I recently attended a commemoration of Black History Month hosted by the Embassy of the United States of America in Harare. The U.S. Ambassador Charles Ray spoke aptly about his personal and professional background; and his perspective of the impact of Obama’s Presidency on race relations amongst other things. At the end of the proceedings Ambassador Ray was asked a question with respect to how Affirmation Action (AA) has played a role in the success and the mobility of the likes of Colin Powell in the Military and Defense force in America. In a nutshell, Ambassador Ray’s response was “Affirmative Action is a benefit and not an institution in America,” and that Colin Powell’s success’ was based on his own merits. Whilst that is his individual perspective on the issue, it is important to consider the historical events of America that has brought the country to a point where the country has a President elect Obama. The Civil Rights movement led by the big six A. Philip Randolph, Roy Wilkins, Martin Luther King Jr., Whitney Young, James Farmer and John Lewis, fought against institutionalized racism that manifested itself both in access to power and material conditions. Material conditions include differential access to education, housing, gainful employment, appropriate medical facilities and a clean environment, (Camara Jones, PhD 2000). Access to power involves access to information (including one’s own history); resources (including wealth and organizational infrastructure); and voice (including voting rights, representation in government, and control of media), (Camara Jones, PhD 2000). Research has long shown that the relationship between socioeconomic status and race in the U.S. has its association in institutionalized racism. How, do you explain a time when black slaves had no right to owning property or even their own bodies? Hence, it is important to note that current socioeconomic status and race in the United States has its origins in its very own historical events. That is why, in Africa, countries like Zimbabwe and South Africa, Affirmation Action commonly referred to as “Indigenization” in Zimbabwe and “Black Economic Empowerment, (BEE)” in South Africa will continue to persist because of existing structural factors that perpetuate those historical injustices. Thus, as an SME or, start-up in Zimbabwe shouldn’t it be important to understand how your business benefits from Indigenization as opposed to it being a customary or established way (institutionalization) of doing business.
In strategic management it is important for a company starting up to analyze both its resources and capabilities before competing in a market. For example, a surplus of resources but the absence of organizational capabilities will empower the start-up company to the extent of equitable ownership and control of the resources. Thus, as a start-up company one is already disadvantaged has one does not have prior/inherited or acquired resources to build on the strengths of an existing and established company. According to John Kachembere, in an article, “SMEs hold key to economic growth’ in October 2011, the “SME sector in Zimbabwe accounts for about 90% of the country’s population.” However, due to current liquidity constraints most banks to do not have the resources to provide long-term loans. In recent, Reuters news, Nelson Banya states that, “the country has been battling a dollar shortage since the start of 2012 due to a lack of dollar inflows on foreign investor concerns over government policies.” As a result, the SMEs continue to remain largely informal, limiting their contribution to the sector. So how does an SME benefit from Indigenization is such a situation? This is when existing structural factors such as legal and regulatory frameworks in financial institutions can affect SME development in a country. This leads us to the next side of the coin. Having the organizational capabilities but lacking the resources will enable a start-up to develop innovative capabilities to the extent of establishing or capturing a market but not necessarily being able to neither grow the business nor sustain it as a result of inability to secure appropriate resources or have resources that deliver a true competitive advantage over the competition. Again, this highlights the concern of how do SMEs benefit from Indigenization in such a situation? That is why; institutionalizing AA acts a socioeconomic mechanism to restore equitable ownership within the market. Governments are responsible for the market mechanism they create. Most European governments understand that. That is why, when it came to various FDI programs implemented in Sub-Saharan Africa, some European countries have their government generously subsidize their SMEs seeking foreign business partnerships in those regions despite their inability in majority equitable ownership in the venture. Why? It’s simple. In the past decade production is those European countries have increasingly become too costly for an SME with a value chain that has a manufacturing component. European governments understand that for SMEs to continue to contribute to their economies they have to invest in them even beyond borders. Understanding this global strategy executed by international government allows countries such as Zimbabwe and South Africa to build institutional frameworks that support local business’ to become equitable owners of their business. However, there is an inherent danger that comes to life when the local SME loses the benefit of being able to manage and control the resources that they have acquired as a result of the transaction.
Drawing from the insights of strategic development in resources and capabilities of an organization, institutionalized indigenization has a dual purpose:
1) Delivers Value-add – The fundamental role of resources in a company is to add value. From a public sector point of view this is done by government selling government bonds to raise capital to finance its various projects. For example, this week the Zimbabwean government said would soon launch a $50 million bond to raise funds for infrastructure projects. From an SME/private sector point of view this is done through debt and/or equity financing. The SME Association of Zimbabwe seeks to create an SME stock exchange and investment in Research and Market Development of formal markets to promote fair competition, amongst other things. Please visit http://www.smeassociationzimbabwe.co.zw/ for more details.
2) Delivers Competitive advantage – the fundamental role of organizational capabilities in a company is to gain a competitive advantage. As a country, what is our competitive advantage? In business there are some proved sources of competitive advantages e.g. quality, service offerings, product differentiation however, do not underestimate the importance of culture, leadership and style of an organization. It is not new that Zimbabwe has been criticized by the global community that we lack competitive advantage in this specific area. That is why; institutionalizing AA is one way the current government can gain domestic support from SMEs. However, does this incentivize a fast response from local and foreign investors for new market developments? Perhaps, in the mining industry. This area is a challenge to quantify, which is more the reason why the impact of institutionalized AA on SME development in Zimbabwe should not be minimized.
