The Politics of Privatization

Scientific socialism refers to the combination of political and economic science and empirical scientific methodologies in attempt to achieve socialism, where socialism is the belief that people are equal and should therefore equally share in a country’s resources.

 

In 1980, the post independence Zimbabwean government adopted scientific socialism as its developmental and governance paradigm.

 

 

One of the economic strategies associated with this paradigm was the extension of State Owned Enterprises (SOEs).

 

It is not a fluke that the government chose to adopt scientific socialism instead of free market capitalism in 1980 for two fundamental reasons.

 

 

Firstly Zimbabwe’s independence was achieved at the height of the “Cold War,” when the Soviet Union and the Western powers led by the United States were competing for geo-political and economic influence across the globe.

 

 

Since Zimbabwe’s liberation struggle was largely supported by Eastern European and Asian ideology and resources, it was natural in 1980 for the Zimbabwean state to adopt an economic paradigm that leaned towards communism.

 

 

Secondly, the ZANU-PF government in 1980 (unlike the South African ANC government in 1994) wanted to see social services and employment urgently extended to the majority black population after years of white minority rule and colonial oppression.

 

 

In this context soon after independence, the ZANU-PF government passed sweeping legislation that gave free primary education and free healthcare for the poor.

 

 

The new government also introduced consumer price controls, worker committees and black trade unions.

 

 

While it was Ian Smith’s pre-independence government that began buying controlling stakes in key agro-processing and textile industries prior to independence, the post-independence government continued with this culture, and today Zimbabwe has around 107 State Owned enterprises, many of which are burdened with mismanagement, debts and high wage bills.

 

 

It is true that on the basis of populist voter mobilisation just after 1980, parastatals made political sense as they provided black workers with jobs at both working class and managerial levels in a highly racialized economy at that time.

 

 

In simple terms, in 1980 and in the early years after independence, State Owned Enterprises won votes for ZANU-PF.

 

 

However, over time these parastatals have become bloated and barely functional.

 

 

In fact a reports from the auditor general’s office dating back to 2015 suggest that many parastatals are characterized by weak corporate governance resulting in huge financial losses and misappropriation of funds.

 

 

For that reason there is good cause to privatise non–performing parastatals; after all, SOEs are meant to benefit the taxpaying citizen, and not are not meant to milk the taxpayer.

 

 

The Pros and Cons of Privatisation

 

 

According to reports, the Zimbabwean government is selling off its shareholding in Air Zimbabwe, ZESA, NRZ, ZB Holdings, Agribank and Zimre Holdings.

 

 

Apparently the government is soon to add more enterprises to this list.

 

 

If indeed Zimbabwe is embarking on a privatisation process, it is important that we discuss the pros and cons of privatisation.

 

 

Some of the pros of privatisation can be listed as follows:

 

 

  • Improved efficiency. Private companies have a profit incentive to cut costs and to become more efficient. In this context privatization is positive.

 

  • Lack of political interference. Across the world, SOEs are motivated by political pressures rather than sound economic and business sense. As we have seen in Zimbabwe in the past SOEs were used to ‘sponsor’ million-marches and other political events.

 

  • Short term view. Across the world, it is common for governments to think only in terms of the next election, and this often has long term consequences. Perhaps privatization brings private sector pragmatic long term planning to SOEs.

 

  • Increased competition. Privatisation of SOEs occurs alongside deregulation and the enactments of legislation to allow more firms to enter the industry and increase the competitiveness of the market. This is positive and welcome.

 

  • Government will raise revenue from the sale. Selling state-owned assets to the private sector raises significant sums for the government. The UK government benefited from privatization in the 1980s as did the Russian government in the 1990s.

 

 

Some of the negative aspects of privatization can be listed as follows:

 

  • Natural monopoly. Privatisation runs the risk of creating monopolies. The risk of privately controlled monopolies is that they tend to raise prices and exploit consumers.

 

  • Public interest. Some industries like ZESA, arguably perform an important public service. In this context their privatization should be considered with enough due diligence and with the national interest in mind.

 

  • Government loses out on potential dividends. While it is true that SOEs are often poorly managed, government should consider whether or not these entities would be good sources of revenue if they were managed better. In this context government could consider employing better management staff and techniques rather than privatization.

 

  • Foreign Ownership of Key Assets. The greatest threat presented by privatisation is the foreign ownership of key state assets. In this context, perhaps our government leaders should pursue the privatisation process guided by our indigenisation laws, and should allow youth consortiums and women consortiums to benefit from the privatisation processes.

