Indigenisation: Having our cake and eating it?

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Indigenise, develop, empower and create jobs — the Zanu PF election winning ideas have taken centre stage.

Painona with Tapiwa Nyandoro

Create jobs, develop, empower — while indigenising would be a more bankable approach.

This is how the South East Asian Tigers and China have done it post their own land reform eras.

The difference between the two approaches is explained by the so called “cake theory” advanced in 2011, which stated that “China needed to pursue economic growth before it could worry about how to distribute, equitably, the wealth”.

As one liberal, economic reform-oriented member of the Communist Party of China (CPC) put it, “One must bake a bigger cake first before dividing it.”

But populist Bo Xilai, then a senior CPC official, but now fallen on hard times, is said to have retorted: “Some people think one must bake a large cake before dividing it, but this is wrong in practice. If the distribution is unfair, those who make the cake won’t feel motivated to bake it.”

With empty coffers, we must attract capital as long-term debt and foreign direct investment.

We can do so while indigenising at the same time. The challenge business faces is to move the political class away from a “politically selected approach” of let us have our cake and eat it now, that puts a few individuals’ interests, camouflaged as Zanu PF’s interest, over the national interest.

Opportunities in the form of “bankable (Brown and Greenfield) transformational projects”, as AfDB’s Donald Kaberuka puts it, abound in the country.

Indigenisation, therefore, needs not focus on redistribution only, but should place greater emphasis on attracting investment and creating new wealth, as a sector-by-sector analysis will show.
State-owned enterprises.

Take the current State-owned enterprises (SOEs) for example.
The majority of them need recaptalisation and has huge debts; some to local authorities.

All back-pay owed, all public sector and parastatal pensions destroyed by hyperinflation, all local council debts, all utility bills and all retrenchment packages needed for right-sizing SOEs, uniformed forces and the public service, could be offered as shares redeemable in five-to-ten years’ time after the SOEs are progressively listed on stock exchanges in initial public offerings.

This would be privatisation with an indigenous face. Lady Thatcher would be most pleased.

Natural commercial and industrial indigenisation

The second opportunity to indigenise is simply the passive one, through growing the economy or baking the bigger cake.

Growing the economy at 9% per annum for decades on end, as Zanu PF promises, will do the trick. Improving the nation’s appeal is an investment destination results in increased flows of foreign direct investment.

This, in-turn creates formal and informal jobs.

A growing economy creates demand, especially where the gap between need and demand is high, such as in low income countries, hence creating opportunities for new basic labour-intensive low wage industries that can be seized by the entrepreneurial indigenous class going forward.

China and India have each created over a million millionaires this way as entrepreneurs self-select, rise and fall, in pursuit of their ambitions.

Following this example, Zimbabwe could have ten thousand United States dollar millionaires by the time gross domestic product is sixty five billion US dollars in 25 to 30 years from now.

State capitalism as collective indigenisation
Love it or hate it, State capitalism works. And it can be done in partnership with private and foreign capital. Diligence, prudence, fiscal awareness and discipline at government level are essential.
A substantial share of the automobile giant VW is owned by the State in Germany.

A portion of General Motors is, or was owned, by the US Federal government as recently as 2009, as indeed was the case with some banks deemed too big to fail.

Our cities and provinces can follow this route of collective indigenisation.

China has perfected the collective indigenisation model.

Among some of the World’s top 500 companies are some Chinese State-owned companies. You find them everywhere; in engineering, resources, banking and technology for example. Zimbabwe has mismanaged the State-owned sector. But this can be corrected.

The State should significantly participate in re-industrialisation with a focus on where there is comparative advantage.
Cabinet has to have a long-term focus and the skills and credibility for transformative leadership.

Natural resource sector
Land reform is in an advanced stage. It should be completed with the clearing off of legacy issues, and the titling of land so maximum benefit can be derived from the resource. Yield in particular need to be technology-driven to match first world ones, to such an extent that a land tax of 2% to 3% becomes a viable proposition.

With drip irrigation and the right technology in soil, science, genetics, pest and weed control, Zimbabwe can live off its land.
If land is fully-utilised, the economy would be many times larger, to such an extent that it would be regarded as “fully indigenised”.

In terms of minerals, an auction system linked to reserves or output per year could define the Zimbabwean government, or its nominee’s shareholding.

The 51%/49% shareholding structure, with no equity injection on our part, may be too rigid for most minerals with the exception of possibly alluvial diamonds, direct shipping ore (iron) and platinum only.

The prospect of Greenfield ventures, as in baking the bigger cake concept, is, however, mouth watering. It could rouse any Cabinet from the default snooze mode.

1 COMMENT

  1. Wataura hako but dambudziko its the mentality of the custodian of the system. With greedy its impossible to go anywhere. All we need as Zimbos is a culture of respect, dignity and high principle. That lacks in the driving team. We see people in high authority rushing to grab prospective wealth for their own “benefit”. However it remains unfortunate that most of them never realise the anticipated benefit. This I think is likened to sharing the cake before its actually bake which sterms up infighting hence hamper any significant progress towards baking the cake. The old foxes lack these sound principles of investing enrgy and commitment for the good of the generality.Baking the cake first with all the commitment and sharing it as we go is highly applausible. No normal person would ever be against owning what is their birthright, our eceonomy. In a sound eceonomy one can either work first to raise own capital and organically grows together with expertise acquired from past work experience or even start with sourced funding invested on a bankable plan. But if you look at the way our economy or nation is run it leaves a lot to be desired.

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