Empowerment Policies Surface Again in Zimbabwe and Namibia

Transparent and impartial black empowerment policy in Namibia has contrasted with Zimbabwe's Indigenisation and empowerment Act that once again increases investor concern.

IHS Global Insight Perspective

Significance
Both Namibia and Zimbabwe have set the objective of increasing black empowerment in their economies within the next few years. The Namibian policy is met with greater acceptance from the business community while the Zimbabwean policy, recently gazetted by the government, has been met with great resistance.

Implications
According to the Global Political Agreement, the publishing of the Zimbabwean Indigenisation and Empowerment Act has not followed due process and therefore could be considered as null and void. This could ease investor fears over the short term; however, it also highlights Zimbabwe's high degree of regulatory uncertainty and the lack of cohesion in government.

Outlook
Despite the formation of a comparatively liberal power-sharing government in February 2009, black empowerment policies in Zimbabwe are not off the scorecard. A revision of the bill, which will try to strike a balance between attracting investors and supporting indigenisation, is most possible over the medium term.

Zimbabwe's Ministry of Youth Development, Indigenisation, and Empowerment gazetted the two-year old legislation of the Indigenisation and Economic Empowerment bill on Tuesday (9 February), to come into force by 1 March 2010. According to the state-owned newspaper The Herald, the act targets companies valued at US$500,000 and above and require all business to inform the government of the racial make-up of their shareholders by mid-April, after which the unity government will determine how much of their shareholding would need to be "ceded" to "indigenous" Zimbabweans. The Empowerment Act further states that the Zimbabwean government will compile a list of "suitable" indigenous partners who will become eligible for shareholding in the future. The main objective of the legislation is to achieve 51% indigenous shareholding in existing businesses within the next five years. Non-compliance could result in a jail term.

Elsewhere in the region, Namibia's Chamber of Mines has shown its commitment towards the government's black economic empowerment (BEE) policy, the Transformation of Economic and Social Empowerment Framework (TESEF), stating that the Chamber has already set up special task teams that will assist mining houses in the transformation process. The financial sector also recently adopted a voluntary BEE policy that was given the green light by Finance Minister Saara Kuugongelwa-Amadhila. Namibia's six-year-old BEE policy still awaits approval from the ruling party South West Africa People's Organisation (SWAPO) as consensus on ideologies has not yet been reached. According to Prime Minister Nahas Angula, "we need political consensus in the party as some have the opinion that economic empowerment should not just be given, but should be earned. Others [in SWAPO] feel that BEE - or TESEF - as we officially call Namibia's transformation - should just be the co-operation of previously disadvantaged Namibians [into companies]." TESEF requires 50% ownership for historically deprived Namibians (HDN) over several years; 50% of HDN in management cadres; 50% of board members; 50% of deprived women in the top, middle, and junior management; and 80% of previously deprived individuals in all permanent posts.

Unlike Zimbabwe, Namibia's black empowerment policy has been met with greater co-operation and approval from the general business community, including foreign investors. This is largely due to the fact that the Namibian BEE policy is more impartial and transparent, with the general objective of increasing black empowerment within the economy assumed to be reasonable for the business community. Zimbabwe's indigenisation and empowerment bill has faced much resistance from the business community and especially foreign investors since its inception two years earlier, and like many other policies such as the land-redistribution programme is expected to be accompanied by high levels of corruption. Already investors fear that the "suitable candidate" list for indigenous shareholding under the law will be a mirror list of well-connected supporters of the Robert Mugabe regime that already benefited from the land-grab campaign. Ultimately, the bill will fail to reach its objective of empowering disadvantaged individuals and will instead reward loyal political supporters.

Outlook and Implications
Zimbabwean prime minister Morgan Tsvangirai immediately dismissed the published Indignation and Empowerment Bill and stated that the bill was "gazetted without consultation" of the unity government. The prime minister, who oversees the formulation of all government policy by the Cabinet and implementation, said that "[the documents] were published without due process as detailed in the Global Political Agreement and the Constitution and they are therefore null and void." His statement will ease the fears of foreign investors in the short term; however, black empowerment policies in Zimbabwe are most definitely not off the scorecard. A revision of the bill that will try to strike a balance between attracting investors and supporting indigenisation is most possible over the medium term. Additionally, the dispute illustrates the severe lack of cohesion between Prime Minister Morgan Tsvangirai and his Zimbabwe African National Union-Patriotic Front power-sharing partners as well as the level of regulatory uncertainty tainting the Zimbabwean operating environment. Both Zimbabwe's private and government sectors face large liquidity and structural constraints that can only be mitigated by a favourable business environment, large private investment, and the commitment of the international donor community to the government economic revival programme. Fears and uncertainty over black empowerment policies will not be conducive in reaching these objectives.