 

 

Conclusion

 

 

It is true that the era of scientific socialism has passed, and I agree with the notion that the world is capitalist and that there are no free lunches. Zimbabwe needs to embrace competitiveness, and privatisation is the first step in that direction.

 

 

While many business leaders and politicians have welcomed the idea of privatisation, there seems to be consensus that the process of privatisation should be conducted on a case by case basis and that adequate due diligence should be applied.

 

 

Furthermore, from a political point of view, 2018 is an election year, and therefore government should perhaps consider whether privatisation should take place before or after elections.

 

 

Finally, the privatisation processes in Zimbabwe should be guided by the principles of indigenisation, and should involve youth and women business consortiums as those subgroups make up the bulk of the electorate.

 

Tau Tawengwa

 

Executive Director

 

Email

zimrays@gmail.com

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Social Capital and Management in Family Businesses

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Family businesses are the economic engines of many nations. They are often credited for nurturing entrepreneurial talent across generations, and creating employment. However they seldom last.

 

A famous Mexican saying about family owned businesses is: “Father, founder of the company, son rich and grandson poor”.
This can be construed as the life cycle of most family businesses all over the world.

 

The founder establishes a competitive business; the founder’s children reap the fruits of his labour and they leave the founder’s grandchildren with a shadow of the original entity.

 

In fact, most family businesses worldwide do not survive beyond the third generation. Statistically only 15% of family owned enterprises continue to the third generation.

 

This is a cause for concern because approximately two thirds of all businesses in the world are family businesses.

 

In fact, some large international corporations like Wal Mart, Richemont, Nike, Volkswagen, Samsung and Armani, are family owned business.

 

Now, given that the Zimbabwean economy today comprises of a significant number of family-run Small to Medium Enterprises, it is worthwhile to discuss how a family-run operation can become more effective. There are two attributes that a successful family business should have. These are: strong social capital, and a strong bureaucratic structure.

 

Social Capital

Social Capital refers to “goodwill, fellowship, sympathy, and social intercourse among the individuals and families who make up a social unit”.

 

Social capital can also be defined as the shared values and understandings that enable people to trust each other and work together.

 

Basically, social capital refers to the shared principles, values and ideas that inspire strong relationships between people.

 

Now, I must emphasize that social capital is pivotal for the success of any organization. The more social capital an organization has, the more competitive it is, because its leaders have shared values and strong relationships which allow for unity of purpose, principled decision making, and a clear business structure.

 

Large corporations tend to have a board of directors with substantial social capital.

 

However family businesses often lack social capital, particularly in Zimbabwe.

 

In fact family businesses in Zimbabwe are often competitive when the founder is still alive. When the founder dies, they tend to contract.

 

This is because relationships among the second generation family members are often weak, and consequently the leaders of the business do not have unity of purpose. Such businesses are characterized by qualities like hatred, suspicion, jealousy, mistrust, fear, greed, superstition and paranoia, resulting in poor decision making, misuse of resources, rivalries among the business leaders and stagnation.

 

Ultimately the business becomes inefficient and noncompetitive owing to weak leadership.

 

Two ostensible indicators of social capital within a business are: employee satisfaction levels, and employee turnover rates. If the workers in a family business are generally unhappy with their work conditions, and if the management constantly hires and fires workers then that business arguably lacks social capital.

 

Efficient Bureaucracy

An efficient bureaucracy has six fundamental characteristics which should be applied if a family business is to be successful. These characteristics are:

 

●Hierarchical Order of Authority
This means that the business has a clear structure in terms of title ranks and roles so that there is no confusion in terms of who is responsible for what.
●Formal Appointment / Promotion
This means that appointments are made formally based upon merit, and not nepotism or favoritism.
●Expert / Technical Training
This means that roles are assigned based on their technical competency, and not based upon blood relation, age, or gender.
●Fixed Monetary Salaries
This means that employees are paid on a pre-agreed salary between the employer and employee that are tied to a pay grade system. It is notable to mention that when employee salaries are late it is a sign of organizational inefficiency.
●Division of Labor
This means that labor in the organization is divided into distinctive departments and roles.
●Impersonality
This means that all dealings within the bureaucracy and with external clients are conducted on the basis of equal treatment and according to a written rule-based procedural routine. In other words the daily conduct of business should be subject to written rules and free from any personal feelings.

 

Of course, there are challenges that affect all businesses in the country. These include liquidity constraints and a slowdown in consumerist behavior.

