Indigenization: Formulating Sustainable Options
June 6, 2014 Opinion & Analysis
Keith Guzah
While the debate over a straightforward position of principle over the reform of indigenisation legislation continues, progressive forces continue to look into the matter for opportunities to create value. There is absolutely nothing wrong with the reform of the laws to make them more investor friendly as long as the principles on which the national legislation on indigenisation is based are clear.
The reality on the ground is that there is not enough money circulating in the economy and this has forced some people to make clandestine arrangements with investors, and becoming fronts for foreigners.
Some have argued that it is dogmatic and counterproductive to hold on to a frame of reference which allows us to have all the resources but without any productivity.
During a ZimAsset symposium organised by the National Business Council of Zimbabwe last month, Minister Nhema alluded to the sad fact that quite a number of indigenous businesspeople have been used as fronts to circumvent the indigenisation process.
Even in farming, many black farmers are working with investors on a contract basis. They get small percentages for their contract.
The challenge remains that they do not have capital and at the same time the banks are not lending money because they do not have assurance from the 99-year lease as collateral.
The investors have money, equipment, experience and collateral.
Instead of maintaining a rigid stance, we are better off acknowledging the realities on the ground and formalise the current informal arrangements between farmers and farm owners.
This can sustain a lot of production without eroding the gains made through indigenisation.
Contract farmers/investors can actually be granted renewable or long-term contracts based on legally constituted contracts as long as they do not violate the ownership structure as per indigenisation law and as long as there is a clear understanding that the indigenous people are building capacity to eventually sustain their own operations as a long-term vision of indigenisation.
The Production Sharing Model (PSM) and Joint Empowerment Investment Model (JEIM) offer a lot of practical opportunities for SMEs and other start-up entrepreneurs.
A key window of opportunity presents itself in the form of supply chain integration. The supply chain offers a lot of opportunities for the implementation of the two models. Before demonstrating how the supply chain can facilitate the implementation of these two models, below is a definition of supply chain.
Cooper et al, (1997) and Fisher, (1997) define supply chain management as the process of planning and controlling the materials, information flows and the logistics activities both in the internal operations of a company and between companies.
A more traditional definition from Beamon (1999) looks at the supply chain as an integrated manufacturing process in which raw materials are processed or manufactured into final products until the final delivery to customers through distribution or retail outlets.
Whichever perspective one takes on the matter, the process opens up the business process to a larger number of people at different levels of integration in the business process.
In terms of JEIM, supply chain integration offers opportunities for a regular set of orders that can sustain SMEs. This consistent revenue flow contributes to the raising of capital for indigenous SMEs to grow.
The participation of the indigenous SMEs into the supply chain impeccably conforms to Maslow’s needs analysis framework.
This creates a very intimate link between the people’s needs and business imperatives.
The current indigenisation drive based on share ownership is too focused on the more self-actualisation and esteem needs of the people which occupy only 35 percent of the empowerment needs.
The majority of the people are still not yet fully included in the indigenisation and empowerment process. One cannot put across a convincing argument that people at the grassroots are benefiting as much as the people in higher echelons of power.
Even in the hypothetical event that they did, they do not have the requisite capacity to operate large-scale corporations and mines. They do not even have the absorptive capacity or administrative capability to handle large sums of money. Yet they can handle their own small businesses and then grow with them if they benefit systematically.
The supply chain formula also makes sure that empowerment is not stopped once a few people have managed to get stakes in big corporation.
In this sense, it becomes additive and complementary to the mainstream share ownership model. Thus as the SMEs participate in the PSM and JEIM models of empowerment, they benefit immediately while preparing for a future scenario of complete ownership and operation.
Instead of undermining the existing legislation, it actually reinforces it.
Of particular relevance is the concept of mainstreaming the procurement processes to the different changes in legislation to make sure that indigenous people benefit. Parastatals and Government are some of the biggest clients in any business.
If it is decreed that a certain percentage of raw materials and services shall be procured locally through an integrated system of registries, then it follows that all firms, foreign and local, who wish to benefit from government tenders, will automatically comply.
Their granting of supply chain opportunities can thus be measured in terms of the contributions they make to the development and growth of the local SMEs. It is possible to realize more returns from the gains which have already been made by the indigenisation and empowerment processes.
Furthermore, it is possible that unwittingly, we Zimbabweans may find ourselves shifting from an economy dominated by a few white people to an economy dominated by a few black people.
Dr Keith N Guzah is the president of the Zimbabwe National Business Council and publisher of the Empowerment Today magazine. He is also the secretary for indigenisation in Zanu-PF’s Mashonaland West province.
