Business and the State in Southern Africa: The Politics of Economic Reform 9781626371019

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Business and the State in Southern Africa

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Business and the State in Southern Africa The Politics of Economic Reform Scott D. Taylor

b o u l d e r l o n d o n

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Paperback edition published in the United States of America in 2007 by Lynne Rienner Publishers, Inc. 1800 30th Street, Boulder, Colorado 80301 www.rienner.com and in the United Kingdom by Lynne Rienner Publishers, Inc. 3 Henrietta Street, Covent Garden, London WC2E 8LU Published in hardcover in 2007 © 2007 by Lynne Rienner Publishers, Inc. All rights reserved ISBN 978-1-58826-546-3 (pbk. : alk. paper) Printed and bound in the United States of America The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Printed Library Materials Z39.48-1992.

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For my parents and for Priscilla

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Contents

List of Tables and Figures Acknowledgments Map of Southern Africa

ix xi xv

1

Business and the State

2

The Origins and Fate of Business-State Coalitions

23

3

Business-State Cooperation in Zambia: Rhetoric and Realities

55

4

1

From Partnership to Enmity: Business, the State, and Economic Collapse in Zimbabwe

101

5

South Africa: Both Model and Cautionary Tale?

151

6

Crafting Business-State Coalitions: Lessons for, and from, Southern Africa

203

List of Abbreviations and Acronyms List of Interviews Bibliography Index About the Book

225 229 235 253 267

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Tables and Figures

Tables 2.1 3.1 4.1 5.1 5.2 5.3 5.4

Reform Coalition Emergence Composition of Zambian Exports, 1996–2001 Contribution of the Zimbabwe Agriculture and Manufacturing Sectors: Key Indicators South Africa’s Average Annual Economic Growth Selected South African Business Forums and Community-Oriented Activities in Partnership with the State Constant South African GDP Growth Since GEAR Unemployment in South Africa, 1993–2005

35 73 119 160 173 182 188

Figures 2.1 4.1 5.1

Endurance and Collapse: The Relationship Between Institutional Strength and Utility Zimbabwe Economic Trends by Sector, 1991–2002 National-Level Business Associations in South Africa, 2000

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39 123 177

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Acknowledgments

The road from concept to completion of this book has been a long one. It began as a chance encounter with several energetic Zambian businesspeople I met at an international conference at the Carter Center in Atlanta in 1992. The nascent political and economic activism they displayed struck me as both inspiring and naively optimistic: they seemed to have a number of sound ideas, but would their political counterparts listen? This question stayed with me, even as it became increasingly clear how uncompromising certain state leaders could be. My early curiosity gave rise to a set of more involved questions and to broader study of business and the state that eventually came to encompass Zimbabwe, with its many contradictions, and later South Africa, whose sociopolitical complexity can sometimes make Zimbabwe look almost quaint by comparison. This book, then, is the product of that longstanding fascination with the role of and prospects for business in a region where it has long faced ambivalence, and at times naked hostility, from political leaders and citizens alike. Paradoxically, southern Africa is also a region that has seen business achieve genuine influence in spite of that ambivalence. Perhaps it took longer than many of us realized in 1992, but it seems that the issue of business-state relations in Africa is, at long last, a timely one: scholars and practitioners, as well as foreign investors and local entrepreneurs, are all paying attention. It is my hope that this book will make a contribution to this increasingly important area of inquiry. The assistance of many people improved the book, and to them I owe an enormous debt of gratitude. A number of friends and colleagues generously read and commented on all or portions of the manuscript. Particular thanks go to Deborah Bräutigam, Rick Doner, Toyin Falola, Richard Joseph, Kathleen McNamara, Adam Rothman, George Shambaugh, and Ernie Wilson. My friend and erstwhile departmental colleague Greg White not only read the entire volume, but he did it more than once—commenting on drafts, redrafts, and re-redrafts of various chapters. Even when my own enthusiasm was waning, xi

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Greg’s active interest in this project was a source of inspiration and encouragement. He was willing to take on reading duties with great speed and characteristic good will, even when I thoughtlessly asked him at the last minute. Greg’s intellectual ability and keen editorial eye are exceeded only by his generosity as a friend and mentor. At the invitation of Peter Lewis, I was provided two platforms at American University to both present and discuss my work; Peter kindly gave me several years to sharpen my ideas between the first invitation and the second. Ongoing conversations and collaboration with Pádraig Carmody, Gretchen Bauer, Meredith McKittrick, Gwendolyn Mikell, and Simon Winter were also instructive in helping me reformulate arguments. More important, these scholars have also helped shape the way I think about the entire southern African region and the issues that affect it. I would also like to express my appreciation to the Carter Center for the opportunity to work with them, particularly on Zambia. My relationship with the organization has been incredibly gratifying, both professionally and personally. I am particularly thankful for the support of David Carroll, Tynesha Green, and Gordon Streeb. A visiting research fellowship at the Christian Michelsen Institute (CMI) in Bergen, Norway, in 2003 allowed me to present several chapters in a seminar environment with a group of scholar-practitioners whose expertise on southern Africa and political economy is unrivaled. I thank Michael Alvarez, Siri Gloppen, Lise Rakner, Theunis Roux, Elin Skaar, and Lars Svasaand for their insightful feedback and helpful suggestions for revisions. CMI provided an institutional home that was both welcoming and intellectually stimulating. My friend Lise Rakner, at whose invitation I visited CMI, graciously shared her knowledge about the Zambian business scene and its political economy. Our many hours of discussions helped me to write not only a better Zambia chapter, but a better book. My thanks also go to Gunnar Sorbo, the director of CMI, and to the professional and administrative staff of the organization. Several Georgetown students were involved in various stages of the project. In particular, my thanks go to Kennji Kizuka, Nicholas Morin, Adrian Ohmer, and Lauren Rosapep for their excellent research assistance. In addition, the students in my course on Politics and Business in Developing Countries offered feedback on various aspects of the text. The empirical data for this book were derived from more than a decade of fieldwork in Zambia, Zimbabwe, and South Africa, which included countless interviews, off-the-record conversations, and archival research. Over the years, I have been shown boundless patience as I endeavored to learn about three different countries, their politics, and the diversity of traditions and practices of the people that reside in them. I have also found great value in having simply the opportunity to look, to listen, and to absorb. Indeed, the ability to be in a place, if not necessarily of it, remains for me one of the most attractive aspects of fieldwork in comparative politics. But field researchers are almost

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invariably guests, and I am grateful to my hosts, the people of Zambia, Zimbabwe, and South Africa for their hospitality. They and their fellow citizens who gave of their time and provided valuable insights, both anonymously and for attribution, made the research a genuine pleasure. Although some of my findings are critical, it remains my fervent hope that a positive future is in store for each of these countries, not least Zimbabwe, whose people have suffered untold hardships and indignities during the years I worked on this project. In the course of my many visits to southern Africa, the assistance of a number of individuals deserves mention. In addition to suggesting whom to seek out for interviews, Mutembo Nchito, Brian Raftopoulos, and Steven Friedman never hesitated to help me when my own assumptions were leading me astray; I hope that I managed to capture in these pages even a small amount of their wisdom. The late Theo Bull seemed to know every businessperson and politician in Zambia. He was a kind and gracious man, and I deeply regret that he did not have the opportunity to read this book. Hilary Mulenga Fyfe has been a near-constant supporter since my first visit to Zambia in 1992. I also appreciate the contributions of Brenda Muntemba, Gaudenzio Rossi, and the late Bill Fyfe. In Zimbabwe, my friends Carl Shoup and Anne Sheerin warmly opened their home to me. In South Africa, Simon and Andi Winter provided this itinerant researcher a bed for the night (which invariably became many) on numerous trips to Johannesburg, brilliant analyses of South African and Zimbabwean politics, and a cheerful willingness to facilitate contacts. Several institutions supported the research, which spanned nearly a decade. Portions of my fieldwork were funded by the Institute for the Study of World Politics and Emory University. The Institute for African Studies (now the Institute for Economic and Social Research) at the University of Zambia provided me with a base in 1996. I am grateful to Ilse Mwanza, research coordinator at the Institute for African Studies, for her care. The University of Zimbabwe Department of Political and Administrative Studies hosted my research in Zimbabwe in 1995 and 1996. I am especially thankful to Faith Tungwarara, John Makumbe, and the late Masipula Sithole. I received two travel grants from Smith College, principally to fund work on South Africa. The School of Foreign Service of Georgetown University provided grant monies to complete the research, particularly the writing stage, and I am grateful to Deans Robert Gallucci, Peter Dunkley, and Margaret Halpin for their support. A junior faculty leave grant from the Graduate School of Arts and Sciences at Georgetown University, and the fellowship at CMI in Norway, enabled me to bring the project to fruition. It has been a genuine pleasure to work with Lynne Rienner Publishers on every aspect of the publication of this book. I would especially like to thank Lisa Tulchin for her generous and cheerful assistance, Shena Redmond for both her efficiency and her patience, and Ruth Goring, whose copyediting made the process simple and straightforward. The anonymous reviewers gave

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unusually detailed and extraordinarily helpful comments. My deepest gratitude goes to Lynne Rienner for supporting this book and its author, and for seeing this project through to completion. My greatest debt is to my family, which has doubtlessly suffered the most dislocation as this book was being researched and written. In my various roles as child, sibling, parent, and spouse, I owe both my eternal thanks and an equally large apology to the members of my family. They were unable to join me on the solitary journey of writing, but they are what makes me whole. I am forever thankful to my parents, Nell and Timothy Taylor, my siblings, and Lisa Dale for their love and support. My two sons, Chilamo and Chali, had to endure too many postponements, delays, and promises of “wait until next weekend.” They don’t care much for business-state coalitions in southern Africa, or anywhere else. But there is plenty of time to teach them that such things do matter. For now, I will simply share their excitement that “next weekend” at last is here. Finally, I would like to thank my wife, Priscilla Muntemba Taylor, for her love, her companionship, and her unimaginable patience. She has been the one constant throughout the long duration of this project. It is conceivable that I could have completed this book without her beside me, but surely it would not have been worth it. —Scott D. Taylor

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MOZAMBIQUE MALAWI

ANGOLA ZAMBIA

ZIMBABWE

MOZAMBIQUE

NAMIBIA BOTSWANA SWAZILAND LESOTHO SOUTH AFRICA

Southern Africa

MADAGASCAR

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1 Business and the State

In 2002, not long after its founding, the Zambia Business Forum (ZBF) proclaimed that “both the Government and the private business sector are committed to the creation of a thriving business sector for the enhancement of the country’s economic well-being.” The founders of this new umbrella organization outlined their vision of a promising future characterized by governmentbusiness cooperation on everything from taxes to investment to legislative reform to the business climate; the ZBF, of course, would play a leading role in shaping this coalition.1 Such enthusiasm for the promise of business-state coalitions was scarcely confined to Zambia. In fact, the stated objectives of the nascent ZBF have been echoed by business and state actors across southern Africa and their international partners, reflecting a newfound consensus about the necessity of institutionalizing state–private sector collaboration as a prerequisite to achieving national development and international competitiveness. The champions of this “new” perspective overlook at least one important, if inconvenient, detail: it is not new at all. In fact, this clarion call for businessstate cooperation and collaboration was heard, and presumably embraced, within the region more than a decade earlier, yet little cooperation ensued, let alone the coordinated policy or economic performance that many had imagined. On the contrary, for many business actors in countries like Zambia and Zimbabwe, the relationship actually deteriorated as the 1990s progressed, and occasional platitudes from both sides have done little to advance actual cooperation. Genuine coalitions between business and state remain scarce in subSaharan Africa. Ironically, the devolution of economic power from overextended, highly centralized African states to private sectors prescribed by economic adjustment programs in the 1990s implied new opportunities for business. Indeed, since “the road to markets is easier to negotiate if business actively cooperates [with the state],”2 a measure of economic liberalization should permit business-state coalitions to flourish. Yet whereas improved relations between state and private 1

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sector—and correspondingly, the potential role for business associations (BAs) and groups as key interlocutors—are now broadly recognized as part of the prescription for Africa’s economic restructuring and development, scholars and practitioners alike were slow to appreciate that fact.3 For example, although the World Bank gave some credence to the notion of state-business “dialogue” even in the late 1980s, the thrust of World Bank and International Monetary Fund (IMF) approaches to Africa was far closer to laissez-faireism than market governance. 4 By the end of the 1990s, however, the World Bank and others had come to appreciate more fully that the infrequency of constructive businessgovernment interaction has had negative repercussions for development. Thus, the bank criticized African states’ lack of emphasis on the potential contributions of business and BAs to the economy, implicitly acknowledging the shortcomings of its own earlier strategies in the process. In a 2000 report, for example, the bank advocated “public-private consultative groups” that would serve as channels for business-government policy collaboration, noting that poor communications between government and business limit growth in many African countries. Laws, rules, and institutions are often inimical to private sector interests. Governments that lack policy credibility have less influence on economic behavior. And a climate of uncertainty and mutual suspicion generates little private investment.5

Beginning in the 1990s, scholarly and policy-oriented research in Africa explores these issues in significant detail.6 Indeed, regular communication between state and business allows business actors to help shape the institutional environment in which policy is enacted. When included in the policymaking process, the business community can provide an important antidote to the failed policies of the past, which in Africa were enacted by thoroughly autonomous states. Two decades of comparative research clearly demonstrates the potential merits of business-state coalitions in the developing world.7 Africa has no shortage of business-state relations, in the broadest sense; such interactions of course occur to some degree everywhere states and nominally private sectors exist. The concept of business-state relations could be so broad as to include both formal and informal, legitimate and illicit relationships, encompassing “developmental” states and “warlord” states alike. The subject of business-state relations, therefore, has been much studied in Africa, usually quite critically.8 Yet it is not just the relationship with any old business that concerns us here but a reform coalition that incorporates the collective power of the leading private-sector actors in the economy. It does not assume that these are all necessarily virtuous players, but it presupposes that they are engaged in productive, for-profit, and “legitimate” enterprise, rather than simply rent seeking. Africa’s challenge is a shortage of such coalitions between le-

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gitimate businesses and the state, that is, genuine, often formal and local linkages between state and private sector that tend to be oriented toward productivity rather than distribution. Notwithstanding their expected benefits, such positive coalitions have proved difficult to establish. With noteworthy exceptions, they have also been fragile, short lived, and too often beset by limited accomplishment where they did emerge.9 Thus, the presumptive partners in African business-state coalitions face difficulties not only in generating meaningful economic reforms (not to mention the more ambitious goal of growth) but in simply establishing the foundations for a constructive partnership in the first place—an undertaking that requires at least a dampening of what the World Bank labels “mutual suspicion.” The core argument of this book is that business-state coalitions are essential institutions of late capitalist development. Yet although the widespread adoption of economic structural adjustment programs (SAPs) in the 1990s indicated that African states had embarked, if haltingly, on a capitalist path, state elites often systematically excluded local business actors thereafter, preferring to keep their own counsel, however unsuitable it might have been. In short, they consented to reforms but largely eschewed reform coalitions that would enhance the new policies’ prospects for success. To be sure, some businesses were extended preferences, and firms owned by politicians did extremely well in Zambia as well as Zimbabwe and elsewhere. But states more commonly thwarted the capacity of business communities as a whole to act collectively. As Ben Ross Schneider has effectively demonstrated, the state needs to provide incentives and thereby lower the cost of collective action for business; in Africa, by and large it has been profoundly disinterested in doing so.10 The question is why. An equally important question concerns the converse: what explains successful collective action by firms and associations and, in turn, their ability to sit at the policy table with the state? More specifically, what factors contribute to the formation and endurance of reform coalitions and, conversely, which factors hinder them? The answers to these questions shed light on why these potentially beneficial institutions are so rare on the continent, and on their prospects for duplication. Unfortunately, despite a growing interest in business-state relations in Africa generally, such fundamental questions have remained largely unexplored.11 This book considers these questions through analysis of the broader context of business-state relations in three southern African countries: Zambia, Zimbabwe, and South Africa. These three countries manifest a range of outcomes yet share enough characteristics to permit meaningful and informative comparisons across cases. Although the analysis covers events and issues into the early twentyfirst century, I emphasize the period from 1990 to 2000, a critical timeframe during which patterns of business-state relations were firmly, though not quite irrevocably, entrenched. As recently as the early 1990s, each of these states

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was embarking on or experimenting with a new economic regime (and in Zambia and South Africa, a new political course as well) that presupposed, in part, enhanced collaboration between business and state. Zambian business groups were key players in the country’s transition; Zimbabwe’s economic transition was regarded as the archetype of business association influence; and in South Africa firms and groups, especially of big business, played a prominent role in the design of posttransition institutions.12 By the end of the 1990s, however, it was apparent that Zambia’s attempt at a business-state coalition had never fully materialized: business and state actors continued to spout the rhetoric of partnership, but neither side put much stock in its existence. Meanwhile, in Zimbabwe, the once-inclusive coalition between business and state narrowed considerably. By decade’s end, only Zimbabwe’s powerful commercial farmers had the ear of their state counterparts; by early 2000, even the last vestiges of this smaller but still important coalition had collapsed, and the reforms it had helped usher in were reversed. Only South Africa maintained the reform coalition forged between business and the postapartheid state in the course of that country’s momentous 1994 transition. Through regular dialogue between state and key business actors, South Africa has generally hewed to its reformist, probusiness agenda. This has not been without negative consequences, as Chapter 5 makes clear, but it is worth noting that the type of policies born of business-state partnership in South Africa have also seen adaptation and modification. These divergent outcomes warrant investigation. The Zambian and Zimbabwean experiences, which are not unlike Africa as a whole in this respect, illustrate the challenges of fashioning and sustaining business-state coalitions. In fact, if anything, the World Bank understated the severity of the problem in its reporting. Most critically, the paucity of reform coalitions contributes to a severe disconnect between state and private sector actors, so that business-association advocacy efforts go unnoticed and policy design remains the one-sided domain of isolated state actors.13 Local business actors then have to bear the brunt of those policies’ frequently detrimental impact without recourse. Further, the absence of coalitions, and an environment that is hostile to their formation, promotes vicious circles by encouraging fragmentation and atomistic behavior rather than collective action among firms (through formal association structures) and among associations. As a set of interests, or class, then, business remains chronically weak. A particular problem for sub-Saharan Africa is that such a context usually gives rise to narrow, particularist interests with illicit ties to state officials, rent seeking, and corruption; these are business-state relations of a decidedly negative cast. In sum, where leading business interests and the state work at cross-purposes, existing in separate, barely intersecting spheres, the result is an incoherent and often hostile policy environment that harms prospects for economic development. Clearly, pinning Africa’s decline solely on absence of formal businessstate coalitions would be reductionistic; the causes are multiple and complex.