 

However, in order to overcome the external challenges, the family business needs to ensure that it is internally well-organized. In this light, the two key questions that every family business must ask answer are: Do you have adequate social capital? And do you have an efficient bureaucracy?

 

Tau Tawengwa

Executive Director

Email

zimrays@gmail.com

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The Politics of Labour in Zimbabwe

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A Zimbabwean Supreme Court ruling handed down on July 17 2015 has given companies the right to end workers’ contracts at any time, without availing terminal benefits and simply by giving them three months’ notice.

As a result of the judgment there has been a bloodbath of job losses across sectors as employers take advantage of the ruling in order to cut costs and shed unnecessary (dead) weight. Ostensibly, about 9000 workers in Zimbabwe have been laid off since July 17.

Labour activists and organizations have cried foul over the ruling, with some union leaders announcing that they were “shocked” at the ruling.

Semantically speaking, the use of the word “shocked” by the Zimbabwe Congress of Trade Unions (ZCTU) president, George Nkiwane, betrays a sense of self-centeredness on the part of employee bodies.

It seems as though workers feel that they should be protected from redundancy at all costs; even when their employer can no longer afford the wage bill.

This is a misconception that has been held by workers in Zimbabwe since independence in 1980.

The error emanates from the pseudo-socialist ideologies embraced by both trade unions and the government in 1980, and influenced by the cold war politics of the time.

However in 2015 the nation’s circumstances have changed somewhat, and therefore, economic policies should not be based upon the socialist grandstanding of yesteryear, especially not when we live in world that acknowledges that labour market flexibility is a precondition for economic growth.

Plainly put, Zimbabwe cannot continue to isolate itself from the rest of the world as continuing to do so is just impractical.

Notably, however, in his July mid-term fiscal policy review, Finance Minister Patrick Chinamasa acknowledged that Zimbabwe’s high labour costs encumber government’s operations.

In fact, the Zimbabwean government employs around 500 000 civil servants whose wages consume around 80 percent of the national budget. In light of this, the Finance minister has announced that he intends to reduce that wage-bill to below 40 percent of the national budget.

Essentially, this means that the government has acknowledged that labour market flexibility is the first step towards pulling the country out of its current economic quandary.

Even though there have been reports that some politicians are pushing for the country’s labour law regime to be urgently amended in order to shield workers from further job losses, it is my view that the government should let the labour market regulate itself, and ultimately take a largely laissez faire approach towards the economy in order to stimulate growth.

Zimbabwe needs to detach itself from its socialist nostalgia and holistically embrace neoliberalism.

Labour Market Flexibility and Globalization

Flexible Labour Markets have two general characteristics, namely:
● Employers can hire and fire workers straightforwardly and without complex legislative hindrances
● Limited Government intervention in the labour market

Now, since the July 17 ruling, some of my pro-worker colleagues have criticized me for lobbying on behalf of capitalist elites. Nevertheless, it’s important for them to remember that to an employer, labour is an asset akin to a car, a cellphone, or a laptop.

Once the asset becomes unsustainably costly, the pragmatic thing to do is to dispose of it completely and find a cheaper way to remain competitive.

The problem in Zimbabwe is that since independence politicians across the divide have often connived with labour leaders to use labour issues as voter bait.

Several instances have occurred where union leaders have advocated for worker rights and higher wages with the backing of politicians; even at times when it has been detrimental to the wider economy.

This has created a sense of entitlement among workers as a collective, and we are now in a situation where workers have a tendency of overstating their own worth

I mean look, as recently as 2013, Zimbabwean labour union leaders (supported by politicians) were advocating for a monthly minimum wage of around USD540 per month (excluding allowances) for both public servants and private sector workers.

That’s nothing short of costly when compared to an average monthly minimum of around USD300 per month in South Africa- a country with a Gross Domestic Product (GDP) of around USD 350 billion (around 25 times higher than Zimbabwe’s GDP).

Nevertheless, Zimbabwe has reached a crossroads, and it is clear to all that if government does not give businesses the flexibility to lay-off their workers, then businesses will continue to fold and eventually there will be no revenue base for the government to speak of.

I’d like to think that’s the reason behind the Finance minister’s bold declaration that “a flexible labour market is key to our economic recovery.”

After we achieve labour market flexibility, the next step is for the government to introduce incentives for businesses to invest and grow our economy.

Perhaps it would be helpful to take a look at our neighbors’ (Mozambique and Zambia’s) economic blueprints and deduce how they are growing their economies so rapidly.

