The Impact of the Nationalisation Threat on Zimbabwe’S Economy
Total Page:16
File Type:pdf, Size:1020Kb
Corporate Ownership & Control / Volume 12, Issue 1, 2014, Continued - 1 THE IMPACT OF THE NATIONALISATION THREAT ON ZIMBABWE’S ECONOMY Patricia Lindelwa Makoni* Abstract The purpose of this study was to examine the likely impact that the proposed agenda of nationalisation of foreign-owned business in Zimbabwe, by implementing the Indigenisation and Economic Empowerment Act, would have on the economy in the country. Nationalisation of foreign-owned businesses comes on the back of the disastrous Fast-Track Land Reform Programme which had sought to give land to the black majority in the country. The results of the study show that foreign investors were shaken by the announcement of nationalisation of all foreign-owned firms, including banks and mines. Most foreign investors adopted a “wait and see” attitude since the nature of their investment was mainly resource-seeking FDI, and they could therefore not remove their fixed, immovable assets from the country. With the economy still trying to recover from earlier declines in economic activity, it is recommended that the Government revises the Indigenisation Act in order to ensure FDI inflows continue to be attracted into the country, in a bid to stabilise and further grow the economy. Keywords: FDI, Nationalisation, Expropriation, Indigenisation, Zimbabwe *Lecturer in the Department of Finance, Banking and Risk Management at the University of South Africa (UNISA) Address: P.O. Box 392, UNISA, 0003, South Africa Tel: +27767538234 Email: [email protected], [email protected]. 1 Introduction access to the High Court to determine the amount of compensation.” (Zimlii.org, Undated). For many years, Zimbabwe was run by the British In essence, this was assurance to both the under the leadership of Ian Smith. In 1979, the minority (whites) and the majority (blacks) of infamous Lancaster House agreement was signed by Zimbabwe, that despite the imminent changes in many great politicians of Rhodesia (now Zimbabwe) Government, several rights would be respected, and at that time, including Bishop Muzorewa, Joshua that included property rights. The British Government Nkomo and Robert Mugabe, each representing negotiated for, and agreed to fund the acquisition of various political parties under their leadership, as well land on a “willing buyer, willing seller” basis, which as representatives of Britain. Amongst many aspects, was constitutionally protected for a ten-year tenure. the agreement pertained to “the people’s land”, and After many decades of British colonial rule, how the country would be run going forward. One Zimbabwe gained its independence in 1980, with particular clause in the 1979 Lancaster Agreement Robert Mugabe emerging as the new leader of stood out; The Freedom from Deprivation of Zimbabwe. Hence, between attaining independence in Property, which stated: 1980 and 1990, the country encountered its Phase One “Every person will be protected from having his of Land Reform, which was guided by the Lancaster property compulsorily acquired, except when the House Agreement of 1979. Fast forward to the late acquisition is in the interests of defence, public safety, 1990s – Zimbabwe published a list of commercial public order, public morality, public health, town and farms owned by whites that it intended to acquire for country planning, the development or utilisation of purposes of resettling the black population, and with that or other property in such a manner as to promote that, the Land Reform and Resettlement Programme the public benefit or, in the case of under- utilised Phase Two was in motion. Displeased at the slow land, settlement of land for agricultural purposes. progress of acquiring farms, and motivated by the When property is wanted for one of these purposes, its recent rejection of the Referendum by the masses, acquisition will be lawful, only on condition that the ZANU-PF between 2000 and 2002, then instigated law provides for the prompt payment of adequate the violent seizing of white and foreign owned farms compensation and, where the acquisition is contested, under the Fast-Track Land Reform Programme that a court order is obtained. A person whose (Mandizadza, 2010). While the Land Reform property is so acquired will be guaranteed the right of Programme Phase Two partially achieved its social objectives of equitable land redistribution to blacks, it 159 Corporate Ownership & Control / Volume 12, Issue 1, 2014, Continued - 1 had far-reaching economic impacts. The country went 5.5million tonnes in the mid-2000s. By 2008, Chile from being the bread basket of SADC to being a net was churning out 34.6% of the world’s production importer of basic grains. (Duncan, 2011). After the 2008 elections, there was no clear-cut Rood (1976) distinguished between winner, and hence a Government of National Unity expropriation, nationalisation, indigenisation and (GNU) was formed between Zanu-PF and the two Africanisation. According to her: MDC factions. The economic situation in Zimbabwe Expropriation is associated with the