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| Zimbabwe platinum facilities. |
Keith Guzah
While the debate over a straightforward position of principle over the reform of indigenisation legislation continues, progressive forces continue to look into the matter for opportunities to create value. There is absolutely nothing wrong with the reform of the laws to make them more investor friendly as long as the principles on which the national legislation on indigenisation is based are clear.
The reality on the ground is that there is not enough money circulating in the economy and this has forced some people to make clandestine arrangements with investors, and becoming fronts for foreigners.
Some have argued that it is dogmatic and counterproductive to hold on to a frame of reference which allows us to have all the resources but without any productivity.
During a ZimAsset symposium organised by the National Business Council of Zimbabwe last month, Minister Nhema alluded to the sad fact that quite a number of indigenous businesspeople have been used as fronts to circumvent the indigenisation process.
Even in farming, many black farmers are working with investors on a contract basis. They get small percentages for their contract.
The challenge remains that they do not have capital and at the same time the banks are not lending money because they do not have assurance from the 99-year lease as collateral.
The investors have money, equipment, experience and collateral.
Instead of maintaining a rigid stance, we are better off acknowledging the realities on the ground and formalise the current informal arrangements between farmers and farm owners.
This can sustain a lot of production without eroding the gains made through indigenisation.
Contract farmers/investors can actually be granted renewable or long-term contracts based on legally constituted contracts as long as they do not violate the ownership structure as per indigenisation law and as long as there is a clear understanding that the indigenous people are building capacity to eventually sustain their own operations as a long-term vision of indigenisation.
The Production Sharing Model (PSM) and Joint Empowerment Investment Model (JEIM) offer a lot of practical opportunities for SMEs and other start-up entrepreneurs.
A key window of opportunity presents itself in the form of supply chain integration. The supply chain offers a lot of opportunities for the implementation of the two models. Before demonstrating how the supply chain can facilitate the implementation of these two models, below is a definition of supply chain.
Cooper et al, (1997) and Fisher, (1997) define supply chain management as the process of planning and controlling the materials, information flows and the logistics activities both in the internal operations of a company and between companies.
A more traditional definition from Beamon (1999) looks at the supply chain as an integrated manufacturing process in which raw materials are processed or manufactured into final products until the final delivery to customers through distribution or retail outlets.
Whichever perspective one takes on the matter, the process opens up the business process to a larger number of people at different levels of integration in the business process.
In terms of JEIM, supply chain integration offers opportunities for a regular set of orders that can sustain SMEs. This consistent revenue flow contributes to the raising of capital for indigenous SMEs to grow.
The participation of the indigenous SMEs into the supply chain impeccably conforms to Maslow’s needs analysis framework.
This creates a very intimate link between the people’s needs and business imperatives.
The current indigenisation drive based on share ownership is too focused on the more self-actualisation and esteem needs of the people which occupy only 35 percent of the empowerment needs.
The majority of the people are still not yet fully included in the indigenisation and empowerment process. One cannot put across a convincing argument that people at the grassroots are benefiting as much as the people in higher echelons of power.
Even in the hypothetical event that they did, they do not have the requisite capacity to operate large-scale corporations and mines. They do not even have the absorptive capacity or administrative capability to handle large sums of money. Yet they can handle their own small businesses and then grow with them if they benefit systematically.
The supply chain formula also makes sure that empowerment is not stopped once a few people have managed to get stakes in big corporation.
In this sense, it becomes additive and complementary to the mainstream share ownership model. Thus as the SMEs participate in the PSM and JEIM models of empowerment, they benefit immediately while preparing for a future scenario of complete ownership and operation.
Instead of undermining the existing legislation, it actually reinforces it.
Of particular relevance is the concept of mainstreaming the procurement processes to the different changes in legislation to make sure that indigenous people benefit. Parastatals and Government are some of the biggest clients in any business.
If it is decreed that a certain percentage of raw materials and services shall be procured locally through an integrated system of registries, then it follows that all firms, foreign and local, who wish to benefit from government tenders, will automatically comply.
Their granting of supply chain opportunities can thus be measured in terms of the contributions they make to the development and growth of the local SMEs. It is possible to realize more returns from the gains which have already been made by the indigenisation and empowerment processes.
Furthermore, it is possible that unwittingly, we Zimbabweans may find ourselves shifting from an economy dominated by a few white people to an economy dominated by a few black people.
Dr Keith N Guzah is the president of the Zimbabwe National Business Council and publisher of the Empowerment Today magazine. He is also the secretary for indigenisation in Zanu-PF’s Mashonaland West province.
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