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Nonetheless, the lack of business-state cooperation was a significant factor in problems such as the rapid deindustrialization, the failure to advance commercial agricultural potential, and rising unemployment across all economic sectors that accelerated in the 1990s. Why such coalitions emerge and endure in some contexts but not in others is therefore a question of some import, not simply for scholars but for practitioners and local stakeholders as well. The appropriate choice of reforms and a coherent strategy by which they will be enacted should be considered a prerequisite for successful economic restructuring and transformation. Hence, the principal outcome to be explained, or dependent variable, in this book is the presence or absence of coalitions composed of key business actors and interest associations and state representatives. I refer to these partnerships between state and business as “reform coalitions” for their potential capacity to influence policy in a businessfriendly direction. The reforms that emanate from such entities generally offer a foundation for constructive economic change of the status quo. It is worth noting that this choice of dependent variable differs from other studies of business-state relations, including one of the most systematic and comprehensive works of this genre, Business and the State in Developing Countries, in which the phenomenon to be explained is economic performance. In their introduction to that volume, Ben Ross Schneider and Sylvia Maxfield rightly contend that “the solution for furthering research is to disaggregate collaborative relations between bureaucratic and business elites and assess the impact of separate features of these relations on specific aspects of economic performance, which in turn have consequences for overall growth.”14 This approach can yield many insights into “the precise causal connections between collaboration and economic performance.”15 Indeed, cases such as South Africa and Zimbabwe in this book, as well as Mauritius, provide evidence of a connection between close business-state relations (“collaboration”) and economic performance in the African context.16 However, an analysis of economic performance ultimately tells us little about the origins of these institutions. Africa, therefore, requires different questions from those of Latin America and Asia, where reform coalitions have been abundant; Schneider and Maxfield, and others, can assume a degree of interaction in much of the developing world that is not yet commonplace in Africa. Yet the comparative literature on business-state relations, as well as the limited African experience, does suggest that some degree of systematic cooperation is a necessary condition for development in capitalist systems. Thus, at a fundamental, a priori level, we need to understand in the African setting what gets capitalists and bureaucrats together—or, far more typically, what prevents them from doing so—in the first place.17 No “ideal” balance between business and the state exists, but the cases examined in this book include examples of collaboration as well as conflict between state and business and represent a range of divergent patterns that reflect a varied commitment to coalition building: an incipient coalition was

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least durable in Zambia, somewhat more so in Zimbabwe, and more still in South Africa.18 Importantly, each country example provides some support for the conclusion that positive and productive exchange between the state and formal business community, albeit of differing intensity and duration, was possible in the 1990s. This range of cases therefore sheds light on the central foci of this book: the achievement of business-state coalitions for reform and the conditions under which they endure or fail. Following this logic, I examine the business-state relationship within and across three phases: coalition emergence, coalition endurance, and coalition decline. Two explanatory, or independent, variables are illuminating in regard to coalition emergence: business’s institutional strength, typically via business associations, and the state’s perception of its own power relative to that of the private sector. The emergence of coalitions, therefore, relies substantially on both the character of the business community and the state’s receptivity to business input. A coalition’s durability, in turn, requires continued utility, which means that the state in particular derives political or economic value from the relationship, as well as the maintenance of institutional strength. Utility can fall when business faces severe losses, thereby diminishing the economic value of its contribution to the state, or when the business constituency—an economically powerful minority group, for example—becomes a political liability for state actors, thus jeopardizing the relationship. Finally, coalitions collapse when the institutions established to bind state and business are insufficiently strong to withstand threats. These concepts are elaborated in Chapter 2, which draws on insights from insitutionalist, public choice, and democratization literatures. Business-state coalitions are found in a variety of contexts in capitalist systems, from corporatist to pluralist, although their precise functions may be interpreted differently in each.19 The preceding discussion addressed why coalitions are important, both in the context of development and as a puzzle for research. Drawing on scholarship in the area of business-state relations, the following section clarifies further the concept of “reform coalition,” providing a vital bridge to the more detailed analytical framework advanced in the next chapter.

Business-State Coalitions and Reform Toward a General Definition In perhaps their broadest sense, coalitions can be defined as “a wide variety of joint action to exploit a complementarity of interest.”20 Business-state coalitions, more narrowly, are alliances of public and private sector interests that are found in Western and non-Western, developing and developed contexts. They can be thought of as arrangements “in which authority is shared by public and private actors rather than monopolized by autonomous state actors.”21

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Peter Katzenstein observes that public-private governing coalitions in advanced industrial countries aid the implementation of policy by serving to “define policy objectives” broadly and provide the institutional organization to distinct policy networks.22 In practice, coalitions may be quite clearly or vaguely defined, formally or informally organized, and they have varying degrees of mobilization.23 In regions where coalitions are undergirded by historically prominent private sectors, such as Latin America, they serve an important function by helping to legitimize proposed or newly adopted economic reforms. Thus, business-state coalitions play an instrumental role: they unite various public and private actors in common cause, typically around a single issue or set of issues, such as support for a particular set of economic reforms. In general, coalitions in the developing world may be considered akin to Katzenstein’s “governing coalitions,” in the sense that they explicitly include “a set of social groups that support government policy.”24 However, they do not simply respond positively to government initiatives. Coalitions may also emerge to oppose specific policies, or sets of policies, and are thus sites of policy negotiation and modification, particularly where pressure to adopt certain policies emanates from outside. For example, in his analysis of the emergent free trade regime in Mexico, Strom Thacker treats coalitions as “formal or informal alliances of public and private sector actors joined together by shared interests to support or oppose certain kinds of [trade] policies.”25 Furthermore, whereas contributions to and participation in coalitions by private and public actors in coalitions “may be highly unequal,” private sector participants unquestionably enjoy an influential role in these structures.26 Indeed, the impression one gets from recent studies of Brazil, Mexico, and other nations in the developing world is that, while often subordinate, business performs a vital function of assisting the state in “selling” reform programs, regardless of whether business helped design them.27 Yet the coalition is about more than simple acquiescence to the state agenda.28 Since “the state is not necessarily capable of making wise decisions about development,” scholars such as Richard Doner have noted that “an effective development strategy requires a cooperative relationship between business and government, sometimes referred to as a ‘growth coalition.’”29 Reforms, Then Growth As relatively formal arrangements in which business and state converge to enact, modify, or implement growth-promoting policies, “growth coalitions arise when [‘good, growth-enhancing’] relations take the form of active cooperation that both parties expect will foster investment and increases in productivity.”30 Yet despite the suggestion that such “institutionalised channels”—or what Peter Evans has described as the “embeddedness” of state in society— should be considered important elements for moving Africa beyond its rather

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dismal status quo, these characteristics are substantially lacking in most African countries.31 Nonetheless, research on the growth coalitions concept in Africa highlights the fact that the establishment of such channels is critical. After all, we cannot hope to explain outcomes (for instance, growth or decline) without understanding the process by which we arrived at those outcomes. In this book, however, I employ the term reform coalition quite deliberately as an alternative to growth coalition. The distinction between growth coalition and reform coalition is not entirely semantic. Growth coalitions produce both commitment to and expectation of growth; by implication, “growth” is a direct result of the coalition. But this can be misleading and can result in the wrong lessons. For example, is the coalition to be considered a failure if growth does not result? And over what time period? In contrast, the concept of reform coalition simply suggests that coalitions between state and business generate expectations of reform—often, but not always, beneficial for the economy as a whole. They represent examples of both effective collective action by business and business-state collaboration that is likely to affect policy in a business-friendly direction. Thus, the notion of reform is more descriptively accurate and offers a clearer causal chain than the conventional focus on growth coalitions. It is possible to analytically identify and evaluate, for example, state policies that are counterproductive and growth constraining and, in turn, to conceive of necessary and appropriate modifications, or reforms, to those policies. Thus we can determine which proposed and enacted policy changes actually constitute “reform,” and we can trace the input, or lack thereof, of key firms and business associations over time. Implicit in the notion of reform, therefore, is that the politicoeconomic status quo circa 1990 was untenable.32 Reform, in short, is not a policy prescription per se; rather it is embodied in a businessstate commitment to economic change, arrived at through negotiation. I contend that when these arrangements include the lion’s share of key firms and business associations in the country, such economic change will proceed in a generally positive direction, relative to the prevailing status quo. “Growth,” or the expectation thereof, is subsumed within the reform coalition framework, which envisions reform as a more or less continuous process. Further, the concept of reform coalition permits dynamic interactions and avoids some of the teleology associated with concepts like “development” and “growth.”33 In this view, then, business groups and associations may be part of the process of designing and enacting reforms and may continue to act in concert with the state in the implementation phase. At its most basic level, a reform coalition is one that desires reforms and attempts to work toward them. Yet to rise above tautology, it is necessary to give greater clarity to the terms reform and reform coalition in the African context. The types of reform sought by business have at times overlapped substantially— but hardly completely—with the neoliberal economic prescriptions advanced in

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Africa in the decades straddling the turn of the century. Clearly, there is a certain intrinsic value in such features as reining in runaway budget deficits, an end to state monopsony, an export-oriented foreign exchange regime, a measure of privatization, and reduced tariffs on industrial and agricultural inputs. Other typical elements of neoliberal reforms, however, such as flexible labor policies, changes to the tax regime (more efficient collection coupled with reduction in corporate tax rates), wholesale privatization, or, especially, trade liberalization, may be more ambiguous.34 Some features, such as drastic reductions in social welfare expenditure without provision for an alternative safety net, or unyielding prohibitions on the state’s role in market governance or husbandry of key economic sectors, can prove downright debilitating. In sum, the term reform coalition refers to a cooperative arrangement between the state and business, typically acting collectively via associations that play an instrumental role in formation of generally “good” policies. It is not necessary to impute wholly virtuous characteristics to business, however. Admittedly, business at both the firm and association level is generally motivated by self-interest (profit), and groups that are members of reform coalitions are no exception. Yet as various analyses, especially the work of Jack Knight, have shown, business associations’ self-interested behavior can lead to socially and economically optimal outcomes via spillover effects in the larger economy, such as tax reform.35 Hence, the business interest organizations that enlist in a reform coalition can be characterized as relatively less distributional and as such tend to engage in economic and policy-related business practices that may have positive national impact. For this reason business-state coalition and reform coalition, which are used interchangeably throughout the book except where otherwise indicated, are interpreted as having a positive connotation. Since business-state relationships that privilege individual regime cronies—firms that exist solely to access rents rather than produce, or members of the “bureaucratic bourgeoisie”—are fundamentally at odds with the kinds of reforms that can benefit a broad range of businesses and the economy as a whole, they fall outside the definition of reform coalition. Finally, a reform coalition relationship frequently is evidenced by a formal institutional structure. It may be given institutional expression through some variety of functioning, statutory negotiating forum or similarly sanctioned body that brings together business and state actors at the national level. Although such forums are not always essential for reform coalitions, the fact that policy objectives are usually defined in an ad hoc and decidedly informal way in Africa must raise a number of concerns. Given that informal arrangements are widely associated with the illicit networks and corruption that have precipitated economic decline on the continent, there is less possibility of real reform coalitions that are based on networks and informal connections rather than on more institutionalized, and transparent, channels. Moreover, as the Zambian and Zimbabwean cases make clear, the mere existence of formal institutions is not

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enough. The parties must demonstrate commitment and express confidence that the process offers adequate channels for the articulation of business interests. Although such traits are in evidence in South Africa’s business-state “working groups,” initiated by President Thabo Mbeki in 1999, they are far less apparent elsewhere on the continent. Armed with a more complete understanding of the characteristics and expectations of reform coalitions, we can begin to flesh out the argument more fully. The initial puzzle lies in the paucity of such coalitions in Africa, despite the existence of a macroeconomic environment and a presumptive national mandate to effect economic transformation—a context that, ceteris paribus, would appear to favor the emergence of coalitions. In southern Africa, their emergence resulted from a combination of institutional strength on the part of business associations and a perception by state actors that the state’s own power was relatively limited, or at least constrained. These conditions obtain only infrequently elsewhere in Africa, where power generally accrues to the state. It is appropriate, therefore, to focus much of the investigation on the state as a source of coalitional scarcity. Yet two possible alternative explanations that have featured prominently in other analyses also warrant examination. One view holds that business actors themselves are, in effect, “to blame” for coalitional scarcity, because they are poor partners for states. The second is based on the structuralist or “externalist” argument that implies that the strictures of structural adjustment and the neoliberal economic agenda actually prevent states from entering into coalitions. I address each of these positions briefly below before returning to the discussion of the state role.

Business Associations, Structural Reforms, and the African State Business Weakness An emphasis on the potential negative outcomes of business-state relations features prominently in existing research, both in the developing world and in the West. Indeed, as some scholars point out, “the general presumption is that when business and the state have close congenial relations, democratic ideals, economic efficiency, and social welfare will suffer.”36 Mancur Olson argues that economic interest and lobby groups, particularly those representing business, are inclined toward “distributional” and rent-seeking activities rather than productive, developmental behaviors.37 Following Olson’s logic, collective action by business yields associations that are assumed to be strategic, self-interested actors whose proliferation and activities lead not to growth but to economic decline. Olson’s only exception is for what he terms “encompassing organizations,” which are sufficiently large that distributional behavior would act

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against the self-interest of the organization’s members. Due to the degree of collective action required and the potential costs to be borne by leading members, Olson concludes that encompassing organizations are rare. Far more commonly, Olson argues, is that as business and lobby groups proliferate, they eschew collective-gains strategies in favor of distributing economic rents to members. Eventually, such directly unproductive behavior by what he terms “distributional coalitions” induces economic stagnation by hindering new development and innovation as a result of diminished state resources. Taken at face value, Olson’s thesis suggests that close relations between capitalists and the state should be scrupulously avoided. Indeed, while not employing Olson’s theoretical framework, numerous scholars of African capitalism seem to arrive at similar conclusions about these actors’ distributional tendencies.38 However, these negative views of business interest associations, and, by extension, coalition between state and business, are “not so much mistaken . . . as they are one-sided.”39 Although Olson is correct to impute self-interested and “distributional” behavior to interest groups, the assumption that associational self-interest leads almost inexorably to national economic decline has proved overly deterministic.40 It is simply not supported by the growing evidence from the developing world, which illustrates the emergence of effective coalitions capable of promoting and implementing growth-oriented policies and the enhancement of national competitiveness.41 Moreover, encompassing organizations appear to occur more often than allowed by Olson, as Schneider convincingly demonstrates.42 Perhaps surprisingly, given the stereotype, even African cases fail to conform universally to Olson’s “distributional coalition” label. In fact, business interests possessing capacity or potential capacity for growth-enhancing activities such as exports, vertical integration, provision of infrastructure, and other characteristics associated with productive enterprise have been found in a range of African countries.43 Indeed, African business associations in countries as varied as Nigeria, Senegal, and Tanzania have been shown to participate in the “market-supporting” activities that Doner and Schneider attribute to other developing environments.44 These include pushing “underperforming states to provide the public goods that only states can provide: property rights, uncorrupt administration, and infrastructure.”45 Yet despite their willingness to push, success is admittedly less common for African BAs. Without the means to connect these efforts with their state counterparts, market-supporting activities resemble proverbial trees falling in the forest. A reform coalition, however, enables market-supporting activities to occur with regularity and institutionalizes the role of business. Lastly, it is also the case that a number of associations exist that represent sectors requiring only minimal state support—for instance, limited tariff protection, depoliticized access to finance, and public-private partnership opportunities. In short, the suggestion that, following liberalization, states lack suitable coalition partners simply is not sustainable. To fault

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business and business associations, or the quality of their potential contribution, for the absence of coalitions therefore is akin to blaming the victim. Structural Constraints Another argument for the paucity of business-state coalitions in Africa is a structuralist one. Neoliberal structural adjustment programs, enacted with great frequency by the World Bank and the IMF beginning in the early 1980s, imposed a liberal orthodoxy on the continent. The application of this model, which sought to privilege markets by calling for the withdrawal of the state from economic life, has proved problematic.46 Engaging this wider debate is beyond the scope of this book; I note simply that the widespread adoption of SAPs fundamentally altered the discourse over the role of the state in African development. By the 1990s, at least, the imposition of SAPs created something of a paradox for African business-state relations and the prospect for coalitions. On the one hand, the adoption of liberalization programs throughout subSaharan Africa appeared to create some space for the emergence and consolidation of a genuine, wholly representative private sector. African states moved from the restrictive conditions of the past to a presumably more “enabling environment” in which a vibrant private sector and business-state interaction were no longer automatically seen as antithetical to the state’s development objectives. On the other hand, however, despite the putatively enabling environment, there remained considerable ambiguity over precisely what the relationship between business and state should look like in a SAP-era economy. Whereas neoliberalism altered the context for capitalism writ large, it was hostile to the idea of market governance or “power sharing” between political and economic actors seen with coalitions.47 Thus, even in cases where the newly “liberal” state itself appeared to endorse greater cooperation with the private sector, it was effectively prohibited from engaging in economic activism by the neoliberal prescription. According to this view, weak African states, beholden to donors and the international financial institutions rather than to domestic actors and interests, lack the flexibility needed to engage in developmental strategies that require nurturing and partnership.48 In a word, “globalization” effectively prohibits the formation of business-state coalitions with any capacity or authority. Yet these arguments, sometimes parroted by state elites, that they would engage business but for the constraints imposed on them by SAPs also lack validity. First, though far short of prescribing formal coalitions, the World Bank itself advocated some degree of business-state “dialogue” as early as the 1980s. Yet in many countries, including Zambia, even the most minimal dialogue was often strained and ad hoc. Second, even after the international financial institutions (IFIs) and other observers began to identify business-state

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cooperation as a significant lacuna, coalitions continued to be the exception to the rule. Structuralist arguments, in short, obscure the role played by the state in thwarting the development of business-state coalitions. In southern Africa, as in most of Africa, the preponderance of power accrues to the state rather than nonstate actors, including business groups. In most cases, then, the state is the final arbiter of coalition emergence, and the explanation for the scarcity of coalitions typically lies with state actors. Often the state itself, acting in its own interest—or more precisely, the interests of its leading personnel—serves as the primary brake on business contribution in the postliberalization context in southern Africa. The following section offers a preliminary investigation of the state role vis-à-vis coalitions. A more in-depth examination appears in Chapter 2. The Role of the State In a number of instances, notwithstanding the existence of relatively autonomous and self-sufficient business associations that were eager to engage the state, state actors exhibited deliberate hostility toward them. Indeed, despite the potential direct and indirect benefits to the state of local privatesector capacity—formal sector employment, information provision, foreign exchange receipts, tax revenues, and so on—the state opted to undermine rather than promote private sector actors, which is the very antithesis of a reform coalition. This contrast is seen most starkly in the Zambia case throughout the 1990s, discussed in Chapter 3, and, as Chapter 4 reveals, in Zimbabwe late in the same decade. Such evidence indicates that regardless of their potential capacity to aid the overall development project, business actors are rarely able to force their agenda and prevail in the face of an unyielding and recalcitrant state. The institutional strength of most business organizations simply does not match the range of resources and capabilities that the state has at its disposal to effectively control and limit, if it so chooses, the influence of business associations and the business community as a whole. (On the other hand, however, the fact that several sectoral and encompassing peak associations in southern Africa had such institutional strength makes the region a particularly interesting area of study.) Paradoxically, as various analyses have shown, African state strength has eroded steadily since independence, and this process actually accelerated in the 1990s through forces both exogenous and endogenous.49 However disconcerting, the conclusion reached by Michael Bratton in the late 1980s still holds today: although weak by most indicators, the state remains the most prominent institution on the African political landscape.50 As Nicolas van de Walle argues, “African states combine high levels of autonomy with extremely low capacity, in a context in which nonstate actors are poorly organized and weak.”51 The weakness of societal counterparts has often allowed the African

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state to use its relative power to thwart the establishment of business-state coalitions. Some scholars have argued that regardless of their development potential (or perhaps because of it), business-state growth coalitions are anathema to African states and political elites that are more preoccupied with rent seeking and fomenting “disorder” than with development.52 There may be, in fact, a profound lack of political will and bureaucratic capacity on the part of state elites to improve the relationship with a broad cross-section of the business community when the status quo already works to their narrow advantage.53 Ironically, SAPs may exacerbate this tendency.54 Ultimately, the “disorder” thesis falls short, however, because it lumps all of Africa into a single, undifferentiated basket, fails to account for commonalities between Africa and other developing regions, and imputes to Africa an “extreme agency,” which reduces state behaviors to simplistic cultural explanations.55 The principal benefit of critical analyses of the African state, however, is that they refocus our attention on state agency.56 Indeed, as the country case studies in this book reveal, at times even a modicum of state leadership and direction surely would have proved adequate to support coalitions—and without sacrificing compliance with the strictures imposed by international lenders and donors. But states hardly act in a vacuum: they react to both historical and structural factors, as well as to the resident business community, in calculating whether to establish, bolster, or undermine coalitions. In short, whereas states ultimately may matter more in determining coalitional success or failure, business orientation and capacity, reflected in terms of both institutional strength and utility, are important features that enable us to complete the story.57 This is the task for the rest of the book.

