Museveni was right on Mugabe's lack of knowledge on private sector

ZIMBABWE President Robert Mugabe’s latest outburst on attempts to seize foreign companies and his self saving birthday public attacks on Zimplats Holdings Limited and Nestle Zimbabwe confirms the wikileaks report of comments made by the Ugandan President Yoweri Museveni when he said the Zimbabwean dictator is not blessed with the knowledge of the commercial world.

In the damning WikiLeak leaks report, Museveni told a senior United States government official that Zimbabwe’s faltering economy and Mugabe’s poor understanding of the private sector were at the root of Zimbabwe’s political problems.

In all his working life Robert Mugabe never worked in the private sector and only moved from teaching into politics.

According to Zimbabwe’s largest political party the Movement for Democratic Change, Mugabe was wrong to attack Zimplats Holdings Limited in the manner he did during a recent speech.

The MDC, who shares government with Mugabe’s MDC, also say that forceful nationalisation of foreign companies in Zimbabwe is not government policy.

The latest statements made by MDC mark a welcome change by the influential party who have until now been quiet on the issue of nationalisation – a major block to unlocking the full potential of Zimbabwe’s recovering economy.

Regarding Zimplats Mugabe told his mob at his 87th birthday:

"Zimplats has never given us any substantial money," Mugabe said. "They are taking all the money to South Africa that’s why I have told (Empowerment Minister Saviour) Kasukuwere to deal with those mines."

The MDC, in a statement out yesterday, says Mugabe’s comments are misleading:

"Available information suggests that Zimplats have always operated within the framework of Zimbabwe’s tax legislation, and more importantly, have recently announced a US$500 million investment and expansion plan for this country.  

"This, in our view, is clearly not "…taking all the money to South Africa" especially as their reported profits for the half year to December 2010 were US$85 million.  

"Disingenuous, because we are aware of their commendable social responsibility policy whereby they have constructed various community-related projects such as hospitals, Clinics and Schools in their areas of operation.  The donation of a mortuary to the Zvishavane government hospital and the construction of a School in that area by their subsidiary, Mimosa Platinum mine, are cases in point."

Zimplats have said they have no comment.

The MDC has also dismissed, as false, the latest threats by Zanu PF indicating that the inclusive government plans to nationalize foreign businesses and hand them over to a minority section of Zimbabweans. 

"For the record, it is not government policy to forcibly seize foreign owned businesses under the guise of indigenization," says the MDC.

Mugabe’s lack of understanding of the commercial world has always been the whole mark of Zimbabwe’s catastrophic failure.

Robert Mugabe was raised as a Roman Catholic, studying in Marist Brothers and Jesuit schools, including the exclusive Kutama College. He qualified as a teacher, but left to study at Fort Hare in South Africa graduating in 1951, while meeting contemporaries such as Julius Nyerere, Herbert Chitepo, Robert Sobukwe and Kenneth Kaunda. He then studied at Salisbury (1953), Gwelo (1954), and Tanzania (1955–1957) Teachers Colleges.

Originally graduating with a Bachelor of Arts degree from the University of Fort Hare in 1951, Mugabe subsequently earned six further degrees through distance learning including a Bachelor of Administration and Bachelor of Education from the University of South Africa and a Bachelor of Science, Bachelor of Laws, Master of Science, and Master of Laws, all from the University of London External Programme. The two Law degrees were earned while he was in prison, the Master of Science degree earned during his premiership of Zimbabwe.After graduating, Mugabe lectured at Chalimbana Teacher Training College, in

Zambia from 1955–1958, thereafter he taught at Apowa Secondary School at Takoradi, in the Western region of Ghana after completing his local certification at Achimota School (1958–1960), where he met Sally Hayfron, whom he married in April 1961.

Mugabe never worked in a private sector enviroment and hence he has very limited understanding of the impact of his actions or omissions thereof.

To him Zimbabwe is one giant classroom and Zimbabwean people are all school pupils who get bashed if they question his standing as leader.

He has appointed Saviour Kasukuwere as Minister in charge of Indigenisation and Empowerment. Kasukuwere is from the Robert Mugabe’s old school. The politician-cum businessman only got to understand the private sector when he established his business empire through the patronage of his boss.

Kasukuwere was a driver in the CMED before he joined the Central Intelligence Organisation , again as a driver. From that position he got to acquaint himself with the Zanu PF leaders and hence his dramatic rise to power. Today he is in charges with a key policy shift meant to transform Zimbabwe’s business ownership.

In a report in the Wall St Journal this morning which says, a daily stream of multinational executives is asking Zimbabwe’s industry and commerce minister the same question: Does President Robert Mugabe plan to seize my company?

"I can’t give them any firm assurance," said the minister, Welshman Ncube, who belongs to the Movement for Democratic Change, one of three political parties that form Zimbabwe’s fragile coalition government. "That is always going to be difficult when we have people in government who are speaking strongly in favor of takeovers."

Indigenization Minister Saviour Kasukuwere, who works a few floors above in the same building, had a different answer. He said companies from Western nations targeting Mr. Mugabe and his allies with sanctions are likely candidates for a majority local acquisition, or "indigenization," as it is known under an embryonic Zimbabwean law. That stance is sowing doubt among investors.

"Hostile Western countries are not showing any signs of relenting, and the only way to protect ourselves against that hostility is by making sure those companies are in the hands of local people," said Mr. Kasukuwere, who belongs to Mr. Mugabe’s Zanu-PF party.

Amid the war of words over foreign investment in Zimbabwe, the economy is suffering collateral damage. Foreign companies have been considering exit strategies, scaling back or not investing in the southern African country renowned for its mineral riches, fertile farmland and educated work force.

