Home » General » The Folly of Judging a Book By Its Cover

The Harare “International Carnival” ended on a very high note last Sunday. As if to give it more stamina to travel far, The Sunday Mail newspaper led with a headline which sent our journalists into a frenzy of celebration where there should have been national mourning, that is if what was implied in the headline were true. “Govt in major climb-down”, the paper announced in reference to the “hated” indigenisation and economic empowerment policy.

Fortunately, there was very little by way of a “climb-down”. But our politics has bred so much polarisation that we easily conflate our hatred for Zanu-PF with what should be issues of national concern. For indeed what should be there to celebrate were Zanu-PF to reverse the land reform and its indigenisation policies, and instead open the floodgates to every investor to come and grab our finite natural resources without any legal safeguards, so long as they created temporary employment?

In partial defence of The Sunday Mail, I believe they might have got the message distorted under the pressure of deadline. But to their credit, they carried the full interview with Professor Jonathan Moyo on Page 11 and made reference to this on Page 1. Apparently those who relayed the message could not be bothered to read the interview.

Everybody was happy to judge the book by its cover. Reading would be too taxing and perhaps allow facts to get in the way of a wished-for agenda. So the “news” of Zanu-PF’s Damascene moment flew far and wide. It was now open sesame in Zimbabwe. Like the rest of Africa.

Yet after explaining at some length the two indigenisation implementation concepts – the Production Sharing Model (PSM) and the Joint Empowerment Investment Model (JEIM) – on Page 11, Professor Moyo was specifically asked whether Government was “ditching the indigenisation policy as espoused in the Zanu-PF election manifesto”?

The response was categorical: “Not at all. I don’t know or understand where that suggestion is coming from.” He said what was necessary was “to review, tighten and strengthen both the law and policy to … clarify the fact that Zimbabweans cannot be expected or required to buy back their God-given natural or economic resources”.

A climb-down turned on its head indeed.

A sustained complaint raised by the said foreign investors against the indigenisation policy, more to make the opposition and civic society happy than as a convergence of opinion that the policy is bad, has been about lack of “clarity and consistency”. Professor Moyo stated that there was now some “consensus” in Government that the PSM and JEIM were the best way to go.

That clarification addressed both Zimbabweans and investors. Through the PSM, Zimbabweans would retain 100 percent ownership in respect to mineral resources, agriculture and some aspects of tourism. The investors would “be allowed to recover their initial capital investment, an appropriate return on investment and operational costs… ” Thereafter, Zimbabweans and the investors would share “production outputs or profits”.

That doesn’t sound like rocket science. It just needs separation of wish from fact. One would have hoped that this clarification of policy is what needed to be conveyed to squeamish and skittish investors by our journalists?

Under the JEIM, Zimbabweans would go into joint ventures to be able to raise capital needed to build enterprises wholly owned by Zimbabweans, Professor Moyo explained. The level of indigenisation would be sector-specific while Government would create the enabling environment to encourage beneficiation and value addition to build capital in line with Zim-Asset.

And this is what President Mugabe said at the official opening of ZITF 2014: “There is no appropriation or nationalisation of shares held by non-indigenous persons in companies as some of our detractors would want the world to believe. In fact, there is no imposition of indigenous partners instead investors are free to identify partners of their choice. With this clarification, let me take this opportunity to invite potential investors to come and do business in Zimbabwe as there is huge potential for joint venture partnerships between investors, manufacturers, industrialists and the private sector.”

Those who have raised reservations have asked that these policy pronouncements be codified in statute, a process Government has embarked on by asking Indigenisation Minister Francis Nhema to align these to the new Constitution.

Anyway, having hopefully disposed of the media circus and carnival over a climb-down that never was, there is need for a caveat regarding both implementation models. There is a challenge of corruption, corruption of a national illiteracy which presents great pitfalls in executing the JEIM which Government should be wary of, corruption which requires that we engage the best lawyers in town to draft the appropriate contracts, the best geologists to determine the quantity of minerals we are signing for per mine, and the best evaluators and auditors to determine the possible costs of exploration, development and extraction of minerals or rehabilitation of our railway infrastructure or the Beitbridge to Chirundu highway.

We have been found wanting so far, and that can undermine the best intentions around indigenisation and economic empowerment if not handled with due care and caution.

It is corruption of the mind and pen. Recent experience with the Joshua Nkomo Road in Harare and the Chisumbanje ethanol plant has shown that the cost of investment projects can be obscenely inflated to a point where the benefit to our people doesn’t go beyond employment.

As the Government creates opportunities for more investors in the economy, it should never underestimate the rancour engendered by both the land reform programme and indigenisation policies. Thus no trick will be spared to undermine these policies or to ensure they fail by treating Zimbabweans as mere guardians or gatekeepers of resources they can’t enjoy.

While it is true, for instance, that the investor bears the financial risk of investment in mining, if not prudently audited, it is conceivable that costs of exploration, development and extraction and associated equipment can be so exaggerated that the investor takes forever “to recover their initial capital investment” and to achieve “an appropriate return on investment and operational costs”.

By the end of the contractual agreement after 30 years the investor will simply transfer obsolete equipment to Government to work empty caverns. That means “100 percent ownership” of a finite resource like a mineral on its own does not guarantee automatic benefit for the owner if the sharing of production output or profit is not properly structured or there are no foolproof legal safeguards.

This danger lies embedded in the PSM where we are told that 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”. This is a potential loophole which demands the most diligent auditing of the resource itself and what the investor claims to be putting in.

Imagine Mr Long Nose investing US$100 million in a gold mine in Shamva but claiming to have put in US$400 million instead. If it takes him 10 years to recover his actual investment, how much will it take to recover the other US$300 million before he starts sharing the profits with the owner of the resource?

Thus in negotiating these contracts, it is far better to be certain than to be nice. You are expected to be Mr Nice Guy in negotiations but once you are in breach after signing the deal, the investor stops talking to you but to his lawyer through the paper you signed. He will unsheathe his sharp teeth as he demands more than his pound of flesh.

A win-win partnership should be both resource and investor-friendly. Hurrying to sign a bad deal and trying to renegotiate it can only condemn us further as a nation which lacks clear and consistent policy application, a nation which cannot be trusted to keep its word, and acts in uttermost bad faith. And that has grave consequences for marked nations like Zimbabwe.

I thought those who were eager to celebrate the policy clarifications would temper the carnival atmosphere with a sober reflection on these potential pitfalls than focus on an imagined “climb- down”, especially from those who express concern about the Zanu-PF Government mortgaging our resources to foreigners. Doesn’t the celebrated “climb-down” endorse a mindless disposal of the family heirloom?

Source : The Herald