The Plan of the Book The next chapter begins the process of untangling the diverse set of approaches to the study of business-state relations in Africa and in the developing world in general. Beyond outlining the theoretical underpinnings of the argument, Chapter 2 draws on insights from the development and institutionalism literatures to put forward an initial model of business-government relations in southern Africa that seeks to explain under what conditions these relations are more likely to engender reform coalitions. Although the development literature tends to underestimate business, it can still tell us something about the environment in which business-state relations take place. Institutionalist approaches are useful in illuminating many of the features of business associations and help explain the structure of interactions at the mid- or meso-level between state and society. However, as Doner and Schneider point out, the new institutionalism sometimes assumes the worst about business associations and may neglect the

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role and response of the state as well.58 Because the relations between states and business in contemporary Africa were often forged amidst dual transitions, I also draw on elements of scholarship on democratization, especially as it relates to business-state relations. Chapter 2 makes three principal arguments about business-state coalitions. First, coalitional emergence occurs when leading business actors, principally associations, possess institutional strength and the state perceives its own power to be constrained vis-à-vis business. In at least two southern African countries, Zimbabwe and South Africa, the economic transitions of the early 1990s provided fertile context for such conditions. Second, coalitions endure where the utility of the business-state relationship remains high. Although business-state power is substantially in balance or modestly favoring business at the stage of emergence, coalitional endurance sees power accrue increasingly to the state, which must derive tangible political or economic benefits (that is, “utility”) from the relationship. Finally, when threats to the state’s political or economic interests exceed the utility of maintaining the relationship, coalitions collapse. Chapters 3 through 5 turn to the analysis of business-state relations in each of the countries. From a recent historical perspective, Zambia, Zimbabwe, and South Africa offer compelling contexts in which to examine the interaction of the business community and the state. The three countries share a number of important characteristics that effectively serve as control variables in the analysis. Of course, there are important distinctions between the countries as well, but these permit appropriate comparisons across cases that provide broader insights about business-state relations in the subregion, if not the continent as a whole. Although varied in their levels of economic development, Zambia, Zimbabwe, and South Africa each adopted a liberalization program in the 1990s. The model of economic adjustment embraced by each might have provided fertile ground for private sector activity: indeed, given each state’s limited capacity to implement structural reforms without the support of societal actors, their governments’ relative inexperience with private sectors, and the need for information about emerging markets, we might expect that elites would be inclined to look to business institutions to perform certain intermediary, marketsupporting functions.59 However, whereas at least two of these states, Zimbabwe and South Africa, engaged business in a reform coalition, the duration and effectiveness varied considerably across countries. As noted above, neoliberalism also created common constraints on state autonomy, yet the variation in coalitional duration demands deeper explanations. The Zambia example, explored in Chapter 3, provides signs that a businessstate coalition was ascendant early in the liberalization phase, but it proved fleeting. Zambia underwent a transition from a dirigiste economy and singleparty rule to a market-based, multiparty regime in 1991. Whereas business-

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government relations expanded, and in frequently nefarious ways, a reform coalition scarcely materialized, and the economically dominant yet highly vulnerable state quickly moved to marginalize the formal business community and its associations. By 1993, even the prospects for a positive relationship between business actors and the Zambian state had substantially evaporated.60 Business was left without a seat at the table, and the private sector floundered as it was unable to secure influence. The state, meanwhile, became ever more corrupt and engaged in unproductive, growth-averse policies. In contrast to Zimbabwe and especially to South Africa, the Zambian private sector is small, accounting for just 20 percent of gross domestic product (GDP) and less than 10 percent of exports for most of the 1990s. The country’s dependence on copper exports, substantially undiversified since independence, in a sector that long maintained a significant state shareholding, means that the small private sector has been unable to provide a significant counterweight to the state.61 Consequently, privatesector business associations lacked measurable institutional strength. With BAs weak and the state unaccountable, business-state relations were rapidly undermined, with dire consequences for the health of Zambia’s private sector and for national development prospects. Chapter 4 examines Zimbabwe, where a business-state coalition emerged and began to initiate a range of potentially developmental policies in the early 1990s. However, despite once having considerable utility to the state, it collapsed in part due to rising threats to both sides and amidst racial acrimony.62 A business-state coalition was achieved that helped inaugurate the Economic Structural Adjustment Program (ESAP) in that country in 1991.63 Early on, the predominantly white business community was seen as an asset to a state, and a black populace, with limited private-sector experience and expertise. Ironically, the policies advocated by the business community resulted in unsustainable pressures on many members of that same business community, who subsequently lobbied the state for their removal or curtailment. The productive relationship between business and the state in Zimbabwe was always vulnerable to the collapse of the delicate racial alliance upon which it lay. Although the private sector enjoys deep roots in Zimbabwe, business’s principal identification with Zimbabwe’s white community proved to be a major political liability and an inhibitor of further dialogue after the economy turned sour in the mid-1990s. The South African case, taken up in Chapter 5, differs in important ways from its two regional counterparts. Perhaps most notably, its business-state coalition appears to have endured and in some ways deepened in the period under examination. South Africa has one of the most formalized systems of business-state relations in sub-Saharan Africa.64 Contrary to most expectations, the African National Congress (ANC) government that came to power in 1994 established a coalition with the sophisticated, predominantly white business community. Though it had once extolled the virtues of socialism and

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nationalization, the ANC hierarchy instead adopted—and largely clung to— ostensibly business-friendly policies, in this case, a staunchly neoliberal program that endorses a minimalist state. In certain respects, South Africa represents an ideal type for business-state coalitions, with its leading role for business associations and with its policy negotiations coordinated formally through the National Economic Development and Labour Council (Nedlac), a statutory body. In addition, notwithstanding the challenges of establishing clear causality, South Africa has experienced some growth in the period. Thus, as a country that has consistently seen close, positive business-state interactions at the highest levels since 1994, South Africa offers an extremely useful counterpoise to the other cases in this study, and it is instructive for other African countries as well. South Africa is hardly problem free, however, and provides a reminder of some of the genuine limitations on business-state relations: such relations can be formalized and mutually beneficial, but unless they can contribute to sustainable policies that result in—or at least promote— long-term economic and political transformation, the presumed benefits for development, broadly conceived, from these relations will prove limited. Chapter 6 reexamines the argument in light of the detailed investigation in the case study chapters. It attempts to delve more deeply into the possible linkage between reform coalitions and actual economic performance and development. I draw on evidence from other African cases, with a particular focus on Ghana, in order to highlight the unique features of southern Africa as well as identify commonalities with other countries on the continent. Using the comparative framework introduced in Chapters 1 and 2, the conclusion assesses the prospects for reform coalitions, and for business-state relations broadly, in other African polities.

Getting State and Business Together In sub-Saharan Africa, the reform programs of the 1990s made durable reform coalitions increasingly necessary. For their part, business actors themselves largely took it on faith that they would gain privileged access to newly capitalist states. In practice, however, coalitions were largely absent from the landscape. Today, after years of experimentation with liberal economic policies, most countries have moved little beyond rhetorical commitments. Certainly, as is the case in all capitalist and semicapitalist polities, business and state actors alike want to maximize their respective positions and advantages in terms of political power and economic gain. Although this frequently brings the two sides into conflict, it also creates opportunities for cooperation. Yet the factors that bring state and business together in Africa remain little investigated, and few studies have addressed, for example, the mechanisms by which such arrangements would emerge. A major goal of this

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book is to respond to this lacuna by deepening our understanding of the institutional contexts in which businesses operate and interact, particularly in a formal way, with African states. The broader significance, however, lies in determining what factors lead to greater convergence of business and state interests, particularly where that convergence lays the groundwork for beneficial development outcomes, not only in southern Africa but throughout the continent. I begin this investigation in the following chapter, with a look at the “state of the art” and an effort to elucidate the key arguments that help to explain the disparate outcomes of reform coalitions in southern Africa.

Notes 1. See www.zamtie.org/news/zambziforum.htm. 2. Ben Ross Schneider and Sylvia Maxfield, “Business, the State, and Economic Performance in Developing Countries,” in Business and the State in Developing Countries, edited by Sylvia Maxfield and Ben Ross Schneider (Ithaca, NY: Cornell University Press, 1997), 5. See also Richard Doner and Ben Ross Schneider, “Business Associations and Economic Development: Why Some Associations Contribute More Than Others,” Business and Politics 2, no. 3 (2000): 261–288; Francisco Durand and Eduardo Silva, eds., Organized Business, Economic Change, and Democracy in Latin America (Coral Gables, FL: North-South Center, 1998). 3. See Deborah Bräutigam, Lise Rakner, and Scott Taylor, “Business Associations and Growth Coalitions in Sub-Saharan Africa,” Journal of Modern African Studies 40, no. 4 (2002): 519–547; and World Bank, Can Africa Claim the Twenty-first Century? (Washington, DC: World Bank, 2000). 4. World Bank, Sub-Saharan Africa: From Crisis to Sustainable Growth (Washington, DC: World Bank, 1989). For a critique, see Thandika Mkandawire and Charles Soludo, Our Continent, Our Future: African Perspectives on Structural Adjustment (Trenton, NJ: Africa World Press, 1999). 5. World Bank, Can Africa Claim the Twenty-first Century? 226. 6. A sampling includes John Lucas, “The Politics of Business Associations in the Developing World,” Journal of Developing Areas 32, no. 1 (1997): 71–96; World Bank, “Private Sector Development Strategy: Directions for the World Bank Group,” Strategy Paper, Washington, DC, April 9, 2002; Bräutigam, Rakner, and Taylor, “Business Associations”; and Jon Kraus, “Capital, Power, and Business Associations in the African Political Economy: A Tale of Two Countries, Ghana and Nigeria,” Journal of Modern African Studies 40, no. 3 (2002): 395–436. 7. Among the most effective is Richard Doner, Driving a Bargain: Automobile Industrialization and Japanese Firms in South East Asia (Berkeley: University of California Press, 1991). 8. Roger Tangri, The Politics of Patronage in Africa: Parastatals, Privatization, and Private Enterprise (Oxford: James Currey, 1999); Paul Kennedy, African Capitalism (Cambridge: Cambridge University Press, 1988); John Iliffe, The Emergence of African Capitalism (Minneapolis: University of Minnesota Press, 1983). 9. Bräutigam, Rakner, and Taylor, “Business Associations.” 10. Ben Ross Schneider, Business, Politics, and the State in Twentieth Century Latin America (Cambridge: Cambridge University Press, 2004), 6.

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11. The subject of business-state relations has been examined with increasing regularity in Africa. But although these studies have provided a wealth of data about what BAs do, most research fails to examine systematically and comparatively why states and business interact. See, for example, Richard Doner and Ernest J. Wilson III, “Business Associations in Developing Countries,” paper presented at the Annual Meeting of the American Political Science Association, Washington, DC, 1988. 12. See Carolyn Baylies and Morris Szeftel, “The Fall and Rise of Multiparty Politics in Zambia,” Review of African Political Economy 54 (July 1992): 75–91; Tor Skalnes, The Politics of Economic Reform in Zimbabwe: Continuity and Change in Development (New York: St. Martin’s, 1995); Timothy Sisk, Democratization in South Africa: The Elusive Social Contract (Princeton, NJ: Princeton University Press, 1995). 13. On the distinction between “advocacy” and policy design roles of BAs, see Eli Moen, “Private Sector Involvement in Policy Making in a Poverty-Stricken Liberal Democracy,” Working Paper 2003/04, Centre for Development and the Environment, University of Oslo. 14. Schneider and Maxfield, “Business, the State, and Economic Performance,” 7. 15. Ibid. 16. Bräutigam, Rakner, and Taylor, “Business Associations.” 17. Following Schneider, Business Politics, throughout the book, I use the terms “state” and “state actors” to describe top officials in the executive branch, including senior members of the bureaucracy (p. 6n). Schneider himself subscribes to Alfred Stepan’s definition of the state as “the continuous administrative, legal, bureaucratic, and coercive system” as distinct from civil society and political society. See Alfred Stepan, Arguing Comparative Politics (New York: Oxford University Press, 2001), 100–101. 18. See Peter Kingstone, Crafting Coalitions for Reform: Business Preferences, Political Institutions, and Neoliberal Reform in Brazil (University Park, PA: Penn State University Press, 1999), xxi. 19. Moen, “Private Sector Involvement.” 20. William H. Riker and Peter C. Ordeshook, An Introduction to Positive Political Theory (Englewood Cliffs, NJ: Prentice-Hall, 1973), 120, cited in Sisk, Democratization in South Africa, 46 n. 23. 21. Doner, Driving a Bargain, 5. 22. Peter Katzenstein, introduction to Between Power and Plenty: Foreign Economic Policies of Advanced Industrial States, edited by Peter Katzenstein (Madison: University of Wisconsin Press, 1978), 19. 23. Kingstone, Crafting Coalitions, xxi. 24. Ibid. 25. Strom C. Thacker, Big Business, the State, and Free Trade: Constructing Coalitions in Mexico (Cambridge: Cambridge University Press, 2000), 20, emphasis added; see also Peter Katzenstein, Small States in World Markets: Industrial Policy in Europe (Ithaca, NY: Cornell University Press, 1985), and Sylvia Maxfield, Governing Capital: International Finance and Mexican Politics (Ithaca, NY: Cornell University Press, 1990), 29. For simplicity, Thacker considers principally two competing types, a protectionist coalition and a free trade coalition, since neither state nor business is truly unitary. The emergence of a protectionist coalition, despite the government’s endorsement of free trade, suggests that a powerful array of business and state actors exists in Mexico that can coalesce to challenge reform initiatives. 26. Kingstone, Crafting Coalitions, xxi. 27. For example, ibid.; Thacker, Big Business. 28. The notion of governing coalition appears far more statecentric in East Asia. Numerous scholars argue that the strong developmental states of Korea and Taiwan

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tended to play a much greater role in “governing” the activities of the private sector and, as a result, occupied a more dominant position vis-à-vis business actors. See Robert Wade, Governing the Market: Economic Theory and the Role of Government in East Asian Industrialization (Princeton, NJ: Princeton University Press, 1989); Peter Evans, Embedded Autonomy: States and Industrial Transformation (Princeton, NJ: Princeton University Press, 1995); see also T. J. Pempel, “Japanese Foreign Economic Policy: The Domestic Bases for International Behavior,” in Between Power and Plenty, ed. Katzenstein. According to Lucas, however, “the state-centric view pays insufficient attention to the contributions made by the organized private sector, especially since 1980” (Lucas, “Politics of Business Associations,” 82). 29. Gary Hawes and Hong Liu, “Explaining the Dynamics of the South East Asian Political Economy,” World Politics 45, no. 4 (July 1993): 629–660, at 655; Lucas, “Politics of Business Associations,” 73, citing Hawes and Liu; Doner, Driving a Bargain. 30. Bräutigam, Rakner, and Taylor, “Business Associations,” 520. 31. Ibid., 521. 32. Stephan Haggard and Robert R. Kaufman, The Political Economy of Democratic Transitions (Princeton: Princeton University Press, 1995), 55, quoted in Lucas, “Politics of Business Associations,” 77–78. See also Kingstone, Crafting Coalitions, 16–17, explaining why even previously protected firms would support liberalization. 33. Although “development” frequently is perceived as an end point, it may be interpreted in far broader terms than simply measures of “growth” or “economic performance” at the macro level. See, for example, Amartya Sen, Development as Freedom (New York: Anchor, 1999). 34. See Kingstone, Crafting Coalitions, 18, especially n. 41. On the problem of rapid trade liberalization, see Dani Rodrik, “The Rush to Free Trade,” in Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment, edited by Stephan Haggard and Steven B. Webb (New York: World Bank and Oxford University Press, 1994), 83. 35. Jack Knight, Institutions and Social Conflict (New York: Cambridge University Press, 1992). Richard F. Doner, Ben Ross Schneider, and Ernest J. Wilson III, “Can Business Associations Contribute to Development and Democracy?” in Business and Democracy: Cohabitation or Contradiction? edited by Ann Bernstein and Peter L. Berger (London: Pinter, 1998), 128. 36. Schneider and Maxfield, “Business, the State, and Economic Performance,” 3. 37. Mancur Olson, The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities (New Haven, CT: Yale University Press, 1982). 38. Kennedy, African Capitalism; Sayre Shatz, “Pirate Capitalism and the Inert Economy of Nigeria,” Journal of Modern African Studies 22, no. 1: 45–57; Iliffe, Emergence of African Capitalism; Volker Wild, Profit Not for Profit’s Sake (Harare, Zimbabwe: Baobab, 1997). 39. Doner, Schneider, and Wilson, “Can Business Associations Contribute?” p. 128. 40. Knight, Institutions and Social Conflict. 41. For example, Anek Laothamatas, Business Associations and the New Political Economy of Thailand (Boulder: Westview, 1992); Richard Doner, “The Limits of State Strength: Toward an Institutionalist View of Economic Development,” World Politics 44 (April 1992): 398–431; Lucas, “Politics of Business Associations”; Doner and Schneider, “Business Associations”; Maxfield and Schneider, Business and the State; Durand and Silva, Organized Business; Andrew MacIntyre, ed., Politics and Business in Industrializing Asia (Ithaca, NY: Cornell University Press, 1994); Ernest Bartell and Leigh Payne, Business and Democracy in Latin America (Pittsburgh: University of Pittsburgh Press, 1994); Thacker, Big Business; Kingstone, Crafting Coalitions; Bradford Dillman, State and Private Sector in Algeria (Boulder: Westview, 2000). 42. Schneider, Business, Politics, and the State.

