy 51 percet of businesses that they will run down. It’s nonsensical, there’s no sane business person who will do that.

Do I take a million dollars and put it in a country where I will eventually end up owning 51 percent – yes if I’m going to get value for my investment and I’m going to put a price to it, I will. There’s this misconception that 51 percent, owning more than 51 percent is the most profitable, is the most best thing, we all know that even some of the richest people control 12 percent of the companies that have made them rich, so we must not be hamstrung on this issue of percentage ownership. We must look at the value of the businesses, the value of the assets that Zimbabweans have, whether they’ve been exploited or not exploited, the value that they have by just being Zimbabwean.

GONDA: Peta, can you respond? Are you scaremongering?

THORNYCROFT: I don’t think I’m scaremongering. I’m personally not a legislator or an expert on legislation or statutory instruments, I phoned others and I’ve got the regulations, I had them, I read them, I phoned and I asked questions of people like Daniel Ndlela who is an economist and who deals in these fields, that’s his life’s work and he said, he told me the 49 and 100 dollars story; I spoke to John Robertson, I spoke to businessmen who had read the Regulations and they said these are extremely anti-friendly towards investment.

Zimbabwe is not a prize place to invest in the first place. The infrastructure is so broken, why would investors really want to come here in the first place, so we’ve got to make it look really attractive to get investment in the first place, then we are going to dictate to these investors, percentages. That’s the first point I have.

The second point I have is I can’t understand why anyone wants to tamper with companies that maybe running successfully already, why not start a new one? Why not expand it rather than messing up what, if any business has survived the last 10 years, particularly say the last five years in this country, my goodness they should get a business Oscar for having survived the chaos of hyperinflation and money printing. If they’ve survived, leave them alone, we’ve got so few industries left. Start new ones. Why don’t previously disadvantaged people of whatever colour start a new business? Shouldn’t government be looking to assist new business establishment rather than tampering with what is already there – because it wouldn’t matter how you wrote the story about those Regulations, the percentage is there and in 400 words when you write that story, that is what the world reads and I’m afraid that is the impression that has been created and it’s not going to go away.

ZANU PF has an extremely poor record in the last few years of leaving businesses alone, leaving people to decide their own future, deciding how they are going to survive. They are an extremely interfering political party and this is headed up by one of them who has this enormous discretion and as Daniel Ndlela said, you know you start sticking in jail sentences, then come on, come on – there’s the headline.

GONDA: Mutumwa, what are your thoughts on this and Peta says perhaps it’s time that the government started providing an environment where people actually start their own businesses, but those in favour of this new Law say that it targets industries like the mining industry where these mines already have claims and it’s difficult for locals, or indigenous people to enter into these industries, so how do the locals buy or enter into these competitive markets?

MAWERE: I think it’s always a complex issue what makes enterprises succeed, what makes nations win. Some people believe that Zimbabwe belongs to people who look like myself or Supa or Peta and I can build a Zimbabwe that is like that. But imagine you are driving your car and you are told that you need three passengers in the car and you are moving from Point A to Point B. Whether you’ve three passengers or you don’t, you still get to Point B; it doesn’t really make a difference in terms of driving and enterprise. There are people who follow, who will work for the enterprise. Shareholding itself is like being a parent. You spend school fees on your children but you can’t invoice them. So really for somebody to say I own and know that I’m going to die anyway is to accept that the proceeds of your effort may go to the next generation, who may not necessarily be qualified or whatever, but they have to inherit what you have. But if you build now and say the success of an enterprise is based on parents, merely that the shares, the holder of the share can decide whether the company succeeds or not.

DRC has minerals, 100 percent are indigenous but there’s no activity taking place in some of those minerals. You can equally convert Zimbabwe into 100 percent title and nothing takes place. What is good for Zimbabwe? Is it for people to sit to play God and say I own 100 percent of Zimbabwe but I don’t have the means, or I own 100 percent of the car but I don’t have fuel? Their car may be worth US$100 000 but if you don’t have one litre of fuel, the car won’t move. So we can end up with cars that provide no motion to it. And equally somebody who has turned 30 years now who was born in 1980 who is white, how are we going to face that person? Born in Zimbabwe 1980, was not part of the previous story, now does it mean that that business ought to carry three passengers or four passengers for it to pass through a toll gate where Supa or the Minister is a Toll Gate Inspector?

NDLELA: Can I come in there?

GONDA: Yes Daniel.

NDLELA: It’s really, if Zimbabwe, if the legislators in Zimbabwe, if the policy makers in Zimbabwe were honest that theirs is promoting indigenous Zimbabweans, they should really be honest about that – and for instance in the mining sector, countries that have gained from the mining sectors, countries that have made government itself go 50/50 percent with foreigners and so that the rewards of the ventures come back to the poor people of that particular country, not the business of actually lifting patronage business people when in fact the sister is getting nothing.

