What are the “linkage programmes” referred to in the statement that foreign banks are expected to fund?
Instead of empowering Zimbabweans, the law has only been a tool for political rhetoric, and a way for the well-connected to drain state resources down a maze of “youth funds.”
Default rates on Old Mutual’s Kurera-Ukondla Youth, for instance, are as high as 99.5 percent. In Mashonaland East, only 0.5 percent of the loans was paid back, according to figures from Zhuwao’s own ministry.
A new state fund, worth $10 million, is now being distributed to 210 constituencies. There, thousands of youths in each constituency are, somehow, expected to share $47 000 to start businesses, and, somehow, still be able pay it all back.
The damage has been massive, but it could have been worse. Thankfully, some investors ignored the rhetoric. It is in fact foreign money that has kept the economy afloat. On the Zimbabwe Stock Exchange, with local investors struggling, foreign investors now account for up to 70 percent of trade.
Now that they are net sellers, investors have lost over $400 million on the market since January.
Iconic Zimbabwean brands are being saved by foreign money; South Africa’s Investec buying into OK Zimbabwe, Tanzania’s Bakhresa buying into Blue Ribbon, France’s Société Industrielle Lesaffre buying Anchor Yeast, Kansai Plascon saving Astra.
Today, as liquidity shortages deepen, it is just six banks importing cash; Barclays, Standard Chartered, CBZ, MBCA, Stanbic and FBC Bank. Just two of these are local, with significant direct government and indirect shareholding. Barclays has also raised up to $130 million in offshore lines of credit for Zimbabwean businesses.
Authorities like to cast Zimbabwe as the pioneer of resource nationalism and empowerment. It is not. Many other countries realise how necessary local ownership is. They are just more predictable and pragmatic about it.
Mozambique’s Mega-Projects Law, passed in August 2012, demands local equity of up to 20 percent in major projects. Zambia, DRC, Kenya and Namibia set royalties on mines. When these are changed everyone knows about it. Investors go in knowing what they are getting into, because it is in the law, and not tied to the whims of whoever speaks last or the loudest.
Tuesday’s statement is an admission that something is wrong in the empowerment law itself, and in how it has been implemented. It goes beyond Zhuwao, however entertaining his smack-down was.
For the first time ever, President Mugabe has offered to amend the law. He must, in fact, take an even bolder step; drop the law entirely, draft a better one and, this time, stick to it.- The Source
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