“In Western economies, all industry is national in the sense that it is to the largest extent controlled by and with the capital of nationals and in the event, therefore, of a national crisis, they will place their resource behind the national cause and will not decamp in jets to fly ‘home’.”
Introduction to President Kenneth Kaunda’s speech at Mulungushi, April 19, 1968.
Not long ago one of Britain’s daily newspapers. The Guardian, published an article headlined “U.S. consultants lead state management revolution.” It seems that the Bank of England had hired an American management consulting firm Mc Kinsey & Company to overhaul five of Britain ‘s nationalized industries. The invasion of managerial elites into state enterprises is even more striking when it occurs in an African country. Tanzania’s National Development Corporation asked the same American management consultants to advise them on the reorganization of their “head office” following that country’s “nationalization ” of seven companies in 1967. The trend toward adopting American management techniques to run nationalized industries has also spread to nearby Zambia where that country’s Industrial Development Corporation (lndeco) recently negotiated 51 % government participation in that country’s two huge mining companies, Roan Selection Trust and Anglo American.
Although Indeco has not yet had the McKinsey treatment its Chairman and Managing Director, Andrew Sardanis, appears to be one jump ahead of the latest developments in state management. He readily compares his organization’s function to that of an American management consulting firm “When something goes wrong in one of our subsidiaries ” He says, “lndeco moves in to set things straight.”
Zambia followed the lead of her neighbours by announcing major economic reforms affecting the private sector.
Zambia, Congo and Tanzania now form a belt of countries across central Africa where so called “nationalizations” have occurred.
President Kenneth Kaunda sent hock-waves through the international business community for the second time in less than sixteen months in August 1969 when he asked the country’s two copper companies to sell 51% of their shares to the Zambian government. Nonetheless, three months after the “takeover bid,” mining executives had settled amicably on the terms of compensation: book value of the assets paid in eight year bonds at 6% interest, plus ten year management contracts which give the companies 1½% of gross sales and 2% of profits after Zambia’s new 51% mineral tax, but before income levies.
The relatively mild reactions of company officials to the takeover were partly due to the numerous events which prefigured the Zambian move. ln April 1968, President Kaunda had announced the wide-ranging Mulungushi reforms which included a request that 24 firms allow the government to acquire 51 % of their shares. The major reform affecting the mining companies who had been left off the list of takeovers at Mulungushi was a new regulation limiting repatriation or profits to no more than 30% of a company’s equity capital or 50% or its declared profits.
There are many parallels between the two phases or Zambia’s takeovers which make examining the Mulungushi reforms a prerequisite to understanding recent developments.
The basic formula for government participation in the copper companies was roughly the same as that of Mulungushi: 51% shareholding, no change in management and compensation paid from future dividends. The agency executing the government’s new policy in both cases was the Industrial Development Corporation whose handling or the takeovers can be studied somewhat objectively since the earlier Mulungushi takeovers have been fully implemented. Though Kaunda subsequently created a new parent organization called the Mining and Industrial Development Corporation with separate subsidiaries, the Mining Development Corporation (MINDECO) and the Industrial Development Corporation (INDECO) for each sector, the essential patterns of control still follow the INDECO model. The continuity of policy and interconnections between the two grounds is evident since INDECO’s Chairman Andrew Sardanis was also appointed Chairman or MINDECO and Managing Director of the parent organization, the Mining and Industrial Dcvclopment Corporation.
Political analysts have tended to link the timing of the various takeovers exclusively to Zambia’s tense internal politics. There has been hardly any serious discussion or precisely what this increasingly prevalent type or “semi- nationalization” actually means in terms or the business structures being erected in post-colonial Africa. Zambia’s case suggests that rather than being a disguised form or “nationalization”, government participation may actually be viewed as an alternative to it. Observers should certainly take a closer look at what is really happening beneath the familiar rhetoric of “nationalization.”