Is Indigenisation Possible In The Sub-Region?

By Fernando Goncalves
Southern Africa Political & Economic Monthly, Vol 7, No 11-August, 1994

It does appear strange that in Southern Africa, after such a bitter struggle for national
emancipation and the deaths of thousands of people in the process, we should be debating
the issue of indigenisation. Worse still, that the matter remains so contentious in societies,
such as Zambia and Zimbabwe that have been politically independent for a long time.
After years of championing the cause of state intervention in the economy and
pursuing the policies of socialism, many governments in Africa are now beginning to
realize that their countries political independence is meaningless without real economic
power.
Privatisation, indigenisation and affirmative action now dominate the economic
vocabulary across the continent, and concrete policies and structures are being put in
place in order to ensure that those who in the past have been economically disadvantaged
and marginalized, get into the mainstream of their countries economic activities.
But just what is meant by indigenisation, is another story. Conferences, workshops
and seminars have been taking place throughout the continent, where a number of ideas
and theories have been developed and debated on how best indigenisation can be
achieved.
Elsewhere on the continent, indigenisation has been muted in the form of affirmative
action, the need to expropriate large tracts of land from white minorities and distribute
them to prospective black entrepreneurs, government concessions on new indigeneous
business ventures, etc. In a nutshell, Indigenous is euphemism for African, and
indigenisation is synonymous with economic protectionism in favour of Africans,
involving some limited form of positive discrimination.
At the radical end of the debate, indigenisation is often seen as a programme that
should involve nationalization of foreign owned properties without compensation.
The issue of indigenisation, controversial as it may seem to be, derives from centuries
of colonialism, where the indigenous people have largely been denied access to
meaningful business ventures, which have generally continued to be the preserve of the
white minorities that ruled these countries.
During the colonial era, economic activity was mainly dominated by a variety of
colonial companies which exploited natural resources on behalf of the colonial powers
that claimed to own these territories. In the former federation of Rhodesia and Nyasaland,
the most dominant business concern was the British South African Company and its
subsidiaries, which were mainly concerned with mining and agricultural activities.
The company held the regions exclusive mining rights, and all those involved in
mining activities were required to surrender almost 50% of their proceeds.
Indigenous Africans were generally barred from engaging in any meaningful
business, and in the case of the former Portuguese colonies of Angola and Mozambique,
even shopkeepers had to be white. In Mozambique, for example, the Portuguese colonial
authorities virtually destroyed the entire tradition of peasant farming by enforcing a
system of compulsory production of cotton in order to supply the textile industry in
Portugal.

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 And as a measure designed to protect the Portuguese wine industry, Portugal imposed
a ban on wine production in Mozambique. In turn, the colony had to import from
Portugal wines, textiles, and a variety of other finished products which included canned
fish and vegetables.
The legacy of colonialism in many African countries has left all major economic
activities virtually in the hands of foreign multinationals, or under the control of a
handful of whites who remained after independence.
In the early days of independence, many governments on the continent believed that
their countries economic performance was to be better served by a greater state
intervention in the economy and the placement of committed nationals in strategic
positions of management in companies which overnight were turned into parastatals.
Great emphasis was also placed on indigenisation of the public service. In Zimbabwe,
for example, 93 percent of top positions in the public service were indigenised by 1989,
barely ten years after independence.
The majority of African leaders followed Kwame Nkrumahs teaching on the need to
conquer the political kingdom first. Some openly professed the socialist ideology, melted
it with self-styled humanism. Another group claimed to be building a mixed-economy,
while others were outright capitalists. What they failed to recognize was the crucial role
of an indigenous, self-sustaining and booming economic private sector.
In some cases, frustrated indigenous entrepreneurs have blamed socialist policies
pursued by their governments as the main reason why the realization of the need for
indigenisation had come later than desired.
When our government came to power, they were talking of socialism, and that meant
that they were not interested in the emergence of a black elite coming from capital
ownership activities, because they thought that they were part and parcel of the capitalist
programme which they were here to fight and remove, says Mercy Zinyama, executive
director of the Zimbabwe Indigenous Business Development Centre (IBDC).
The IBDC was established in 1990, to lobby government and assist aspirant
indigenous business people to establish themselves.
The most common form of indigenisation has been the establishment of an affirmative
action programme, through which indigenisation lobbies call on governments to restrict
areas of economic activity by foreign investors.
Indigenous lobbyists are also calling for preferential terms of borrowing from
financial institutions, tax holidays and exemption of import duty on capital goods.
In Zimbabwe, would-be black entrepreneurs contend that financial institutions
deprive them of loans, even though blacks account for 70 percent of all banks deposits,
while their borrowing level is only two percent. The IBDC in Zimbabwe believes that the
entry point for the indigenisation process would be African technocrats working for
multinational corporations and whose job satisfaction can no longer be enhanced, as they
do not own those companies. But the problem with them is that if they were to leave their
jobs to start businesses, they would have to give up a number of attractive perks such as
company cars, company subsidized mortgages and school fees for their children.
According to the IBDC, if these people were to forfeit their jobs and become
independent entrepreneurs, then a number of incentives, which would include a three year
tax holiday, sales tax exemption for businesses operating at a certain level, borrowing

