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Cablegate: Industry Braces for Forced Indigenization

This record is a partial extract of the original cable. The full text of the original cable is not available.

130957Z Aug 03

UNCLAS HARARE 001605

SIPDIS

STATE FOR AF/S
NSC FOR SENIOR AFRICA DIRECTOR JFRAZER
USDOC FOR 2037 DIEMOND
PASS USTR FLORIZELLE LISER
STATE PASS USAID FOR MARJORIE COPSON

E. O. 12958: N/A
TAGS: ECON EINV PGOV ELAB ZI
SUBJECT: Industry Braces for Forced Indigenization


1. Summary: Zimbabweans reflexively cringe when their
near-octogenarian president boasts of a new economic
initiative. Robert Mugabe's policies have already
produced farms with no crops, gas stations with no gas
and banks with no money. Although still just an idea
percolating in ZANU-PF circles, Mugabe might next use
corporate indigenization to justify a ZANU-PF grab of
certain remaining Asian- and white-owned businesses. End
Summary.

2. In his July 22 address to Parliament, Mugabe said a
new Indigenization Bill would ensure that "companies
allocate a minimum 20 per cent shareholding to their
workers." At first glance, Mugabe appeared to advocate
an employee profit-sharing plan for all businesses
operating here. Based on initial deliberations in
Parliament, however, it seems that the ruling ZANU-PF
party seeks to limit the proposed law to minority (i.e.,
Asian- and white-owned) businesses. Furthermore, the
measure would require these businesses to accept twenty
percent black ownership, but not necessarily by workers.

CZI's waning credibility
------------------------
3. Following up on Mugabe's address, the Confederation of
Zimbabwe Industries angered member companies by asking
them to complete a questionnaire about black
participation on their boards. Minority business-owners
accuse CZI President Anthony Mandiwanza of deserting
their interests and colluding with the Government trying
to expand his own holdings. (Takepart Enterprises, co-
owned by Mandiwanza and three other ZANU-PF heavyweights,
has recently acquired stakes in various firms.) Because
Mandiwanza earned accolades throughout the business
community for standing up to the GOZ on price controls,
this recent turn of events is unfortunate.

4. While it is too early to tell what form the new law
might take, minority business-owners fear the fervor of
fast-track land reform swinging toward them. Mugabe's
controversial land redistribution resettled many small-
scale black farmers, but also enabled ZANU-PF higher-ups
to extrajudicially seize many commercial farms. Business-
owners dread being pressured to accept these political
strongmen as co-owners, especially in non-listed family
operations.

Comment
-------
5. To be sure, indigenization of the private sector is a
worthy post-colonial objective. Blacks comprise 99
percent of Zimbabwe's population. In fact, Zimbabwe has
made admirable strides to foster black business-owners
and CEOs over the past 10 years, so much so that Asian-
and white-company heads are an increasing rarity. Still,
after the GOZ policy of political favoritism in land
redistribution, concern that the Indigenization Bill
could degenerate into political cronyism is not
unwarranted. As chances for talks with the opposition
Movement for Democratic Change mount, the GOZ also seems
to be accelerating its seizure of remaining white-owned
farms. In the worst scenario, leaders might regard the
next months as their last chance to pilfer.

Whitehead

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