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43. See, for example, Lucas, “Politics of Business Associations”; Bräutigam, Rakner, and Taylor, “Business Associations.” 44. See Deborah Bräutigam, “Business Associations in Nnewi, Nigeria,” paper presented at the American University conference Business and the State in Africa, Washington, DC, February 1997; Ibrahima Thioub, Momar-Coumba Diop, and Catherine Boone, “Economic Liberalization in Senegal: Shifting Politics of Indigenous Business Interests,” African Studies Review 41, no. 2 (September 1998): 63–89; Bruce Heilman and John Lucas, “A Social Movement for African Capitalism? A Comparison of Business Associations in Two African Cities,” African Studies Review 40, no. 2 (September 1997): 141–171. 45. Doner and Schneider, “Business Associations,” 262. 46. See Nicolas van de Walle, African Economies and the Politics of Permanent Crisis, 1979–1999 (Cambridge: Cambridge University Press, 2001). 47. See Doner, Driving a Bargain. 48. See, for example, Pádraig Carmody, Tearing the Social Fabric: The Impact of Structural Adjustment in Zimbabwe (Portsmouth, NH: Heinemann, 2001); Joseph Stiglitz, Neoliberalism and Its Discontents (New York: W. W. Norton, 2002). These condemnations of global neoliberalism stand in stark contrast to Asia’s “developmental states” of an earlier era. See Evans, Embedded Autonomy; Meredith Woo-Cumings, ed., The Developmental State (Ithaca, NY: Cornell University Press, 1999). 49. Jeffrey Herbst, States and Power in Africa: Comparative Lessons in Authority and Control (Princeton, NJ: Princeton University Press, 2000); Jean Francois Bayart, The State in Africa: Politics of the Belly (London: Longman Group, 1993); William Reno, Warlord States in African Politics (Boulder: Lynne Rienner Publishers, 1998). 50. Michael Bratton, “Beyond the State: Civil Society and Associational Life in Africa,” World Politics 41 (1989): 407–430. This appears to contrast with cases like Brazil, where states must “craft” coalitions, suggesting at least the prospect of greater equality between state and business actors (Kingstone, Crafting Coalitions). 51. Van de Walle, African Economies, 16. 52. Most famously, or perhaps infamously, this perspective was captured by Patrick Chabal and Jean Pascal Daloz, Africa Works: Disorder as Political Instrument (Bloomington: Indiana University, 1999). 53. Michael Bratton and Nicolas van de Walle, Democratic Experiments in Africa (Cambridge: Cambridge University Press, 1997), for example, would characterize this as stemming from “neopatrimonial” politics. 54. By providing otherwise scarce resources to the regime that can be diverted to patronage, and by providing the state with a liberal orthodox rationale for its refusal to engage even legitimate (nondistributional) business actors while tacit alliances with less legitimate, “rentier” business interests may be cultivated covertly. Scott D. Taylor, “Race, Class, and Neopatrimonial Politics in Zimbabwe,” in State, Conflict, and Democracy in Africa, edited by Richard Joseph (Boulder: Lynne Rienner Publishers, 1999). 55. Lacking empirically verifiable data, Chabal and Daloz ultimately resort to universal claims of witchcraft, superstition, and the occult to explain the failure of African development (see their Africa Works, 63). See Mkandawire and Soludo’s rejoinder in Our Continent. 56. Chabal and Daloz, Africa Works. See also George B. N. Ayittey, Africa Betrayed (New York: St. Martin’s, 1992). 57. Here I depart from our argument in Bräutigam, Rakner, and Taylor, “Business Associations,” 519, which attributes coalitional emergence almost entirely to the state. These differences are explored in greater detail in Chapter 2. 58. The view of BAs stems mainly from Olson (Doner and Schneider, “Business Associations,” 262). Hawes and Liu, “Explaining the Dynamics,” 646, 654, note that institutionalists err by treating the state as only a set of institutions.

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59. Doner and Schneider, “Business Associations.” 60. Bräutigam, Rakner, and Taylor, “Business Associations”; Lise Rakner, Political and Economic Liberalisation in Zambia, 1991–2001 (Uppsala: Nordiska Afrika Institut, 2003). 61. See D. Michael Shafer, Winners and Losers: How Sectors Shape the Developmental Prospects of States (Ithaca, NY: Cornell University Press, 1995). 62. Bräutigam, Rakner, and Taylor, “Business Associations.” 63. Skalnes, Politics of Economic Reform. 64. Nicoli Nattrass, “Business and Employer Organisations in South Africa,” Occasional Report 5 (Geneva: International Labour Office, 1997).

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2 The Origins and Fate of Business-State Coalitions

In Africa, the collaboration between state and business, highly anticipated in some quarters in the early 1990s, seldom got past general agreement over the adoption of liberalization programs. The nascent coalitions that helped to usher in economic reforms in cases such as Zambia were, in the main, not sustained or replicated in reference to subsequent policy issues. Where this occurred, economic policymaking, as a result of the growing alienation of formal business from the state, became ad hoc in character, rather than coordinated, thus constraining private sector actors’ collective capacity to shape a more informed policy agenda. Ultimately, this occurred in Zimbabwe, although state and business actors were able to coalesce around a reform agenda that lasted well into the 1990s, so it is an intermediate case. A few countries, such as South Africa, have proved able to sustain and even expand the partnership between state and business. The impacts of failures to build or maintain genuine coalitions were severe, however: contradictory and often incoherent industrial, agricultural, and trade policies contributed to unchecked imports and deindustrialization as well as insufficient concern for the commercial farming activities in which many African countries enjoy comparative advantage. The consequences of these issues, in turn, are widespread business failures, rising unemployment, and, ultimately, the failure to sustain political support for economic reforms as a whole from a vital constituency. Still, it is possible to identify several key factors that affect business and state behaviors in a way conducive to the establishment and duration of reform coalitions, as opposed to other, less beneficial business-state relationships. Thus, the objective of this chapter is to advance a framework for addressing the problem of business-state coalitions in southern Africa. The analytical framework is limited to Zambia, Zimbabwe, and South Africa but is sufficiently broad to permit contingent generalizations applicable to other regions.

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Three principal arguments are advanced. First, reform coalition emergence was most likely when key business actors, typically associations, possessed institutional strength and the state perceived that it lacks a power advantage over business. This created a degree of parity, and a corresponding perception of mutual dependence, between private and public actors. The endurance of a reform coalition, on the other hand, is centered more explicitly in state actions; hence, the second argument posits that coalitions endure provided the relationship continues to have political and economic utility for the state. Whether formal institutional mechanisms, such as a statutory body, were created at reform adoption to govern interactions between actors may also contribute to coalitional durability. The third argument is that coalitions collapse when perception of threat exceeds the political or economic utility of maintaining the arrangement. The emergence of a coalition is the result of the convergence of business preferences and state preferences around a particular rule structure that bounds the expectations of its members, and therefore is a question of institutional choice.1 Among the most distinguishing features of a reform coalition is institutionalized access to the state by key national business associations or other representative bodies. More concretely, such access refers to “arrangements, whether informal but enduring or formal, where representatives of business associations meet with state officials to deliberate on policy.”2 This notion of deliberation is essential. Indeed, the relationship must be accompanied by more than mere dictation of policy directives by the state to pliant business actors; BAs must win, at least periodically.3 Coalitional decline and collapse, on the other hand, can be understood as the sustained diminution and eventual elimination of business’s previously privileged access to the state. A decline in access and influence can occur directly, when the state undermines a coalition by reducing or eliminating collective business actors’ privileged access or by strengthening other groups by cultivating support among alternative institutions or constituencies, such as informal associations, distributional actors, or key ethnic constituencies. Indirectly, the state may simply refuse to intervene to stanch a decline in business associations’ institutional strength resulting from exogenous pressures, such as import competition resulting from liberalization that weakens members. In other words, changes in the macroeconomic environment may undermine a business association’s members, and eventually the association itself, while the state does nothing to restore its access. African capital lacks the privileged, and highly mobile, character of many of its Latin American counterparts. Thus, private sector actors retain a deeply ingrained incentive to cooperate with the state, because access is frequently essential to their prosperity, if not their survival. As established in the previous chapter, African states therefore ultimately play the decisive role in determining the fate of business-state coalitions.

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Theorizing Business-State Coalitions: Limitations and Prospects This book draws on two major schools of thought associated with the subject of business-state relations. The first, which resonates in the work of Charles Lindblom but whose origins may lie with Adam Smith, can be labeled business-centric because it suggests that business is the decisive, powerful— “privileged”—actor in this relationship.4 Most analyses tend to focus on various aspects of business behavior, as seen below. This perspective does not necessarily place the state in the role of wholly passive, liberal “gatekeeper,” but it does suggest, consistent with contemporary views on globalization, that states must attempt to appeal to local and multinational capital, whose mobility gives them an upper hand in relations with political actors. The second school of thought is associated with the statist tradition and essentially proceeds from the opposite assumption. Importantly, the state is accounted for to a fuller degree, yet like traditional statist theories, there is an overly heavy reliance on the state as the residual solution to all market problems. Both of these schools inform this study, yet alone, neither successfully captures the nature of business-state relations in Africa, nor the politics of constructing and maintaining coalitions oriented toward the ongoing demands of general economic reforms. Business Centrism The dependent variable in many, if not most, analyses of business-state relations tends to center around some aspect of business behavior, or the origins of business preferences—for example, business support or nonsupport for reform in the case of coalitions, business organization, business “contribution” to markets and to “economic performance.”5 The reason for this is rooted in the fact that much of the work on business-state coalitions, like theories of business, derives from economic theories that examine business preferences. These include variants such as the production profile, factor endowment theories (the StolperSamuelson model), and specific factors arguments, all models that are quite familiar to economic and trade theorists.6 Each attempts to explain some aspect of business behavior in the domestic or international marketplace. Implicit in analyses of business-state coalitions that employ these models, however, is that the “governing coalition” is for business to join. Thus, in seeking to explain why Brazilian business supported reform coalitions, Peter Kingstone, drawing on Peter Gourevitch, argues that businesses “made their choices in ‘hard times’—times of crisis in which the status quo was no longer tenable.”7 Despite the anticipated hardship that adjustment would bring, “it grew increasingly clear through the 1980s that import substitution generally and protectionism

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specifically no longer offered answers.”8 Hence, business actors threw their support behind the state’s reform agenda, thereby making the new policies possible. At bottom, if the state is presumed to be an instigator and initiator of reforms, proactive, and willing to bargain, then coalitional emergence can be explained solely with reference to business actions. Privileged business can pick and choose when and around what issues to formally cooperate. Business-centric analyses can also explain the endurance of business-state cooperation. Dani Rodrik, for example, finds that business support for reforms can be durable: “once reforms have begun and firms have had time to adjust, business support stabilizes.”9 Rodrik notes that reforms gain legitimacy with time, and there is limited pressure from business actors for reversal of reforms, particularly once they start to meet with some successes. At the same time, new beneficiaries emerge who would block an attempt to return to the status quo ante.10 Yet it is important to point out that a business-centered dependent variable works well in much of Latin America because, unlike in Africa, coalitions are not uncommon and the achievement of a growth or reform coalition is not regarded as (potentially) antithetical to the self-interest of state actors. Therefore, analysis of the state position may reasonably escape scrutiny.11 Certainly, the state is hardly dismissed altogether; indeed, some of the research focusing explicitly on coalitions makes allowance for state actors. For example, Peter Kingstone notes that “politicians have a significant impact on whether they choose to support or oppose reforms and which adjustment strategies they choose to pursue.”12 Furthermore, there is an explicit recognition that a coalition requires “crafting.” Thus, “to some extent, the problem of crafting reform coalitions is a bargaining problem” in Latin America, therefore state policy makers must be prepared and able to compensate the potential losers of reform in order to sway their support.13 Nonetheless, the dependent variable remains business centered: although state policy may vary, business is depicted as the more wary party whose perceived self-interest may not, at first glance, be served by cooperation with the state. At bottom in Kingstone’s book and much of the work of this genre, then, there is an underlying assumption that a business-state coalition is achievable because contentious issues are bargained and negotiated between business actors and state elites who are inclined to be receptive to inputs. This obtains in some Asian states too, including Thailand, Malaysia, and Indonesia—at least those where the state is not quite strong enough to compel cooperation, as was the case in Korea and Taiwan. Of course, in contrast to Latin America and Asia, the African experience reveals few examples of coalitions for reform, or even a limited capacity to convene ad hoc but meaningful bargaining sessions, hence the puzzle for this book. The underlying logic of a proactive, coalitionseeking state fits awkwardly in much of Africa. In some African cases, the policymakers themselves appear complacent about, if not actively disinterested

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in, an iterative bargaining process that may be indispensable to the successful articulation and implementation of reform, thus providing fodder for the harshest indictments of the African state.14 Whereas the achievement of sustained coalitions for reform is unusual, the states’ commitment to embarking on economic reforms in the 1990s (however imperfectly) is well documented.15 Yet despite consenting to reforms, subsequently African states systematically excluded local business actors, thereby severely curtailing their potential contribution to the success of the new policies. Theories of business preferences common to the existing business-state literature therefore are inadequate to explain state behaviors. Bringing the State Partly Back In In general, as John Lucas observes, statist analyses of development have downplayed the business association role.16 Peter Evans’s embedded autonomy framework appears initially to offer a helpful corrective to this oversight. Evans notes that linkages between state and private sector associations that promote interaction, negotiation, and information sharing are critical determinants of development. His continuum, along which states may be characterized at one end as having embedded autonomy and at the other as predatory, has considerable merit as a heuristic device: Evans describes embedded autonomy as a condition in which the state bureaucracy is “embedded” in societal institutions such as business organizations, yet at the same time the state enjoys a substantial degree of autonomy from particularistic societal interests.17 At bottom, however, lies the rather straightforward assertion that the state—and in particular, a meritorious “Weberian” bureaucracy—is critical to development and to businessstate coalitions. Evans’s framework fails to clearly articulate, for example, how states that lack the conditions of embedded autonomy can obtain them. Thus, as Lucas notes, “it seems that for states that fall short of the exacting ideal set by South Korea and Taiwan, they are damned if they do, and damned if they don’t.”18 It is worth noting, however, that the problem may not be entirely insurmountable. For instance, David Kang suggests that the Korean ideal was never as “Weberian” as it was reputed to be. Rather, in addition to a strong dose of “crony capitalism,” what mattered in the Korean case, according to Kang, was the presence of strong business groups and powerful firms with which the state could interact—and not altogether autonomously.19 In other words, the state requires counterparts with which it can “embed.” Examining the Latin American context, Ben Ross Schneider advances Evans’s formulation by providing insight into the specific process and interactions between state and business that lead to an outcome consistent with embedded autonomy. Schneider’s admonition to assess the strength of “various types of state incentives for business to act collectively” is particularly instructive, because it emphasizes that the overwhelming amount of power lies with

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the state, to shape and influence business organization and capacity and to engage business.20 Expanding on the arguments of Mancur Olson, Schneider demonstrates that the organizational strength or capacity of business associations actually stems from the incentives provided by the state. Thus, when the private sector organizes, it “is essentially a reactor to government actions.”21 Indeed, “state actors, usually top officials in the economic bureaucracy, were the pivotal causal agents [of business organization]. . . . These state actors adopted policies, in response to changing political and economic crises, that helped business to organize or in other cases undermined business organization.”22 That is, the state has the capacity to organize—or disorganize—business to a significant degree through use of selective incentives. Business organization, or collective action, in turn, is essential to the effective articulation of the business point of view. Thus, the relationship between state and business clearly has the capacity to be a reciprocal, mutually reinforcing one.23 Yet it is the state, with its power to bestow or withdraw selective incentives from business, that “unlocks” the potential contributions of business associations by promoting their institutional strength. Implicit in Schneider’s and similar studies, then, is a state recognition of, and willingness to tap, business associations’ potential at one point or another. Ceteris paribus, the state is the key to the establishment of reform coalitions. If Schneider’s analysis offers insights into the nuanced relationship between the state and business associations’ institutional strength, recent analyses of coalitions can shed light on their emergence in the developing world. However, one difficulty with existing social science theories of coalitional formation is that they tend to be narrowly focused on the achievement of specific types of coalitions rather than cooperation more broadly. They emphasize coalitions that are centered on specific issues, such as the decision to adopt particular economic reforms (especially major trade agreements), and thus are best interpreted as discrete events rather than institutions that endure.24 Indeed, despite the acknowledgment that “the problem of crafting a support coalition does not disappear after the initiation of reforms” and that, as a result, “governments must continuously adjust their policy programs to maintain political support for reforms,” analysts tend to neglect the investigation of what that “continuous adjustment” entails, particularly concerning the state role.25 Frequently left unasked is, what factors render business-state coalitions (in)capable of enduring and addressing a more comprehensive range of economic policy issues?26 Clearly, these analyses should not be criticized for not doing more than they set out to do. Yet their emphasis on how coalitions (albeit limited ones) emerge, or are “crafted,” rather than how relations evolve following their emergence takes us only part way. This is particularly problematic in an examination of Africa, where states rather than business organizations tend to be the reluctant actors.27 Thus, a core challenge of this book lies in explaining when and

