Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

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Indigenisation policy: More questions than answers

Indigenisation policy: More questions than answers

Thursday, 04 August 2011 17:41

Happiness Zengeni

WITH essential issues still on the table as the September deadline for the 
submission of indigenisation proposals approaches, the Youth Development, 
Indigenisation and Economic Empowerment ministry is yet to give a clear 
outline on the implementation of the policy, particularly on the composition 
of the thresholds and the Sovereign Wealth Fund (SWF).

At the Indigenisation Indaba held recently, minister Saviour Kasukuwere said 
government would take a minimum 51% shareholding, which would be directed 
towards three beneficiaries that will gain from the empowerment of the 
mining sector. Under the plan, the community where the resource is found 
will get 10%, the workers 10% while the remainder will be put into the 
Sovereign Wealth Fund, which would be the national reservoir of resources.

And this is all based on the valuations of the minerals in a particular 
location. According to Kasukuwere, the private sector will be left out as 
there is need to avoid white-owned companies using black people as fronts as 
happened in South Africa.

The government said it will target all companies with net asset values of 
one US dollar or more, and where the investment is less than the value of 
the asset government will end up owning, for instance as in areas like 

To date no further information has been given about how this SWF will be set 
up and how it will be aligned to the nation’s fiscal system, save for the 
examples that the funds have been successful in some countries where they 
have been implemented, such as China.

SWFs are defined as a special purpose investment fund or arrangement, owned 
by the general government. Created by the government for macroeconomic 
purposes, SWFs hold, manage, or administer financial assets to achieve 
financial objectives, and employ a set of investment strategies.

Based on the source of funds there are two objectives that the minister can 
follow in setting up an SWF in Zimbabwe. Firstly, as a reserve investment 
that aims to enhance returns on reserves, and secondly, as a development 
fund which uses returns to invest for development purposes. Whatever route 
is followed, it is important that it has to be consistent with the overall 
macroeconomic framework of the country.

Appropriate coordination between the SWF and the fiscal and monetary 
authorities is critical to achieve a country’s overall policy objectives in 
the context of which an SWF is established. It has to go beyond a PowerPoint 
presentation at some conference and move over to implementation. The 
ministers of Economic Planning and Finance left it out in their policy 

There has to be a properly laid out plan and structure of the SWF as an 
entity. Will it be set up as a unit under the Reserve Bank of Zimbabwe, the 
ministries of Finance, Mines, Youth Development, Indigenisation and Economic 
Empowerment, or maybe will it run as a separate legal entity?

However they are going to set it up it will be complicated. Regardless of 
any governance framework that they will lay down for it to conduct its work 
independently, it will be prone to political influence or interference. 
Globally, the majority of governments have been known to fan corruption and 
raise unemployment levels, thereby stopping the continuity of income.

There is currently a lot of debate on whether this fund then will only 
benefit government. The most vocal of the empowerment groups, the 
Affirmative Action Group (AAG), has openly said (assuming they want to be 
the immediate beneficiaries) that government should not benefit at all from 
the system, but rather the people should.  Government cannot be creator of 
wealth; it can only be at best a facilitator, an enabler.

The focus should be on the development of an enabling economic environment 
that is conducive for the development of local entrepreneurs and that also 
channels the Essars and other foreign direct investors into Zimbabwe.

According to, globally SWFs are worth roughly around US$2,704 
trillion, with Norway having the most successful at US$560,5 billion.  The 
sources of most of these funds are commodities, particularly oil. It could 
work in Zimbabwe, but to date even the minister concerned has been 
inconsistent in his proclamations.

What has also not been clearly laid out is how the communities will benefit 
from the 10% stake. Statutory Instrument 134 lays out how communities will 
participate in the programme and how they will draw down benefits. According 
to Kasukuwere, traditional chiefs and the rural district councils will be 
involved and take the central role. What has not been pointed out is how 
this will benefit the whole community.

Firstly, there has to be a fund which should be created to provide an 
opportunity for the people to directly and indirectly acquire shares, with 
equal access being granted to all.  Those with central roles will get board 
representation, the aim being to make them decision makers. Overall, the 
policy must directly impact on the lives of those purposefully and 
systematically left out of the economy and not just a random selection of 
those known in the community.

Attempting to paint the indigenisation policy as a people-centred strategy 
in word has already created a lot of debate and the key is to handle it 
carefully. The fluid nature of capital should guide policy makers and they 
should take note of the contributions from the Reserve Bank of Zimbabwe, 
Chamber of Mines and other proactive business people and scholars. For 
Zimbabwe, the challenge is to facilitate the sustainable transfer of wealth 
through a transformative, rather than a destructive policy.  But already 
there are proclamations by Zanu PF members that the whole programme is a 
party policy just like the BEE is an ANC policy.


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