Blow, wind, blow

Southern Africa: economic nationalism

‘Empowerment’ benefits political elites while businesses are spooked and citizens are left with nothing but empty promises

By Ray Ndlovu

A wind of economic nationalism is blowing over southern Africa but curiously, the ordinary citizens who are supposed to be its main beneficiaries have largely been left to spectate from the sidelines. A sign of the emergence of this form of economic nationalism occurred in early 2000, when Zimbabwe’s president, Robert Mugabe, authorised the seizure of farms owned by nearly 6,000 commercial white farmers. Mr Mugabe’s ruling party, ZANU-PF, liked to refer to the land seizures as the “Third Chimurenga”—symbolic of a third war of liberation, after two others fought in the early 1900s and the 1970s. Whereas the motive in the first two wars was political independence, this time the rationale was economic emancipation. Neighbouring countries in the southern African region publicly condemned Zimbabwe’s land seizures, which were carried under the leadership of war veterans and often accompanied by considerable violence.

Zimbabwe’s gross domestic product has shrunk to less than half its size in 2000 as a result of the fall in agriculture. Production dropped 44% from 6.3 million tons in 2000 to 3.5 million tons in 2005, according to the UN’s Food and Agriculture Organisation, while some two-thirds of the country’s 325,000 farm employees lost their jobs. Once the region’s breadbasket, Zimbabwe is now reliant on maize imports to feed its own population, with hunger and food shortages common. BMI Research, a UK-based research group in a report released in January this year said the country would remain a net maize importer over the longer term. “Over the next five years, we expect production of the grain to demonstrate moderate growth, although production will remain well below the totals seen in the early 2000s,” it said.

The consequences of Zimbabwe’s land reform has had leaders in South Africa and Namibia wary of publicly advocating for radical land seizures, having observed the economic and social havoc they wrought in that country. Mr Mugabe himself is reported to have said that the land reform programme was “flawed”. But behind closed doors many of them appear to admire Mr Mugabe’s attempt at correcting the imbalances in land ownership that were a legacy of the colonial era. Similar questions with regard to land ownership have troubled both South Africa and Namibia. In South Africa, the ruling party, the African National Congress (ANC) has oscillated between different stances on land in the past 20 years, but seems now to have settled on radicalism—like Zimbabwe. Perhaps driven by populism and pressure from upstart political parties, the ANC has its eye on land reform, regardless of the cost to the economy.

The slow pace of land reform in South Africa is telling. After coming to power in 1994, the ANC set the goal of redistributing 30% of farmland to black farmers by the end of 2014. The target was for 24.5 million hectares of land to be owned by blacks out of the 82 million hectares then in white hands. But only 4.2 million hectares—or about 4,800 farms—have since been transferred to black workers. About 35,000 mostly white farmers still dominate the land sector. A new populist approach to resolving South Africa’s land question was signalled in February last year, when the South African government proposed a law that would prevent foreigners from buying farmland, and at the same time restrict the size and number of farms that citizens were allowed to own. “The fate of too many,” Mr Zuma said in an address to the country’s parliament, “is in the hands of too few.”

In Namibia the land issue is also a deeply emotive issue. “As in South Africa, and as in Zimbabwe at the beginning of its own land reform experience, Namibia’s land reform programme has so far been based on the “willing buyer-willing seller” principle…This, together with the low number, high prices and poor quality of the farms offered to the government by these farmers, is slowing down the process considerably,” says Carlos Tapia Garcia, a research fellow at the Istituto agronomico per l’oltremare, a technical and scientific research body of the Italian Ministry of Foreign Affairs that provides research, training and advice on tropical and subtropical agriculture.

At independence in 1990, 42% of Namibian agricultural lands were under white farmers’ control, while white people—who represented a small proportion of the total population—possessed more than 34 million hectares of land, according to Namibia’s Ministry of Agriculture, Water and Rural Development. In contrast, black people, who constituted more than 90% of the population, owned 40% of all agricultural land, and were mainly oriented towards subsistence farming under customary tenure systems. Like Zimbabwe’s ZANU-PF and South Africa’s ANC, Namibia’s ruling party, the South West Africa People’s Organization (SWAPO) has also used the land issue to give its leaders an opportunity to extend their stay in power. “The fact is that most of the liberation movements presented the “reconquering” issue as an extremely important element during the struggle.