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from financial institutions for indigenous businesses kept at five percent, and customs
duty exemption on capital equipment would have to be provided.
But a lot of questions have been raised in relation to the issue of indigenisation, with
views varying in accordance with the social strata or interest group. According to the
IBDC executive director, it has to be an adoption of an affirmative action that recognizes
that there are anomalies in the existing economic system.
But for one senior executive with the Confederation of Zimbabwe Industries (CZI),
which represents predominantly white established companies, indigenisation is an
extremely dangerous concept, as it makes a particular group in society (the blacks)
believe that it is entitled to more privileges.
He added that contrary to the widely held belief that there is some merit in the
programme, indigenisation can only be detrimental to the development of the economy,
as those excluded from it may see no reason for competitiveness, while by the same
token, those meant to benefit from it may see themselves as natural beneficiaries and
hence no need to work hard.
We fought wars against discrimination, and there is no reason why we should be
discriminating against others, the executive said.
But IBDC officials maintain that unless indigenous entrepreneurs are brought into
the mainstream of economic activity, industrial development in Zimbabwe will remain
uncompetitive due to its present capital intensive and monopolistic nature.
Indigenous entrepreneurs also dismiss allegations from their white counterparts that
indigenisation will scare away foreign investment. According to Zinyama, it costs more
than US 10 000 for an established big company to create one job, while it takes US $ 375
for a small business venture to create the same job.
She also states that the current level of investment in Zimbabwe, which is just over
US $ 31 million annually constitutes only one percent of what is necessary to alleviate all
the existing unemployment, which means therefore, that there will still be room for
foreign capital to invest in the country.
Other critiques of indigenisation dismiss it simply as a vehicle by post-independence
emerging bourgeoisies to further enrich themselves through state patronage. They argue
that because most African politicians are now openly advocating for free enterprise and
the promotion of indigenous capitalism, it is only appropriate that the indigenous
business lobby will seek closer ties with the state bureaucracy, as political connections
become vital to facilitate the approval of business ventures and in accessing some of the
funds set aside to advance indigenous business interests.
They also point out that in those countries where indigenisation has been attempted,
the programme has failed to create a wide economic base from which the majority
population could benefit. Unemployment, which indigenisation often purports to be
fighting to eradicate, is still rampant in Zaire, Kenya, Nigeria and Ivory Coast, where
indigenisation has simply managed to enrich the pockets of a few.
But in Zimbabwe, the government sees indigenisation as the only way forward, and
has adopted the 1990 IBDC recommendation that at least 70 percent of the countrys
economy should have been indigenised by the year 2010, through a programme that does
not include expropriation.
Apart from legislating against non-Africans participating in certain economic
activities, the Zimbabwean Government last year committed over US $ 15, 3 million to

