ECONOMY-ZIMBABWE: Black Economic Empowerment Under Threat?

By IPS Correspondents Reprint | | Print |

Lewis Machipisa

HARARE, May 8 1998 (IPS) - When an icon of the Zimbabwean Black economic empowerment movement fell off the wall and had a great fall recently, analysts began to speculate that other up and coming Black businesses would find it hard to pick up the pieces.

As a result of the unprecedented closure of the largest black- owned merchant bank, United Merchant Bank(UMB), on Apr.29, indigenous business people, who have never been chummy with bank managers, say now it will be even more difficult to march into a bank and seek a loan.

UMB, owned by controversial Black tycoon Roger Boka, had its licence revoked last week after it was discovered that it could no longer meet depositors’ claims and that its liquidity ratio was too low to meet debt obligations and other liabilities.

Although government officials have switched off alarm bells saying all is well, banking experts differ, with some expressing fears that the incident will put a damper on moves for Blacks to make inroads into Zimbabwe’s White-controlled economy.

According to an economist with a local indigenous bank, who declined to be named, “…Boka’s mess will ultimately affect the entire indigenous sector battling to make an impact.”

“Now the word indigenous is suspect, not just in banks, but all sectors, because of the deemed propensity for indigenous businesses to collapse and to do bad business,” he added.

“There can be no doubt that confidence in the indigenous banking sector has been eroded tremendously and one can foresee a situation where commerce and industry will shy away from the sector,” says Richard Mashave, a leading business executive and Chairman of the Indigenous Business Development Community’ Harare branch.

Until Boka botched up, the tycoon was widely regarded as a symbol of Black empowerment in an environment which is hostile to the idea.

Although Whites constitute about two percent of this Southern African nation’s more than 11 million people, they dominate industry and commerce, a situation Blacks say needs to be reversed.

Boka’s problems, explains Mashave, are “grim reminders of Black peoples’ trials and tribulations as they pilgrimage along to the Land of Canaan, in terms of Black economic emancipation”.

Mashave likens the ailing Boka to the Biblical figure Moses, who after leading the children of Israel for decades, never made it to the ‘promised land’. “But the philosophy and the ideals he stood for, still burn like an eternal flame.”

“Roger Boka may have made some mistakes, but should he not be assisted to ensure that the efforts of the most meaningful endeavours by a Black entrepreneur are not wasted?” asks Mashave.

Boka had built a vast business empire worth billions of dollars and created hundreds of jobs. He also financially helped many infant businesses to get on their feet. Boka’s tobacco auction floors are believed to be the largest in the world.

But bad risk assessment and poor management led to his merchant bank’s collapse.

Hardest hit by the Boka crisis, says an economist here, are the Small Medium Enterprises (SMEs), which despite the crucial role they have played in the other developing countries, are battling for recognition in Zimbabwe.

“The whole thing is unfortunate and has seriously undermined the indigenisation programme, and I think that a lot needs to be done to restore confidence and make a separation between this bank and other indigenous sectors,” explains Theresa Moyo, economics lecturer at the University of Zimbabwe.

“The SMEs will be worse off at the end of it all, because banks will be much more reluctant to assist small, medium enterprises, as they are viewed as high risk business,” adds Moyo, who is also a banking specialist.

“Some of us have been advocating for banks not only to consider collateral, but also to look at the project proposal, how viable it is, and economic feasibility as a basis for lending. But now they may require higher levels of collateral and be less inclined to go just on viability. It will be more difficult for SMEs,” she told IPS.

The Affirmative Action Group (AAG), a lobbying group for Black economic empowerment, is also watching recent events critically and is dismissive of talk that Boka’s failure reflects on the abilities of Black entrepreneurs.

“We are talking about an individual and the whole sector,” says Caleb Chihota, of the Affirmative Action Group (AAG).

“Those saying it’s a ‘Black thing’ and that Blacks should not be trusted, are blind. They are just looking at capitalising on one problem which has befallen one person and magnifying it,” Chihota told IPS. “Blacks are not failures. There are a lot of successful Black businessmen who are in operation and yet no one is talking about their success.”

“Obviously most of this talk is coming from the White community, which is feeling the pinch, because of the indigenisation and affirmative action programme being implemented by the government,” says Chihota. “One person’s failure cannot and should not be construed as an entire failure for Black businesses.”

Mashave says one way for confidence to be restored in Black businesses is for the government to take a cautious line during its investigations into Boka’s operations.

“I urge the government and our policy makers to proceed cautiously and not do anything that would reverse the gains of indigenisation, by being unduly critical and insensitive to the United Merchant Bank. Instead, they should help to rebuild it,” appealed Mashave.