SA’S economic model for Africa
Some newly independent countries are utilising our BBBEE policy as a guideline for local empowerment
HISTORY is constantly repeating itself and hopefully with each cycle we correct at least some mistakes of the past. This can be seen in the case for economic empowerment policies in Africa.
The issue of state participation, indigenisation and what has come to be known as economic empowerment was raised as African states gained independence, mainly in response to their colonial history and resulting economic systems, such as apartheid in South Africa that saw economic participation determined along racial lines. Today this topic remains at the heart of many African economic policies.
State participation can be defined as an obligation that private companies that operate in certain sectors reserve a shareholding for public entities. This participation is generally established at the creation of the company and cannot be diluted. State participation can also be decided at a later stage through nationalisation, providing the right to indemnities.
Economic empowerment, in this context, refers to the goal of restoring economic power to sections of the population that social discrimination processes had previously excluded from decision-making based on race and gender, among other factors.
Indigenisation is a mechanism whereby governments may seek to achieve economic empowerment. It can be defined as the increase of local participation in, or ownership of, established entities. Indigenisation has proved to be one of the most popular measures for implementing economic empowerment for the previously disadvantaged through either granting shares to national, individual or entities in a company, the obligation to reserve some employment for nationals, or to reserve certain commercial or industrial activities for nationals.
Many states in Africa have tried to implement one or several of the above measures and today some of them seem to tend towards a new model inspired by South Africa’s broad-based black economic empowerment (BBBEE) policy.
In the past indigenisation has been expressed as a return to African identity, as well as the idea of restoring the economic power taken from African peoples by their colonisers. This was the case in Zaire (Democratic Republic of Congo) through “Zairisation” and in Côte d’Ivoire through “Ivoirisation”. The result was not much more than a series of nationalisations, giving birth to huge state-owned companies.
Apart from a few exceptions, these state-owned companies did not have enough experience to meet the economic challenges of the ’90s successfully, and this led to significant restructuring, liquidation or privatisation. To this extent, therefore, these policies failed and gave birth to a situation that is, at best, the opposite of their original intention.
It appears that state participation, indigenisation and economic empowerment are still applied in various parts of the continent in a manner distinctive to each region, possibly as a result of the different historical backgrounds of the countries in which they are implemented. As a general overview, indigenisation does not seem to exist in Francophone Africa and more generally in West and Central Africa. In countries in these areas state partic-
It appears that state participation, indigenisation and economic empowerment are still applied in various parts of the continent in a manner distinctive to each region
ipation seems to be mandatory only for companies created for the operation of mining projects. This is the case for all member countries of the West African Economic and Monetary Union, where the state must have a shareholding of 10% — Benin, Burkina Faso, Mali, Niger and Senegal. This is also the case in Guinea, where this shareholding may be as much as 35%, 5% for the DRC or 15% for the Central African Republic.
Indigenisation and economic empowerment appear to be a trend in the southern and eastern parts of Africa, and although several colonial influences exist in these regions, the AngloSaxon and Portuguese heritage remains a common feature, as does the fact that colonialism lasted far longer in this region than elsewhere on the continent. As a result, these states faced severe and potentially destabilising disparities of wealth and resources between rich and poor when they attained independence from colonial rule, which, because of the economic policies of colonialism, was based on the colour line. This has been the case in South Africa and Zimbabwe, but also to some extent in Namibia, Botswana, and Angola.
Indigenisation, such as in Zimbabwe, aims at giving a “controlling interest” of not less than 51% of the shares or interest in an enterprise to black indigenous Zimbabweans. Every company in respect of which 51% of the shares, or a controlling interest, is not held by indigenous Zimbabweans, and whose net asset value is above certain thresholds (depending on the industry), must submit an indigenisation plan detailing how and when a controlling interest of its business will be transferred.
Indigenisation in other countries has been a relatively smooth process. In Angola, the “Angolanisation” policy seeks to ensure preferential treatment of Angolan businessmen and stipulates that companies must conform to a ratio of 70% national workers to 30% foreign workers.
In Botswana the government proactively encourages citizen businesses and entrepreneurs. Certain categories of tenders are restricted to citizenowned companies only, and citizenowned or majority citizen-owned companies enjoy preference during tender evaluations. Certain manufacturing activities are also restricted to citizens and citizen-owned companies. The government has set up the Citizen Entrepreneurial Development Agency to provide fledgling citizen-based companies with technical, financial and managerial assistance.
Other countries tend to apply this policy for very specific and strategic sectors. This is the case in the DRC, where land concessions for agriculture are only granted to Congolese individuals or companies having the state or Congolese individuals or companies as shareholders.
The more sophisticated policies appear to be Namibia’s new equitable economic empowerment framework, which aims to provide a clear overarching policy framework for promoting transformation in business through the pillars of ownership, management control and employment equity, human resources and skills development, entrepreneurship development and community investment; and of course SA’s BBBEE.
We will continue to keep an eye on the evolution of the economic empowerment policy in Tanzania and Zambia’s citizen economic empowerment, which seem to be influenced by the South African system.
These trends are a good sign and show that states have learnt quickly from the past, seeking to amend policies to take cognisance of previous successes and failures elsewhere on the continent. In any case, the rise of African states will go hand in hand with re-appropriation of their economies.