The Sunday Mail
Q1: The Zanu PF manifesto for the 2013 harmonisedelections was anchored on (and we quote President Robert Mugabe verbatim) “Zanu PF’s policy of Indigenisation and Economic Empowerment, which seeks to enforce the transfer to local business entities of at least 51 percent controlling equity in all existing foreign-owned businesses”.
This was a bold and unequivocal assertion. Nearly a year into your party’s Government, can you cite a single example in which the Government has implemented indigenisation as articulated in the aforementioned manifesto?
A1: The thrust of your question is on President Mugabe’s foreword to the Zanu PF’s manifesto for the 2013 elections, which the party won resoundingly, and you are singling out and putting emphasis on a key aspirational statement made by the President regarding the ultimate objective of Zanu PF’s indigenisation and empowerment objective which is to enable the indigenous population to take back the economy. What this means from an aspirational point of view is that after everything has been said and done in the implementation of Zanu PF’s indigenisation and empowerment national agenda, we should have a new economy in our country in which the indigenous population has at least 51% controlling equity, not only in all existing foreign-owned businesses but also in such future businesses.
Against this background, the auditing question in my view is not about citing a single example of a foreign-owned business that has been indigenised in accordance with the aspirational statement made by President Mugabe in Zanu PF’s 2013 election manifesto not least because we all know that one swallow does not make a summer. Rather, I think the issue is about what has been done in policy terms to create the enabling environment under which indigenisation and empowerment aspiration can be realized in accordance with the President’s aspirational statement. In this connection, quite a lot has been done.
We now have Zim Asset, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation, as the country’s economic policy blueprint based on the Zanu PF 2013 election manifesto and adopted and spearheaded by the Government after consultations with key stakeholders in the economy and society. Zanu PF’s indigenisation and empowerment aspiration has therefore found concrete expression in government policy. This is very significant. Therefore our focus now should be on the implementation of Zim Asset, an offshoot of the Zanu PF election manifesto, and an honest audit of the implementation of Zim Asset since last November should show that already big things are happening, with many more on the horizon, especially in agriculture and mining.
Q2: Mines and Mining Development Minister Walter Chidhakwa was at one time quoted as saying there could be indigenisation concessions for mining companies that set up a platinum refinery. Some days later, the Youth, Indigenisation and Economic Empowerment Minister Francis Nhema was quoted as saying that nothing had changed.
President Robert Mugabe at one time said, “But we cannot demand 51 percent (where) we don’t have materials. These materials are coming from outside and the machines are also coming from outside and we have no basis on which we can demand 51 percent except to say the locality of the company is ours.”
Meanwhile, Nathaniel Manheru, a columnist in The Saturday Herald, has expressed dismay at the chaos and lack of policy articulation in as far as indigenisation is concerned.
These pronouncements are demonstrably contradictory.
Do you accept that the Government has failed to articulate a clear position on indigenisation?
A2: While I indeed accept that, from a communication point of view, we need to do more and better to put across our otherwise very clear indigenisation and empowerment message by communicating more effectively. I do not accept that our need to do more therefore means we have failed as Government to articulate a clear position. Failure is a final position but we are not there and we will not get there. Otherwise, yes, it is self-evident that business, diplomatic and media communities have continued to assert that the Government’s position on indigenisation lacks clarity and is inconsistent. This is a serious situation and so we accept that we need to do something about it and we are committed and determined to engage and communicate the indigenisation and empowerment policy to implement Zim Asset in the national interest.
This is because we fully understand that it is one thing to have a message and quite another to communicate that message in ways that ensure that it is understood by its stakeholders or audiences. What you and others are interpreting as contradictory pronouncements on indigenisation are in fact various or many voices that are genuinely seeking to express one message.
Q3: So what it is that one message?
A3: Well, it is that our liberation struggle was not just about regaining our civil and political rights but also and in equal measure, about reclaiming our economic and social rights in a new independent Zimbabwe with a new economy. In political terms, we now have the institutional underpinnings of a new Zimbabwe with a new Constitution but we do not yet have the institutional underpinnings of the requisite new economy which will take root only when we have fully implemented Zim Asset as an expression of our indigenisation and empowerment program. Our message is very clear with regard to its ideological, legal and policy premises as well as in terms of its beneficiaries.
Our ideological message is that as Zimbabweans we must have sovereignty not only over our politics in terms of making our own decisions in our national affairs and foreign policy, but also that we must have sovereignty over our God-given natural resources in terms of ensuring that these resources are owned by the indigenous population for its economic benefit. Legally speaking, section 3 of the Indigenisation and Economic Empowerment Act (Chapter 14:33) as read with the Indigenisation and Economic Empowerment Regulations (General Regulations, 2010) clearly seeks to secure at least 51 percent of the shares (ownership) of every public company and any other business so that it is owned by indigenous Zimbabwean. That is very clear. It is also equally clear that our policy is to realize or materialize this legal imperative whose beneficiaries are the workers of indigenising companies, the communities that host these companies and the generality of the citizens and residents of Zimbabwe. I believe we have all been clear about this message in our different or many voices.