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support indigenous entrepreneurs, a facility which was upgraded to US 4 50 million for
1994/95, in addition to US 3,75 million earmarked for the Small Enterprises
Development Corporation (Sedco).
But the existing disparity of participation levels in business by both the public and
private sectors in Zimbabwe will make the government goals of indigenisation an
arduous task to accomplish. Statistics show that through parastatals, the government
controls ten percent of the countrys business activities, while multinationals lead with 40
percent, and local whites with 30-35 percent. That leaves individual African
entrepreneurs crowded within the remaining 15-20 percent share of the economic cake, a
situation unlikely to change in 20 years.
Ironically, the indigenisation drive has the full backing of the World Bank, which
calls for a more open door economic policy that attracts foreign investment as an engine
for economic growth.
According to Kapil Kapoor, the World Bank resident economist in Zimbabwe,
indigenisation is critical in order to ensure a greater participation of Africans in the
countrys economy.
But in spite of public pronouncements that indigenisation does not clash with the
present drive to woo foreign investors or with the current economic reforms, the reality is
that foreign investors will try to impose their will on African governments.
Because foreign investors are understood to bring foreign currency to the already
debt-trapped African nations, it is unlikely that governments will go beyond
electioneering rhetoric and do anything that would make foreign investors look away.
After all, these governments will have to spend more money assisting their local business
people than benefiting from their existence.
Former US Vice-President Dan Quayle recently warned that South Africa may lose
potential private American investment if it went ahead with its indigenisation programme,
as investors were nervous about policies that discriminate between themselves and their
local counterparts.
In fact, some of the indigenisation gains of the post-independence era are being
reversed as African nations steam ahead with World Bank and International Monetary
Fund (IMF) sponsored economic reforms.
Companies that had been nationalized are gradually being privatized, and are often
bought by foreign business interests. In those countries where stock markets exist,
company shares are increasingly being acquired by foreign companies, as indigenous
incomes continue to dwindle in the face of the austerity measures inherent in the
economic reforms currently being implemented in their countries.
Indigenisation, particularly its affirmative action component, may also clash with the
provisions of the new General Agreement on Trade and Tariffs (GATT), which stipulate
that importers can boycott goods produced under protective measures, such as tax
concessions, duty exemptions, etc.
There is a growing sense that economic indigenisation may not only be inevitable, but
also necessary if African nations are to achieve the real liberation that they have sought to
achieve for the past three decades. With new investment codes being developed in most
of Africa which allow foreign companies to remit up to 100 percent of their profits, thus
draining out the very same foreign exchange that they are supposed to bring in,
indigenous enterprises can be the only viable alternative to stop the flight of capital.

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 But for indigenous enterprises to be able to effect that transformation and make
indigenisation more acceptable as the avenue towards economic empowerment and
dependence reduction, there will be need for them to be able to stand on their own and
reduce their emphasis on state patronage.
In that sense, indigenisation needs to go hand in hand with a number of actions which
may include state assistance in the form of managerial training, and the creation of an
environment in which governments facilitate, rather than seek to control economic
activity.
Because of all its ingredients, indigenisation becomes a highly charged political issue,
that any argument standing in its way becomes reactionary. But with emotions running
too high, it is also easy for people to lose sight of rationality, and simply call for the
replacement of white capitalists by black ones with the state as the provider. How do you
tell a majority of blacks who over centuries of colonialism have been exploited and
discriminated against, that they should not seek to replace their oppressors, that they
should have no right to economic emancipation, using the same methods that foreigners
and white minorities used to get to where they are?

ZIMBABWE: INDIGENISATION OF THE ECONOMYCAN IT WORK?

By Ariston Chambitiformer Zimbabwe Finance Minister
Southern Africa Political & Economic Monthly Vol. 7 No. 11 August, 1994

The controversy surrounding efforts to indigenise the economy in Zimbabwe is in large

part due to the lack of a clear definition of the process and what the objective is. Put
simply, indigenisation is a policy initiative which is aimed at rectifying the enormous
economic disparity between the white minority and the black majority. The blacks are
clearly at a disadvantage due to decades of legalized discrimination. Indigenisation is an
economic, political and social process whose ultimate objective is the presentation of
political stability and harmony between and among the different ethnic groups.
The objective is to create more wealth for equitable distribution among the people of
Zimbabwe regardless of race, creed, colour or tribal affiliation.
The present very considerable disparity in the distribution of wealth between the
white minority and black people is a recipe for a disaster in the long term. The situation
must therefore be corrected.
Indigenisation of the economy stands a better chance of success if it is supported by a
broad cross-section of the population, particularly the business community. There is a
definite role for white entrepreneurs to play. It is most unfortunate therefore, that the
campaign for greater participation in the economy by blacks is seen in some business
circles as a ploy by a few black businessmen to break into the business establishment in
order to enrich themselves.
Genuine and selfless commitment by business to this important cause appears to be
lacking, and as a result, calls for measures to indigenise the economy have been received
with mixed feelings. Those who control the economy see indigenisation as a policy

