Friday, April 23, 2010

Zimbabwe: ZSE Bull Run Anticipated

Paul Nyakazeya and Leonard Makombe
22 April 2010

A BULL run is expected on the Zimbabwe Stock Exchange (ZSE) in the short-term as investors take advantage of low prices on the market following the extension by another month of the deadline for submitting indigenisation plans for companies that failed to do so by April 15.

Kingdom Stockbrokers (KSB) this week said equity market loyalists should take advantage of the low prices currently prevailing on the stock market as they continue with their capital preservation methods.

"We believe that the market still presents investment opportunities for the long term investors and opportunities to switch from expensive to cheaper stocks," said KSB.

"Investors should consider that the market is currently characterised by high volatility implying that the risk of losing money is also very high. It has therefore become of paramount importance for investors to put more emphasis on value preservation rather than some aggressive investment strategies."

Addressing journalists in Harare on Tuesday Indigenisation minister Saviour Kasukuwere said the extension of the deadline was meant to give more time for firms to comply with empowerment regulations.

He dismissed reports that the indigenisation law had been repealed.

"Government at its cabinet sitting last week acknowledged the pressures faced by reporting companies in meeting the deadline," he said. "It has to be appreciated that a good number of the companies, which are affected by this law are domiciled abroad and have intricate shareholding structures, which make their decision-making process drawn out. In recognition of this reality, government decided last week to extend the deadline in the regulations by another month to May 15 2010."

KSB said equities investors should also put emphasis on companies with March year-ends which are expected to announce their results by 31 June.

This includes companies like Aico, Delta, African Sun, CFI, Seedco, OK and Pretoria Portland Cement Company.

OK will be of particular interest especially after the coming of a new partner, Investec, and a rights issue which was 70% subscribed making it the most successful rights issues since dollarisation.

ZSE has had a wobbly performance since the beginning of the year leaving investors wondering where it is going.

Investors seeking signposts on where to put their money may be reading more on what the politicians are saying than the performance of the companies listed on the local bourse.

As a result, the local stock exchange is being largely held hostage to political and policy developments which in most cases have had a negative effect.

Last week for example, the ZSE traded positively riding on the news that the Indigenisation and Economic Empowerment Regulations (requiring that companies with a capital base of above US$500 000 cede 51% to locals) had been suspended.

This excitement was immediately doused when President Robert Mugabe stated that there would be no changes on the substance of the regulations.

Events last week summarised what has been happening to the local bourse since the beginning of the year.

In January, the ZSE grew 3,1% to 156,52 points on the December 2009 figure but this was not sustained as it slipped to 140,37 points in the following month.

The ZSE saw slight growth on the February figure to 142,37 in March with US$39 million changing hands.

Analysts are cautious about the performance of the local bourse, citing the proposed regulations and the shaky political settlements as the main drivers of fear in investors.

At least 60% of the investors on the stock exchange are international investors who are risk averse hence the susceptibility of the ZSE to political developments.

"Any positive changes will be a major boost to the equities market which has been very sensitive to this development," said the analyst with a commercial bank.

Even the lure of low prices has not attracted investors who fear losing out as a result of the volatility on the market. In a normal situation, investors buy when prices are low and sell when they pick up.

Investors are looking at the volatility and have realised that the risk outweighs the benefits and may be looking for alternative investment destinations, though there are very few options.

Meanwhile market expectation of revenue from tobacco and diamond sales has seen increased resistance of higher interest rates by borrowers on the local money market, a situation that has stabilised interest rates at their current levels.

Tobacco sales have so far contributed US$59,7 million to local money market liquidity from the sale of 18,01 million kgs of flue-cured tobacco at an average price of US$3,32 per kg since the 2010 marketing season began on February 16.

Wholesale investment rates, have stabilised within the 7% - 25% range for the 7-90 day investment area.