On Tuesday, Mr. Mugabe, who has ruled the country since 1987, faced not only external pressure but the threat of protests by local opposition groups. A heavy police and military presence that included armored cars, trucks of riot police and water-cannon vehicles appeared to be effective in deterring the planned antigovernment protests in Harare, the capital. Activists who tried to organize via Facebook and mobile phones said they were inspired by the protests in the Middle East.

Mr. Mugabe doesn’t tolerate gatherings of political opponents. Zimbabwe’s security forces recently arrested 45 political activists for allegedly plotting to end his rule. The U.S. Embassy has called on Zimbabwe’s government to investigate allegations the activists were tortured.

On Wednesday, Mr. Mugabe continued efforts to halt the Western sanctions with a mass rally in Harare. His party aims to get two million people—or about one-sixth the country’s population—to sign a petition to protest the measures. At the rally, he said indigenization should start with the "400 British firms" now operating in Zimbabwe.

"Time has come to take action," he told an estimated 30,000 of his supporters. "We have nothing to be afraid of."

Zimbabwe’s president has resorted to draconian economic measures before to drum up political support. In 2000, he allowed his supporters to seize white-owned farms ahead of elections.

Following violent elections in 2008, Mr. Mugabe and his political rival, Morgan Tsvangirai, were forced into a coalition government, with Mr. Tsvangirai becoming prime minister. Mr. Mugabe has argued for elections this year, while Mr. Tsvangirai has said constitutional reforms must be tackled first. The two are also butting heads over the indigenization law, with Mr. Tsvangirai warning that expropriation of assets will scare away investors.

The prospect that the fractious "unity government" could break up and lead to elections this year is heightening uncertainty among investors.

South Africa’s Massmart Holdings—a company Wal-Mart Stores Inc. is in talks to buy, aiming to pave the way into Africa’s billion-person market—said it was in the process of selling two of its stores in Zimbabwe to a local retailer. A Massmart representative cited uncertainty over the indigenization law.

"Zimbabwe is not ready for prime time," said R. Michael Jones, chief executive of Platinum Group Metals, which has invested heavily in South Africa but is steering clear of its neighbor despite its massive platinum reserves. "Until there’s a change in the business environment, we won’t be investing there."

Aside from depriving a weak economy of capital and jobs, the investor caution means Zimbabwe’s factories and mines often aren’t getting technical upgrades needed to stay competitive, analysts say.

The Confederation of Zimbabwe Industries says factories on average are operating at 30% capacity because of lack of lending and the reluctance of foreign firms to invest in their Zimbabwe subsidiaries.

Zimbabwe’s economy grew 8.1 % in 2010 compared with 5.1% the prior year, thanks to a confidence-building political settlement and the introduction of the U.S. dollar as an official currency. Officials and economists say the figure would have been far higher without the controversy around the indigenization law.

"Industry is suffocating," said the confederation’s president, Joseph Kanyekanye.

Few companies say they are opposed to increasing levels of local ownership and bringing more black Zimbabweans into the economic mainstream through employee-shareholding plans and community-development projects. But the debate over levels of local ownership, and the timetable for reaching them, has polarized government camps. And some officials are now taking swipes at specific corporate targets.

Reserve Bank of Zimbabwe Governor Gideon Gono, a close ally of Mr. Mugabe, has accused "aloof" foreign banks of sabotaging economic recovery by refusing to lend. Mr. Kasukuwere, the indigenization minister, said food giant Nestlé is a "prime" target after it refused to buy milk from Mr. Mugabe’s farm after the company faced word-wide threats of a boycott.

A spokeswoman for Nestlé Equatorial Africa Region Ltd., Brinda Chiniah, declined to comment on the minister’s remarks. She said the company has no plans to pull out of the country.

Some foreign companies have sought to stay ahead of any requirements from the legislation. SABMiller PLC, which owns a 36% stake in a local joint venture, Delta Corp., a major contributor to its earnings in Africa, has already awarded shares and options to employees.

The Indigenization and Economic Empowerment Act states that companies with a net asset value above $500,000 should sell majority shareholdings to local Zimbabweans. Although the law was published in March 2010, it hasn’t been enforced. Government panels continue to wrangle over various ownership levels in different industries.

Political tensions have inflamed the indigenization debate. Zimbabwe’s defense minister, Emmerson Mnangagwa, touted as a potential successor to Mr. Mugabe, has warned that the government would take over multinationals whose executives don’t publicly campaign against sanctions. At a recent party conference, Mr. Mugabe echoed that threat.

"We can read the riot act," he said. "If the sanctions persist we are taking over 100%."

Zimbabwe’s president has adopted draconian economic measures before. In 2000, he allowed his supporters to forcibly take over white-owned farms ahead of elections. Mr. Mugabe touted the steps as land reforms, but violent farm seizures sent agricultural production into a tailspin, prompted Western sanctions and triggered capital flight. Zimbabwe’s government estimates its economy contracted by nearly 50% from 2000 to 2008.

The sanctions have stayed in place. Last month, the EU extended a visa ban and asset freeze relating to 163 individuals and 31 businesses viewed as aiding Mr. Mugabe’s effort to subvert property rights. The sanctions include an arms embargo. The U.S. has imposed financial and travel sanctions on over 200 individuals and companies viewed as propping up Mr. Mugabe’s regime.

Mr. Ncube said the threats from Mr. Mugabe and others have done more harm to the economy than sanctions. "Virtually all foreign companies have stopped major funding for their Zimbabwe operations because of the uncertainty and confusion," he said. – Plus Farai Mutsaka