Zimbabwe Economic Policy

Zimbabwe Government Policy Framework for Indigenisation of the Economy

The Meaning of Indigenisation of the Economy

Indigenisation of the economy is the deliberate economic empowerment of indigenous Zimbabweans mainly through economic expansion. This is a long-term programme for laying a strong foundation for the development of a fully fledged democratic society in which all Zimbabweans equally enjoy economic and social justice. The importance of indigenising the economy arises from the need to eliminate the socioeconomic development imbalances of the past, to create employment and more wealth so as to eradicate poverty among the majority of Zimbabweans and to expand the domestic market and tax base.

Broadly, indigenisation aims at bringing about economic justice between races; at democratising the economic system and at creating favourable economic conditions for the promotion of basic human rights, such as the right to development, the right to employment, the right to own property (productive and non productive) and the right to an adequate standard of living.

For such rights to be realised all the Zimbabwean people must have equal opportunities and unhindered access to resources and skills. An enabling environment and a level playing field should therefore be created to pave the way for equal participation in economic development by all Zimbabweans. Economic injustice is one of the major factors, which brings about social and political conflicts. The potential for conflict will persist in the Zimbabwean society for as long as economic justice is not attained.

In short, economic indigenisation is a strategy for the development of a democratic socio-economic system, nation building and poverty eradication among the majority of Zimbabweans. The master key to indigenisation of the economy includes an increase of indigenous productive investment in the economy, industrialisation, skills development, land redistribution and mobilisation of financial resources.

Policy Objectives and Constraints

The main policy objectives for indigenisation of the economy are as follows:

  • Economic empowerment of indigenous Zimbabweans by increasing, mainly through economic expansion, their productive investment in the economy so as to create more wealth and eradicate poverty among the majority of Zimbabweans;
  • To create conditions that will allow the hitherto disadvantaged Zimbabweans to participate in the economic development of their country and earn themselves self respect and dignity;
  • to democratise the ownership of productive assets of the economy so as to eliminate racial differences arising from economic disparities;
  • to develop competitive domestic private sector to spearhead economic growth and development; and
  • to develop a self sustaining economy.

a) an unstable macro-economic environment characterised by the following:-

  • high budget deficit
  • high interest rates
  • high inflation levels
  • low levels of domestic saving-
  • low levels of new productive investments.

b) Inadequate medium and long-term financing facilities.

c) lack of production know-how - graduates from most of the skills development institutions are trained to meet the requirements of the job market. They lack entreprenuership skills that are necessary to start and run businesses.

d) inhibitive legislation - legislation governing the operations of the different sectors restrict the easy entry by indigenous entrepreneurs e.g. title deeds, local authorities by-laws etc.

e) absence of decentralised business information centres

f) lack of collateral - most aspiring indigenous entrepreneurs have no collateral; a condition that financial institutions place before loans are advanced for start-ups.

Strategy for Indigenisation of the Economy

Economic indigenisation is a nation building programme that requires the unreserved support from all sections of the society. Resources in the public sector, the private sector and the community at large should be mobilised and channelled towards the achievement of the policy objectives set-out above.

The main component parts of the strategy for indigenisation of the economy are as follows:

Creating an enabling macro-economic environment

Experience elsewhere has shown that indigenisation of the economy will succeed in an environment characterised by economic growth and spearheaded by a vibrant domestic private sector. In order to bring about macro-economic stability it is necessary to put a two year or three year ceiling on government consumption expenditure accompanied by fiscal incentives to stimulate productive investment, and to accelerate privatisation of state enterprises.

Industrialisation of the economy

Industrialisation will provide the country with an engine of economic growth as well as bring about economic expansion (establishment of new industrial enterprises and related economic activities). Economic expansion will result in business expansion, employment creation and poverty eradication among the majority of Zimbabweans, expansion of the domestic market and widening of the tax base. The widening of the tax base will lead to the reduction of budget deficit. Furthermore, industrialisation will lay a strong foundation for the development of a competitive domestic private sector and self sustaining market economy. Industrialisation will increase the country’s exports of manufactured goods and reduce its dependence on export of primary commodities.

Land redistribution:

Land redistribution is aimed at providing the indigenous population with agricultural land. Access to agricultural land, rural economic infrastructure (roads, communications, water for irrigation and market facilities) including credit facilities, as well as security of tenure and development of production know-how (agricultural technical skills and entrepreneurship) are key to the development of indigenous commercial agriculture. The development of indigenous commercial agriculture is a strategy for rural development, and rural development in turn, is a strategy for employment and wealth creation as well as poverty eradication in rural areas.