According to the Reserve Bank replacements for the 90-day area were trading in the 30% area as financial institutions' demand for funding ahead of corporate tax payment date increased

Thursday, April 22, 2010

The state of Zimbabwe

Controversial new policies to give black Zimbabweans majority stakes in foreign companies in the country have scared off investors from abroad, stock exchange CEO Emmanuel Munyukwi said on Wednesday.

Munyukwi said in an interview orders from foreign investors had dried up since the end of January when Zimbabwe moved to implement the Indigenisation and Economic Empowerment Act that requires foreign firms sell a 51% stake to local blacks.

"Last year our market was being driven by foreigners, upwards of 40% were foreigners and net buyers. But from the end of January with the gazetting of the indigenisation regulations, there has been a lot of uncertainty and foreigners have put a hold on their transactions," Munyukwi said.

A minister said on Tuesday the transfer of control of foreign companies would begin in the key mining sector.

Under the rules, which took effect on March 1, foreign-owned firms must submit plans to show how they will sell 51 percent of their shares to black Zimbabweans within five years.

The Zimbabwe Stock Exchange (ZSE) has 79-listed companies and a market capitalisation of $3,2-billion, down from around $11-billion in 1997-1998.

The exchange re-opened in February 2009 after closing in November 2008 at the height of the country's hyperinflation which devastated the economy and made its currency worthless.


During the economic crisis, many Zimbabweans used the stock exchange to invest as it was the only investment option which gave some measure of protection to savings.

"When you started seeing vendors in the street playing the the market, you knew something was wrong," Munyukwi said.

Since then, volumes have picked up and until the controversy about selling off stakes of foreign firms, foreign buyers - including South Africa's Investec and investment bank and asset manager RMB - were acquiring Zimbabwean equities and providing much of the exchange's liquidity.

Daily turnover, which averaged $2-million in 2009, fell to about $700 000 after the empowerment law was published, although there has been an improvement to $1,3-million in recent days.

Munyukwi said although some foreign interest had returned, the uncertainty over the empowerment laws remained an obstacle to badly-needed foreign investment.

"We are hearing that the regulations are going to be reviewed but the unfortunate thing is, investors don't wait for you. They will go elsewhere."

The new laws have divided the fragile power-sharing government formed by President Robert Mugabe and Prime Minister Morgan Tsvangirai last year, with Tsvangirai saying they were issued without consulting the cabinet.

Munyukwi said new listings on the Zimbabwe Stock Exchange (ZSE) all depended on the economy picking up further. He singled out tourism and mining as sectors for possible new listings.

The ZSE, which opened in 1896, was looking to modernise and set up a central securities depository as a precursor to moving to electronic trading from open outcry, Munyukwi said.

It may look at South African bourse operator JSE Ltd (Johannesburg Stock Exchange) for help, he said.

"We are looking at all the various options. If you look worldwide, people are trying to piggy-back on the big exchanges because technology is always moving. I see scope in linking up with the JSE," he said.

Edited by: Reuters

Wednesday, April 14, 2010

From John Robertson

Zimbabwe's Government of National Unity has suspended the recently Gazetted indigenisation regulations and its intention is to review these to arrive at a consensus before trying to bring the Indigenisation and Economic Empowerment Act into force.

The decision, reached in yesterday’s Cabinet meeting, came just in time to make unnecessary the submissions on how each company proposed to ensure that 51 percent of its shares would become the property of indigenous Zimbabweans during the next five years.

The statement issued by the government did not indicate the specific reasons for the suspension, but a considerable amount of adverse reaction had been generated at numerous public meetings on the subject. Government is likely to have been surprised that some of the harshest criticisms came from business organisations that receive most of their support from indigenous people. A common theme at the meetings was that a forced change of ownership of the businesses now in operation would do nothing to generate the investment needed to bring about the expansion of business activity. As investment could not take place without savings, and as Zimbabwe’s savings had been virtually wiped out by its recent economic experiences, the need to have inflows of investment funds from abroad had to be supported by policies that would promote confidence.