After the achievement of independence, this aspect has been repeatedly invoked as electoral propaganda, particularly when the ruling party risked being dismissed by the electors,” Mr Garcia adds. These developments have had a parallel in these countries’s business sectors. In early 2007 the ANC government in South Africa launched its Broad-Based Black Economic Empowerment (BBBEE) policy, an extension of its Black Economic Empowerment (BEE) policy of 2003, which was intended to redress the inequalities of apartheid by giving previously disadvantaged groups such as blacks, coloureds and Indians economic privileges with regard to business ownership and in the jobs market.

The earlier policy has been criticised as benefiting only a few well-connected individuals. It has also been charged with being a “front” for big businesses, which often incorporated black people in their structures in order to qualify for government contracts, but retained ownership and control by their proprietors. To counter these perceived problems, BBBEE set out to distribute wealth across as broad a spectrum of the previously disadvantaged South African society as possible. This included facilitating the ownership and management of businesses by communities, workers and other collective enterprises, boosting human resource and skills development and achieving “equitable representation” of all categories across all levels of the workforce.

Further north, meanwhile, in Zimbabwe the rise of an opposition party, the Movement for Democratic Change (MDC) led by Morgan Tsvangirai, was putting pressure on ZANU-PF to come up with a new electoral message. A major element of the challenge represented by the MDC was its control of major city and town councils, where it had a strong urban support base. Accordingly, ZANU-PF has increasingly sought ways to attract more city voters. For this reason, and perhaps also encouraged by developments in South Africa, Mr Mugabe turned his attention to business. In March 2008, his party introduced an indigenisation law, which focuses on the question of business ownership. It stipulates that foreign owned companies must cede a controlling stake of 51% to indigenous Zimbabweans. Despite its air of determination, the law has not had an easy time of it, as previously reported in Africa in Fact.

In April this year, the government apparently bowed to pressure and said it would change elements of the act to make the country more attractive to foreign direct investment. No specific measures were indicated, but even a whiff of willingness to compromise drew the ire of some hardline party members. The issue is still up in the air. Harare-based independent economist John Robertson says that Zimbabwe has bitten off more than it can chew through its approach to economic nationalism. “[The country] has imposed very costly limitations on itself and progress has been backwards, he told Africa in Fact, adding that the effects of a similar approach in South Africa and Namibia have been seen to be negative. “The maturity of a country is important. We don’t see either the US or Europe imposing this kind of radical economic nationalism. The market must be allowed to make decisions best for itself, but politicians are trying out populist measures,” he said.

In South Africa, the gap between a market-oriented approach and the new economic nationalism has been driven by a resurgence in leftwing ideologies as represented by South Africa’s Economic Freedom Fighters (EFF), as well as the growing militancy of lobby groups such as the country’s Black Management Forum and Black Business Council, says Andile Ntingi, co-founder and chief executive officer of GetBiz, a “real-time tender notification service” based in Johannesburg. These organisations are “vocal about the inclusion of black people in executive managements of big corporates and the opening up of private sector supply chains to black suppliers,” he adds. The EFF, led by Julius Malema, a firebrand former ANC member, was founded on the cornerstone of economic emancipation based “on the expropriation of land and mines without compensation”. The latest unemployment figures in South Africa are at 26,7%, the highest since 2008, according to StatsSA.

“Certainly, the nationalisation of minerals and metals might ignite international condemnation by global imperialists, institutionalised in the World Bank, [the] International Monetary Fund, and, notably, the World Trade Organisation,” the EFF’s policy on nationalisation says. But it claims that nationalisation would see key benefits, including an increased tax base, more employment, better salaries and working conditions in mines and greater levels of economic and political sovereignty for previously disadvantaged groups of society. Insofar as it identifies costs or risks, the EFF says that these would be better than leaving economic power in the hands of a few white-controlled businesses. The EFF’s policy on nationalisation has struck a chord, mainly with South Africa’s unemployed youths. In the 2014 national election it suddenly became the second-largest opposition political party, trailing only after the Democratic Alliance.

