Zimbabwe’s indigenisation mess


Zimbabwe’s Finance Minister, Patrick Chinamasa is fighting alone, an almost hopeless battle in pursuit of common and economic sense. If it wasn’t considered taboo to quit the government in Zimbabwe, he might have thrown in the towel. When one government minister decided to quit several years ago, he flew out of the country and from that safe distance despatched a fax, communicating his resignation.

Every time Chinamasa takes one step forward, his boss or one of his colleagues drags him two steps backwards. Last year he announced that government would not pay bonuses because there was no money for that expenditure. His boss rebuked him publicly and reversed his announcement. Four months into 2016, Chinamasa still hasn’t paid the bonus to some civil servants. He was right the first time but he was overruled by the boss.

Last week, Chinamasa posted a statement in the national media announcing that all foreign financial institutions had submitted adequate indigenisation compliance plans, as required by law. This was a pre-emptive reaction to an ultimatum issued by his Cabinet colleague, Patrick Zhuwao, who heads the indigenisation portfolio that all foreign companies were to comply with the indigenisation law by the 31st March 2016, or face closure.

Just hours after Chinamasa’s statement, Zhuwao issued a counter-statement, angrily refuting Chinamasa’s statement. He added a video recording to make his point clearer. He pointed out that he had written a strong letter to the head of the central bank, Dr John Mangundya, who had earlier stated, like Chinamasa, that banks were complying with the indigenisation law.

Thus there were two different statements from two government ministers on precisely the same issue.

This was a hideous clash between two ministers over an important policy matter affecting a very sensitive sector of the economy. Social media was abuzz with Zimbabweans expressing their disgust at the public conflict between the two men. It was not just a policy inconsistency, but policy paralysis on public display. How could investors take Zimbabwe seriously when members of the same government were issuing different signals over the same issue and clashing so publicly? Did they not discuss these issues in Cabinet? What exactly is the position on indigenisation? These are some of the scores of questions Zimbabweans were asking in the wake of the clash.

The trouble is that all this is not new.

A previous minister responsible for indigenisation, Saviour Kasukuwere, who had the same combative approach being exhibited by Zhuwao, also issued similar ultimatums in the past, achieving little in the process. He also had a public clash with Dr Gono, the then Governor of the central bank, who like current Governor Mangundya and Chinamasa, was strident in his defense of the financial sector. Kasukuwere wanted to force compliance among foreign banks operating in Zimbabwe, but Gono resisted and defended the banks, arguing it would spell doom for the sensitive sector which thrives on stability and confidence. That battle was won by Gono, who also had the advantage of a particularly close relationship with President Mugabe. Gono offered alternative models of empowerment in the finance sector, but it’s not clear what happened to those propositions. In any event, Kasukuwere was moved from that ministry in 2013, bringing an end to a boisterous era.

Just four months ago, Chinamasa and Zhuwao clashed on the same issue of indigenisation. On 24th December 2015, Chinamasa gazetted a set of indigenisation regulations, but eleven days later, after clashing with Zhuwao, he was forced into a humiliating climb-down. He rescinded the 11-day old regulations and issued a new set of rules. It was an ugly incident that suggested hints of a dysfunctional government. At the time, President Mugabe was away enjoying his annual holiday in Dubai. On the occasion of the most recent clash, Mugabe was in Japan, on an official visit where he also hoped to attract investment.

While Mugabe was hoping to persuade the Japanese to invest in Zimbabwe, Zhuwao, who is his nephew, was adamant that foreign business had to comply with indigenisation laws or face losing their operating permits and closure. This was notwithstanding the fact that the law does not actually give him the power to close businesses or take away licenses, that being the domain of line ministries. He cannot, for example, shut down banks because that is the responsibility of the finance ministry and the central bank. But this lack of power hasn’t stopped him from issuing ultimatums and making grandiose claims over the closure of companies.

Zhuwao has also attacked the ZBC, the national broadcaster for criticising his approach on indigenisation. As has become the pattern, Zhuwao sought to cast ZBC’s critique of indigenisation as criticism of President Mugabe, the idea being to add weight to the alleged transgression – in ZANU PF circles, no-one wants to be seen as attacking Mugabe and everyone wants to be seen as his best defender.

Others see Zhuwao’s approach as being overzealous; that he is overplaying his radicalism in the implementation of a controversial indigenisation policy at the expense of the economy, especially at a time when Zimbabwe is in desperate need of investment and job creation for more than 80% unemployed people, many of them young but idle graduates. Some think he exploits his familial proximity to President Mugabe, who appointed him to his post last year in a Cabinet reshuffle.

