Mugabe grabs control of Zimbabwe’s banks
Mzwake Mzala
Published: 26-NOV-04

It began with the nationalisation of land, then mines and now President Robert Mugabe’s administration has pointed its poisoned chalice at the banking sector with the creation of a banking phoenix christened the Zimbabwe Allied Banking Group (ZABG).

The financial behemoth, which will be capitalised to the tune of Z$2trn, will be made up of eleven banking institutions that failed to meet new minimum capital requirements of Z$10bn set by regulators in January.

When the entity becomes operational in January 2005, relief will be brought to millions of depositors who had their money locked up in the collapsed banks, as they will be reimbursed their money by the end of January 2005.

The central bank says the institution, which will be owned by the government through a special purpose vehicle, would be three or four times bigger than individual existing banks. Central bank chief Gideon Gono says the nationalised banks will be freed from the shackles of the government by 2007.

However, critical observers view the move to nationalise banks as reflecting the commitment of the government to retain state control on key assets and build a socialist state. They say Harare’s return to socialism is a characteristic of the irrationality of a desperate regime that will stop at nothing to stay in power.

The ruling Zanu PF party faces the opposition MDC in crucial elections set for March 2005. Besides targeting the banking sector, which for years had been considered the bonfire of black empowerment until Gono introduced some painful reforms in 2003, the government is eying the lucrative mining industry.

Accordingly, President Robert Mugabe in September proclaimed the seizure of half of every foreign owned mine operating in the country, shifting his focus from land repossession to the mining sector.

“There can be no absolute ownership of natural resources in Zimbabwe,” said Mugabe.

Land is not the only issue that needs reform. There are still many other issues we have to address, like the mining sector. We will ask that government be given a 50% share in the mines.”

In addition, a new mining legislation stipulating the surrender of 49% shareholding to locals awaits debate in parliament. Although the Chamber of Mines suggest the empowerment stake be sliced to 40% and that foreign companies be allowed to scout for black, local shareholders over a period of time the government can not take anymore of that.

And to back up the plan, Mugabe last month complained that South African companies were exploiting the country’s platinum reserves.

All these uncertainties, which have sent shivers down the spines of miners, has led to a cutback in investment and total disinvestments. Anglo Ashanti has since sold its Zimbabwean operations to Mwana Africa.

Investors see the transfer of mines to favoured black owners as expropriation akin to the land grab initiated in 2000. Africanisation or indigenisation, investors say, evokes memories of Zanu-PF’s previous commitment to a state-controlled socialist economy. As such, international jitters about Harare’s economy in the wake of the mines threat are increasingly turning to fullblown panic.

According to the Zimbabwe Congress of Trade Unions (ZCTU), four mines that were controlled by the governmentrun Zimbabwe Mining Development Corporation (ZMDC) have already been forced to shut down because of mismanagement while more than 3 000 employees have been forced out of employment in the sector in the past four years.

Observers say besides ‘africanising’ mining and banking, the next target could be the commercial sector. With 24 years of experimenting with command economics and free market reforms, what Zimbabwe boasts is a disintegrating and devaluing economy, which is dramatised by frightening shortages of essential commodities and medical drugs. Although inflation is receding at 251%, it is still the highest in the region. Despite claiming an end to the land grab exercise, the government has given six companies and estate firms three months to give up more than one million hectares of land in a fresh campaign to seize corporate-owned land. Personal assets have also not been spared in the government’s blitz against economic ‘saboteurs’ and the fight against graft.

Businessman Mutumwa Mawere has had his multi-million dollar asbestos mines and other ventures seized after falling out with the authorities.

But businessman and economist Jonathan Kadzura defends the return to socialism. “What the government is saying to these foreign mines is can they show the reflection that you are mining in Africa. We need our people to participate in the economy,” says Kadzura.

On the contrary, Zimbabwe’s main opposition party, the MDC, sees nationalisation as the wholesale plunder of the country’s resources by the ruling elite. It says the programme, which many countries have abandoned is the highest act of desperation and could lead to economic disaster.

“They (the government) are a vampire. They have to touch something. They don’t know what direction to take,” remarks Tendai Biti, the party’s secretary for economic affairs.

“When you preside over a failed state and economy you must continuously create a victim ideology to justify the victimisation.”

Under nationalization, the likelihood of company closures would increase, say analysts. The Confederation of Zimbabwe Industries (CZI) reports that more than 1 000 companies have shut down since 2000. It records that 25 firms are battling to remain in production while eight are sounding death knells.

Nonetheless, by setting its sights beyond the land reform, Harare is trying to stroll where Soviet Union angels feared to tread decades ago.

Other African countries that have tried a go at the largely discredited ‘Africanisation’ are Uganda and DRC formerly Zaire. As for Russia, it has since adopted some dramatic market reforms.

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