Friday, March 08, 2013

(NEWZIMBABWE) Interview: Gideon Gono on indigenisation

Interview: Gideon Gono on indigenisation
08/03/2013 00:00:00
by Faith Zaba I ZimInd

ZIMBABWE’S contentious indigenisation programme has of late been under scrutiny after debate erupted on over a whole range of issues, including the ideological foundations of the policy, its conceptual basis, frameworks, implementation, consultations, valuation of companies, legislative issues, exchange rate approvals, consultation fees, and terms and conditions of agreements.

The debate comes at a time when resource nationalism, varied widely in terms of definition from tax hikes, demand for greater state equity and indigenous participation to renegotiation of stability clauses in mining contracts and beneficiation strategies, is all the rage.

In Zimbabwe, the issue has sucked in people from all spheres of life — ordinary citizens, analysts, company executives and government officials — all the way to President Robert Mugabe.

Faith Zaba (FZ), news editor of the Zimbabwe Independent, this week interviewed Reserve Bank of Zimbabwe (RBZ) governor Gideon Gono (GG), one of the protagonists in the unfolding indigenisation drama, as part of a series of interviews the newspaper will conduct over the issue starting this week:

FZ: Governor Gono there has been a heated debate of late on indigenisation and it has been suggested you are opposed to the current policy because of your actions and remarks on the issue. Do you support indigenisation or not?

GG: Well, I have heard those false claims, including attendant labels bordering on character assassination and insults, but evidence exist to the contrary and my track record of practically embracing and supporting the ideals and values of indigenisation speaks for itself.

Throughout the 36 years of my working life I have always strived to emancipate indigenous people of this country from the bondage of historical economic disadvantage.

Indigenisation of our economy and broad empowerment of masses was at the core of the liberation struggle and for that reason I have always supported the concept and the vision informing it.


FZ: So in brief, are you saying you support indigenisation, is that correct?

GG: It’s common cause, I unequivocally support, not just the indigenisation policy itself, but also its ideological foundations, vision and objectives. I have said already my record of walking the talk speaks for itself and is there for all to see.

The record will also show my first high-profile and public endorsement of President Mugabe’s position on empowerment and associated national aspirations was in October 1996 when I had the privilege to address the Afro-American Conference on investment in Harare attended by African heads of state and business executives.

Some of those accusing me of undermining indigenisation now were either still youngsters then or anti-Zanu PF donor-funded expatriates.

In supporting the President’s vision then, I argued clearly and eloquently that the future stability of our country depended on the urgent extension of economic opportunities to indigenous people and broadening the ownership of the means of production to include the majority of hitherto disadvantaged Zimbabweans.

Furthermore, some of those who have chosen to be my loudest critics today know my record very well. By his own admission, Honourable Minister of Youth Development, Indigenisation and Empowerment (Saviour Kasukuwere) himself is on record admitting that “had it not been for Governor Gono who saw the need to support and empower some of us as far back as 1994, I would not be where I am today”.

FZ: But are you not trying to blackmail Kasukuwere through such a reminder or remarks?

GG: I have no reason to blackmail him at all, I’m just telling the truth.

FZ: Your critics say your supply-side model is a fundamental negation of equity-based indigenisation and reflects your “house nigger” mentality. What’s your comment?

GG: I don’t want to sink to the pits of name-calling and insults like my critics who are dripping with venom and malice. Anyone who has carefully listened or read what I have been saying would know that I suggested the supply-side model to complement the equity model in line with my rationale that a “one-size-fits-all” policy approach is unworkable in this situation. I’m glad the President supports our position and this should be the way forward.

FZ: If you support indigenisation as you say, why is it that you have of late been publicly clashing with Kasukuwere on this issue?

GG: It is a toxic misrepresentation of the truth to suggest that I have spent the last few weeks arguing with anybody about indigenisation and empowerment. What you are probably referring to are brickbats that have been publicly thrown at me by some individuals who cannot accept advice from anyone other than themselves, but I’m not going respond to those attacks, except maintaining my position on this issue.

As one of my critics revealed in his venomous outbursts, I have engaged some colleagues privately in an attempt to exchange notes and see how some grievous mistakes made so far can be rectified, but we differed in approach over these matters, hence some of us are being unfairly targeted.
FZ: So who have you met in a bid to deal with these issues privately and what was the outcome of those meetings?

GG: I have met so many officials, and I can also hint, although this was not supposed to be public, that I had meetings with His Excellency (Mugabe), Vice-President (Joice Mujuru) and technocrats to seek their views and guidance on matters to do with indigenisation, including on deals such as Zimplats, Unki, Mimosa, (Pretoria Portland Cement) PPC, the banking sector and other transactions being negotiated or signed left, right and centre without input from others.