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designed firstly, to appease a small but vocal section of the black business community
and secondly, as an attempt to take away wealth from the rich.
What is urgently needed is to turn the indigenisation campaign from an elitist
approach into a grassroots movement. Greater and more visible public support for the
campaign is necessary for policy makers to take note and act to bring about the required
necessary changes, through the establishment of special institutions that are specifically
designed to promote the indigenisation of the economy.
The attainment of independence meant the transfer of political power to the
indigenous population. However, ownership and control of the economy has remained in
the hands of the minority and multinational corporations. It took almost 10 years for the
black people to realize that the assumption of political power by them did not
automatically empower them economically through meaningful participation in the
economy.
Calls for greater participation in the economy by blacks intensified after 1991,
following the introduction of the Economic Structural Adjustment Programme. This was
in response to the collapse of many small businesses that had been established in the late
1980s due to high interest rates, lack of access to markets and the depressed demand for
goods and services.
These efforts culminated in the establishment of the Indigenous Business
Development Centre (IBDC). The IBDC has identified two major problems faced by
indigenous businesses, lack of access to finance and restricted access to markets.
IBDC strategy has been to persistently challenge Government, financial institutions
and the private sector to support indigenous businesses.
Blacks occupying positions of influence within financial institutions and who are
perceived as not doing enough to promote the cause of indigenous businesses have been
criticized, in some cases unfairly.
The ability of financial institutions to assist these businesses is constrained by the
general availability of funds and they have to operate within a framework which has
certain constraints.
As the debate on indigenisation of the economy gathers momentum, it is necessary to
restate what the issues are and what is at stake.
The majority of blacks have been marginalized and forced to operate on the periphery
in the informal sector and in the communal areas.
Because of past discriminatory legislation, blacks were obliged to operate certain
types of businesses such as general dealers, bottle stores, transport, small scale grinding
mills and entertainment.
Manufacturing, commercial and financial sectors were and are still, dominated by the
white community and multinational corporations. Such a situation, if allowed to continue
unabated would mean that the policy of reconciliation which is responsible for the
tranquility and harmonious relations currently enjoyed would be jeopardized and the
consequence could be too ghastly to contemplate.
The economic reform programme that was launched in 1991 has laid a firm
foundation for the development of a vibrant and efficient indigenous private sector.
However, it has not solved the basic problems of lack of access to finance and markets.
These problems are merely symptoms of deeper underlying imperfections in financial
markets that need to be addressed by policy makers.