Chinamasa on the other hand is seen as more sensible and realistic, pursuing a course of re-engagement with the broader international community, multilateral international financial institutions, and investors. He is no angel, of course, given his own history of highly inflammatory and damaging rhetoric in his previous station as Justice Minister. But he has been doing a better job of redeeming himself in recent years, with a tone of moderation and a sensible, pragmatic policy-thrust since he was appointed to the finance portfolio three years ago.

While Chinamasa is conscious of the need to do more to attract foreign investment and has been working tirelessly to paint a picture of a more tolerant and stable Zimbabwe where property rights are secure and respected, Zhuwao has been pulling in the opposite direction, banging on the indigenization drum. Last week he even went further and threatened to use non-existent powers to raid the personal assets of directors of non-compliant companies. There is no legal basis for such powers but he issued the threats anyway, citing “advice” from lawyers.

The public disagreement between the two men has been an embarrassment. Even Professor Jonathan Moyo, a close ally of Zhuwao, admitted on social media that the public conflict between his two Cabinet colleagues was “unfortunate and regrettable”, before adding that they would eventually “find each other”.  But the damage to Zimbabwe has already been done.

Some see the Chianamsa-Zhuwao clash as the manifestation of the bigger succession battle raging on in ZANU PF in the race to succeed President Mugabe. While Zhuwao has publicly denied membership to the G40 faction, few believe him and think he is an integral part of that faction vying to succeed his maternal uncle in competition with the Lacoste faction which is backing Vice President Emmerson Mnangagwa. Chinamasa has not been vocal in the succession wars but he is believed to be sympathetic to Lacoste, or at least his detractors place him in that faction. If Zhuwao’s approach represents the G40 mentality, then G40 is showing itself to be more unreasonable in its radicalism. On the other hand, if Chimanasa represents Lacoste, it would seem to be the moderate and pragmatic faction, at least on the issues of indigenisation and foreign investment.

Meanwhile, investors looking at Zimbabwe will be seriously concerned by the policy paralysis and apparent confusion that has been on public display. Last year, Nigerian billionaire was given rock star treatment when he came to Zimbabwe, with great expectations on his promised investment. The Chinese also signed so-called “mega deals” two years ago. The Russians, too were reported to have taken a keen interest. Much of this promised investment is yet to materialise. But with mixed signals coming from government Ministers and the confusion and uncertainty around indigenisation and property rights, these deals may be threatened. The recent closure and nationalisation of diamond companies have only added to the concerns. The Chinese ambassador warned last week that bilateral investment agreements need to be respected and in typically diplomatic language criticised the seizure of diamond companies, which affected Chinese companies.

Serious challenges and controversy have stalked Zimbabwe’s indigenisation policy since inception in 2007. Resource nationalism is not new, nor is it unique to Zimbabwe. Yet for all the bombastic rhetoric, Zimbabwe doesn’t have great results to show in the implementation of this controversial policy. Other countries like Botswana, Angola, Nigeria, or oil-rich Middle-East states, which also have critical natural resources and models of sharing with foreign investors, have much better results without the noise that accompanies Zimbabwe’s indigenisation. In recent days, locals from the Chiadzwa diamond fields have been telling a parliamentary committee of their serious grievances over the complete failure of indigenisation plans they were long promised. President Mugabe announced in February that the country had lost $15 billion worth of diamonds. Pledges allegedly made towards indigenisation trust in Chiadzwa were never fulfilled. Locals got nothing, but the politicians got extremely wealthy.

The fact of the matter is that for all its bravado and noisy rhetoric, Zimbabwe is in a severely desperate state. Today, the media reports that there is nation-wide cash shortage and banks have started to restrict withdrawal limits. The causes of this are probably structural and long term, but the current hullabaloo over indigenisation of banks may have contributed to people losing confidence in the banking system. The country experienced a severe drought and food is in short supply, and in remote parts there are reports of starvation stalking ordinary people. Government is struggling to meet its bonus commitments from last year. It’s only three years since the last controversial election which spelt the end of the Government of National Unity which had brought some respite to the people, but things are fast spiralling out of control.

But as the two Ministers slug it out in public, most people are asking: where is the captain?

In an eloquent piece for the African Independent, Zimbabwean scribe Brezhnev Malaba reports that one woman at the gathering to welcome him from Japan bluntly announced during his long speech, “President, we are suffering!” When Mugabe asked what they was suffering from, she explained, “We are suffering from hunger.” To which he responded by asking her to “Put your grievances in writing, and we will look into them.”

After that he drove off to his well-appointed home in the suburbs. And the woman? She probably joined the hordes or women, men and youths on the pot-holed streets and dusty pavements of Harare, trying to eke out a living in conditions that are becoming worse by the day. She probably can’t even afford pen and paper for her child, let alone to put down her grievances in writing as directed by her leader.