Paul Chikawa
Zimbabwean Ambassador to the People's Republic of China
Diplomacy / Zimbabwe
Zimbabwe indigenization modeled by “economic inclusivity”
Zimbabwe’s Indigenization and Empowerment Act was signed into law in 2008, which, in part, made it mandatory for locals to take majority ownership of operations across many sectors of the economy. While the policy remains controversial in its implementation, there are little-broadcast exceptions to majority local-ownership outlined within the law, a policy that derives itself from the leadership’s deep-seated hope to rebalance economic and societal wrongs suffered under colonial rule. Paul Chikawa, Zimbabwean Ambassador to the People’s Republic of China, explains the rationale behind this policy and more.
Many international investors have misunderstood Zimbabwe’s Indigenization and Empowerment Act. Could you please set the record straight by outlining the national goals and economic rationale behind this policy?
Zimbabwe adopted our indigenization policy in 2008 when we decided that it was not only correct, but necessary, that the majority of our people participate in our nation’s economic activities. The idea was to promote an all-inclusive economic structure in the country so as to avoid a situation where there would be resentment. If local people saw foreigners becoming the major beneficiaries of the opportunities in their economy, you then ran the risk of resentment. And out of resentment, there could be instability; out of instability, insecurity.
The indigenization policy was adopted for both historical and pragmatic reasons. The historical reasons were in the sense that, prior to our independence in 1980, the majority of Zimbabweans were deliberately sidelined or marginalized from being made economic players in the country. This was done by both illegal as well as, sometimes, aggressive and violent means. The pragmatic side was to create an environment of economic inclusivity that promotes harmonious co-existence.
The indigenization policy is not zero-sum. We do not seek to disadvantage the investors wilfully or necessarily, but instead wish to create a situation where the foreign investor and the local partner work together on a mutually beneficial basis.
In short, the indigenization policy seeks to promote inclusive growth and development opportunities for both locals and foreigners in a manner that would promote harmony rather than resentment, suspicion and, therefore, insecurity.
What are the terms of foreign ownership under the indigenization policy?
The Zimbabwean economy is divided into three broad sectors. We have what we call the closed sector, which includes activities like retail and public transportation. Ideally these are closed to outsiders. We would expect Zimbabweans to be driving these sectors, but exceptions are possible.
Then we have the resources sector, which includes mines and precious minerals. This is a sector that is very delicate because we are dealing with finite resources that also generate certain environmental impacts. Therefore, the government sees fit that, in the resources sector, the Zimbabwean entity must hold a minimum 51 percent shareholding. The Zimbabwean entity is represented by either the government, or some government-designated entities. But this is done on a commercial basis; it is not a decreed position.
Finally, there is the non-resources sector where commercial discussions between the foreign and local partners should result in a shareholding structure that is, again, fair to both parties. And in all these instances, we have line ministries that are involved. Usually, we expect a similar 51 percent to 49 percent structure in favour of the Zimbabwean entity. But if there is an investment where the foreign partner is coming to process a natural resource into a value-added commodity, then the shareholding structure could be different from typical 51 percent to 49 percent division.
Tobacco has been a top foreign currency generator for Zimbabwe for a long time. Could you provide an overview of tobacco development?
Tobacco has been and remains a very significant cash-crop in the Zimbabwean economy. It is probably the most important single agricultural commodity we have, and remains a major trading item between Zimbabwe and China. The reason for that is because Zimbabwe produces among the best blending leaf tobacco in the whole world, which is known as flue-cured tobacco. We are sometimes described in the same league as Brazil and the US tobacco industries.
While tobacco remains a significant trade product, what we hope to achieve is more value addition of the tobacco leaf. Rather than just exporting it as a semi-processed good, we want to see more value-added processing and even the production of cigarettes—either on our own or in partnership with foreign companies—so that we can produce brands for global marketing. Of course, we are also cognizant of the market circumstances around tobacco, and because of that, we are now looking to diversify our agro-structure.
How would Zimbabwe diversify its agricultural offerings?
Fortunately, we are a country that enjoys very favorable climatic, weather and soil conditions. (Of course, this is discounting the recent phenomena of global warming and droughts induced by El Niño.) Our cotton quality is comparable with Egyptian cotton, or long-fibre cotton from Benin, Mali or Xinjiang in China. Beef quality is also high: we were one of a few African countries, including Botswana, Namibia and South Africa, which exported beef to the EU. And Zimbabwe is also a very high-quality producer of fresh-cut flowers. Yet, due to a constricted external environment from international sanctions, these market spaces have not been that open for us. However, the potential is undoubted, and these are the products that we want to focus on.
How would you sum up Sino-Zimbabwe relations?
China-Zimbabwe relations have withstood the test of time. We are peoples who have complementary capacities and means. There are things that China has that Zimbabwe does not have. There are things that Zimbabwe has that China does not have. Our relationship is thus complementary. So my invitation and appeal to our Chinese friends is to not look at Zimbabwe as the West sees us. Zimbabwe is a friendly and stable country and full of opportunities in many areas of business, especially in infrastructure, energy, telecommunications, mining and agriculture.