Honourable Minister Kasukuwere and myself also met after those consultations with a view to regularising some transactions behind closed doors, but officials at the central bank faced attitudinal impediments from some colleagues who refused to co-operate and provide paperwork.

It now transpires that we could not get those official documents to fix certain irregularities because unilateral decisions had been taken by some people and their advisors in and outside government that we “forfeited” our right to be consulted or to do our jobs by making our positions known or because we are “house n*ggers”.

FZ: Is there anything wrong with the frameworks and implementation mechanisms being used in deals like that of Zimplats and others?

GG: There is a lot of issues which need to be looked into, including corporate governance, legal issues, perceived lack of transparency in the appointment of advisors to the National Indigenisation and Economic Empowerment Board and government, inappropriate valuation methods and potentially excessive financial burdens imposed on taxpayers and indigenous beneficiaries of empowerment deals.

We also need to pay attention to the conditions attached to some of these transactions and violations of standing exchange control laws, rules and regulations all of which could have been avoided had necessary consultations been done.

These problems technically render some of these transactions null and void if fundamental amendments required are not made. We also found unacceptable conflicts of interest and unfair awarding of all indigenisation consultancy assignments to one company established only a few years ago, while charging what we believe are exorbitant fees which eventually could be paid by taxpayers.

FZ: Given what you are saying, is it a wrong conclusion to say you are opposed to the current indigenisation thrust?

GG: It has to be appreciated that constructive criticism of a flawed process is not the same as opposing its framework and objectives. We are very clear about that. We are also clear about the fact that inclusivity, transparency, accountability and corporate governance as well as the quality of advisory inputs to a process guarantees its integrity and credibility of the outcomes, including its ability to withstand scrutiny and the test of time. Dodgy arrangements may undermine an otherwise noble idea and programme.
FZ: What exactly is your problem with the indigenisation programme as it stands now?

GG: Where the RBZ has differed is with the current “one-size-fits-all” approach in which the law is used to treat all sectors of the economy as if they are the same when we know they are not.

In that connection, we were deeply heartened to note that this same view was echoed by His Excellency (Mugabe) in his birthday interview aired last Friday. We stand by our well-considered view that the banking sector is different, has its own structural peculiarities and sensitivities which require a different mutually-agreed model.
FZ: Besides that, what else has been your gripe with this indigenisation approach?

GG: Apart from pointing out that a “one-size-fits-all” model is inappropriate for the banking sector, we have also been at pains to bring to the attention of relevant authorities contradictions in the indigenisation law and other pieces of legislation.

Also at stake is fact that the Indigenisation and Empowerment Act requires that shares acquired by local investors must be paid for.

How? It is not clear, but the law says the acquired equity must be paid for, not nationalised? We agree with the President that we should have found a formula in which our resources are used as equity, but as things stand, the constitution and relevant laws require payment of fair value in indigenisation transactions.

FZ: Let’s take the Zimplats deal, what is wrong with it? So what will happen to the Zimplats, Mimosa and Unki transactions, just to mention but a few?

GG: On the Zimplats, Unki, Mimosa transactions, the jury is still out. According to the law, we must pay fair value for what we acquire. But our ideological position as expressed by the President is, especially on mining companies, our resources must have been used pay for the shareholding, but that was not done. This is where we must secure the best brains available internally and externally to advise on these issues.

We need experts on corporate finance, accounting, taxation, law, geology, banking and other relevant disciplines to put their heads together to negotiate the best deals for our indigenous investors and communities.

The problem with some colleagues, for instance those who studied political science, is that they want to be economists, financial experts, actuaries, brokers and lawyers all at the same time because they think they know everything yet the truth is no one knows it all — nobody is omniscient.

The Zimplats deal, its valuations and term sheet left a lot to be desired and, as a result, there is a perception that the resource was undervalued, while the company itself was overvalued. The proposed financing model, loan and terms and conditions of the agreement being negotiated are skewed against locals in favour of existing shareholders, making it difficult for some of us to support such things.

FZ: Some people say the Zimplats deal and other indigenisation transactions are riddled with corruption in its various manifestations, including extortion, bribery, cronyism and patronage. What is your comment?

GG: Whether or not there is corruption in the Zimplats or other deals, it’s too early for anyone to reach that conclusion. We can’t say that without first closely examining necessary documents, resolutions and minutes on the transaction to establish if due process was followed or detect corruption, if any. Only time will tell.

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