North of the Limpopo River, the rhetoric of empowerment also translated into an election victory for Mr Mugabe in the July 2013 elections. Mr Mugabe’s election campaign was run under the theme “Indigenise, Empower, Develop and Create Employment”. His ZANU-PF party promised to create 2.2 million jobs under its economic blueprint, the Zimbabwe Agenda for Socio-Sustainable Economic Transformation. That promise of jobs is yet to materialise. Unemployment is estimated at 90% of the population. Business however took umbrage at Mugabe’s election victory on the back of scaling up on economic empowerment. The Zimbabwe Stock Exchange (ZSE) lost 22% of its value days after the election results were announced. Since the 2013 elections, the ZSE, a barometer of foreign investor sentiment, has lost over US$2 billion of its value—spooked mainly by the radical tone of empowerment. “There is no way that foreign investors would be attracted to a country where they have to give away more than half of their shareholding,” said Mr Robertson.

The diplomatic community in Harare has also been watching events closely. Australia’s ambassador to Zimbabwe, Suzanne McCourt, says that Australian investors and local businesses interested in Zimbabwe are seeking a stable and transparent business environment, underpinned by clear and consistent policies. “Building business confidence [is] critical to unlocking Zimbabwe’s great potential and spurring continued economic growth,” she said in an e-mailed statement. Despite the pressure being made to bear on them, compliance to the empowerment law by foreign-owned businesses in Zimbabwe has been slow, as foreign-owned companies adopt a wait-and-see attitude. In response, Patrick Zhuwao, the Minister of Youth Development, Indigenisation and Economic Empowerment and a nephew of Mr Mugabe, said in March this year that the licenses of all foreign-owned firms that failed to comply with an April 1st deadline to submit empowerment plans would be cancelled.

Mr Zhuwao’s ultimatum was devastating. The country’s cash crisis worsened as depositors and businesses held onto their money in fear of widespread company closures. Japhet Moyo, the secretary-general of the Zimbabwe Congress of Trade Unions, the largest labour body in Zimbabwe, said the economic problems afflicting the country were “directly linked to [Mr] Zhuwao’s pronouncements” on indigenisation, which had brought business to a standstill. Meanwhile Namibia’s version of economic nationalism, the New Equitable Economic Empowerment Framework (NEEEF) mooted in 2011, is quickly gaining ground, after a lull. Among other things, the NEEEF stipulates a figure of 25% local ownership of businesses. “NEEEF shall be obligatory to all enterprises. Government shall use all the regulatory, licensing and market mechanisms at its disposal to ensure compliance.

The NEEEF will promote transformation in business through empowerment pillars such as ownership, management control, employment equity, human resources and skills,” said the office of the Namibian prime minister, Saara Kuugongelwa-Amadhila. The Namibia Chamber of Commerce and Industry (NCCI), which boasts of over 2,000 members, says that the government was making a mistake by pressing for obligatory local shareholding in businesses without a proportional increase of the country’s economic productivity. A compromise will be needed in order to avoid hurting the Namibian economy, which is largely dependent on agriculture and mining, says Tarah Shaanika, CEO of the NCCI. As previously reported in Africa in Fact, some $500 million in multi-year foreign direct investment earmarked to begin flowing into the country from 2016 may have been prejudiced by the Namibian government’s uncompromising stance.

While economic nationalism in the region may operate under different terms in the respective countries, its effects in each are similar. As in Zimbabwe, for instance, the Namibian government has adopted a militant tone on local ownership and indicated that it is preparing for a combative showdown with business. A sinking feeling connected with the effects of economic nationalism already seen among businesses in South Africa and Zimbabwe is now felt with regard to Namibia as well. In all three countries, businesses are faced with the challenge of sitting at negotiating tables with politicians who show no inclination of wanting to negotiate. A power contest between the business world, especially large corporates, and local political elites seems inevitable.

“The big question is how the rhetoric of economic nationalism relates to reality,” says Piers Pigou, southern Africa director of the International Crisis Group, an independent not-for-profit organisation that aims to prevent and resolve social conflict. “Are broad-based or elitist interests being served?” So far, political elites appear to be the biggest beneficiaries of economic nationalism, which they have exploited either as a means of gaining political power or of extending their own grasp on it. Powerful politicians continue to browbeat businesses with threats of seizure and closure while citizens are left with nothing but empty promises of jobs and prosperity.