Applying ‘Mugabe laws’ in Ghana

Software entrepreneur Herman Chinery-Hesse’s call on the government to “apply Mugabe laws” to ensure Ghanaians own more companies raises questions about Ghana’s model of economic development.

In an interview with Starr-fm a few days ago, Chinery-Hesse said Ghana was missing indigenisation laws that would give Ghanaians greater ownership and control of companies in Ghana. He cited as examples the Petroleum Act in Nigeria and Zimbabwean laws stipulating that 51% of shares in any company must be owned by Zimbabweans.

“We need to learn to look after each other and put Ghana first,” Chinery-Hesse , who is the founder of SOFTtribe, the country’s largest software company, told Starr-fm.

Unlike Nigeria and Zimbabwe, Ghana does not currently have indigenisation laws that seek to encourage indigenous or wholly-owned Ghanaian companies.

Nigeria began production of oil two years before independence in 1960. The passing of the Petroleum Act in 1969 vested ownership and control of all oil finds in the Federal Government. Today, oil and gas account for 95% of Nigeria’s exports.

Under the Nigerian Oil and Gas Industry Content Development Act, first consideration in the award of licences and contracts must be given to indigenous Nigerian operators and qualified Nigerians must be considered first for employment and training.

The Act is just one plank in the policy of Nigerian indigenisation that reserves certain business activities as the exclusive preserve of Nigerians. Under the Indigenisation Decree of 1972, a wide range of economic activities, both small-scale and large-scale, were earmarked for Nigerian ownership.

By contrast, Zimbabwe’s laws on indigenisation were directly related to the need to give black entrepreneurs a step-up after decades of political discrimination and economic deprivation under settler colonialism. Under the Land Apportionment Act, 70% of the country’s fertile lands were alienated from black peasants to white settler farmers.

After a protracted guerrilla war in the 1970s, Zimbabwe achieved independence in 1980, much later than Ghana in 1957 and Nigeria in 1960. After a decade of independence, the Zimbabwe Indigenous Business Development Centre (IBDC) was established in 1990 to support black businesses during a period of austerity ushered in by the signing of an IMF agreement.

One of the founders of the IBDC was Strive Masiyiwa, who went on to become the founder of Econet Wireless and one of Africa’s most influential entrepreneurs. Though Masiyiwa was to later fall foul of the Zanu-PF government led by President Robert Mugabe, he and other leaders of the IBDC who had come from the civil service were able to leverage close relationships with government officials to push for business concessions, including access to capital.

But the IBDC was concerned mainly with the creation of an elite black commercial class, and the thorny question of land ownership remained untackled.

In 2007, war veterans invaded commercial farms and drove out many white settler farmers. A year later the Indigenous and Economic Empowerment Act was signed into law, as part of measures to economically empower black Zimbabweans. The Act stipulated that 51% of shares of any public or private company were to be owned by indigenous Zimbabweans.

Ghana’s trajectory has been different from both Nigeria and Zimbabwe. Unlike Nigeria, Ghana has only relatively recently discovered oil and is yet to face the full scourge of “Dutch disease”, the name given to the tendency for all factors of production to rush to oil after the discovery of major finds.

Unlike Zimbabwe, Ghana did not experience settler colonialism. Thanks in part to the enterprising abilities of Ghanaian cocoa farmers who participated in a cash crop revolution sparked by Tetteh Quarshie, land was not alienated from Gold Coast farmers to be given to European settler farmers. Instead, land remained in African hands.

Nevertheless, Chinery-Hesse’s concerns speak to the need to put in place policies that anticipate trouble ahead both as the Ghanaian economy becomes more dependent on oil and as land resources dwindle relative to the growing population, which is projected to more than double to 60 million by 2050.

Indigenisation policies are a form of economic nationalism in which governments consciously seek to develop local comparative advantage as part of an industrialisation strategy.

The Zimbabwean and Nigerian indigenisation policies both have at their core economic nationalism. In Ghana, by contrast, there is little sign that industrialisation is a goal of policy makers.

In December 2014, President Mugabe raised eyebrows when he said that Ghana had not developed since the days of its first president, Dr. Kwame Nkrumah, because Ghanaian leaders signed agreements with their former colonial masters that ensured they would lack control of their natural resources.

Recently Ghana joined other African countries in signing the controversial Economic Partnership Agreement (EPA) with the European Union. The EPA is considered controversial because it exposes Ghanaian producers to competition from their counterparts in economically advanced countries.

In this sense, it seeks to replace industrialisation models that protect local industries from global market forces during the early industrialisation phase.

Affirmative action, such as through the design of indigenisation policies that place emphasis on skills development and training for local entrepreneurs, would be one indication that economic development will favour Ghanaians.

* Dede Amanor-Wilks is a journalist and author of a work comparing economic development in Ghana and Zimbabwe.

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