Tuesday, December 31, 2013

(NEWZIMBABWE) Nothing wrong with indigenising current foreign businesses
13/11/2013 00:00:00
by Kuthula Njokweni

COMMENT - For further reading, check out:
Bad Samaritans, by prof. Ha-Joon Chang
Reclaiming Development, by prof. Ha-Joon Chang
23 Things They Don't Tell You About Capitalism, by prof. Ha-Joon Chang - MrK

LOVEMORE Fuyane, in his article titled, “Indigenisation? Absolutely, but”, states that he supports indigenisation but opposes an approach that does not create its own businesses but takes over the existing ones. He says such an approach is a political tool that has a destabilising effect on the market, and will unlikely solve the problems of inequality and sustained economic growth.

First, this is an opinion which is not substantiated by empirical evidence. By his own admission, Fuyane argues that, “Distributive indigenisation via corporate transactions is simply no viable short cut to Zimbabwe and Africa’s economic emancipation. There is no successful precedent for it; South Africa has been at it since 1994 yet remains one of the most unequal societies in the world, this in spite prattling nonstop about broad based empowerment.”

First, Fuyane must understand that there is no contemporary precedence in Africa where such a program has been undertaken, not even in the world to compare against, to warrant using “no successful precedent”. However, the fact that there is no contemporary precedence to compare against in this world should not make it conclusive that indigenisation will cause inequality and fail to sustain economic growth.

Second, it is a bad example to compare the South African Black Economic Empowerment programme with Zimbabwe’s indigenisation and empowerment programs because they are based on two different models. The former intends to gradually integrate blacks into the mainstream without requiring changing the structure of existing foreign controlled businesses. Meanwhile, the latter intends to radically change the structure of the existing foreign-owned businesses as well as grow and integrate a new class of black businesspeople.

My main concern with Fuyane’s article is his preoccupation with wanting to see indigenisation become a process whereby local people have to start their businesses instead of taking over the existing ones! What is wrong with taking over the existing businesses in transparent commercial transactions, not along the rumoured approach suggesting that government will forcibly acquire businesses?

That rumour is nothing but a big lie. Businesses are taken over regularly: Nigel Chanakira’s bank, Kingdom Financial Holdings was taken over; TA Holdings has taken over many businesses. Internationally, the European Commission recently gave permission for Olympic Air to become a subsidiary of Aegean Airlines in a €72m deal. In Canada, Blackberry is lined up for possible takeover.

So the argument that Zimbabweans should start their own indigenous companies is flawed as it suggests that it’s not standard business practice to buy into a company. Government is not acquiring the shares forcibly but creating a framework that allows local investors to buy shares in a company if they (potential local investors) have capital or have struck up some agreed financing scheme. This is not a scandal at all.

Actually, Fuyane provides very convincing arguments why Zimbabwe should indigenise the current businesses under the current model. He states that all developed countries have ten of their biggest publicly traded corporations indigenous to their countries. He says, “Contrast that with Zimbabwe, where among the top ten largest companies you only really have the likes of Econet Wireless, Innscor, and National Foods among a list that includes the likes of South Africa’s SABMiller controlled Delta Corporation, Old Mutual, Shoprite South African controlled OK Zimbabwe, Hippo Valley Estates controlled by South African entity Tongaat Hullet Sugar and British American Tobacco whose name says it all. A substantial number of Zimbabwe’s largest corporations are foreign owned and/or controlled.”

I argue that it is for this very reason that we should indigenise these companies so that they resemble the international trend where the biggest national corporations are indigenous. It’s not that Zimbabwe abrogated creating these corporations, but they were created in a colonial historical context, and they have maintained dominance.

What the government of Zimbabwe seeks to do now, is to break that dominance and create equity in the business ownership structure, not equality as Fuyane suggests. The market mechanisms have failed to provide corrective measures. Now the obligation to intervene and take corrective measures to the problem lies with the government. The primary role of a government is to protect and advance the interests of its people. Fuyane has identified a situation which requires that intervention in order for Zimbabwe to establish its own corporations. The problem is that the current foreign controlled companies dominate the market and can manipulate the financial system and stifle competition. It is for this reason that government should step in and ensure that the playing ground is levelled.

Government intervention in the market to promote the national interest is not anything new or illegal. It is a standing internationally recognised and practiced standard! Social sciences like political economy, economics or development studies understand it as interventionist state or else a developmental state. As for the claim by Fuyane that the Zimbabwe indigenization model will not create sustainable economic growth, it’s just an assumption which is not backed by empirical evidence.

The people of Zimbabwe built these foreign corporations through blood and sweat. The workforce and the resources that have made them household names come from the sweat and blood of both professional and non-professional Zimbabweans. So it’s difficult to understand when someone suggests that we should start “our own companies” as if we already don’t have a stake invested in these companies. It’s like the value chain is composed of solely the foreign owners without any Zimbabwe human and non-human resources already invested.

Fuyane should understand that many of the companies that he provides as national champions were fostered predominantly by the state. Countries that he portrays as economic champions are a result of United States strategic geopolitical considerations. Economic advancement by South Korea and the then West Germany were both a result of such political intervention. The US poured enormous funds into South Korea and created preferential trade terms in order to create a buffer zone against the spread of communism. Same with West Germany through the Marshall Plan.

As a way of concluding, I offer the following: Government, as a developmental state, should perform its primary role of advancing the economic interests of its citizens by correcting a legacy of colonialism; Zimbabweans can build once again their own businesses from scratch even though they have spent a greater part of their productive years working for these foreign owned/controlled businesses, however, that should not preclude them from investing in these companies where they have already invested their blood and sweat; the indigenous businesses, will create equitable wealth and sustainable economic growth as demonstrated by the experience of other countries mentioned by Fuyane.

Kuthula Njokweni writes in his personal capacity. He can be contacted on kmnjokweni@gmail.com

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