The Minister of Finance recently in the budget explained that he only got US$4 million as tax revenues from the mines and yet the mines, we know very well that they are doing very well. These are foreigners, fine. The government itself must go in and then open up those shares in as public listed entities instead of going for all these small businesses and say that if you own a business worth 500 000 and above you must actually share. We have to be honest, intellectual honesty and honest in terms of our morality again because who are these indigenous business people? I’m asking myself, I fought this liberation, I was out there and I don’t understand when I came back 1980 that today we are still talking about that past and at the same time we have destroyed our wealth and we are continuing to destroy the wealth for the future poverty stricken people of this country. They need jobs, they need to be empowered, not to be empowering the few people and making laws for the few people and that is what is happening here. The spirit of this Law does not really auger well with investment worldwide. We like it or not, the results will show. Investment is going to be very difficult from outside under this law.

GONDA: Those in favour of this also say that the Regulation is trying to redress a problem where foreign investors just come into a country like Zimbabwe, take what they want and then go, where they pay very little taxes and also repatriate most of the profits. Do you agree with this?

NDLELA: There is an element of that, particularly in the mining industry. Again, why is it so? It’s because of the opaque nature of those deals with government officials. All these exemptions which are given to the mining sector are done by the very indigenous Zimbabweans in government and so the opaque element, the non-transparency element is one that is actually playing up here – not because a non-Zimbabwean can just come in and invest and you take 51 percent. In the mining sector, of course we don’t know what is happening out there because of the opaque nature of all the deals and the mining agreements that have been done after 1980 not before 1980.

GONDA: Mutumwa, what are your thoughts on this? Is there corporate social responsibility by foreign investors?

MAWERE: It’s not enough, there’s a lot that can be done in terms of balancing the interests of the nation and the corporate citizen or the persons in corporate citizens, and it’s a continuous negotiation. If you increase tax, you discourage people; if you reduce too low then the State itself won’t have the capacity to function. But what you have is that if the unemployment is high in Zimbabwe and the people who are able and willing to offer themselves in the labour market are going elsewhere, are not in Zimbabwe and empowering themselves personally, and they see more value by being able to contract outside the State of Zimbabwe. Then if you go to Pick & Pay, more people pick and pay and Pick & Pay makes for instance makes a profit. What they do with the profit, if it’s derived from a free exchange of goods and services where the people are buying, some are exchanging money for something else, surely the discretion must be left to the person who extracts that profit in a free market but where there is no free market then one can say something else.

Equally Supa’s businesses, if you said Supa I want to join your car as a businessman and I just want 51 percent just because I am black or I am disabled or I’m blind, I’m sure Supa would actually tell me to go and see a psychiatrist. He’ll not be himself, if he were to show by example how he can give up his own privilege so that other people, because if he acquires that privilege through a market system, the question of corporate social responsibility yes, it’s important. Most of the people who have made money, they end up giving away because there’s no coffin that takes cash, there’s no graveyard that has an ATM machine so you know you’re going to die anyway, and your stomach can’t take anymore in a 24-hour day. So why would a rich person threaten a poor person because really they have no capacity to do so because they can only consume as human beings.

So if you don’t understand that side of nation building or corporate citizens then, if I have extra money, I apply my discretion. But then once you institutionalise this and make it a legal instrument which then forces people to say I’m driving at 70 kilometres per hour then I’m speeding and you know that people drive at 120 kilometres, then you’ve got a problem.

So I’m not too sure for whose benefit, when you know what Zimbabwe really requires today – it requires jobs and the people who have the skills are leaving the country and some of them who are there working very hard but clearly they can’t support a State that itself is not serving the growing population of employed people or people who are providing the income. Because the concept behind a government really is nothing more than somebody who has the right to tax you for your income, but somebody must generate the income.

But imagine for 2010 FIFA, Supa and myself, we sit as a committee to allocate seats for the match. It will take maybe a 100 years before we actually know who sits where but if you have a market system, this has been proved over and over, people know that if they can’t afford the game they find alternatives not because. But right now, how are you going to discriminate among maybe 12, 13 million who should get what and who should not.

And this decision is now invested in the minds of people like Supa who then have the prerogative to decide what is good for the country because right now as he is speaking on behalf of the country you’re talking about three million maybe people in South Africa – is he representing them or is he representing what he thinks Zimbabwe should be, because people daily are voting with their feet and they know what is good for them.

If what is good for them is shares, then let them create their own New Mutual instead of an Old Mutual, they create their own Standard Bank, there’s nothing standard about Standard Bank. We have created banks in Zimbabwe, those banks have people believe in, in the bank, you don’t have to go and take shares in Standard Bank. Why should I worry about what Standard Bank is doing when the people who make the bank are the customers and the customers are Zimbabwean – and you say look we are indigenous on the consumption side then we can’t decide where we want to buy, then we buy insurance from the wrong party, then we want to be insured by another party that we’re not buying insurance from.

So we have decisions to make and if time was spent on actually educating ourselves, understanding what it takes to build a winning country then we would make a better prospect than talk about someone’s corporate social responsibility, not our own responsibility.

GONDA: Next week’s discussion gets very heated when the panellists focus on the dipping of foreign accounts by the Reserve Bank, elitism in economic empowerment and who is responsible for the exploitation of Zimbabwean assets among other issues. – ZimOnline