forceful deteriorated so much with an era of hyperinflation seizure of property and assets, justifiable only if in the never imaginable before. In order to curb the end it meets a public purpose and the owner receives hyperinflationary environment, Zimbabwe in 2009 compensation for it; then did away with the Zimbabwean currency and Nationalisation is a term used when asset adopted a multi-currency regime with the United seizure is part of social and economic reform to States Dollar, British Pound, South African Rand and improve the livelihoods of a country’s nationals; Botswana Pula as the main currencies. To this day, Indigenisation is a Government-initiated those are the currencies still in use for trading process whereby it limits certain industrial sectors to purposes in Zimbabwe. its native citizens only, and hence forces foreigners The idea of nationalisation was mooted by the (aliens) to sell those targeted assets. The Government Government in 2007. During his 2007 Mid-Year does not have ownership of the assets, but rather Monetary Policy presentation, the Reserve Bank of ensures a stronger hold over its domestic economy, Zimbabwe (RBZ) Govenor stated that the and through indigenisation can encourage and ensure Indigenisation Policy was a noble move to involve the the growth of local firms and individuals; ordinary Zimbabwean in the economic activities of Africanisation is considered to be the replacing Zimbabwe by giving them access to, and equitable of non-African employees by Africans, and is usually ownership of, the country’s natural resources, effected through a state requirement that an industrial including land and minerals. While there was nothing sector limits the number of foreigners employed. It is wrong with the policy itself, it is the manner in which therefore more of a transfer of jobs and skills as it was to be implemented which posed a threat to opposed to ownership. An example of where this is many foreign-owned businesses, and therefore the practised is South Africa where on an annual basis, economy at large. As such, this study seeks to the Department of Labour issues a list of “scarce examine the economic implications of the skills” which the country requires. The scarce skills Indigenisation and Empowerment Act [Chapter list is then used by the Department of Home Affairs to 14:33] of 2007 in Zimbabwe. assess and issue work visas to foreigners in the The rest of this paper is organised as follows: identified fields. Further to this, South Africa has an Section Two provides a brief overview of Employment Equity (EE) Act which requires indigenisation and nationalisation, using examples companies to fill available vacancies with South from other countries. Section Three provides an African citizens. Where this is not possible, firms are insight on nationalisation in Zimbabwe. Lastly, the expected to submit a detailed report as to why they implications of nationalisation and the Indigensation had to employ a foreigner or an individual who is not and Empowerment Act has had on the Zimbabwean from a previously-disadvantaged background. The economy, as well as the targeted sectors of mining, hierarchy of EE in South Africa favours black banking and manufacturing sectors, and females, disabled persons, and ends with males (black recommendations thereof will be considered in preferred over white). In the corporate world, firms Section Four of the study. which are preferred procurement suppliers are also required to meet the Broad-Based Black Economic 2 Overview of indigenisation and Empowerment (BBBEE) requirements, as stipulated nationalisation in the Black Economic Empowerment (BEE) Act of 2003. This practice has resulted in some firms Nationalisation of private companies has been cheekily putting forward a black face with a top attempted in many developed and developing leadership or managerial position in the company, countries, with mixed results. Examples of while it is in fact whites who control that black face nationalisation in Africa include the nationalisation of behind closed doors of the boardroom, thereby copper mines in Zambia in 1968/9, and privately- defeating the Act’s objective of promoting economic owned banks (not foreign banks) in 1970 (Simutanyi, transformation by enabling meaningful participation 2010). In Angola, the 1976 nationlisation process was of black people in the South African economy targeted at companies of Portuguese origin only (Chiwunze, 2014). (Delgado, 2010). Elsewhere in the world, US-owned Dupuis (2005) defined nationalisation as the copper mining firms were nationalised by the Chilean taking over by the Government of assets and a Government between 1967 and 1971. This move saw corporation, usually by acquiring the majority or the Chilean copper production grow from a mere one whole stake in the corporation, via appropriation or million tonnes in the mid-1970s to just over confiscation of the asset, or by puchasing the assets 160 Corporate Ownership & Control / Volume 12, Issue 1, 2014, Continued - 1 from its legal owners and paying a price close to its Nationalisation allows profits to be equitably market value.