Unless steps can now be taken to repeal the Indigenisation and Economic Empowerment Act, the business sector and economic planners should remain conscious of the fact that the process has been suspended, not scrapped. With more time to consider the issues, those who can offer constructive thoughts on how real empowerment could best be brought about and whether indigenisation, as an affirmative action concept, has any part to play in the process, should now start offering their thoughts to those making the plans.

In this regard, the key issue that separates the rich from the poor is the existence of, and respect for, property rights. Where these have been properly created and the needed institutions have been created to support them, the people have prospered. Where ownership of all property is claimed by the State or by some political authority, prosperity has been enjoyed by only those who could claim privileges conferred upon them by those in authority. Efforts should now be made to steer the Zimbabwean debate into territory of this nature to ensure that any policies that resurface will work on real empowerment, not temporary enrichment through “legalised” confiscations of the assets of others.

I hope to have more on this development within the next few days.
Kindest regards,

Monday, April 12, 2010

BIZ Bulletin

BIZ Bulletin
April 2010(1)

Reproduced with the kind permission of Business Information Zimbabwe

Prepared 9th April 2010

Wednesday 14th April is first ‘deadline’ to submit Indigenisation form

This is a follow-up to our March bulletins on this matter. For reasons of space, we shall not here repeat material previously covered. Feel free to forward this bulletin to anyone you think may find it helpful. (As a general rule, we ask that you don’t forward any bulletins without first asking us, as this is a service sustained by your six-monthly subscriptions, not a free one. However, we are making an exception to this rule in the matter of indigenization because of the intense interest in the topic and the conflicting official statements as we approach the ‘deadline’.)

The big question is what action to take regarding the form IDG 01 (a scanned copy of which we sent to you on 8th March, for your information). This decision has been made more complicated by the mixed signals emanating from the Minister and the Prime Minister on revision of SI 21 of 2010.

Until and unless changes to the SI are gazetted, it remains in place in its original, poorly-drafted form.

This means that in terms of section 4(1) ‘every business in Zimbabwe with an asset value of or above US$500 000’ must submit form IDG 01 to the Minister of Youth Development, Indigenisation & Empowerment ‘within 45 days of the fixed date’ (which was 1st March 2010, so the 45days end next Wednesday 14th April).

As an aside, ‘every business’ would include those owned by the minister himself, presumably, and the RBZ governor – in fact, any government/party official from lowest to highest.

However, as we read SI 21of 2010, no penalties apply if you do not submit Form IDG 01 within 45 days of the 1st March 2010.

Penalties – liability for a fine not exceeding level 12 (currently $2 000) and/or imprisonment for a period not exceeding 5 years – are only raised in the SI (in section 4(4), actually) in connection with the following scenario – ‘if, in the opinion of the Minister, a business that should have submitted a Form IDG 01… has not complied after a period of 45 days… the Minister may serve on the business a copy of Form IDG 01’ in various ways (physical delivery, registered mail and, if these modes are ‘not possible for any reason’ by ‘a notice in the Gazette, notifying the business of the requirement to collect and complete Form IDG 01’.

Thereafter, ‘if such business fails to return Form IDG 01, duly completed, to the Minister within thirty days from the date of the service of the form or of publication… of a notice in the Gazette… the owner of the business or, in the case of a company, the director or every director of the company shall be guilty of an offence and liable…’ (to the afore-mentioned fine and/or imprisonment – after your day in court, obviously, not merely at the whim of the Minister).

So what should you do about the deadline of 14th April?

If you have not yet submitted the form, certainly one completely legal option, as we interpret the law is to just wait and see if (1) the SI is amended and/or (2) the Minister follows up by serving a form on your business.

We think the former is likely to occur before the latter.

Below we reproduce section 4 of the SI, so that you can double-check our interpretation should you wish to do so (always a good idea). Although the SI contains many references to the penalties of a level 12 fine/imprisonment for non-compliance with specific sections, this does not occur in section 4(1) in regard to the 45-day deadline – and we see no general penalties provision in the SI that might have provided for this.