Employment and wealth creation in rural areas will also reduce disparities in social and economic development between urban and rural areas. Furthermore, employment and wealth creation in rural areas will accelerate the industrialisation process in the country by providing the manufacturing industry with a expanded domestic market for manufactured goods.

In order to promote the development of indigenous commercial agriculture, Government will introduce the following

  • commercial farm settlement scheme and 99 year lease scheme with option to buy after 10 years(the two schemes are for those who have qualifications in agriculture);
  • principle of one person one farm;
  • prohibition of agricultural land ownership by foreigners and companies except in special circumstances;
  • limit the sizes of farms; and
  • land tax for un-utilised and under-utilised agricultural land.

The imposition of land tax on un-utilised and under-utilised agricultural land will encourage the release of surplus land onto the market. The land tax will also provide the government with funds for promoting indigenous commercial agriculture.

Increasing indigenous private investment in the economy

The increase of indigenous private investment in the economy will be achieved through the establishment of new indigenous enterprises and new joint ventures, buying of shares in the existing non-indigenous companies privatisation of state enterprises, takeovers, employee stock ownership schemes, subcontracting and outsourcing. It must be emphasised that the establishment of new enterprises is the main strategy for increasing indigenous private investment in the economy as this will lead to economic expansion, creation of employment and more wealth as well as poverty eradication among the majority of Zimbabweans.

Mobilisation of financial resources

Mobilisation of financial resources, especially medium to long-term finance, is crucial for increasing indigenous private investment in the economy and for economic expansion. In order to create an enabling environment for the mobilisation of financial resources, Government will further reduce its consumption expenditure and accelerate commercialisation and privatisation process so as to reduce high budget deficit. The reduction of budget deficit will create macro-economic stability, conducive for productive investment and mobilisation of financial resources.

Furthermore, educational campaigns for promoting domestic savings will include themes like savings against drought, savings for poverty eradication, etc will be introduced. Joint ventures between foreign and indigenous companies will also be encouraged as a way of mobilising foreign investment. In order to mobilise medium and long-term finance there is need to promote the establishment of leasing and venture capital companies. Venture capital and leasing companies will also help to solve the problem of collateral.

Skills development

Skills development is crucial for the development of a competitive and self sustaining domestic private sector which is the engine of economic growth and development. Zimbabwe particularly requires entrepreneurial skills, technological know-how and economic development management skills. Entrepreneurs are required for setting up and running new enterprises. Manpower with technological know-how is needed for research and development as well as for manufacturing products in the newly set up enterprises. It is also needed for developing a strong endogenous technological base for industrialisation, which is a prerequisite for developing a self sustaining and competitive market economy. Economic development management skills are needed for designing appropriate polices that will promote indigenisation of the economy as well as economic growth and development.

Review of legislation that constrain indigenisation of the economy

Current legislation governing the operations of the different sectors of the economy which have a constraining effect on the indigenisation process will be identified, reviewed and updated where necessary. The review process will require consultation with indigenous pressure groups and other stakeholders in the economy. The objective is to ensure that legislative framework provides an enabling environment for the successful implementation of the indigenisation policy.

Some of the Broad Policy Measures for Implementing Indigenisation Strategy

Some of the broad policy measures for implementing indigenisation strategy are as follows:

Joint ventures between indigenous and foreign firms as well as between local and indigenous firms will be encouraged through incentives.

Establishment of more venture capital and lease companies will be encouraged
The scheme of savings for employment creation, poverty eradication and indigenisation of the economy will be promoted by Government through tax-free interest arrangement.

Sub-contracting arrangements between large companies and small and medium scale indigenous enterprises will be encouraged through incentive
Government will establish National investment Trust as a vehicle for indigenous population participation in privatisation of state enterprise
Employee stock ownership schemes will encourage in the private sector and in enterprises, which are being privatised.

Steps will be taken to improve the marketing techniques of indigenous enterprises to make them more effective and results oriented.

A study will be commissioned to identify all laws that inhibit the development of indigenous enterprises so that they can be changed.

In the view of the lack of entreprenuership and technical skills among the indigenous people, Government will:

Review curriculum at vocational and technical training institutions to ensure that it caters adequately for the needs of indigenous entrepreneurs;

enter into tripartite arrangements involving the indigenous entrepreneurs; vocational training institutes and non- indigenous entrepreneurs for development of a meaningful training programme which will include job training, part-time short courses and hands on competency based training; expand staff development programmes to produce enough high level manpower; establish a mechanism for providing training and information to informal sector participants which resembles that of the agricultural extension worker.

The Department of State Enterprises and Indigenisation will co-ordinate, monitor and evaluate the implementation of indigenisation policy and privatisation.

Last Updated on Tuesday 24th November 2009