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why relations between states and business lead them toward lasting coalitions and under what circumstances they become seemingly hopelessly divided. Conceptualizing Coalitions in Africa Examinations of business-state relations in Africa increasingly seek to explain coalitions based on considerations of both business characteristics and state attributes.28 But though business organization—including such factors as business associations’ technical capacity, size, composition, resources, and access to selective benefits—is important, much as Schneider demonstrates for Latin America, the African state is the determinative actor in coalitional formation and maintenance. Specifically, “state leadership, ideology and capacity and the actual choice and sequencing of the chosen policies” may be the essential ingredients to complete the coalitional puzzle.29 The call to highlight the critical importance of the state role, while entirely welcome, also poses several potential analytical pitfalls. Notably, though leadership, capacity, and ideas are obviously important factors, they prove difficult to specify and operationalize as variables. Moreover, as Evans himself points out, “it would be a terrible error to turn the state into the necessary and sufficient deus ex machina that determines all outcomes. Even if states were unitary actors, which they clearly are not, they would not be able to shape growth as they choose.”30 Critiques of the African state suggest far more formidable obstacles affect the states on the continent.31 Since the state is not deus ex machina, where and how does the process of reform coalition emergence begin? First, transitions offer an important window of opportunity. Although not a tabula rasa, a transition presents a favorable environment for business associations and state, and for the emergence of coalitions. In the context of a transition, new leadership, state ideologies, and capacities may materialize that are more amenable to the establishment of reform coalitions. An economic transition occurred in all three countries in this study—as it did in many other African countries—and a political transition took place as well in Zambia and South Africa. As previous research has shown, however, democratization does not guarantee that coalitions will emerge, and the discrepancies between Zambia and South Africa here bear this out.32 Conversely, successful economic transitions appear to offer a genuine opportunity for coalitions, because they may presage a fundamental change in the relationship between the state and private capital. Second, both Zimbabwe and South Africa enjoyed a fortuitous combination of state capacity and business-association institutional strength at the time of their transitions, a legacy of settler rule that conferred on these countries a significant advantage. In both, this institutional strength predated the postcolonial state itself, thereby placing business groups in an initially advantageous position vis-à-vis the state and favoring the emergence of reform coalitions. Such a finding is applicable to other former settler states, or those with

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significant nonindigenous minorities whose business interests were not curtailed by the postcolonial state through ideology (as they were in Tanzania) or usurpation (as in Uganda). As the detailed analysis of Zambia demonstrates, countries that lack BAs with preexisting institutional strength face an admittedly uphill struggle. The framework for coalitional emergence that I introduced in Chapter 1 is fleshed out below.

Coalitional Emergence Existing Institutional Strength The institutional strength of business associations and groups is a critical counterbalance to the state and an essential component in reform coalitions. Institutional strength is defined as including “high member density, valuable selective incentives, and effective internal procedures for mediating member interests.”33 Among these functions, Doner and Schneider argue, the ability to provide selective benefits/incentives to members is the most significant in explaining institutional capacity and developmental contributions.34 Selective benefits are “club goods,” in that they are excludable and divisible. Importantly, “when associations have crucial benefits that they can offer to members only, membership is valuable and exit becomes costly.”35 These range from “marketing, to export quotas, to export licenses, and import controls, to export market information, to upgrading support, to a privileged role as the exclusive intermediary with state actors, especially negotiators for trade agreements.”36 They might also include infrastructure, extension services, access to capital, and so on.37 Institutional strength in BAs tends to be associated with productive developmental behaviors rather than distributional, rent-seeking ones. For example, Doner and Schneider conclude that institutional strength is the key factor explaining business associations’ ability to contribute to developmental activities.38 After all, “poor, unrepresentative, and understaffed associations are rarely capable of redressing state and market failures, so associations first need institutional strength or capacity to perform positive functions.” Moreover, the authors argue, “the state was a key source of major selective incentives, either negative (sanctioning non affiliation) or positive (making membership more valuable).”39 As a result, institutional strength is not necessarily fixed; it can be enhanced by the state, such as through the assignment or delegation of selective incentives, or diminished by the state’s withdrawal of such incentives.40 The seeming contradiction here will be readily apparent. After all, I have suggested thus far that institutional strength is the key determinant of reform coalition formation. However, if institutional strength is itself dependent upon and bestowed by the state, then it would seem that the state (or factors within

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it) is the critical independent variable after all. Thus my line of argument appears to create something of a vicious circle by bringing everything back to the state: business association institutional strength is the principal independent variable that explains coalitions; however, the major source of institutional strength is the state; therefore, the state is the ultimate determinant of coalitions. Following this line to its logical conclusion, if the state does not possess leadership, ideas, or capacity to a substantial degree, then no coalition is possible, as suggested elsewhere.41 At least two conditions appear to invalidate this assertion, however. First, the composition of states themselves is impermanent: a change in the political or economic regime can precipitate a change in the very nature of the (African) state, its relationship with capital, and its commitment to development. To assume otherwise is to relegate Africa to an inalterable cycle while disregarding evidence of the economic and political changes especially since 2000.42 Second, as alluded to above, southern Africa’s peculiar history also fostered a situation in which business and state were not initially isomorphic; that is, they did not resemble each other in a pattern predicted by some analyses.43 In fact, in the postcolonial and postsettler environments with substantial nonnative business communities, institutional strength—and thus the possibility for coalition establishment—at least initially, appears to be unrelated to current factors within the state. Instead, residual institutional strength is an artifact of the colonial and apartheid regimes. Indeed, because the business association structures substantially predated independence, in southern African countries like South Africa, Namibia, and Zimbabwe, for example, relatively few instances of isomorphism were apparent as recently as the 1990s. Thus, colonialera economic institutions—their management, governance, interests, and memberships, and their institutional strength—largely persevered in those states that gained independence late and for a variety of reasons made no immediate move to eliminate them.44 Indeed, these states were ill-prepared to engage in such action. If state and business behaviors and characteristics begin to converge in a possibly less constructive isomorphic pattern, it is likely to be after a considerable lag, as in Zimbabwe’s experience. All of this suggests that a longer-term perspective, extending as far back as the colonial era, is necessary if we are to understand fully the development of institutional strength in the region.45 Although this book addresses businessstate relations in the colonial period only peripherally, it is nonetheless essential to note that a number of contemporary business associations, tracing their origins to the early twentieth century, have significant historical continuities with their colonial predecessors. Further, many aspects of development and economic institutional capacity—including the nature and degree of businessgovernment interactions—expanded the longer the region’s settlers remained in power. In Zimbabwe and South Africa in particular, international sanctions prior to independence gave states additional incentives to strengthen domestic

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institutions, including the then all-white business associations. It is, of course, a truism that the settler state existed to cater to the needs of the small white minority; less appreciated, however, is that the substate institutions created for that purpose did not simply disappear at independence. Admittedly, these business associations were inherently anticompetitive in the colonial period. They were heavily subsidized by the colonial and apartheid states, they held monopolistic or protected market access (especially amidst sanctions), and they were plainly recipients of selective benefits, courtesy of the state: designated, for example, as explicit licensors of business activity in a given sector, charged with vetting foreign exchange applications and export licenses, and so on. Consequently, they accumulated significant institutional strength and became the repositories for much domestic business knowledge and expertise. Following independence, Zimbabwe and South Africa retained associations and capacity, at least initially, with important implications for institutional strength and the birth of coalitions in these countries. By contrast, Zambia’s colonial-era BAs—always less powerful given the colony’s smaller private sector—were further diminished over time, beginning a few years after independence in 1964, when the first African government adopted a nationalist economic program. To illustrate the point more fully: neither Zimbabwe nor South Africa altered its essentially colonial-era economic structures until undertaking neoliberal reforms in the early and mid-1990s—which was almost ten years following independence in the Zimbabwe case. As a result, business associations maintained much of the institutional strength that they had amassed under the prior economic (and political) regimes for a long period. Through most of the 1980s, Zimbabwe’s political economy was characterized chiefly by coexistence rather than coalition between business and the state; although they cooperated on an ad hoc basis, they generally pursued parallel rather than complementary economic programs. In each country, it was only following market reforms, paradoxically, that some BAs lost many of the privileges, members, and functions enjoyed previously, although others were able to preserve their institutional strength. In sum, institutional strength can be both derived from the state (albeit the ancien régime in the cases noted here) and a causal factor in coalitional emergence, and we need not resort to circular reasoning or turn the state into the deus ex machina of which Evans warned. The existence of business associations with significant institutional strength ordinarily should be considered sufficient evidence of the corresponding existence of a coalition, since it suggests that the state has invested in and organized business. In southern Africa, however, with its substantial holdover of colonial-era associations, this was not always the case. There it has been possible for institutional strength to precede coalitions.

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State Power and Business Association Power Business associations’ institutional strength is not inversely related to state strength, but the two do exist in tension with one another and can be characterized by symmetries or asymmetries. If the state perceives its power or capacity to be limited or relatively weaker, then it will be inclined initially toward coalitional arrangements with business.46 These qualities are exacerbated in times of economic uncertainty and instability, such as during transitions. Conversely, if the state perceives its power to substantially exceed that of key BAs, then it has diminished incentive to establish a coalition with existing business institutions. State power manifests itself in various ways. Regarding its relationship with associations, power may rest in the state’s degree of ownership or intervention in the economy (via state-owned enterprises and control over export commodities and revenues, for example) or its position as the leading contributor to GDP, as well as in its typical role as the economy’s leading employer. The state’s monopoly (in most instances) of the means of force means that it faces minimal social or political rivals. In short, the state’s power stems from resources it owns and controls and from its political role as government. States ultimately predominate because they have the capacity to instill institutional strength or to sanction BAs. In spite of this actual power, however, perceptions are also critical. Notwithstanding the resources at its disposal, when it comes to coalitions, the state’s perception of its own power is affected by the institutional strength of its business counterparts. Business associations’ density (or degree of representativeness), cohesiveness (ability to mediate and sanction members), and economic role (through the control of selective incentives) have made them valued—in fact, powerful—partners for states that claimed only limited expertise with the vagaries of a marketbased economy. African states, even Zimbabwe and South Africa, which adopted liberalization “voluntarily,” were particularly vulnerable at the adoption of SAPs. The context of economic transitions, which were both novel and fragile, afforded organized business a “privileged position” in relationship to the state, not unlike that which Charles Lindblom attributed to Western enterprises.47 Coalition Formation as a Question of Institutional Choice Reform coalitions can be characterized as institutions, in that they are forms of sanctions and incentives that structure behavior and relationships among actors.48 Hence it is possible to examine how coalitions form through the framework of institutional choice, which seeks to explain both how actors make choices within a given set of existing and potential institutional settings and how institutions are created or evolve.49 The choice to act cooperatively within

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or outside specific institutions is governed by individual actors’ judgment about how best to achieve their desired ends.50 In the context of a transition, “actors choose among alternative institutions in the midst of uncertainty.”51 The process of institutional choice involves the establishment of rule structures for the transition as well as an agenda for how rules will be established in the future. As a result of repeated interactions, actors are expected to “ultimately converge on a political system that is mutually acceptable.”52 In short, institutions are chosen “by social actors to escape a problem.”53 In business-state relations, that problem centers on how two relatively power-balanced sets of actors with complementary interests, faced with the uncertainties of an economic and political transition, may arrive at a solution that benefits both. Institutions thus provide a specific “rule structure” within which “individuals are assumed to act in a self-interested manner to achieve their ends in response to others’ behavior and to the institutional structure.”54 In South Africa’s political transition, chronicled by Timothy Sisk, actors’ preferences converged based on recognition that positivesum outcomes were achievable.55 In reform coalitions, both business and state converge on an economic program that is mutually acceptable. The notion of relative equality between competing actors is a basic tenet of the literature on cooperation.56 It also informs the work on the role of elite pacts in transitions to democracy and offers valuable insights into the formation of reform coalitions between the state and business. Although “bargaining power relationships can be either balanced or unbalanced, favorably or not . . . when there is a roughly equal power relationship, the conditions for a mutually beneficial exchange are most likely to be present.”57 Importantly, as Sisk notes, “power is operationalized in terms of actors’ perception of their own resources, not on empirical standards.”58 Yet because southern African BAs generally lack the capital mobility that would enable them to “exit,” even in contexts where the state is considered relatively weaker domestically, both actors have a strong incentive to cooperate.59 The linkages between business association and state power attributes and the various possible relationships between the actors are depicted in Table 2.1. Recognizing that national-level abstractions can mask considerable diversity, with the table I attempt to characterize the overall relationship by depicting the circumstances under which reform coalitions are likely to emerge. The table also provides some hints about their possible trajectories, although these are more fully illustrated in the subsequent section. The principal objective of Table 2.1 is to depict the mode of business-state relations at or near the transition and the introduction of major economic reforms. Low/Low.60 While there are perhaps a fair number of states and societies that

have these characteristics, the low/low designation is atypical. Quite simply,

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Reform Coalition Emergence

Low

High

Low Distributional

I. Low/Low Localized power rather than national BAs or national policy Favors distributional coalition [warlordism?]

II. Low/High State control and individual firms Favors cooptation of BAs or irrelevance [Zambia]

High Productive

Business Institutional Strength

State Strength Perception

III. High/Low State incentive to cooperate with BAs Favors durable coalition [South Africa]

IV. High/High State incentive to cooperate with BAs Favors abortive coalition [Zimbabwe]

given weak BAs with little or no institutional strength, it is unlikely that a state would also perceive itself to be correspondingly weak in relation to them. Significantly, none of the states in this study conform to this position. Thus, “low/low” designates conditions of extreme predation and state decline in which institutions no longer function: state capacity is low or nonexistent, and institutional coherence within the state is profoundly absent. Since the state neither possesses capacity nor perceives that it does, the category essentially depicts a scenario of state failure such as Mobutu-era Zaire, or Sierra Leone and Liberia through much of the 1990s. This scenario does not lead to national strategies. On the contrary, it fosters side payments and transactions between individual business actors (outside the ambit of BAs) and political actors. In the most extreme circumstances, individual political and bureaucratic actors are indistinguishable from market ones or become business actors in their own right, possibly as “warlords.”61 Low/High. A situation in which business associations lack substantial institutional strength and the state is cognizant of its superior position vis-à-vis private sector organizations is the typical pattern found in sub-Saharan Africa.62 The state role, however, is instrumental. The Zambian state, for example, used its power to render business associations—which are themselves narrow and dependent—increasingly irrelevant by ignoring or co-opting them over the course of the 1990s. The state’s power position does allow it to channel distributional benefits to politically connected firms. Yet though this category certainly favors state control, we cannot necessarily impute nefarious (antidevelopmental) motives to African states. Indeed, it is possible, if unlikely, that the state will exhibit leadership and use its strong position to enhance

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BAs’ institutional strength by directing selective incentives toward them. This is the developmental path followed initially by the Park Chung Hee regime in Korea beginning in the early 1960s, for example, but it is unusual in postcolonial Africa.63 High/Low. An environment in which BAs have institutional strength in their

favor but states correspondingly perceive a relative lack of strength is most likely to materialize in countries with historically influential business sectors that are experiencing the uncertainty of an economic transition. Perceiving itself to be weaker, the state has strong incentive to cooperate with associations that have already amassed a fair degree of clout. This tends to favor a durable coalition, because BAs may use state concessions to consolidate their economic position, while the state’s augmentation of its own economic capacity and expertise requires training or replacement of personnel that may take some time to achieve. Over time, the initial state vulnerability and weakness certainly ebbs, but trust and reciprocity between state and business can be enhanced via repeated interactions. High/High. Sisk and others argue that “a roughly equal power relationship” enhances the prospect for cooperative relations between actors. In general, this also holds for business-state relations. Indeed, although not precluding cronyism, the stability born of this balance of power “can make long term agreements and investments more beneficial,” as David Kang suggests occurred eventually in Korea.64 Conversely, not cooperating increases the likelihood of mutually hurting outcomes. It should be noted, however, that a “high/high” scenario is unusual in the context of coalitional emergence: since institutional strength typically comes from the state, ordinarily the state’s power affords it the capacity to initiate a reform coalition. Where this “balance of power” has occurred, as in Zimbabwe, it favored the emergence of coalitions, at least in the short term. In Zimbabwe, however, this perception of equality led the state to regard business associations as rivals. Whether a state can turn a potential adversary into a prospective longterm partner is a question this analysis confronts. In part because institutional strength predates the coalition and southern African BAs owe their institutional strength to the ancien régime, high BA institutional strength and high perceived state power are marked by an uneasy coexistence. As in the high/low category, the state does not enjoy a dominant position vis-à-vis business, but it has more discretion in choosing whether to cooperate fully with business than do those states that perceive themselves to be disadvantaged relative to business association power. Since grudging compromise is often preferable to state actors in the context of transition and corresponding uncertainty about the future, I argue that they choose to cooperate, initially.

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Zimbabwe corresponded to this high/high designation in 1990. By the end of the 1980s, the independent state had accrued considerable economic power, though it was not able to dominate the resident, predominantly white, BAs. The high/high classification also appears to apply to Venezuela early in the presidency of Hugo Chavez. Chavez did not move immediately to break the backs of organized business and the institutional strength bestowed upon them under the previous regime; rather, he cooperated, uneasily, with the principal business association partner, Federation of Chambers and Associations of Commerce and Production (FEDECAMARAS). Although elected as a populist in 1998, President Chavez did not initially attempt to usurp the institutional strength of FEDECAMARAS, though this happened subsequently.65 Neither the Zimbabwean coalition nor the Venezuelan one endured more than a few years. Indeed, by 2000, Zimbabwean BAs’ institutional strength was virtually exhausted. Yet whereas these cases suggest that coalitions founded by putative partners that enjoy comparably high levels of strength tend to be short lived, this need not inevitably be the case. In fact, “high/high” should be the goal of the crafters of coalitions: high institutional strength benefits the economy overall and indicates that the state has “invested” in business and promotes isomorphic patterns. In short, state leadership matters increasingly over time. The developmentally inclined state will see the benefits of maintaining BA institutional strength and will make preservation of the coalition a priority. Mauritius, with its durable, cooperative relations between relatively balanced business and state actors, stands out as an example of a successful high/high pattern.66 In sum, although coalitions can emerge in either of the lower quadrants of Table 2.1, patterns of state behavior in southern Africa suggest that the high/low scenario favors the emergence of coalitions that are more likely to be durable. If state actors not fully confident in their capacity to navigate virgin economic terrain yet are willing to engage business associations that possess preexisting institutional strength, this establishes a foundation for repeated interactions and trust building. Admittedly this places a large burden on the shoulders of business, but the history of government hostility to business in Africa must raise genuine concerns about the risks of assigning too much power to state actors at the outset. Of course power relations, and perceptions thereof, can and do shift over time, and the state’s initial dependence on its business partners eventually fades. Hence, regardless of the existence of business’s institutional strength in the early stages of a transition, ultimately its maintenance is up to the state. Chapter 3 explains how Zambia’s fledgling effort at coalition building rapidly fell apart. Given this short-circuiting at its formation, the issue of durability appears almost superfluous. Hence, the arguments advanced below about coalition endurance principally apply to the Zimbabwe and South Africa cases.

