What does it all mean?
History is constantly repeating itself and hopefully with each cycle we correct at least some of the mistakes of the past. This effort 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 immediately raised as African states gained independence, mainly in response to their colonial history and resulting economic systems, such as the example of apartheid in South Africa, which 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 a mere obligation that private companies which operate in certain sectors reserve a shareholding to public entities. This participation is generally attributed at the creation of the company and cannot be diluted. State participation can also be decided at a later stage through nationalisation, giving 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 others.
Indigenisation is one mechanism by which governments may seek to achieve economic empowerment. It is defined as the increase of local participation in or ownership of established entities. Indigenisation has proven to be one of the most popular measures of implementation of economic empowerment to the previously disadvantaged through either the granting of shares to national individual or entities in a company or the obligation to reserve a certain quantity of employments to nationals or reserves certain commercial or industrial activities to nationals.
Many states in Africa have at one point or another 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 Cote d’Ivoire through “Ivoirisation”. The result of these policies was not much more than a series of nationalisations, giving birth to huge state-owned companies, in all sectors, including agriculture, industry and services.
Apart from a few exceptions, these state-owned companies did not have enough experience to successfully meet the economic challenges of the 90s and this lead to significant restructuring, liquidation or privatisation. To this extent therefore, these policies failed and gave birth to a situation that is, at best, opposite to their original intent.
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 these countries, State participation 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 (UEMOA) where the State must have a shareholding of 10 per cent (Benin, Burkina Faso, Mali, Niger, Senegal…). This is also the case in Guinea, where this shareholding may be as much as 35 per cent, 5 per cent for the DRC or 15 per cent for the Central Africa Republic.
Indigenisation and economic empowerment appear to be a trend in Southern and Eastern part of Africa and although several colonial influences exist in these regions, the Anglo-Saxon 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 at the attainment of their independence from colonial rule which, because of the economic policies of colonialism, was based on the colour line. This has been the case in the more commonly-discussed examples of 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 per cent of the shares or interest in an enterprise to black indigenous Zimbabweans. Every company in respect of which 51 per cent 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 also stipulates that companies must conform to a ratio of 70 per cent national workers to 30 per cent foreign workers.
In Botswana, the Government proactively encourages Citizen Businesses and Entrepreneurs. Certain categories of tenders are restricted to Citizen-owned companies only and Citizen-owned 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 shall only be 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 (NEEEF) which aims to provide a clear overarching policy framework into which all other policies will slot, promoting transformation in business through the five pillars of: Ownership, Management Control and Employment Equity, Human Resources and Skills Development, Entrepreneurship Development and Community Investment; and of course South Africa’s BBBEE.
We will, however, 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 very 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 failings in implementation elsewhere on the continent. In any case, the rise of African States will go hand in hand with their re-appropriation of their economies.
BY Sébastien Thouvenot
Sébastien Thouvenot is an executive at ENS (Edward Nathan Sonnenbergs) and has 11 years experience as a former member of the Paris bar. He currently practices in the ENS Africa department and specialises in corporate commercial transactions spanning across Europe and Africa for clients in the public and private sectors including multinationals, states, international financing institutions, investment funds and banks. He has experience in a wide variety of transactions encompassing the oil and gas, mining, telecommunications, energy and infrastructure sectors.