Q4: But may I interrupt you there Honorable Minister. Many people will agree with that but your problem as Government is, how do you implement that ideological, legal and policy vision in concrete terms that people and investors can relate to in workable ways on the ground? Your implementation pronouncements as Government have been contradictory and confusing. So Minister, what is Government’s implementation message on indigenisation and empowerment?
A4: Yes, you are indeed correct about that but your correctness must be contextualized and thus limited as it cannot be based on a blank cheque or on some open ended assumptions that are irrelevant to the origins and objectives of the indigenisation and empowerment programme. I think it is fair to say that the devil has been in the implementation message both from ideologically and technical points of view. In this regard, there are two key and defining issues that we must unpack and understand. The first is the equity side of indigenisation and empowerment. Nobody should doubt or be confused about the fact that our God-given flora and fauna natural resources on or under our soils belong to us as Zimbabweans. This stands out particularly with respect to mining, agriculture and tourism. The equity application of the indigenisation ideology, law and policy to these areas is a no brainer: frankly we as Zimbabweans must own these things not just with 51 percent equity but with 100 percent and without any apology, because these things are ours and they are not for sale and must permanently benefit us as a nation because they belong to all generations of Zimbabweans past, present and future. No generation of Zimbabweans has the right to mortgage the country’s natural resources. We therefore need an implementation model of indigenisation and empowerment that enshrines and recognizes this fundamental fact.
Q5: So what is that model Minister? The Government has not been clear about that and that is why we have serious confusion out there.
A5: There has been quite some debate in Government about this important implementation issue since the adoption of Zim Asset and that debate is ongoing. There is a growing, if not a decided consensus, that the model with the best possibility or chance of meeting the ideological, legal and policy necessities of indigenisation and empowerment are the Production Sharing Model (PSM) and the Joint Empowerment Investment Model (JEIM).
The Production Sharing Model is based on oil and gas exploitation contracts that have been structured around the world to benefit countries that have these subsoil resources along with the business enterprises that extract and market the resources whose ownership remains with the countries in question. Under the Production Sharing Model, Zimbabweans retain 100 percent ownership of mineral resources and agricultural land. The sharing of production will be either fixed or based on a sliding scale depending on the specific mineral or agricultural product and can be linked to profitability or cumulative rate of return. In terms of this model which is gaining wide implementation currency as the best way forward to achieve the aspirational objectives of indigenisation and empowerment, investors will be allowed to recover their initial capital investment, an appropriate return on investment and operational costs before the sharing of production outputs or profits.
Under the Joint Empowerment Investment Model outside mining, agriculture and some investments in tourism, Zimbabweans would be encouraged into joint ventures as a way of generating capital needed to build enterprises that are wholly owned by Zimbabweans. The pattern and extent of indigenisation under this model would depend on factors that dive production and demand on a sector by sector basis. In this regard, key sectors in the economy would work with the Government to develop frameworks or structures that complement production sharing contracts and joint empowerment investments in ways that build on value addition and beneficiation as a key strategy for building national capital in line with Zim Asset.
The implementation of this model would require that Government contractually awards to an investor the right to explore and produce in a specified exploration or agricultural area. The contract would specify the duration of the production sharing, which is typically between 20 and 30 years, depending on the mineral or agricultural product, including the balance of associated risks and related factors.
It is also important to understand that in the implementation of this model, the investor would bear the financial risk of the investment in terms of exploration, development and extraction of minerals, in the case of mining. At the end of the contractual period, all equipment would be transferred to ownership by the Government.
On its part, the Government would be responsible for developing the legal and policy framework for managing production sharing contracts including the setting up the Zimbabwe Mining Revenue Transparency Initiative (ZMRTI) as a fiscal mechanism for ensuring that everyone involved plays by the rules.
Q6: But Minister does this not in fact mean or prove that Government is indeed ditching the indigenisation policy as espoused in the Zanu PF election manifesto?
A6: Not at all. I don’t know or understand where that suggestion is coming from. It would be sheer folly for anybody to imagine that we would abandon or ditch a policy or programme that was overwhelmingly endorsed by the electorate in unprecedented numbers as recent as 31 July 2013. We are reviewing and tightening the indigenisation and empowerment policy by being pragmatic without being dogmatic about it. In any event, the record should show that we did acknowledge in our election manifesto—you can find that on page 35—that, while the law is clear that at least 51 percent of the shares or ownership of every public company and any other business shall be owned by indigenous Zimbabweans, there has been some confusion and misunderstanding over the modalities for achieving this threshold. Consequently, we pointed out that, going forward there is a need to review, tighten and strengthen both the law and policy so that among other things, we clarify the fact that the indigenous Zimbabweans cannot be expected or required to buy back their God-given natural or economic resources. This is why we have been having this review and tightening process under Zim Asset. Some of the pronouncements you say sound contradictory have been a result of this review and any review of a major policy must necessarily be robust and that might play out as contradictory. The Production Sharing Model and the Joint Empowerment Investment Model I have described are a summary of the discussions emanating from the ongoing review and these models do not contradict the essence of the indigenisation and empowerment message at all. Quite the contrary, the production sharing model strengthens the message by guaranteeing that 100 percent equity in the key sectors of our economy.