EXTRACT – section 4 of Statutory Instrument 21 of 2010

(appropriately underlined to focus attention on salient points)

“Every business to notify extent of present or future compliance with indigenization”

4 (1) Within forty-five days from the fixed date, every business in Zimbabwe with an asset value of or above five hundred thousand United States dollars (US $500 000) shall¬ –

(a) in the case of business existing on the fixed date (whether or not fifty-one per centum of its shares or a controlling interest is held by indigenous Zimbabweans), submit to the Minister through the appropriate person Form IDG 01, duly completed; or

(b) in the case of business commenced after the fixed date (whether or not fifty-one per centum of its shares or a controlling interest is held by indigenous Zimbabwe¬ans), submit to the Minister through the appropriate person Form IDG 01, duly completed, within sixty days from the date of commencement of the business.

(2) Every business in which indigenous Zimbabweans do not hold fifty-one per centum of the shares or a controlling interest shall –

(a) in the case of business existing on the fixed date, submit together with Form IDG 01, duly completed, an indigenisation implementation plan in accordance with any guidelines provided by Form IDG 01, within forty-¬five days from the fixed date; or

(b) in the case of business commenced after the fixed date, submit together with Form IDG 01, duly completed, an indigenisation implementation plan in accordance with any guidelines provided by Form IDG 01, within forty-five days from the date of commencement of the business.

(3) Copies of Form IDG 01 may be obtained by or on behalf of any appropriate person from any office of the Ministry of Indigenisation and Economic Empowerment or the Fund during normal working hours:

Provided that an appropriate person may, for the purpose of subsection (1) or (2), submit a form that is substantially in accordance with Form IDG 01.

(4) If, in the opinion of the Minister, a business that should have submitted a Form IDG 01 in accordance with subsection (1) or (2) has not complied after a period of forty-five days from the fixed date or forty-five days from the date of commencement of the business, as the case may be, the Minister may serve on the business a copy of Form IDG 01 in any of the ways specified by subsection (5), and if such business fails to return Form IDG 01, duly completed, to the Minister within thirty days from the date of the service of the form or of publication by or on behalf of the Minister of a notice in the Gazette in terms of subsection (5)(f), the owner of the business or, in the case of a company, the director or every director of the company shall be guilty of an offence and liable to a fine not exceeding level twelve or imprisonment for a period not exceeding five years or to both such fine and such imprisonment.

(5) Service of Form IDG 01 on a business may be effected in any of the following ways¬ –

(a) by delivering it to the owner of the business personally or to his or her duly authorised agent; or

(b) by delivering it to a responsible person at the head office or principal place of business; or

(c) by sending it by registered mail to the head office or principal place of the business concerned; or

(d) in the case where the business to be served is a body corporate, by delivering it to – ¬

(i) a responsible person at the body corporate’s registered office or place of business; or

(ii) a director or the secretary or public officer of the body corporate;

(e) in the case where the business to be served is a partner¬ship, by delivering it to – ¬

(i) a responsible person at the partnership's office or place of business; or

(ii) any of the partners;

(f) in the case where service in accordance with any of the foregoing modes is not possible for any reason, by publication by or on behalf of the Minister of a notice in the Gazette, notifying the business of the requirement to collect and complete Form IDG 01 in terms of subsection (I) or (2), and subsection (3).

(6) A business referred to in subsection (2) or (4) may, in writing, request for an extension of time within which to submit its indigenisation implementation plan, and the Minister may, on good cause shown by the company, permit it a further period not exceeding thirty days within which to do so.

(7) If the owner of a business or, in the case of a business that is a company, the director or directors of the company, make any statement or declaration or furnish any information in or in connection with Form IDG 01 or an indigenisation implementation plan submitted by such business in terms of subsection (2) or (4)¬ –

(a) knowing that such statement, declaration or information is false in any material particular; or

(b) without having reasonable grounds for believing that such statement, declaration or information is true;

the owner of the business or the director or every director, as the case may be, shall be guilty of an offence and liable to a fine not exceeding level twelve or imprisonment for a period not exceeding five years or to both such fine and such imprisonment.”