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Reform Coalition Endurance The key to coalition endurance, like emergence, is institutional strength. State incentives for maintaining the institutional strength of its business association counterparts are rooted in the utility of the relationship. Hence, my argument for coalitional endurance treats institutional strength as an intervening variable. The principal argument pertaining to coalition endurance is that states maintain cooperation with key BAs within a reform coalition when the relationship continues to provide the state with benefits, that is, as long as this relationship has utility for the state. The assumption that business actors have utility for states lies at the core of the articulation of the “business-as-capital” approach by Stephan Haggard, Sylvia Maxfield, and Ben Ross Schneider: states recognize the benefits business provides and are inclined to treat it accordingly, lest capital owners choose to “exit” and take their capital elsewhere.67 The level of utility that businesses and their representative associations can offer the state, therefore, is an essential factor in explaining their continued access to and cooperation with the state, thereby maintaining or enhancing institutional strength. This, in turn, affects the likelihood that government policymakers will respond to business pressure by reforming policy.68 The intersection between institutional strength and utility, as well as actual coalitional trajectories, is illustrated in Figure 2.1. As shown in Figure 2.1, institutional strength and utility are both essential to the continuation of coalitions of business and state. Utility without institutional strength can generate narrowly shared benefits, reinforce oligopolies, or descend into collusion, since it favors conditions for co-optation of business groups; institutional strength without utility foreshadows marginalization by the state rather than coalitional formation. Thus, business associations characterized as “marginal” (the upper-left quadrant of Figure 2.1) maintain some institutional strength, but the loss of arguably the most important selective incentive, access, means that they no longer have an impact. They may continue to perform a range of services to members for a time (hence continuing to be relevant to members), but an association’s loss of access and state-authorized selective incentives means that it will slide inexorably toward irrelevance absent further positive intervention by the state. Irrelevant BAs are, by definition, ignored by the state; they will eventually be abandoned by erstwhile members as well, thereby losing the density of membership that makes an organization viable. The basis for an organization’s utility can be either economic or political: more specifically, utility lies in either resource generation or constituency representation, or both. It is possible to envision other possible components of “utility” in the business-state relationship, but I believe the resource and constituency dimensions are particularly instructive in the study of African reform coalitions. (Of course, nonproductive, rent-seeking, and corrupt associations

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Endurance and Collapse: The Relationship Between Institutional Strength and Utility Institutional Strength

MARGINALIZATION

ACCESS South Africa

Marginal BAs

Reform Coalition Zimbabwe, 1991–1997 3 00 7–2 9 19

Utility Zambia Zimbabwe “Indigenous” BAs 1997–2003

Irrelevant BAs

DISINTEGRATION

Distributional Coalitiona

CO-OPTATION

Note: a. This table captures overall business-state relations in the three states. Finer distinctions can be made, for example, between individual business associations (BAs) and the respective states, and such within-case variation is discussed in the country chapters. Zimbabwe’s indigenous BAs are highlighted in the figure because they assumed a prominent national role in that country after 1997. Although South Africa has similar “indigenous” associations, they are clearly subordinate.

may also have “utility” for states, but if the state enters a coalition with such organizations it will emphasize distributional rather than productive policies, as depicted in Figure 2.1.) Economic utility may be determined by the degree to which the state can avail itself of the resources generated by the private sector. Simply put, utility is higher where key national BAs (1) provide, or have demonstrable potential to provide, tangible revenue benefits to the state, such as through tax receipts and foreign exchange earnings, (2) supplement state capacity, for example by contributing to physical and financial infrastructure, (3) offer a major source of formal sector employment, or (4) permit access to export markets. Within the broader considerations of economic utility and the capacity for resource generation, the export dimension is pivotal.69 In the liberalization environment of the 1990s, which saw “development” defined increasingly in

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external terms, the national connection to the global economy through export markets, expertise, and access was emphasized. Exports provide the only source of earned foreign exchange and the major source of state revenues; therefore, exports correspond with the highest utility. However, the export base of African countries is narrow, typically dominated by a single sector and a few product lines, which are generally unrefined raw materials; even South Africa is not an exception to this pattern. Consequently, the range and diversity of BAs that possess this important dimension of utility has been circumscribed historically. And while a significant incentive exists for firms and the state alike to expand nontraditional exports—amidst overall policies of trade liberalization embedded in economic reform programs—success remains elusive in most countries.70 Thus, groups that represent members that have already made inroads to export markets have greater utility for the state than those that do not, because the former represent a key source of foreign exchange, can provide valuable information to the state about the productive capacity of their members, and can aid in state planning and sectoral policy.71 Such business capacity generates utility—value—for the country as a whole, and as a result, governing elites have greater incentive to sustain the reform coalition. In some countries, perhaps most, political utility refers to the size of the voting bloc represented by business interest groups, their ability to make campaign contributions, and their overall capacity to be an asset to their partners in the government. In southern Africa the political dimension of utility pertains as much to who these businesspeople are as to what they or their firms and associations do for government. Thus, as in other polities where minorities dominate business, political utility chiefly speaks to the importance of ethnic and racial constituencies, which may affect the endurance of the reform coalition.72 For example, as discussed in Chapter 4, the white-dominated business associations in Zimbabwe were valued by the state for many years precisely because their racial composition meant they could never have sufficient numbers to represent a political threat to the state. The discussion that follows addresses the principal economic factors that contribute to coalitional collapse, before turning to the more explicitly political considerations associated with various ethnic or racial constituencies.

Coalitional Collapse The circumstances under which a reform coalition collapses are also state driven. A core assumption of this book is that business actors consistently seek to maintain the reform coalition: business power in Africa, unlike in Latin America, tends to be apolitical in the sense that it lacks an independent political base and the class characteristics of its Latin counterparts,73 and business

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therefore has an inherent incentive to cooperate with the state. As a result, coalition collapse is almost exclusively instigated by the state: the state will cease to cooperate and will exit the reform coalition when state actors determine that the costs of maintaining the close relationship with business outweigh the benefits that derive from it. The catalyst for such change is threat. It is worth noting that in the African cases, states faced with threat do not seek to shore up their business constituencies by organizing business, as in Latin America, but tend to do precisely the opposite. Economic Utility: Diminishing Returns The utility of business association actors is undermined by economic threats, such as declining economic performance in particular sectors, as well as political ones. As African states and businesses are exposed to global markets through liberalization of trade, local enterprises have proved largely unable to compete with international firms, particularly absent the government subsidies, protectionism, and captive foreign markets enjoyed by their Asian counterparts in an earlier era. Only exceptional firms in Africa are already conditioned to competitive international markets. In such an environment, clearly those businesses that possessed export orientation and capability prior to liberalization have a distinct advantage over their counterparts. In southern Africa, and in Africa as a whole, this group is confined mainly to mining companies, large commercial farming operations, and a limited number of manufacturers. Moreover, those with expertise in export markets tend to be older, more established, and predominantly white-owned firms or affiliates of multinational corporations—although preferential international trade agreements, such as the U.S.-sponsored Africa Growth and Opportunities Act (AGOA), may expand the number of exporters over time.74 Yet while the economic dimension, particularly export capacity, is an important component of the utility variable, investigation of the political dimension of utility is essential for a fuller understanding of what made Zimbabwe’s coalition collapse and an appreciation for the challenges faced by South Africa and others. In plural societies with a history of ethnic and racial competition, political utility correlates with ascriptive characteristics and the relative importance to the state of key ethnopolitical constituencies. Political Utility: Some Constituencies Are More Valuable Than Others Southern Africa’s business groups and associations mirror the ethnic and racial mosaic of the societies they inhabit. Thus one finds in the region associations whose members are overwhelmingly white, predominantly or exclusively black, and racially mixed. Further, within the former two categories there may

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be finer distinctions, such as Afrikaner versus English among South African whites, or Shona versus Ndebele among Zimbabwean blacks. These ethnoracial characteristics are linked to organizational capacity and affect the group’s relationship with the state. Whereas racially and ethnically heterogeneous BAs are increasingly common, one of the residual effects of southern Africa’s settler origins is the existence of many BAs that continue to be associated with a dominant ascriptive category. In the still substantially divided societies of the region, the composition of BAs can affect the state calculus for sustaining a coalition. State alliances with associations that have a predominant racial or ethnic identity often carry important symbolism, and not always favorable. In short, coalitions with certain key groups can benefit state actors. Conversely, the state will eschew coalitions with business groups whose members represent a political liability, even if those groups have economic utility. Businesses and associations owned and controlled by settler minorities, which are particularly common in southern Africa, are frequently the most economically powerful. As noted above, because of their colonial-era head start, the racial composition of southern African business associations tended to covary with institutional strength well into the 1990s. White-dominated associations far exceeded black associations along the three dimensions of institutional strength: member density, internal mediation procedures, and selective benefits. However, the racial composition of a business association is not necessarily consistent with long-term political utility. As the Zimbabwe case illustrates most starkly, states in southern Africa may change their assessments about BAs and assumptions about their utility over time, regardless of their continued economic contribution. Initially, minority- (i.e., white-) dominated businesses and associations may provide economic utility to states, with the added benefit that they represent no direct political threat themselves. Indeed, the demographics of postcolonial Africa find nonblack populations in a small minority, incapable of using economic wealth to mount a direct political challenge as a class. After all, as Doner and Schneider note, “minority status often encourages ethnic groups to adopt low political profiles and avoid confrontation with host governments. As a result, business associations might therefore generate economic benefits, but probably not political ones.”75 Clearly, both tacit and explicit alliances with minority capital can become a political liability for state elites over the long term, as in Zimbabwe, Indonesia, and elsewhere.76 This is particularly evident in times of economic hardship, when the majority may blame minority groups for their condition and demand action by the state.77 Of course, the converse—shared kinship ties between business and state elites— can also facilitate business-government relations. However, an extensive literature suggests that these alliances typically (but not ineluctably) center on distributional or neopatrimonial ties and are not, by definition, reform coalitions.78 Since this chapter theorizes the emergence and evolution of re-

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form coalitions, the subject of racial- or ethnic-based patronage linkages—and hence the question, what does the state do in lieu of a reform coalition?—is taken up in greater detail in subsequent chapters. Political threats to coalition endurance stem from political vulnerabilities, specifically, the government’s concern for its potential loss of power; economic utility and institutional strength tend to be casualties of such threats. Often threats are unpredictable and entirely exogenous to the coalition, yet they may cause the state to turn on its erstwhile business partners. When state actors deem it a greater threat to their political power to maintain the coalition than to exit it, the coalition is doomed. As noted above, this appears to be the mirror opposite of the predominant reaction to threat that Schneider finds in Latin America. There the state took refuge in its relationship with business, using times of economic crisis to organize business, thereby promoting collective action, and to grant high-level access to policymakers. Over the course of the twentieth century, numerous Latin American states were willing to draw on the expertise of their business communities. It would be specious to suggest that African state actors are any more obsessed with the preservation of power than are their Latin American counterparts. Rather, the long historical relationship with business in Latin America and record of past cooperation has taught state actors that business can be a useful ally in a time of crisis.79 Mexico, for example, has a history of this form of crisis management, where the government recognized that greater levels of organization helped bring large numbers of the most powerful firms into close contact with the state, thereby displacing or minimizing potential opposition.80 Importantly, an African state’s action to curtail real or perceived political threats by breaking with its business partners can prove highly damaging to the overall economy, as the Zimbabwe case most starkly reveals. Notwithstanding the economic benefits, both realized and potential, of establishing and maintaining reform coalitions, the preservation of state actors’ power becomes paramount. In fact, the subversion of economic efficiency to political exigencies can still be considered rational behavior, as public choice analyses have shown.81 Although in successful cases of coalition establishment state-business power is roughly equal or favors business at the time of the transition, afterward African business groups tend to undergo a decline in institutional strength relative to the state. Thus, in subsequent iterations, the problem of incomplete information no longer affects the state: indeed, state actors become aware of the potentially detrimental effects of economic liberalization on key business segments and that the maintenance of institutional strength requires explicit state sanction. Hence state actors must see continued self-interest in supporting and maintaining the reform coalition rather than defecting from it.82 Their calculation of self-interest is affected by the level of threat experienced. Specific threats are difficult to generalize, as different countries have

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different threat calculations or thresholds. Determining state capacities for varying levels of threat, that is, at what point states abandon coalitions, is beyond the scope of this study; however, evidence from the Zimbabwe experience suggests that the abandonment of an existing coalition does not occur in a single event but instead over the course of a steady reduction in BAs’ access to the state and thus in institutional strength. Evidence from both South Africa and Mauritius also suggests that giving nascent reform coalitions a more formal institutional structure may give them greater capacity to minimize or withstand subsequent threats.83 Such institutions have formal organizational structures, shaped by state and business, often with binding statutory authority, to promote bilateral (or multilateral) negotiations. A prominent example of such a body is Nedlac in South Africa. However, such quasi-corporatist bodies operate in a substantially pluralist environment; therefore, although BAs’ membership may be mandatory and their decisions are often binding, organizational pluralism means that alternate avenues exist for firms and BAs alike to influence the state. Nonetheless, I contend that a coalition enshrined in a formal, institutional arrangement that provides a legal-organizational framework is better able to withstand common threats and thus is less likely to collapse as rapidly as a less structured organization. The cases in this study tend to bear this out. Withstanding Threats, Averting Collapse: Pacts and Formal Organizations Analyses of corporatist pact-making generally conclude that societal corporatism, with its call for institutionalized bargaining, explicit class compromise, and organized interest intermediation, fits uneasily into the fabric of African political economies.84 Moreover, in a study of business and politics in Latin America, Schneider observes that corporatism is “somewhat faded” and is unhelpful in explaining business organization.85 Even among those who once vigorously defended corporatism’s application to Africa, it was regarded more as a supplement rather than a replacement for pluralist theories.86 Nevertheless, corporatism can offer some insights into the role of the state in effecting durable coalitional structures. Indeed, drawing on elements of the literature on corporatism and social pacts, Haggard, Maxfield, and Schneider note that “such institutions provide a forum for negotiation between representatives of business, government, and labor that can resolve the strategic dilemma of governmentbusiness cooperation. By creating opportunities for repeated interactions, such institutions lengthen time horizons and create trust.”87 It is, of course, naive to suggest that any reform coalition could be a permanent feature of a country’s political economy; a coalition is, by definition, a flexible entity. Nevertheless, a formal organizational framework agreed to early in the life of a coalition appears to lend it more staying power than an in-

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formal one.88 An agreement, or pact, accompanying the adoption of the new economic program and resulting in the establishment of a formal negotiating forum helps extend the life of the coalition by reducing the zero-sum assumptions of the actors and institutionalizing cooperation. However, the pact model, too, has limits. First, Bratton and van de Walle suggest that only former settler regimes have the capacity for formal pacts, in part because their stronger political and economic institutions give actors a context to “convincingly negotiate” power sharing and because the settlers have retained economic hegemony and therefore must be reckoned with.89 Among the countries in this study, the transitional situation produced a negotiated pact and eventually led to the creation of an organizational structure only in South Africa, a fact that suggests that this relatively successful model may be difficult or impossible to replicate elsewhere. Second, the timing of the organization’s inauguration appears to be particularly crucial. As discussed above, power tends to migrate toward state actors following the transitional period. Years after the transition, the state may initiate or attempt to initiate a negotiating forum; indeed, this happened twice in Zimbabwe during the late 1990s. Yet the state’s imposition of such a forum should be greeted with some skepticism. Absent tangible steps to preserve or restore BAs’ institutional strength, the mere establishment of a posttransition business-state “negotiating forum” is more likely to be regarded by business groups as window dressing than seen as a meaningful locus of policymaking; this proved true in Zimbabwe. Conversely, when a formal pact is agreed to as an explicit component of the economic transition and results in the inauguration of a negotiating body, it has the greatest opportunity for success. As Kathryn Stoner-Weiss argues in regard to business-state relations in the former Soviet Union, a “transitional or crisis situation can promote cooperation.”90 Importantly, this transitional period is a time when both sides are most mutually dependent. What is the state’s incentive for entering into such long-standing structural commitments rather than a less formal arrangement? The literature on pact making and democratic “crafting” may be helpful in elucidating state incentives for pacts in the economic arena. I argue that the characteristics of socalled democratic transition pacts are equally valid in a transition from one economic regime to another. A pact sets the conditions at the time of transition on “new rules, roles and behavioral patterns which may (or may not) represent an important rupture with the past.”91 Like a coalition itself, a formal pact is arrived at when political and economic actors “conclude that previous confrontational strategies were detrimental to the interest of their constituencies and threatened their own survival.”92 “In a pact, elites agree upon a multilateral compromise among themselves.”93 What differentiates pact from coalition, however, is the former’s explicit call for “mutual guarantees for the ‘vital interests’ of those involved” and the attainment of interlocking accords that are

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dependent on one another.94 Pacts are inclusionary but also “simultaneously aimed at restricting the scope of representation in order to reassure traditional dominant classes that their vital interests will be respected.”95 Many of these features plainly apply as well to the initial emergence of a reform coalition, as discussed earlier in the chapter. Though the coalition is itself an institution, a reform coalition is not necessarily embodied in a formal organizational structure. The South African case reveals that the process through which an elite pact is advanced, however, lends itself to the establishment of a formal institutional structure that protects the “vital interests” of state and economic actors. The absence of a national formal negotiating forum does not preclude the existence of a coalition: cooperation may still take place on an institutionalized basis but without the organizational infrastructure. Yet the establishment of that infrastructure early on provides important signals to national business associations that the state is committed to sustained cooperation and collaboration.96