As it stands, Zambia is growing at 6% per annum, with a GDP of USD27 billion. That’s twice the size of Zimbabwe’s GDP. On the other hand, Mozambique is growing at 7% per annum, with a GDP of 19 billion.

Ultimately, it’s no secret that Zimbabwe has the potential to surpass both Zambia and Mozambique economically. However it’s now up to the government leaders to politic less, and make more practical decisions.

Tau Tawengwa
Executive Director

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Zimbabwe’s Labour Law Amendment Implications

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The South African apartheid policy was based upon the ideological foundation that non-whites were a “detriment, drain and danger to the whites, and should therefore live separately from the white population.”

 

This resulted in “the creation of ten autonomous Bantustans through the 1951 Bantu Self-Government Act, affording to the natives autonomous sovereignty over traditional tribal lands and transferring their citizenship from the greater country to only that of their particular tribal affiliation, effectively disenfranchising the non-white population from South African political life.”

 

One particular law enacted by the apartheid regime that betrayed the racist foundations of the apartheid ideology was the 1949 “Prohibition of Mixed Marriages Act No 55.” This act forbade marriages between whites and non-whites. Furthermore the “Immorality Act of 1957” which prohibited intimate relations between white people and people of other races also betrayed the racist ideological foundations of apartheid.

 

Yet, the incongruity of these edicts is indisputable. I mean why would anyone attempt to legislate who a person is allowed to marry? At the end of the day, these laws were clear infringements of individual rights.

 

Now, the relevance of these apartheid analogies to Zimbabwe’s current national affairs is significant. The fact is, by the mid-1980s it was clear that the apartheid behemoth was on its knees, and as a result all the major South African political economic and social heads were huddling and haggling.

 

Nevertheless, in the course of the mid-1980s negotiations, one of the clear tell-tale signs that the end of apartheid was imminent was the enactment of the Immorality and Prohibition of Mixed Marriages Amendment Act, 1985 (Act No. 72 of 1985).

                                                         

This act of the South African parliament repealed the laws prohibiting marriage and sexual intercourse between white people and people of other races, and as a result it served as a legal indicator to social and political analysts that the impractical and unsustainable apartheid policy was reaching its end.

 

In light of the above, I’d like to zero in on certain aspects of the Zimbabwean legislature and their possible socio-economic indicators.

 

Firstly, labour laws in Zimbabwe are in the process of being amended in order to make it easier for employers to hire, fire and retrench employees, and to ensure that employees are paid for what they produce, and not just for being at work.

 

This is a significant legislative step, because historically, the labour laws in Zimbabwe have favored employees. In fact, prior to independence most African countries saw a coalescence of Black African trade unionism and African nationalism in the effort to achieve independence; and furthermore, the labour-nationalist coalition was often characterized by populist pro-socialist, pro-worker and pro-poor approaches to policy.

 

The same is also true in Zimbabwe where it was active Black trade unionism that organized the strikes of 1960, which arguably created a context for the spread of nationalism and liberation consciousness. Consequently, up until 1980, one could argue that black trade unions and African nationalist movements sang from the same song sheet.

 

After 1980, however, the pre-independence Marxist Leninist and socialist rhetoric of the liberation rulers slowly gave way to neo-liberal pro-business policies which included trade liberalization and reduction of role of the State in the economy. In practice, this meant reducing public sector jobs, slashing welfare services, and removing wage and price controls.

 

Yet, in resistance to neo-liberalism, the post-independence Zimbabwean trade unions often attempted to flex their muscles (especially in the 1990s) through repeated strikes, demonstrations and sometimes riots. In fact scholars have described industrial relations in Zimbabwe in the 1990s as “a decade of unprecedented industrial and social action.”

 

Since 2000 the trade union base has largely diminished, and as it stands in Zimbabwe today there are more people unemployed than those in formal work.

 

Ultimately, the amendment of the labour legislation indicates two things: firstly, the populist pro-socialist, pro-worker and pro-poor approaches to policy are officially dead. By amending labour laws the government is explicitly making it clear that it is taking the neo-liberal approach to the economy, which means it will have to shelve its African populist policies.

 

This in effect means that secondly, the indigenization laws will also be eventually amended in attempt to make them investor friendly. This is because, as it stands, the amended labour laws will make it easy for employers to hire and fire workers, and this will therefore have a direct impact on the indigenization inspired “employee share ownership schemes,” which by nature, require workers to be permanent in order for them to bear fruit.

 

The fact is that the country is moving away from its populist socialist history, and has now submitted to the fate of neo-liberalism.

 

Tau Tawengwa

Executive Director

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