Eric Bloch: Constructive economic empowerment possible
http://www.theindependent.co.zw/
Thursday, 11 March 2010 18:51
NOT only with justification, because of its unjust, inhuman, foolhardy, and economically destructive consequences, but also because it is so deviously and racialistically discriminatorily conceptualised, and because its economic impacts can only intensify the suffering and distress of millions of Zimbabweans, this column has scathingly criticised the Indigenisation and Economic Empowerment Act, and its underlying, recently promulgated regulations. However, as intimated in last week’s column, none of that criticism was motivated by opposition to the principle of economic empowerment of the Zimbabwean populace (or, at the least, a great majority of that populace). A positive future for Zimbabwe, and the wellbeing of its people, is contingent upon effective and substantive economic empowerment. And such empowerment is readily possible and achievable, if pursued realistically, dynamically and innovatively, non-confrontationally, devoid of political objectives and of self-enrichment strategies for a favoured few, and without alienation of those currently economically-empowered, of those who would invest in Zimbabwe, and of the international community at large.
However, not only does the prevailing legislation have none of the necessary characteristics for successful economic empowerment, but it does have all the characteristics which can only assure its failure and the greater impoverishment of almost all Zimbabweans.
To achieve, successfully, indigenisation and economic empowerment, Zimbabwe must abandon the concept of forced divestment by so-called non-indigenous Zimbabweans from existing enterprises in favour of indigenous Zimbabweans, and of mandatory subordination and domination of current owners of businesses, and of potential future non-indigenous investors, by indigenous Zimbabweans. It must vigorously discard the tactic of disguised
expropriation from the perceived to be business rich, in favour of a minority of already excessively well-endowed Zimbabweans (being the few with sufficiently substantial resources to acquire ownership of enterprises, albeit undoubtedly at below fair value).
Doing so impoverishes some, in order to make a few even richer, but does not benefit any significant portion of the population. It is a gross distortion of the Robin Hood act to take from the rich to give to the poor!
In reality, it is transferal from the few rich, and from many who are neither rich nor poor, in order temporarily to enrich a few others, who in the main are qualified thereto only by race, some also having the investment-acquisition enhancement of appropriate political linkages. These policies only decimate the relatively minimal economic infrastructure existent, whilst assiduously discouraging greatly needed foreign and domestic investment, for few (if any) investors are willing to enter into so-called partnerships where no partnership exists, for the 51% controlling interests can totally rule over the enterprise operations, in callous disregard for the interests of the 49% minorities.
Already, in less than four weeks, several billion dollars of intended foreign investment into mining, manufacturing, tourism and other economic sectors, has been forfeit.
The intending investors have been wholly deterred from their intended investments, and are now focusing their interest upon Angola, Namibia, Botswana, Zambia, Mozambique, and elsewhere. Zimbabwe’s self-generated loss is the region’s gain (for which the region should be truly grateful!).
But great opportunity exists for Zimbabwe to develop its economy dramatically, with concurrent economic empowerment for very great numbers of its indigenous people. This can be achieved in innumerable ways, including:
l Facilitation and enablement of extensive, progressive establishment of Small and Micro-scale Enterprises (SMEs), and their enhancement and growth to Medium-scale Enterprises(MSEs). Doing so has been the foundation of many of the world’s larger economies including, amongst others, India, which is now the world’s third largest economy, and Malaysia. Only three decades ago, the vast majority of Indians were as impoverished as are most Zimbabweans today, but that has spectacularly transformed. India vigorously deregulated its economy, not only thereby motivating development of entrepreneurism, but in particular evolution from informal to formal sector economic activity. Zimbabwe should do likewise, concurrently with very extensive facilitation by developing ready access to start-up capital, to acquisition of business skills and support services, acquisition of requisite technological and other expertise, and of reciprocally-beneficial interaction between established and new enterprises.
l Inducement of partial equity disinvestment, in favour of indigenous Zimbabweans, by meaningful incentivisation. Such incentives could include the waiver of capital gains tax on any disposal by non-indigenous Zimbabweans to indigenous Zimbabweans, and waiver of withholding tax on any dividends accruing to indigenous Zimbabweans where such dividends are applied by the recipients to payment for acquisitions of equity.
l Establishment of industrial and trading parks with requisite operational facilities, with transitional nominal rentals, for newly-established, indigenous Zimbabwean enterprises, the costs thereof being funded by the
state with international assistance (which would be readily available if a conducive, internationally-acceptable, political environment, is brought into being and maintained).
l Adaptation of Zimbabwean secondary education to incorporate more extensive than heretofore training in the precepts of commerce and industry, and in business techniques and skills (without in any way minimising the focus of currently prevailing educational systems and syllabi).
l Creation of an investment-conducive and welcoming environment to induce substantial foreign direct investment and domestic investment, incorporating assured, on-going investment security, regional and international market-competitiveness, equitable taxation, assured access to investment returns, and reinforced by constructive general investment incentives, with maximum benefits in instances of collaborative, self-negotiated, investment by non-indigenous and indigenous Zimbabwean investors.
Government needs to learn, with long-overdue and great rapidity, that motivation and facilitation is far more effective than legislative diktat. The latter has, in already the last four weeks, cost Zimbabwe several billion dollars of critically-needed investment. That investment would have yielded employment for thousands, considerable direct economic growth as well as downstream economic beneficiation, substantial fiscal inflows, and significant foreign exchange generation.
With the foolhardy, heavy-handed, draconian Regulations of February 12, government has undermined the economic recovery initiated last year and, instead of aiding the Zimbabwean people to move from horrendous plight, has intensified that plight. But, albeit very belatedly, it could still make good, by rescinding its disastrous enactment and, instead, embarking upon effective economic development for Zimbabweans as a whole, hand-in-hand with foreign investors and with existing business.