US embassy cable - 03HARARE1605

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