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 The question of economic empowerment of blacks cannot be left to an evolutionary
process. Deliberate policies and programmes which are not totally dependent on market
considerations need to be put in place if the indigenisation process is to succeed.
A useful start has been made by Government in this direction through:
(a) Affirmative action to assist black businesses to secure government contracts
below $ 10 million;
(b) Restrictions on investment in certain sectors by foreign investors;
(c) The introduction of a special $ 400 million facility to assist the small business
sector over the next two years and at a concessional rate of interest.
These efforts are highly commendable but they do not go far enough. Development
institutions such as SEDCO, VCCZ and ZDB which render valuable assistance and
advice to small businesses are only able to scratch the surface of the problem. They
simply do not have the financial resources or administrative capacity to provide
assistance on the desired scale.
Economic empowerment of blacks should be pursued through the establishment of a
special and well-funded programme to assist indigenous enterprises. Such a policy has
been successfully implemented in countries like Malaysia and to some extent in the USA
in the form of affirmative action for minorities and particularly blacks.
Admittedly, there have been failures, but the overall success of the project should not
be judged by the failure of the few, but by the immense contribution made to society by
the majority who succeed.
There is need for the creation of a special fund to assist Indigenous entrepreneurs, and
possible sources of finance for such a fund include the World Bank, the International
Finance Corporation, the African Development Bank and other international agencies.
The government would facilitate the creation of such a fund but control and decision-
making would be left to professional and independent administrators.
It should be emphasized that the success of such a plan depends on the establishment
of clear objectives and sound administration. Financial resources need to be made
available on a larger scale that so far has not yet been attempted, and assistance must be
targeted at those who are able to make the best use of such resources. Making funds
available alone is not the answer to indigenisation. There must be tight control of the
finances, clearly thought-out programmes, hard work on the part of the recipients of such
funds and rigorous and vigorous training in sound business management and practices.
In addition to the above measures, government can assist indigenous entrepreneurs to
gain direct access to the productive sector through the privatization of public enterprises
in the form of affirmative action.
And, in this context, privatization of state-owned enterprises should only be pursued
as a vehicle for economic empowerment of black people and when a mechanism has been
devised which would enable indigenous people to acquire a meaningful stake in these
new enterprises. Parastatals that have relatively simple operations and only require good
management should be reserved for indigenous people, who would receive the necessary
training to manage these businesses properly and profitably.
Those that are of a high-tech nature should be sold to joint venture operations between
indigenous people and foreign investors, who have the ability to inject fresh capital and
new technology. Further, foreigners could be given Management Contracts in respect of
these joint businesses until such time as sufficient local skills have been developed.

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It is both pleasing and encouraging to note that efforts to indigenise the Zimbabwean
economy have the support of the international donor community, as pronounced at the
Paris Conference held in February this year. The donor community views the policy, not
only as an economic imperative but also as the major guarantor of long-term political
stability in the country.
Indigenisation of the economy will only become a reality when there is a change in
some of the entrenched attitudes and perceptions; petty jealousies and sectional interests
should not be allowed to derail the process.
It is also important to recognize that established businesses and external investors feel
threatened by the indigenisation process. In order to allay these fears, it must be
emphasized that indigenisation is aimed at broadening the countrys economic base,
creating employment and enhancing business opportunities for all. Its ultimate goal is to
allow more people to share a large piece of the cake and not simply, to further subdivide
the existing cake.
In South Africa, this message has been embraced as part of the new political
dispensation and plans have reached an advanced stage towards enacting a law promoting
affirmative action.
Affirmative action goes hand in hand with the indigenisation process; it plays a vital
part in this crucial process of development of the human society.

Empower majority economically

The Herald, 09 June 2005
By Caleb Chiota

ZIMBABWE was born out of a bitter-armed struggle and attained its independence from
colonial rule on 18 April 1980.
This is a moment which every Zimbabwean should forever cherish in their hearts.
Every Zimbabwean must always remember that the sovereignty and democracy that we
are enjoying today, did not just come but that it was as a result of sacrifices made by the
gallant sons and daughters of Zimbabwe both the living and departed.
What led to the waging of the bitter armed struggle? It was land! The war was waged
against colonialists in order to regain and restore the land to its rightful owners, who are
the indigenous black Zimbabweans.
Our Government would have wanted to repossess the land from white settlers and give it
back to blacks, as far back as 1980.
However, our Government respects the law and despite the fact that it is the one that
fought and brought democracy to this country, it abided by the Lancaster House
agreement which forbade it from repossessing the land from white commercial farmers
for the first 10 years on condition that the British government was to provide funds for
compensation to their kith and kin, to which they later reneged.
A land donor conference was held in 1997, as a Government initiative and its chairman
was the Honourable Vice President Msika.