(End of extract from SI 21 of 2010)


Under the Interpretation section of the SI, ‘appropriate person’ is defined by reference to section 8(1) but we think this should read 10(1) – i.e. company secretary, senior partner/partner, nominated person for unregistered association/trust, person in whose name a PBC is incorporated, sole trader.

Gazette means the weekly Government Gazette (price $2), available (in Harare) from Printflow P/L, Ground Floor Arcade, Cecil House, Jason Moyo Avenue, between Fourth and Third Streets (i.e. it does not refer to the Financial Gazette, just in case you were confused). For contact details in other cities, please look in the Telephone Directory.

© This Bulletin has been sent to subscribing Members of

Business Information Zimbabwe

but this issues has been forwarded to you with their permission

For subscription enquiries, please contact

ISSN 1684-8837

Thursday, April 1, 2010

The Zimbabwean Economy - John Robertson

Update at the end of the First Quarter 2010

The extent to which the Zimbabwe government’s obsessive preoccupation with politics totally prohibits sensible discussion on its economic needs became very much more obvious with the launch of the Indigenisation and Economic Empowerment regulations.

Government’s recent actions can be taken as evidence that the senior party officials believe they have the right to achieve political ends by forcing changes of ownership of the assets of others. Their approach seems to be that, as they have the authority to pass Acts of Parliament that formalise their claims to these powers, they have every right to use this authority to rearrange the economic landscape to suit their needs.

They obviously feel that acquiring productive assets that way is much easier than working for them, but more to the point, they feel they are properly responding to their conviction that they are in power to exercise power, not to share power with markets.

With such powers at their disposal, they feel they can help supporters avoid the need to pit their wits against market forces to acquire such assets for themselves. Supporters will therefore increase in number, encouraged by their hopes that they can become shareholders of important companies without having to contend with normal business risks.

By enacting, and now giving teeth to the Indigenisation and Economic Empowerment Act, the politicians are now confirming their belief that government has the right to force every company, whether it exists already or has yet to be started, to relinquish control to indigenous Zimbabweans.

Because of his efforts, the Minister of Indigenisation has claimed that Zimbabwe’s indigenous people will soon become much better off. Some among them might have even accepted his public pronouncements as an invitation to sit and wait to be empowered and enriched.

However, my own belief is that very nearly all Zimbabweans are not fooled by claims that “indigenisation” and “economic empowerment” policies have been designed to bring advantages to the masses. From their responses all over the country, the bulk of the population has shown that they are fully aware of the real purpose of the policies: it is to score electioneering points, partly by promising the undeliverable “enrichment”, but more importantly by achieving the disempowerment of all those whose influence is thought likely to be used in support of politicians who are opposed to the policies of Zanu PF.

This brings the topic back to markets. In true democracies, different politicians try to market their different ideas and each tries to persuade the electorate that theirs are most worthy of support. In a democratic society, the electorate is free to choose the politician whose ideas they like the best, just as, when they are out shopping, the same people are free to choose between competing suppliers of baked beans or bath soap.

But in Zimbabwe, some politicians would rather use force than good arguments to win or reclaim support, specially when they do not have good arguments to offer and when their track record ranks among the worst in history.

In undemocratic societies, very forceful attempts are made to persuade the population that dominant politicians have a right to claim the people’s devotion, loyalty and obedience, and Zimbabwe’s leadership has often admitted turning to North Korea for guidance and inspiration. However, having failed to achieve the devotion or loyalty of Zimbabwe’s business sector, Zanu PF has decided to settle for its obedience. This it plans to extract by stripping the business owners of their powers to control their companies and by threatening them and all their directors with five-year jail sentences for any show of resistance.

The serious implications this move will have on the economy need to become part of the ongoing debate. Already, companies have started reporting more serious isolation from the investment flows needed to rebuild capacity, so the hoped-for arrest of the economic decline and the desperately needed recovery of the productive sectors appear to have become almost immediate casualties.

