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banker dissents over nationalisation
Institute for War and Peace Reporting (IWPR)
Mike Nyoni (AR No. 138, 11-Oct-07)
October 11, 2007
The Zimbabwean authorities
are pressing ahead with a nationalisation scheme despite warnings
from the country's central banker that the economic effects
will be ruinous.
The dispute highlights
the schism between politicians who place ideological policies above
pragmatism, and the technocrats in the administration.
26, the lower house of parliament passed the Indigenisation
and Empowerment Bill, which will compel foreign-owned firms,
including mining companies and banks, to cede 51 per cent of their
shares to black Zimbabweans. After the upper chamber, the Senate,
passed the law on October 2, only President Robert Mugabe's
assent is required for it to enter into force.
Defending the bill in
the lower chamber, Indigenisation Minister Paul Mangwana likened
the planned takeover of foreign banks, mining and manufacturing
firms to the government's seizure of commercial farms which
started in 2000 - a move which critics say has been counterproductive,
destroying farming and ultimately the wider economy.
Mangwana said the new
bill represented a "political decision" taken to correct
the injustices of the colonial past.
"They want to create
white islands in a liberated Zimbabwe, but we will not take that,"
he said. "The 51 per cent is only the minimum - we want
90 per cent. When you are carrying out a revolution, you do not
do it in half steps. Zimbabwe cannot be half independent."
The minister scoffed
at warnings that partial nationalisation would prompt foreign investors
to pull out of Zimbabwe.
"If Standard Chartered
Bank feel they cannot continue their operations in Zimbabwe, they
can simply go," he said, indicating that local banks would
step in and fill the gap.
A day before the Senate
vote, President Mugabe made it clear he agreed with this view when
he addressed ZANU-PF members at Harare airport on October 1 after
returning from the United Nations General Assembly meeting in New
"The minerals are
ours. We are offering partners, good partners, friendly partners,
a share, 49 per cent or thereabouts. If they won't take it, hard
luck - we will give it to our people," he said, according
to the DPA news agency.
The same day, the governor
of the Reserve Bank of Zimbabwe, Gideon Gono, adopted a very different
line on the issue. In a statement on monetary policy, he called
for a "fine balancing act between indigenisation of the economy
and investment attraction".
concern to us as monetary authorities would be any attempts to forcibly
push the envelope of indigenisation into the delicate area of banking
and finance," he said.
by politicians worsened Zimbabwe's country's sovereign
risk factor and undermined property rights, which would act as a
deterrent to badly-needed foreign investment, he said.
Gono warned that hasty
decisions would have "unintended consequences", just
as he did in July, when the government to slash prices of goods
and services in a bid to curb inflation. The result of that policy
move was that basic goods disappeared from the shops in a rush of
Instead, the central
bank chief recommended that the indigenisation process should be
managed in such a way as to ensure local people were able to pay
for shares. Thus, if a company had assets valued at 500 million
US dollars, it would take about 15 years for locals to acquire a
51 per cent stake.
Gono alleged that the
present nationalisation initiative was being backed by "well-connected
cliques" who wanted to use it to "amass wealth for themselves
in a starkly greedy but irresponsible manner".
In a pointed rebuke to
Mangwana, Gono challenged those who wanted to muscle into the banking
and financial sector to apply for operating licences from the central
Mugabe had a five hour
meeting with Gono on September 3, which according to the Zimbabwe
Independent, resulted in a "temporary truce".
However, an economic
analyst in Harare said it was unlikely the central banker and his
political masters would be able to agree on the fundamental issues.
are divergent," said the economist, who did not want to be
names. "Mugabe sincerely believes we need price controls to
cushion the most vulnerable members of society. He also wants to
take over companies he believes are working in league with the opposition
against his government."
The analyst said more
of the same kind of populist rhetoric could be expected from the
political leadership as the March 2008 presidential and parliamentary
elections drew closer.
"People like Mangwana
are more likely to align themselves with the president before they
are reined in by prudent advice from Gono, who better understands
the implications of such reckless utterances on investor confidence,"
"When Gono said
in his monetary statement that he was merely offering advice . . .
he knew what he was up against. There will be more wanton spending
and even more economically damaging statements until the elections
in March. Any meeting of minds on policy issues can only be coincidental,
although one would expect government to appreciate the importance
of getting into an election riding on a healthy economy."
Zimbabwe is in its eighth
year of recession, with annual inflation put at 6,600 per cent,
unemployment at 80 per cent, and widespread shortages of fuel and
Mike Nyoni is the pseudonym
of a journalist in Zimbabwe
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