A Comparative Case Study Approach to Business-State Relations A principal objective of this research is to make national-level distinctions about business-state relations in each of these countries and the problems of coalitionmaking. A broader goal of the book is to contribute to theory building about the processes of business-state coalitional emergence and of coalitional endurance in Africa. Although macro-level national analysis necessarily requires certain abstractions, it is clear that neither “business” nor “state” is a unitary actor in these countries or any other African polity. As such, the investigation necessarily requires multiple levels of analysis: the firm level, the business association or societal level, the state level, and the level at which they interact, which some refer to as the “meso.” Thus it is necessary to compare business associationstate relations within states in order to draw conclusions about the nature of the collective business-state relationship in each country and the capacity of that relationship to generate outcomes consistent with economic strengthening. I then compare the relationships across states. This allows within-case comparisons as well as among the three countries. Comparable cases should be “similar in a large number of characteristics, but dissimilar with regard to variables between which a relationship is hypothesized.”97 The three countries this book examines were selected for their similarity among a number of characteristics at the national level (i.e., the control variables). Several fundamental commonalities among the cases are worth reviewing. These include a shared history of settlers and the continued importance of white minorities; a significant degree of cultural pluralism; urbanization and industrialization.98 Another related factor is the similar origins of

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business institutions. In several southern African states, European businesses “formed the backbone of business association strength during the post-colonial period. After independence, non-European businesses could join these associations and take full advantage of their pre-existing capacity and their ‘close working relationship with government’ rather than building slowly from a low base, as in many other countries.”99 Thus, as argued throughout this chapter, many business associations achieved and retained institutional strength by independence. Finally, Zambia, Zimbabwe, and South Africa each committed to neoliberal reform programs in the 1990s, which profoundly affected the environment in which negotiations and interactions have taken place. Taken together, these and other considerations justify exclusion of other southern African states from the scope of the analysis. Neither Namibia nor Botswana, for example, adopted or had need for a structural adjustment program, and thus neither had need for the type of reform coalition born of an economic transition, as in Zambia, Zimbabwe, and South Africa. The differences between Anglo-American social and business practices also provides a rationale for omitting Mozambique and Angola from the study, with their distinct Lusophone traditions. Moreover, these two Afro-Marxist states constrained private sector activity to a much greater degree throughout their histories, requiring an extensive re-creation of their private sectors.100 And finally, the postwar environments now prevailing in each of those states also differs from the long, relatively stable context in which business-state relations evolved historically in Zambia, Zimbabwe, and South Africa. In sum, these three southern African polities shared similar and intertwined histories, comparable economic regime types, and, in the 1990s, broadly similar political structures, but they differ in a number of important ways as well. Most important, the dependent variable—formation/nonformation of coalitions and their duration—offers a similar class of events to be analyzed in each case. However, since the outcomes differ, this variation in the dependent variable allows us to make useful comparisons across the cases, particularly in terms of the institutional strength of BAs, state power, utility, and the existence of formal versus informal institutions. The methodological problem of establishing causality has been duly noted by scholars of business-government relations who employ case study methods.101 However, the method of process tracing, which “attempts to identify the intervening causal process—the causal chain or causal links—between an independent variable (or variables) and the outcome of the dependent variable,” can be helpful in establishing a causal sequence and reaching explanations.102 Borrowing from the model developed by D. Michael Shafer, it is possible to first, identify the policy preferences of business associations and members (whether narrowly distributional or broadly developmental) and their ability to deliver them (institutional strength); second, determine how they are grouped into politically and economically relevant social forces (collective action among BAs

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and the achievement of national business organizations); third, trace the aggregation of organized state and business interests in the context of existing institutions (coalition formation); fourth, determine and trace pressures that induce states to enter into coalitional arrangements with business or, alternatively, reject appeals and entreaties from business; and finally, examine policy outputs and determine the degree to which they are reflective of the mass of business preferences and interests.103 Individual decisionmaking at the level of state and business elites is key to coalitional formation and endurance. Thus process-tracing methods are uniquely suited to this kind of study and its use of multiple levels of analysis and individual interview data.

Conclusion This chapter has set out a framework for examining business-state relations in Africa, especially the features that contribute to coalitional emergence, durability, or collapse. Whereas the variables that explain these phenomena are similar to those observed elsewhere in the developing world, they manifest themselves differently in southern Africa, particularly in regard to coalitional emergence. Coalitions emerge amidst a rough balance between state and business actors. In Zimbabwe and South Africa, BA institutional strength predated the regime transitions of the 1990s. Business associations therefore used their institutional strength, which was initially an asset to states, in order to help fashion coalitions to institute reforms. Thereafter, however, southern Africa resembles most other developing areas in that the state is the critical actor in what transpires after a coalition takes shape. In most cases in sub-Saharan Africa, business organizations have incentives to cooperate with states rather than defect. The nature of domestic capital in Africa is that it tends not to be mobile and seldom can threaten to exit. Moreover, often no credible opposition exists to whom BAs could align, or threaten to align, their interests, even in the second decade of African democratization. Coalitions with the state ensure access, credibility, and policy “voice.” The broader and more multisectoral, or “encompassing,” a given business association, the more positively it augurs for development. For their part, states may exercise far greater choice in Africa. The state will abandon the reform coalition when it perceives that its relationship with business comes at too high a cost—that is, at the cost of its retention of power. In Zambia, Zimbabwe, and South Africa and across the continent, African states adopted liberalization and reforms in the 1990s. It was widely expected— and largely taken for granted by business actors—that states would embrace business and BAs. These countries offer a range of cases with divergent out-

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comes, enabling us to explain how coalitions emerge or fail to emerge, how they are sustained, and how they collapse.

Notes 1. See Timothy Sisk, Democratization in South Africa (Princeton, NJ: Princeton University Press, 1995), 46, n. 23. 2. Richard Doner and Ben Ross Schneider, “Business Associations and Economic Development: Why Some Associations Contribute More Than Others,” Business and Politics 2, no. 3 (2000): 272. 3. Sustained policy agreement or influence—including especially outcomes that were explicitly sought by BAs rather than those that may be favorable but are arrived at randomly—can be demonstrated through a causal chain of actual influence. D. Michael Shafer, Winners and Losers: How Sectors Shape the Development Prospects of States (Ithaca, NY: Cornell, 1994). 4. Charles Lindblom, Politics and Markets: The World’s Political Economic Systems (New York: Basic Books, 1977). 5. Business support or nonsupport for reform in the case of coalitions: Peter Kingstone, Crafting Coalitions for Reform: Business Preferences, Political Institutions, and Neoliberal Reform in Brazil (University Park, PA: Penn State University Press, 1999); Strom C. Thacker, Big Business, the State, and Free Trade: Constructing Coalitions in Mexico (Cambridge: Cambridge University Press, 2000). Business organization: Ben Ross Schneider, “Patterns of Business and Politics in Latin America,” typescript, 2003. Business “contribution” to markets: Doner and Schneider, “Business Associations.” Business “contribution” to “economic performance”: Ben Ross Schneider and Sylvia Maxfield, “Business, the State, and Economic Performance in Developing Countries,” in Business and the State in Developing Countries, edited by Sylvia Maxfield and Ben Ross Schneider (Ithaca, NY: Cornell University Press, 1997). 6. These economic models have been employed by many political scientists. Production profile is elaborated by Helen Milner and Peter Gourevitch; factor endowment theories, the Stolper Samuelson model, is elaborated by Ronald Rogowski; and specific factors arguments is elaborated by Jeff Frieden. See Kingstone, Crafting Coalitions, 14; Stephan Haggard, Sylvia Maxfield, and Ben Ross Schneider, “Theories of Business and Business-State Relations,” in Business and the State in Developing Countries, edited by Maxfield and Schneider. 7. Kingstone, Crafting Coalitions, 17, drawing on Peter Gourevitch, Politics in Hard Times: Comparative Responses to International Economic Crises (Ithaca, NY: Cornell University Press, 1986). 8. Kingstone, Crafting Coalitions, 17. 9. Ibid., 234, following Dani Rodrik, “The Rush to Free Trade,” in Stephan Haggard and Steven Webb, Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment (New York: World Bank and Oxford University Press, 1994), 83. 10. Rodrik, “Rush to Free Trade,” 83. 11. Doner’s explicit treatment of business-state coalitions is a noteworthy exception; see Richard F. Doner, Driving a Bargain: Automobile Industrialization and Japanese Firms in South East Asia (Berkeley: University of California Press, 1991). 12. Kingstone, Crafting Coalitions, 19.

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13. Ibid., 20. This is also the issue addressed by Stephan Haggard and Steven Webb in their introduction to Voting for Reform. 14. For example, Patrick Chabal and Jean Pascal Daloz, Africa Works: Disorder as Political Instrument (Bloomington: Indiana University Press, 1999). 15. Nicolas van de Walle, African Economies and the Politics of Permanent Crisis, 1979–1999 (Cambridge: Cambridge University Press, 2001). 16. John Lucas, “The Politics of Business Associations in the Developing World,” Journal of Developing Areas 32, no. 1 (1997): 71–96. 17. Peter Evans, Embedded Autonomy: States and Industrial Transformation (Princeton, NJ: Princeton University Press, 1995), and “State Structures, GovernmentBusiness Relations, and Economic Transformation,” in Business and the State in Developing Countries, edited by Maxfield and Schneider. 18. Lucas, “Politics of Business Associations,” 73. 19. David C. Kang, Crony Capitalism: Corruption and Development in South Korea and the Philippines (New York: Cambridge University Press, 2002). 20. Ben Ross Schneider, Business, Politics, and the State in Twentieth-century Latin America (Cambridge: Cambridge University Press, 2004), 6. 21. Ibid., 11. 22. Ibid., 13, emphasis added. This argument is an elaboration of the view that business associations are isomorphic with government (Haggard, Schneider, and Maxfield, “Theories of Business,” 50). In southern Africa, however, this is not entirely the case, as discussed below. 23. See Evans, “State Structures,” 65. 24. Thacker, Big Business; Kingstone, Crafting Coalitions. 25. Kingstone, Crafting Coalitions, 20. 26. Ibid., and Thacker, Big Business. On trade, see Rodrik, “Rush to Free Trade”; Ronald Rogowski, “Structure, Growth, and Power,” in Toward a Political Economy of Development: A Rational Choice Perspective, edited by Robert Bates (Berkeley: University of California Press, 1988). 27. Roger Tangri, The Politics of Patronage in Africa: Parastatals, Privatization, and Private Enterprise (Oxford: James Currey, 1999), 97. 28. Deborah Bräutigam, Lise Rakner, and Scott Taylor, “Business Associations and Growth Coalitions in Sub-Saharan Africa,” Journal of Modern African Studies 40, no. 4 (2002): 519–547. 29. Ibid., 521. 30. Evans, “State Structures,” 65. 31. Richard Joseph, “Africa: States in Crisis,” Journal of Democracy 14, no. 3 (July): 159–170; Jeffrey Herbst, States and Power in Africa: Comparative Lessons in Authority and Control (Princeton, NJ: Princeton University Press, 2000); Chabal and Daloz, Africa Works. 32. Bräutigam, Rakner, and Taylor, “Business Associations”; Lise Rakner, “The Pluralist Paradox: The Decline of Economic Interest Groups in Zambia,” Development and Change 32, no. 3 (June 2001). 33. Doner and Schneider, “Business Associations,” 263. 34. Ibid., 279. The ability to provide selective incentives as a source of collective action follows Mancur Olson, The Rise and Decline of Nations: Economic Growth, Stagflation, and Social Rigidities (New Haven, CT: Yale University Press, 1982). 35. Ibid., 271. 36. Ibid. 37. Peter John Lucas, “State and Society in Nigeria: A Study of Business Associations in Kano,” Ph.D. diss, Indiana University, 1993; Scott Taylor, “Business and Pol-

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itics in Zimbabwe’s Commercial Farming Sector,” African Economic History 27 (1999): 177–215. 38. Although it is not an “iron law” that BAs with institutional strength are synonymous with developmental associations, Doner and Schneider found that institutional strength was often channeled away from distributional activities (“Business Associations,” 278). See also Jack Knight, Institutions and Social Conflict (New York: Cambridge University Press). 39. Doner and Schneider, “Business Associations,” 273, emphasis added. 40. Ibid., 263. 41. Bräutigam, Rakner, and Taylor, “Business Associations.” 42. Peter VonDoepp and Leonardo Villalon, “Elites, Institutions, and the Varied Trajectories of Africa’s Third Wave Democracies,” in The Fate of Africa’s Democratic Experiments, edited by Peter VonDoepp and Leonardo Villalon (Bloomington: Indiana University Press, 2005). 43. Doner and Schneider, “Business Associations.” 44. The colonial-era state was instrumental in shaping these associations, often at times of great domestic or international instability. Over time, however, such organizations become, as Schneider (“Patterns of Business and Politics in Latin America,” computer printout, 2003, 4) observes, “less malleable.” This suggests limits to isomorphism: business becomes more of a powerful actor in its own right through iterated (and empowering) interactions with the state. In Zimbabwe, this loss of “malleability” contributed to insuperable conflict between the state and the white-dominated (“settler”) business community. 45. Schneider, Business, Politics; see also Bräutigam, Rakner, and Taylor, “Business Associations,” 544. 46. This is a pragmatic response to external and internal pressures concurrent with liberalization. Although it assumes some developmental inclination on the part of states, it does not preclude subsequent rent-seeking behaviors by the state. 47. Lindblom, Politics and Markets. 48. The following discussion draws extensively on Sisk, Democratization in South Africa, particularly his concise treatment of the new institutionalism (45–51). Sisk’s own summary is particularly beneficial here given his focus on institutions in the context of transition, specifically in southern Africa. Sisk, of course, is concerned primarily with a transitional democracy pact between political competitors, but the logic applies equally well to business and state actors confronting a transition to a new economic regime. 49. Ibid., 45. This line of argument follows James March and Johann Olsen, Rediscovering Institutions: The Organizational Basis of Politics (New York: Free Press, 1989), 160–162. But institutionalists see the state only as a set of institutions. See Gary Hawes and Hong Liu, “Explaining the Dynamics of the South East Asian Political Economy,” World Politics 45, no. 4 (July 1993): 629–660; Richard Doner, “The Limits of State Strength: Toward an Institutionalist View of Economic Development,” World Politics 44 (1992): 398–431. 50. See Robert Axelrod, The Complexity of Cooperation: Agent-Based Models of Competition and Collaboration (Princeton, NJ: Princeton University Press, 1997). 51. Sisk, Democratization in South Africa, 47. 52. Ibid., 6. 53. Ibid., 45, citing George Tsebelis, Nested Games: Rational Choice in Comparative Politics (Berkeley: University of California Press, 1990), 92. 54. Ibid., 45. 55. Ibid., 13.

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56. Robert Axelrod, The Evolution of Cooperation (New York: Basic Books, 1984), and The Complexity of Cooperation: Agent-Based Models of Competition and Collaboration (Princeton, NJ: Princeton University Press, 1997). 57. Sisk, Democratization in South Africa, 51. 58. Ibid., 50, following Hubert M. Blalock, Power and Conflict: Toward a General Theory (Newbury Park, CA: Sage Publications, 1989), emph. added. 59. Albert Hirschman, Exit, Voice and Loyalty: Responses to Decline in Firms, Organizations, and States (Cambridge, MA: Harvard University Press, 1973). 60. These categories, “low/low,” “high/high,” etc., recall Shafer’s scheme, although I address entirely different phenomena. See Shafer, Winners and Losers. 61. William Reno, Warlord Politics in African States (Boulder: Lynne Rienner Publishers, 1998). 62. Jon Kraus, “Capital, Power, and Business Associations in the African Political Economy: A Tale of Two Countries, Ghana and Nigeria,” Journal of Modern African Studies 40, no 3 (2002): 395–436; Lise Rakner, Political and Economic Liberalisation in Zambia, 1991–2001 (Uppsala: Nordiska Afrika Institut, 2003); Ibrahima Thioub, Momar-Coumba Diop, and Catherine Boone, “Economic Liberalization in Senegal: Shifting Politics of Indigenous Business Interests,” African Studies Review 41, no. 2 (September 1998): 63–89. 63. See Shafer, Winners and Losers, esp. 94–142. Note that Kang argues that business and state in Korea eventually established a balance of power, becoming, in his phrase, “mutual hostages” by the 1980s. Kang, Crony Capitalism, 3, 15. 64. Kang, Crony Capitalism, 3. 65. Owain Johnson, “Venezuela Business Leaders Back Strike,” United Press International, October 11, 2002, available at www.upi.com/archive/view.php?archive=1& storyID=20021011-033631-6543r. 66. Bräutigam, Rakner, and Taylor, “Business Associations.” 67. Haggard, Schneider, and Maxfield, “Theories of Business,” 40. 68. See Thacker, Big Business, 16. 69. Factors such as contributions to the employment and tax bases may also be important. Outside of South Africa, however, analyses of labor marginalization in the region suggest that states are scarcely preoccupied by employment issues or labor activism. Brian Raftopoulos, “The Labour Movement and the Emergence of Opposition Politics in Zimbabwe,” in Striking Back: The Labour Movement and the Post-colonial State in Zimbabwe, 1980–2000, edited by Brian Raftopoulos and Lloyd Sachikonye (Harare: Weaver, 2001); Rakner, Political and Economic Liberalisation in Zambia. Similarly, although tax collection is important for some big firms, which probably pay a disproportionate share, corporate tax collections are in part a reflection of their capacity to earn export revenues (Mick Moore and Lise Rakner, “Introduction: The New Politics of Taxation and Accountability in Developing Countries,” IDS Bulletin, 33, no. 1 [July 2002]: 1–9). 70. World Bank, Can Africa Claim the Twenty-first Century? (Washington, DC: World Bank, 2000); Seamus Mclericain, “Sub-Saharan Africa’s Trade Liberalization Experience,” in Regional Integration and Trade Liberalization in Sub-Saharan Africa, vol. 4, Synthesis and Review, edited by Ademola Oyejide, Benno Ndulu, and David Greenway (London: Macmillan, 1999). 71. Doner and Schneider, “Business Associations.” Zimbabwe’s Commercial Farmer’s Union is an excellent example of this phenomenon. See Taylor, “Business and Politics in Zimbabwe’s Commercial Agriculture Sector.” 72. See Amy Chua, World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability (New York: Doubleday, 2003); Myron