In conclusion, AA whether in the U.S., or Zimbabwe or South Africa, it’s a benefit, AND an institution; an institution that strives to restore and accelerate the relationship between socioeconomic status and race in these countries. Whilst we have seen the benefits in the U.S. only time will be able to show the societal and economic benefits in African Governments, maybe after ten generations or more.
Copyright @ February 18, 2012. This article was first published online on Hello Harare magazine on February 18, 2012. BlogSpot by Tambu Ndoro, Strategist at Hanga Consulting and Principal Director of Ndoro Resources (PVT) Ltd, ©2011. www.hangaconsulting.com. Tambu is also a member of Research and Development Committee of SME Association of Zimbabwe ©2011
In strategic management it is important for a company starting up to analyze both its resources and capabilities before competing in a market. For example, a surplus of resources but the absence of organizational capabilities will empower the start-up company to the extent of equitable ownership and control of the resources. Thus, as a start-up company one is already disadvantaged has one does not have prior/inherited or acquired resources to build on the strengths of an existing and established company. According to John Kachembere, in an article, “SMEs hold key to economic growth’ in October 2011, the “SME sector in Zimbabwe accounts for about 90% of the country’s population.” However, due to current liquidity constraints most banks to do not have the resources to provide long-term loans. In recent, Reuters news, Nelson Banya states that, “the country has been battling a dollar shortage since the start of 2012 due to a lack of dollar inflows on foreign investor concerns over government policies.” As a result, the SMEs continue to remain largely informal, limiting their contribution to the sector. So how does an SME benefit from Indigenization is such a situation? This is when existing structural factors such as legal and regulatory frameworks in financial institutions can affect SME development in a country. This leads us to the next side of the coin. Having the organizational capabilities but lacking the resources will enable a start-up to develop innovative capabilities to the extent of establishing or capturing a market but not necessarily being able to neither grow the business nor sustain it as a result of inability to secure appropriate resources or have resources that deliver a true competitive advantage over the competition. Again, this highlights the concern of how do SMEs benefit from Indigenization in such a situation? That is why; institutionalizing AA acts a socioeconomic mechanism to restore equitable ownership within the market. Governments are responsible for the market mechanism they create. Most European governments understand that. That is why, when it came to various FDI programs implemented in Sub-Saharan Africa, some European countries have their government generously subsidize their SMEs seeking foreign business partnerships in those regions despite their inability in majority equitable ownership in the venture. Why? It’s simple. In the past decade production is those European countries have increasingly become too costly for an SME with a value chain that has a manufacturing component. European governments understand that for SMEs to continue to contribute to their economies they have to invest in them even beyond borders. Understanding this global strategy executed by international government allows countries such as Zimbabwe and South Africa to build institutional frameworks that support local business’ to become equitable owners of their business. However, there is an inherent danger that comes to life when the local SME loses the benefit of being able to manage and control the resources that they have acquired as a result of the transaction.
Drawing from the insights of strategic development in resources and capabilities of an organization, institutionalized indigenization has a dual purpose:
1) Delivers Value-add – The fundamental role of resources in a company is to add value. From a public sector point of view this is done by government selling government bonds to raise capital to finance its various projects. For example, this week the Zimbabwean government said would soon launch a $50 million bond to raise funds for infrastructure projects. From an SME/private sector point of view this is done through debt and/or equity financing. The SME Association of Zimbabwe seeks to create an SME stock exchange and investment in Research and Market Development of formal markets to promote fair competition, amongst other things. Please visit http://www.smeassociationzimbabwe.co.zw/ for more details.
2) Delivers Competitive advantage – the fundamental role of organizational capabilities in a company is to gain a competitive advantage. As a country, what is our competitive advantage? In business there are some proved sources of competitive advantages e.g. quality, service offerings, product differentiation however, do not underestimate the importance of culture, leadership and style of an organization. It is not new that Zimbabwe has been criticized by the global community that we lack competitive advantage in this specific area. That is why; institutionalizing AA is one way the current government can gain domestic support from SMEs. However, does this incentivize a fast response from local and foreign investors for new market developments? Perhaps, in the mining industry. This area is a challenge to quantify, which is more the reason why the impact of institutionalized AA on SME development in Zimbabwe should not be minimized.
In conclusion, AA whether in the U.S., or Zimbabwe or South Africa, it’s a benefit, AND an institution; an institution that strives to restore and accelerate the relationship between socioeconomic status and race in these countries. Whilst we have seen the benefits in the U.S. only time will be able to show the societal and economic benefits in African Governments, maybe after ten generations or more.
Copyright @ February 18, 2012. This article was first published online on Hello Harare magazine on February 18, 2012. BlogSpot by Tambu Ndoro, Strategist at Hanga Consulting and Principal Director of Ndoro Resources (PVT) Ltd, ©2011. www.hangaconsulting.com. Tambu is also a member of Research and Development Committee of SME Association of Zimbabwe ©2011