In the mining industry, major investment plans affecting platinum production have been put on hold and, for businesses in all sectors, production and service delivery remains severely affected by power cuts, badly maintained roads, erratic telecommunications and wage demands that are beyond the means of employers.

Companies in every sector have need of larger amounts of bank credit than they can find and they need it at more manageable interest rates than those now being charged, but the already slow inflows to the banks, whether in the form of equity capital or lines of credit, have been further discouraged by government’s indigenisation plans.

This Act means that equity capital is now unlikely to flow into any business sector and the already reduced earnings of export companies now seem far less likely to recover. So Zimbabwe’s ability to service debt will not recover either and new loans will remain out of the question. These, in turn, will keep the capital account funding needed to restore electricity supplies, water supplies, railways and roads well beyond the country’s reach.

A less obvious effect of government’s move will be the resentment that will be felt by current technical and financial personnel whose career paths will become far less promising. Unless government assures the population soon that far-reaching amendments to the legislation will be accepted, thousands of people will essential skills, all of whom can so easily find work elsewhere, will soon start making plans to emigrate.

The Minister of Indigenisation, Saviour Kasukuwere, has addressed well-attended meetings in many centres in the past few weeks. The audiences hoped to hear that their concerns had been noted and that amendments to at least clarify definitions and remove conflicts between the Act and the Gazetted regulations would be accepted.

However, the Minister used the meetings only to inform the public that no deviations from the legislation would be considered. And at a meeting on Friday, March 26 in Harare, before saying anything at all to the participants, the Minister walked out in protest against criticisms being expressed by one of the presenters, Prof Tony Hawkins.

Minister Kasukuwere’s accusations, as quoted in the Press, said Prof Hawkins was “blatantly racist and against the empowerment of the black majority in Zimbabwe”, arguing that this was because he had “likened the Indigenisation and Empowerment Act to apartheid law.”

In fact, Prof Hawkins has done more to empower indigenous Zimbabweans than perhaps any other person in the country, having spent the past 48 years lecturing to thousands of economics and business studies students. It is also a fact that he used the word “apartheid” to describe the Zimbabwe government’s decision to have indigenous and non-indigenous people function under different laws. As the Minister chose to walk out, he was not able to offer the meeting a better word to describe officially imposed laws of this nature.

If the Press reports accurately reflect the Minister’s comments, he went on to become increasingly extravagant with his accusations, accusing Prof Hawkins of making racist and backward statements and of being interested only in protecting the interests of white people. He also accused the conference organisers of choosing “a racist stance” for a meeting that was meant to be interactive and informative.

Again, the facts contradict the accusations. As he had been asked to speak on “The Economics of Indigenisation”, Prof Hawkins built an argument that fully justified his conclusion that indigenisation is not an economic concept and therefore it could not be subjected to economic analysis. However, he said, it is a political concept, and he noted that in Africa, “Politics trumps economics”. Issues of race did not feature in his analysis and neither did they feature in the planning, administration, programme or any other part of the conference.

As for the questions the delegates could not put to the Minister or his officials on the prospects of amendments, Minister Kasukuwere offered those answers to the Press: he said government was going ahead and would not be deterred as it was “part of its broad agenda to uplift the status of the majority”.

The Affirmative Action Group secretary-general, Mr Tafadzwa Musarara, said officials from his organisation also walked out of the meeting in solidarity with the Minister, so they, too, did not present their paper. However, it was made available to delegates.

Under the heading, “Empowerment, my Divine Rights Restored”, Mr Musarara’s paper argued that no white Zimbabwean could ever qualify to be described as indigenous. By implication, therefore, no white person could hope to gain advantage – or protection – from the Act.

But, as Mr Musarara explained to the Press, “We walked out in solidarity with the Minister because we realised that it was a racist convention.”