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The objective of that conference was to request the white commercial farming
community to voluntarily surrender some hectarage for the resettlement of landless
blacks and to request for financial backing from the donor community.
The farmers refused and they also influenced the donor community to withdraw their
pledges for financial support for the resettlement programme.
Our people got tired of the snails pace of the land resettlement programme and the Third
Chimurenga was on its way.
The land reform programme became and still is the largest indigenisation and black
economic empowerment exercise ever to take place in Zimbabwe.
Because of its broad-based nature, the programme has seen a million plus Zimbabweans
resettled on arable land and has and will continue to reap enormous rewards for our
economy.
Our Government was aware that political power was only the first step towards the
democratisation of our country and that without addressing the economic imbalances that
existed we were not going to achieve peace and harmony among our people.
In 1989, Government initiated the affirmative action under the indigenisation programme
by awarding some black entrepreneurs the first merchant banking licence, which gave
birth to National Merchant Bank Limited.
Our Government was swaying black people to be the majority in their own economy.
Those who have been sidelined by changes in economic empowerment must now come
to the centre and this is non-negotiable.
It is as natural as breathing. The economy of Japan is predominantly owned by the
Japanese. The same applies to the British, French, Indian and Chinese economies, etc.
Why should our economy become an exception?
Even after many years of independence African economies have continued to be the
playing fields of foreign interests at the expense of their indigenous population.
What is needed is a partnership between foreign capital and indigenous efforts.
The early 1990s saw the establishment of the Indigenous Business Development Centre
(IBDC) by black business people, of course, with the assistance and support of our
Government.
After its formation, the IBDC, working with our Government, came up with an
affirmative action policy which was a deliberate effort to economically empower black
business people by bringing them from peripheral economic activities into the
mainstream.
Some measurable successes were scored because it was during that period when the then
Zimbabwe Government Tender Board started awarding State tenders to indigenous
companies.
It was also the same time that many emerging black entrepreneurs started making inroads
into various economic sectors.
Other indigenisation groupings such as the Indigenous Business Womens Organisation,
Affirmative Action Group, Women In Business, Zimbabwe Indigenous Freight
Forwarders Association, Small Scale Miners Association came along and received a lot of
support from the Government.
Our Government must be applauded for raising the standards of living for the black
majority. Our Government started improving infrastructure in three essential areas:
education, transport and communications.

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We had one university in 1980, now we have about 10. Government established more
tertiary institutions, primary and secondary schools, clinics and hospitals.
Our Government deregulated the financial services industry in the early 1990s and saw
the entrance of many indigenous players such as Metropolitan Bank, First Bank, Trust
Bank, Barbican Bank, Intermarket Bank, Kingdom Financial Holdings, NMB Bank,
Century Bank (now CFX Bank), United Merchant Bank, ABC Holdings, Interfin,
Renaissance, among others.
The telecoms sector saw the entrance of Telecel, Tele Access and Econet.
The insurance sector saw some companies change hands to indigenous business people
Fidelity Life, Zimnat Life, First Mutual Life and Nicoz Diamond.
In the mining sector acquisition of Shabanie Mashaba Mines, among others, is a clear
testimony of black empowerment.
The tourism sector saw the acquisition of Zimsun, Cresta, etc while the fuel
sector witnessed indigenous oil companies such as Comoil, Exor, Jovenna, Ekhaya,
among others coming in.
Other big companies, including those listed on the stock exchange, such as CAPS
Holdings, CFI Holdings, Cottco, Dairibord, Interfresh, Mashonaland Holdings, National
Foods, OK Zimbabwe, PG Industries, Tedco, Turnal, TA Holdings, Zimplow, M&R and
most recently Zimbabwe Alloys Ltd, are now owned by indigenous Zimbabweans.
In 1980, there were about 25 listed counters, now we have 79 listed counters.
However, as our nation embarks on the second phase of indigenisation, concentration
empowerment equity should not be in the hands of a few (narrow empowerment).
Focus should be moved from the 1990s and early 2000 deals which involved equity
transfer to a few individuals, to deals which include significant provision for economic
empowerment of staff and communities such as women and youth.
The economy can indeed reap enormously from the empowerment of locals if it is broad-
based because this will ensure that resources are widely distributed which will have very
positive effects on the economy.
Over the years, a significant number of indigenous business people have gone further and
created their own towering business empires that all go towards celebrating the cause of
indigenisation.
While it is healthy to have many indigenous people in business, it will not benefit the
nation if the majority do not have access to that economic empowerment.
However, our Government must be applauded for making huge efforts in availing funds
for economic empowerment to SMEs and the informal sector through institutions such as
SEDCO, ZDB, VCCZ, NIT and State-owned banks such as CBZ and Zimbank.
Our people must understand that indigenisation and economic empowerment is not a
licence for engaging in illegal activities as they undermine the positive development and
growth of our economy. Indigenisation does not mean disregarding the law.

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