Q7: You publicly clashed with Dr Gideon Gono after he cautioned against indiscriminately implementing the 51 percent model in all sectors of the economy. In one article you described his arguments as “baseless.” Given the reported difficulties facing indigenisation and what seems to be a movement towards softening the policy, are you ready to eat humble pie and withdraw your criticism of the former central bank governor?
A7: I am sure I even used stronger words than that. There’s no pie to eat or anything to withdraw. The debate was as it still is about ideas and not personalities. It is very important that as Zimbabweans we should all learn to debate ideas without personalizing them and to appreciate that, besides God, no one person has a monopoly of wisdom. I must underscore that the production sharing model is not an alternative to indigenisation or a softening of anything, rather it is a “win-win” refined implementation mechanism that would ensure that, with respect to mining, agriculture and some tourism investments, 100 percent ownership remains in the hands of the indigenous population while also ensuring that investors get a return on their investment and a share on production or profits.
Q8: Foreign investors have been quoted as saying there is a lack of clarity and predictability in the manner in which indigenisation is implemented.
The Australian Ambassador to Zimbabwe, Matthew Neuhaus, was quoted as saying, “Certainly, indigenisation laws have been confusing, and the implication of the 51 percent ownership does not inspire confidence in investors.”
Do you accept this criticism?
A8: We have conceded that we have understood where some of that criticism has come from and we have committed ourselves to clarifying all relevant matters because it is our responsibility and duty to do so as Government in the interests of our country’s socio-economic transformation.
Q9: President Robert Mugabe is on record as saying that the 51 percent stake in mining should not be paid for, arguing that the minerals account for the controlling stake.
Do you think it is reasonable to ask an investor to put in a dollar and immediately cede 51 cents in equity?
A9: No it is not reasonable to ask any investor to do that and President Mugabe has never ever said that. But, yes, there has been some unfortunate misunderstanding about that which we should clarify and move on. What he has said is that with respect to subsoil investments, we as Zimbabweans bring to the table at least 51 percent of the investment in the form of our ownership of the resource while the foreign investor brings at least 49 percent in the form of capital. It is not true that the only investment in a mining enterprise is the one dollar brought by the investor. That does not make sense at all. The Production Sharing Model removes any misunderstanding over this matter. Under the model, Zimbabweans retain 100 percent ownership of their natural resources while the investor gets a return on the investment to recover its cost before sharing production or profits with the owners of the resource.
Q10: There are a number of companies that invested in this country before the Indigenisation and Economic Empowerment Act was enacted. Do you accept that forcing these companies to implement this Act is retrospective and therefore unjust since these companies agreed to invest under conditions prevailing at the time?
A10: Yes, there’s a challenge there that we need to deal with in a careful way. But we must first understand that the rule of law must apply to everyone otherwise we risk undermining the fundamental tenets of our constitutional democracy. We accept that while the Production Sharing Model and Joint Empowerment Investment Model that are promising to be the best implementation way forward are easier to apply to new projects than to existing enterprises due to the need to factor in historical costs, both models have mechanisms for addressing these concerns but that requires each case to be approached on an individual basis on its own merits. What is required is for the framework and modalities to be transparent through a legal instrument, which in this case is the Indigenisation and Economic Empowerment Act.
Q11: The Government continues to laud the virtues of Zim Asset. You would be well placed to know that this is not the first blue print by Government. Many have come and gone. Apart from verbal affirmations of the policy, is there anything measurable you can point to that Government has done in line with Zim Asset?
A11: Yes, the widely expected bumper harvest from the 2013/2014 agricultural season is as a result of the direct intervention of Government under Zim Asset’s food security and nutrition in terms of cropping and livestock input support whose budget was at least $180 million. But keep in mind that we are still in the early days of Zim Asset. We obviously need to do more and that is what we are precisely doing as Government. The policy review and tightening up of the indigenisation and economic empowerment programme along with the ongoing revival of the Central Bank are two important cases in point. Yes, we have formidable challenges to contend with, there’s no doubt about that but we also have a formidable policy response in Zim Asset and National confidence in our economy is on the rebound without any doubt. Success is guaranteed with hard work and a resolute intolerance of corruption across all levels of our government, economy and society.