RESERVE Bank of Zimbabwe Governor Gideon Gono last week outlined details of his indigenisation and empowerment model, the Supply and Distribution Based Indigenisation (SaDIE) in an article titled “Indigenisation: aiming for fuller participation”.
The principle underlying the SaDIE model calls for central government to make it mandatory for all companies with a minimum capitalisation of US$500,000 to source their consumables, spares and raw materials from indigenous suppliers with capitalisation levels of below US$200,000.
On the other hand, the government indigenisation model requires a mandatory 51 percent controlling shareholding by indigenous Zimbabweans in companies with capitalisation levels above US$500,000.
While the two models are policy levers that government can use to empower the indigenous Zimbabweans, I see the government initiative as a principal framework of indigenisation while the SaDIE model can be an implementation policy. The reason for saying this is because Gono seems to miss the point that the political vision of the government is not only to empower indigenous Zimbabweans with business opportunities, but fundamentally change the ownership structure of the businesses.
Changing that structure is important because it creates companies whose character is Zimbabwean and therefore more likely to serve the national interest better. No country in the world has prospered without creating an economy which reflects its national character; that is, an economy owned by its nationals.
So, while the government policy framework will facilitate the change to creating companies with a national character, the SaDIE model will ensure that these companies support our Small to Medium Enterprises through sourcing and contracting.
That said, Gono insinuates that the current government’s indigenisation model will not create opportunities for outsourcing. It is difficult to see how that could be possible. The only deficiency that Gono might argue against the current model is that the Indigenisation and Empowerment Act should incorporate his principal feature of the model, if it is not provided anywhere within the statute.
The government should mandate all companies with a minimum capitalisation of US$500,000 to source their consumables, spares and raw materials from indigenous suppliers with capitalisation levels of below US$200,000. When the government legislates that provision, the two models become symbiotic as opposed to having one or the other.
It is not entirely correct for Gono to suggest that the current government model will only create shareholders who wait for dividends “only once a year or so”. Away from their investments in the indigenised companies, these new investors have other jobs and economic activities that they do. They don’t sit idly by to wait for dividends at mid or end of the year!
Even in the absence of a SaDIE model, with a controlling majority in the indigenised companies, it is most likely that the new majority shareholders will favour their own in terms of procurements and giving out contracts. But as the SaDIE model stands, it is good because it will give structure and transparency to something that would inevitably be done when the majority shareholding is changed.
Those that currently dominate the corporate shareholding still favoured their own in providing contracts even without this SaDIE model provision. Therefore, it is necessary, as well, for Zimbabwe to change the corporate ownership structure, and then further bolster the empowerment of Zimbabweans by introducing the SaDIE model as an implementation policy!
There is no empirical evidence to argue, or let alone suggest that the equity-based government indigenisation and empowerment model will not create jobs or contracts for the indigenous businesspeople; but that people will just sit and wait to be paid dividends once or twice per year!
Gono’s model seeks to address the need to have minimum disruption on the economy while we change the corporate structure of businesses. He is right to warn us to be wary of such disruption; however, disruption is inevitable in any such exercise, even in his SaDIE model. The disruptions manifest themselves in different ways such as frustrating indigenous procurements by raising technical standards to ridiculous levels.
So, indeed although we should be mindful that our actions aim for minimum disruption of the economy, we also need to set our sights on the strategic vision of the country; to control our companies and be responsible for setting our own national development agenda! Businesses are not only for profit for their minority shareholders, they are a critical tool for national development.
As the SaDIE model confirms, companies provide jobs and business opportunities. It is for this reason that Zimbabweans control such institutions so that they use them in whatever fashion reasonable to influence national development.
Finally, Gono’s estimates in the various sectors of the economy are helpful in providing the cost structures and likely benefits to the indigenous Zimbabweans. However, it is wrong for Gono to suggest that only the SaDIE model can bring about such economic benefit. The equity-based indigenisation programme can have a similar effect. The only difference between the two models is that the government programme goes a step further by transferring the majority shareholding to Zimbabweans.
It should be clear that transferring a majority shareholding to Zimbabweans in any company does not mean that company ceases to have its foreign partners! In addition, in the new world where competition for business opportunities and control of resources is fierce, very few, if any, reasonable companies will walk away from controlling 49 percent of shareholding! The competition will gleefully jump in to snap up the opportunity, and be eternally grateful for that 49 percent!
The seemingly tough statements and threats that we read and hear in the media from foreign companies are for the large part empty threats from companies that are either naïve of the changed global business configurations or simply trying a hard bargaining tactic. Empirical evidence so far about exodus of companies does not match the rhetoric, on the contrary, we have seen huge companies with a global reach who understand the changed global business configurations signing up to owning 49 percent!
In that regard, Gono should not provide intellectual support to a weak cause of resisting the equity-based government indigenisation and empowerment programme, but do two things.
First, he should encourage his business colleagues to comply with the government programme as it has a very viable national development objective.
Second, he should push for his SaDIE model to be incorporated into the government’s equity-based program to provide a structure and transparency to indigenous procurement and contracting, not compete against it.
Peace Thabane is a policy analyst based in Canada. He is writing in his personal capacity