Failed measures of economic empowerment
By Eric Bloch
IN the last 2004 issue of the Zimbabwe Independent, this column addressed the very negative, counter-productive policies that are the mainstay of Zimbabwe’s economic empowerment of t
he black population. The column recognised that during the pre-Independence era, very pronounced hindrances existed to almost any endeavour of those constituting the majority population engaging themselves in economic activities, with virtually the only exceptions being employment in non-managerial roles (in most cases) within the diverse sectors of the economy, and the operation of “tuckshops” in high density areas.
In particular, they could not own land, and could not lease business premises within the central business districts of Zimbabwe’s cities and towns. Similarly, they could not obtain trading licences other than for some limited business activity in the quasi-ghettos of the high-density areas.
With such recognition of the gross inequities of the past, the column contended that there is a very great need for constructive economic empowerment to be pursued vigorously. However, the Zimbabwean approach has been an abysmal failure, with the only newly empowered being — with rare exception — those endowed with influential connections within the political environment, those who became flagrantly enriched with corrupt practices, and those who were able to disregard good and sound, ethical economic fundamentals. Of course, there are pronounced exceptions, including the many black professionals in the avenues of law, accounting, finance, medicine, insurance and various others. However, in relation to the size of the populace as a whole, the numbers that are economically empowered, lawfully or otherwise, are minimal.
This appalling and unacceptable situation needs to be addressed, but not in the manner that government has pursued to date. Government’s over-riding approach has been that the much needed and very necessary economic empowerment should be achieved by a heavy-handed, often draconian, redistribution of existing wealth.
It has sought to disregard the basic principles of international law, human rights, morals and ethics by expropriating thousands of farms, breaking them up into unrealistic, non-viable operational units, and redistributing them to a favoured few (less than 150 000 out of a population of over 12 million), without giving them title to the land, and ignoring the recipients’ lack of resources and, in many instances, their not being possessed of requisite skills. The result has been that those recipients have, with some exceptions, not been economically empowered, and concurrently the entire economy was brought to its knees and most of the nation impoverished.
Despite the pronounced failure of the land programme (no matter the endless, incredulous contentions of government and its propagandists that the programme has been a tremendous success, although the evidence on the ground refutes those contentions), government is now contemplating similarly disastrous forced transferral of equity in the mining sector and in commerce and industry to the indigenous population. The result has been to create yet another major deterrent to both foreign and domestic investment.
Government has clearly not learnt from its mistakes and also does not appreciate that breaking-up a cohesive entity does not necessarily preserve viability of the entity’s operations. In contrast to the normal mathematical rule, the sum of the parts does not necessarily equal the whole!
Most of all, government has very evidently failed to understand that not only does taking wealth from some and giving it to others not grow the economy, and merely transfers it from some to the others, but it also invariably results in shrinkage of the economy. Redistribution renders the rich poor but usually does not make the poor rich.
The best way to benefit the nation is to create new and additional wealth, much of which should be by facilitating economic empowerment of those previously deprived of opportunity.
The need for economic empowerment is a characteristic of most on the African continent.
Amongst the continent’s countries seeking to achieve it is South Africa. Rather than tackling the issue without due analysis, evaluation and consideration, it established a high-powered Black Economic Empowerment Commission (BEE) to study in depth how best to achieve the greatly needed, wide-ranging economic empowerment. Under the very able chairmanship of the renowned Cyril Ramaphosa, very extensive research was carried out, including much dialogue with all sectors of society, and study of over 100 publications and submissions.
The BEE Commission concluded its task by the issue to government and to the private sector of an extremely comprehensive report. The prologue to that report suggests that its contents present “South Africa with an opportunity to break the cycle of under-development and continued marginalisation of the black majority from the mainstream economy”. It further states that the strategies proposed in the report are “integral to the success of” South Africa’s Reconstruction and Development Programme, and that “at the same time it will launch South Africa on a course of sustained and even spectacular rates of growth”. In 72 pages, it then strives to identify positive measures to achieve those objectives, and space constraints preclude this column giving due justice to it.
At the outset, the report states that BEE “must be implemented in a coordinated and integrated manner…Accumulation strategies to expand the identified growth sectors will have to go way beyond increasing the size of the current narrow economic base. They must be accompanied by measures to increase access to productive assets for the majority of the population and appropriate support to ensure sustainable use.” The key components of the Integrated National BEE strategy include:
*An investment for growth accord between business and government aimed at reaching an agreement on a concrete strategy to lift the country’s levels of fixed investment and economic growth;
*The design and implementation of an integrated human resources development strategy.
*Implementation of the integrated sustainable rural development strategy and the creation of an agency to streamline and co-ordinate funding and other initiatives
in rural areas, including land reform;
*A national procurement agency located within the Department of Trade and Industry aimed at transforming the public and private sector procurement environment;
*A National Black Economic Empowerment Act, being enabling legislation aimed at creating uniformity in policy and establishing the necessary institutional support and instruments with which to drive the BEE strategy. The Act should…facilitate deracialiation of economic activities in the public and private sectors;
*An enabling framework aimed at improving access to finance for households and businesses through disclosure and reporting requirements in the banking sector and targets to encourage service delivery…
*Streamling and co-ordination of public sector funding initiatives.
Thereafter, the BEE Report addresses the various economic sectors. Amongst other recommendations, the BEE Commission recommended a public sector restructuring programme which “must aim to improve delivery of services and enhance the rollout of infrastructure to underdeveloped and rural areas”, which include:
*Retrenchments should be avoided at all costs;
*Aggressive training and skills development programmes must be introduced;
*Management should have the responsibility to facilitate financial and non-support for employees starting their own business;
*Management should have the responsibility to seek alternative employment for workers in the event that redeployment and retention options fail;
*A fixed percentage of restructuring proceeds should be earmarked for social plans.
The BEE Commission argues that “every form of black equity participation can be an effective instrument to drive empowerment”, but that “to realise the objective of effective black equity and management participation, the State will have to play a facilitative role through the provision of favourable and preferential funding mechanisms and information, support and independent advisory capacity. To increase the equity and management participation of black entrepreneurs, the following measures should always be considered: discounts, deferred payment terms, and new BEE founding mechanisms including claw-back, earn-in and vendor funding”.
To improve the livelihoods of the rural poor, the BEE Commission called for:
*Establishment of a framework for targeted initiatives that meet the needs of rural communities, aimed at breaking the cycle of under-developed and at stimulating rural economies;
*Improving the economic and social position of woman in rural areas through specific programmes;
*Increasing levels of food security;
*Provision of increased access to schooling and adult basic education and training, including promotion of skills development and entrepreneurial capacity within schools, tertiary institutions and SME support agencies;
*Giving rural communities real ownership of productive assets by increasing access to financial services and through land reform programmes;
*Technical support, marketing and product development to rural communities to ensure productive utilisation of land.
Instead of trying to achieve the very necessary black economic empowerment by expropriation and destruction, Zimbabwe’s government should strive to develop economic growth through constructive economic empowerment strategies and facilitation, and could well take a leaf out of South Africa’s book.