Zimbabwe’s needs

The promulgation of this law, the government’s decision to back it up with very harsh regulations and the tangled, shallow justifications offered can be described as perhaps the most inappropriate set of measures that could have been conjured up, short of a decision to simply nationalise everything in the country.

If this package is the result of an entirely deliberate set of decisions, the only explanations have to be that the people exercising authority in Zimbabwe are determined either to prevent any recovery from taking hold, or to ensure that any recovery that does take place will be entirely under their control.

The rationalisation of either explanation might best be a simple statement that the dominant political party’s officials have no intention of ever surrendering power, and they see their own requirements as far more important than the requirements of about twelve million Zimbabweans.

In that context, economic success that empowers the people could also strengthen their resolve to break free of government’s controls, so government is fearful of the possible political repercussions of an economic recovery.

This graph is one of the many illustrations of how serious the situation has become for the Zimbabwean population. Formal employment levels have fallen considerably in recent years and have badly affected the quality of life for the entire population.

Initially the fall shown was the result of the evictions of labour from commercial farms after the acceleration of the land reform programme in 2000, but with falling agricultural inputs, job losses were immediately felt in manufacturing and the service sector industries.

Even mining and tourism were affected when government began to fix the Zimbabwe dollar exchange rates. These soon made mineral exports unviable and turned Zimbabwe into the world’s most expensive tourist destination.

Various estimates of the extent of unemployment have been made, most of them placing the figure at between 65% and 70%, but the basis for the estimates are subject to many interpretations of the numbers, particularly in respect of definitions of contract employment, under-employment and informal sector employment.

However, estimates of actual formal employment numbers suggest that the 2009 total matched the figure from forty years ago. As Zimbabwe’s population has more than doubled since 1970, this decline is twice as bad as it looks in the graph. The social repercussions have been enormous, ranging from the generation of shantytowns and widespread destitution to mass emigration.

The forced closure about 4 500 large-scale farming companies caused not only the major loss of jobs, but also the loss of school places for many hundreds of thousands of children. As tax revenues fell, educational standards soon fell almost elsewhere else in the country and the quality of health services also became a casualty of government’s destructive policies.

These not only affected production, employment and economic growth; they soon also affected government’s tax base and they undermined the traditional social security network, best described as a deeply-seated tradition of generous support for members of employed people’s extended families. Now, those with formal employment and responsibilities to their extended families have to provide for many more young people than they can manage.

Family members working abroad do carry part of this load, but the extent and dependability of this support is impossible to assess. Only by attracting flows of investment capital can the needed local employment be increased, but the discouragement to new investors that will be caused by the Indigenisation and Economic Empowerment Act will make an already very bad employment growth situation considerably worse.

If the authorities show they have learned nothing from the economy’s experiences from the damage done to agriculture, and they go ahead with their plans for the take-over of 51% of all shares in the business sector, the confidence of potential investors who might have been planning to develop opportunities will be very severely damaged, if not destroyed.

As happened with the commercial farms, the workers will suffer badly from the destruction of capacity that will follow and a hidden statistic will be the unknown number of jobs that never come into existence.

Government repeatedly refers to claims that capacity utilisation has improved from less than 10% to more than 40%, which, to the officials, is conclusive proof that the economy is recovering. However, the evidence that this improvement has taken place is challenged by the few production statistics released and is challenged further by indications that new declines in output have been recorded in the first quarter of 2010.

The policies needed to remove the uncertainties and to restore the confidence of investors call for nothing more complicated than government’s commitment to respect property rights, with property defined to include, not only land, but savings, bank balances, securities, company shares and intellectual property.

The empowerment actually needed by the country would be promoted by respect for bankable property rights and this respect would draw from the local as well as foreign investors the initiative needed to build upon the country’s productive capacity. The “empowerment” described in the contentious Act will bring about nothing more than the change of ownership of what is left of the productive capacity created in the past, the bulk of which has been damaged or destroyed by the attacks on property rights.

The reason why that attack was carried out is simple: property rights empower people and Zanu PF has no intention of sharing power with anyone.