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Weiner, “Business in Ethnically Divided Countries,” in Business and Democracy: Cohabitation or Contradiction? edited by Ann Bernstein and Peter Berger (London: Pinter, 1998). 73. Scott D. Taylor, “Race, Class, and Neopatrimonial Politics in Zimbabwe,” in State, Conflict, and Democracy in Africa, edited by Richard Joseph (Boulder: Lynne Rienner Publishers, 1999). 74. This may be optimistic, however. See Margaret C. Lee, The Political Economy of Regionalism in Southern Africa (Cape Town: University of Cape Town Press, 2003). 75. Richard F. Doner and Ben Ross Schneider, “Business Associations,” computer printout, 1998, 40, following Nathaniel Leff. Conversely, Weiner suggests that minorities may be the worst rent seekers. However, even Weiner’s own examination of Malaysia provides some evidence that minority self-interest and rent seeking need not lead to suboptimal development outcomes. See Weiner, “Business in Ethnically Divided Countries.” See also Knight, Institutions and Social Conflict. In addition, Bratton shows that majority-group BAs often lead to distributional outcomes in postsettler conflicts over control of resources, such as those in southern Africa: Michael Bratton, “Micro-democracy? The Merger of Farmer Unions in Zimbabwe,” African Studies Review 37, no. 1 (April 1994): 9–37. 76. Weiner, “Business in Ethnically Divided Countries.” 77. A number of scholars have examined this issue in various countries, including Andrew MacIntyre, Business and Politics in Indonesia (North Sydney: Allen and Unwin, 1990), and Weiner, “Business in Ethnically Divided Countries.” A multicountry study is Chua, World on Fire. These studies imply that in a historically fragmented society, business must also be a social actor, pursuing both “bottom-up” appeals toward the state and “top-down” strategies to engage the wider populace. If they leave such outreach to the state, any subsequent claims of “social responsibility” by BAs will likely ring hollow. 78. See Bratton “Micro-democracy?” and Michael Bratton and Nicolas van de Walle. Democratic Transitions in Africa (Cambridge: Cambridge University Press, 1997). A partial, albeit short lived, exception to this claim is found in Taylor, “Race, Class.” Examining the Asian development experience, Weiner takes a more benign view of “close personal bonds between the political and business classes based on ethnicity [and] kinship” (“Business in Ethnically Divided Countries,” 111). 79. Schneider, Business, Politics, 63. 80. Ibid., 80–81. 81. The classic work in the African context is Robert Bates, Markets and States in Tropical Africa (Berkeley: University of California Press, 1981). See also Alberto Alesina, “Political Models of Macroeconomic Policy and Fiscal Reforms,” in Voting for Reform, edited by Haggard and Webb. 82. Axelrod, Complexity of Cooperation. 83. On Mauritius, see Bräutigam, Rakner, and Taylor, “Business Associations.” 84. Eboe Hutchful, “The Limits of Corporatism as Concept and Model,” in Corporatism in Africa: Comparative Analysis and Practice, edited by Timothy Shaw and Julius E. Nyang’oro (Boulder: Westview, 1989), 35. 85. Schneider, Business, Politics, 10. In practice, corporatism has been in decline for two decades, as globalization and neoliberalism have eroded the capacity for social bargaining: Sebastian Royo, “A New Century of Corporatism?” Corporatism in Southern Europe—Spain and Portugal in Comparative Perspective (London: Praeger, 2002). Hutchful observed this in Africa as early as the late 1980s (Hutchful, “Limits of Corporatism”). 86. Julius E. Nyang’oro and Timothy Shaw, introduction to Corporatism in Africa, 3. See also Alfred Nhema, Democracy in Zimbabwe (Harare: University of Zimbabwe

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Press, 2002), 24; Tor Skalnes, The Politics of Economic Reform in Zimbabwe: Continuity and Change in Development (London: St. Martin’s, 1995), 188–194. 87. Haggard, Maxfield, and Schneider, “Theories of Business,” 41. 88. See Bräutigam, Rakner, and Taylor, “Business Associations.” 89. Bratton and van de Walle, Democratic Transitions, 177. 90. Kathryn Stoner-Weiss, Local Heroes: The Political Economy of Russian Regional Governance (Princeton, NJ: Princeton University Press, 1997), 26. 91. Philippe Schmitter and Terry Lynn Karl, “Modes of Transition in Latin America, Southern and Eastern Europe,” International Social Science Journal 128 (May 1991): 273. 92. Royo, New Century of Corporatism? 3. 93. Schmitter and Karl, “Modes of Transition,” 275. 94. Ibid., 281. 95. Ibid. 96. Dani Rodrik, “Promises, Promises: Credible Policy Reform via Signalling,” Economic Journal, 99 (September 1989): 756–772, cited in Haggard, Maxfield, and Schneider, “Theories of Business,” 41; see also Kingstone, Crafting Coalitions. 97. Arend Lijphart, “The Comparable Case Strategy in Comparative Research,” Comparative Political Research 8, no. 2 (July 1975): 160. 98. Pierre du Toit, State Building in Southern Africa: Zimbabwe, Botswana, and South Africa (Washington, DC: United States Institute of Peace Press, 1995), 5. 99. Bräutigam, Rakner, and Taylor, “Business Associations,” 544, quoting Sheila Nicholas, “The State and Development of African Capitalism in Zimbabwe,” in African Capitalists and African Development, edited by Colin Leys and Bruce Berman (Boulder: Lynne Rienner, 1994), 104. 100. M. Anne Pitcher, Transforming Mozambique (New York: Cambridge University Press, 2003). 101. Shafer, Winners and Losers. 102. Ibid., 248. See also Andrew Bennett and Alexander George, “Process Tracing in Case Study Research,” paper presented at the MacArthur Foundation Workshop on Case Study Methods, Belfer Center for Science and International Affairs, Harvard University, October 17–19, 1997. 103. Shafer, Winners and Losers. Shafer follows a point made by Jeffrey Frieden, Debt, Development, and Democracy (Princeton, NJ: Princeton University Press, 1991).

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3 Business-State Cooperation in Zambia: Rhetoric and Realities Government and the private sector have formed a partnership for prosperity. —Ronald Penza, minister of finance, in Profit 3 (February 8, 1995) Thus, yet again, the government has retracted into its shell at a critical time when it needs its more objective partners. Sadly, this is a demonstration of lack of commitment to the much talked about government-private sector partnership. Where is the “transparency” and “accountability” that is preached? —Gideon Phiri, ZACCI chief executive, ZACCI BusinessLine, July 1996 The dialogue is very important because we want to look at why the government has not responded to our earlier representations concerning the performance of the sector. —George Chabwera, ZACCI chairman, quoted in The Times of Zambia, August 22, 2002

Zambia provides an example in which a prospective coalition, buoyed by the economic and political transition of 1990–1991, quickly dissipated. In fact, the coalition proved so ephemeral that subsequent declarations of partnership between business and state were at best ill-founded and at worst disingenuous. In Zambia’s low/high power distribution, both the core business associations and the wider private business community lacked the central characteristics of institutional strength and utility. Without these essential features, a coalition proved impossible to launch successfully. In the early stages of the transition to the neoliberal economic program adopted by the ruling Movement for Multiparty Democracy (MMD), Zambian business expressed support for fiscal restraint and liberalization of trade coupled with export promotion, as well as for privatization and foreign investment. In conjunction with the majority of civil society, business was a major supporter of the MMD in the 1991 elections that brought the party to power. Having toiled for years under the yoke of a state-dominated economy, Zambia’s private sector 55

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actors were anxious to seize the opportunities they believed a liberalized environment would present. Moreover, because they staunchly backed MMD, business associations perhaps somewhat naively believed that the new government would return the favor. Yet the consensus reached between the public and private sectors over the concept of economic adjustment was short lived. Zambian businesses were, like many of their counterparts throughout sub-Saharan Africa, ill-prepared for liberalization, from the standpoint of both firm competitiveness and collective action. Without institutional strength and utility, BAs were unable to effect policy changes and at the same time insufficiently valuable to the government to attract selective incentives, thereby fueling vicious circles. What business needed, which was a reevaluation particularly of trade-related policies and equality of treatment between domestic and foreign private investors, was not achieved. Except for the brief interregnum in late 1991, the power relationship between business and state remained imbalanced, strongly favoring the state throughout the decade. As the low/high model suggests, the state did not use its relative strength to empower and organize business; instead it expanded its power vis-à-vis the formal business sector. Although several important political and economic changes have occurred since the beginning of 2002, thus far these have had but a modest overall impact on the business-state relationship, where difficult realities continue to lag behind the ambitious rhetoric. In a number of respects, Zambia’s experience, particularly in the 1990s, is representative of many sub-Saharan African states, where a tradition of statecentric development policies and corresponding hostility toward private sector interests contribute to a climate that fundamentally discouraged the formation of public-private coalitions; recent private sector development (PSD) initiatives must overcome this difficult legacy. Consequently, the Zambian experience offers valuable insights for African states with similar historical and material endowments. It is therefore an appropriate case with which to begin our examination.

Historical Origins of the Zambian Economy: 1890–1990 In spite of their divergent interests in the late twentieth century, business and state in Zambia actually have links dating back more than a century. Like Zimbabwe and South Africa, Zambia was established largely as a business venture, at the intersection of the interests of British colonialism and mining magnate Cecil Rhodes’s private empire. In 1889, the area was designated as a territory of the British South Africa Company (BSAC); it became known as Northern Rhodesia, after the BSAC founder, in 1897.1 Although a number of whites, most initially in the employ of the BSAC, began to arrive in the 1890s, the period of “company rule” persisted until 1924, when the administration of Northern

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Rhodesia finally was ceded to local settler control as a crown colony of the British Empire.2 From 1953 until 1963, Northern Rhodesia was part of the Central African Federation with Southern Rhodesia (now Zimbabwe) and Nyassaland (contemporary Malawi), an arrangement brokered by the Colonial Office in Britain that resulted in significant net outflows of capital from resource-rich Northern Rhodesia to the more heavily settled and industrialized southern territory.3 Although the federation was at its zenith in the mid-1950s, the arrangement could not forestall the rise of African nationalism, and by 1958 and 1959, the Northern Rhodesian movement led by Harry Nkumbula and Kenneth Kaunda had reached peak levels of agitation. The climate of uncertainty and unrest eventually led to constitutional negotiations, which took place in 1961–1962.4 In the ensuing 1962 elections, an African majority was elected to the Northern Rhodesian Legislative Council, thereby paving the way for the transition to majority rule.5 Independence was achieved on October 24, 1964, and the country was officially renamed the Republic of Zambia. Kaunda, at the helm of the United National Independence Party (UNIP), became Zambia’s president, a position he held until 1991. Following independence, the white population declined from its peak of 73,000 to a level less than half that today.6 Although the white community maintained its dominant presence in the private sector (especially in trade, large-scale commercial farming, and manufacturing), Zambia’s history runs contrary to that of other postsettler states in that race ceased to be the defining societal cleavage in the postcolonial period, for at least two reasons. First, Kaunda skillfully managed the peaceful transition, and those whites who remained were, by and large, willing to live amicably under black rule and committed to the new state.7 Second, the new government’s nationalization program, which began less than five years after independence, and the role of the state in the economy generally, deprived the entire private sector, regardless of race, of a privileged position vis-àvis the state. Hence, whereas nonblack actors continue to enjoy an outsized role in Zambia’s business sector, this has not proved a measurable source of conflict. Neither has Zambia’s considerable ethnic diversity generated fault lines in the business community.8 Thus, whereas ascriptive categories are hardly unimportant in Zambia, ethnic and racial pluralism is reflected within associational groups, including business associations, far more consistently and harmoniously than in Zimbabwe and South Africa. As a result, race is not politically “fungible” in Zambia the way it has been in Zimbabwe and South Africa, where a business association’s historically and disproportionately white profile correlates with institutional strength. On the other hand, the depoliticization of race means whites are not very useful as a political foil. During the colonial period, the small white private sector benefited from state protection and favorable access to land and resources,9 but this population and its activities were not the central pillar of the colonial economy; business

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associations, including the Rhodesia Farmers Union (established in 1905), the Lusaka Chamber of Commerce (1933), and the Commercial and Industrial Association of Northern Rhodesia (1938), reflected this secondary status.10 Instead, the main engine of the colonial economy was copper production, which was largely carried out by multinational—British, South African, and American— mining companies.11 Following independence in 1964, the continued economic dominance of a few large multinational corporations militated against racially based competition and demands for redistribution at lower levels of the economy, chiefly because locally domiciled white- or Asian-owned businesses were relatively smaller targets. The structure of the economy also lent itself to rapid nationalization: multinational domination of the economy therefore was replaced by state domination. The UNIP-led state thus promoted black capital— but not a black private sector—through a program of “Zambianization.” Driven by nationalist goals and a statist agenda, Zambia, similar to other newly independent African countries at that time, quickly adopted a strategy of import substitution. President Kaunda’s particular industrialization and development strategy became tied to his guiding social philosophy of “humanism,” whose lofty but somewhat ill-defined goal was national unity in economic, political, and social matters.12 The Mulungushi Reforms, launched by Kaunda in 1968, were part of this national project. The reforms called for acquisition by the Zambian state of majority shareholdings in most locally and internationally owned enterprises, in an effort to put the economy under black (albeit state) control. On the whole, private business activity in Zambia was severely displaced and sometimes, depending on the sector, proscribed by the level of state involvement in the economy.13 The institutional strength of the chambers and other business associations, never comparable to Zimbabwe or South African BAs, continued to erode commensurate with the relative decline of private sector activity. At the same time, as in countries like Mozambique and Tanzania, which pursued similar strategies, “Africanization” simply resulted in the nationalization of 80 percent of the economy, rather than any meaningful expansion of the African private sector.14 At the conclusion of the nationalization exercise in the mid-1970s, “foreign and state capital constituted overwhelmingly the dominant actor within the economy, holding virtually all of the largescale private enterprises and dwarfing the participation of private Zambian capital. Indeed, even resident non-Zambian individuals probably remained more economically important than private Zambians.”15 The role of foreign firms was chiefly confined to the mining sector, although Zambian subsidiaries of manufacturing companies like Colgate, Reckitt and Coleman, and Lever Brothers, for example, continued to produce consumer goods for a captive domestic market. The critical policy error by Kaunda and UNIP was not nationalization per se, but that little effort was made to diversify the country’s export revenue stream beyond mining, particularly copper and cobalt, which still account for

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more than two-thirds of Zambian exports; nationalization greatly compounded that dependence. Indeed, with the exception of the copper mining interests acquired from Anglo American Corporation and American Metal Climax Company (consolidated eventually under the Zambia Consolidated Copper Mines, ZCCM16), most of the nationalized firms produced solely for local markets. This, as researchers have noted, was the root cause of Zambia’s economic decline that began to reach crisis proportions by the late 1970s.17 Zambia was compelled to sign its first standby agreement with the IMF following the 1973 oil crisis, availing itself of the fund’s Oil Facility. World copper prices fell sharply in 1974–1975, reducing Zambia’s 1975 copper export revenues by over 43 percent.18 The second international oil crisis in 1979–1980 raised copper production costs further and further depressed global demand for the metal. Between 1975 and 1986, Zambia attempted seven unsuccessful stabilization and adjustment programs at the behest of the IMF.19 The global recession in the early 1980s brought a sharp decline in the Zambian economy: copper prices failed to recover, per capita GDP declined 3 percent per year in the decade, and the country faced a rising debt burden. Now borrowing from the World Bank’s International Development Assistance (IDA) window for the world’s poorest countries, the government agreed to a 1983–1985 adjustment package with the bank and the fund to “restore financial stability,” but by 1986, the government of Zambia (GRZ) was over $100 million in arrears to the IMF and the program was suspended. Zambia briefly tried a “home-grown” structural adjustment program, but this too failed, and neoliberal reforms were discontinued. In the end, the combination of oil price shocks in the 1970s, declining world copper prices, and the cost of sustaining the dirigiste economic program ballooned the external debt level from $627 million in 1970 to $7.2 billion by 1990 and saw per capita GDP fall by 2.5 percent per year from 1975 to 1991.20 After Kaunda was defeated in the multiparty transition in October 1991, the new government reinstated SAP under the auspices of the World Bank and the IMF.21

Business and the Kaunda Regime: Ebbing Institutional Strength Private sector business activity, mostly in commercial farming, the commercial trades, and light industry, continued throughout the Kaunda years but was subordinated to state enterprise. Major manufacturing was undertaken by state-owned monopolies under the umbrella of the giant industrial parastatal holding company, the Industrial Development Corporation, INDECO, which had been set up in 1968. A number of factors served to crowd out private sector activity. For example, a rigid price-control regime was introduced in 1969,

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and strictly enforced—with jail sentences for offending businesspersons— thereby squeezing profit margins, while an oppressive, often arbitrary tax structure also discouraged business and investment.22 In addition, an overvalued currency, the kwacha, and rigid foreign-exchange controls constrained new investment in manufacturing or other productive sectors, whether stateowned or privately held. Finally, the government, through INDECO and its counterparts in other sectors, served as both leading supplier and competitor to private businesses, placing such enterprises at a severe disadvantage. Kaunda’s humanism itself was implicitly hostile to private wealth accumulation, although the president himself had no clear policy toward private enterprise—except for government officials inclined toward entrepreneurship—and he alternated between supportive and critical public statements.23 Within this ambiguous environment, business associations “did not constitute an organized force,” although formal lobbying efforts by BAs did occur.24 Among the major nonfarm business associations then in existence, such as the Zambia Industrial and Commercial Association (later ZACCI) and the local chambers, institutional strength was predictably constrained. Individual businesspeople found that personal networks and kinship-based linkages with political elites were more likely to result in concessions than were collective lobbying efforts via business associations.25 The commercial agricultural sector fared little better under Kaunda, and institutional weakness characterized the Commercial Farmers’ Bureau (CFB, formerly the Northern Rhodesia Farmers’ Union, NRFU) during the UNIP era. Unlike Zimbabwe, where the status quo of white individual and corporate ownership in the commercial farming sector was substantially preserved after independence, and where BAs retained institutional strength, in Zambia the state intervened heavily in agricultural markets, ostensibly to redirect resources from predominantly white large-scale farmers to peasant farmers. One mechanism employed by the state was broadening the powers of the colonialera marketing boards. Hence the National Agricultural Marketing Association (NAMBOARD) “was established to buy up maize and other agricultural goods and supply inputs.”26 Thereafter, for most commodities, once farmers harvested their crops, they became the legal property of the marketing board, which had both monopsony and monopoly powers, as well as control over exports. The price guarantees, provision of transport, and storage facilities, though imperfectly applied, appealed to the widely dispersed peasant farming community (estimated at around 600,000 farmers in the 1990s).27 Ironically, however, the benefits to peasant and small-scale farmers were, at best, modest. In fact, NAMBOARD “displayed a pattern of high costs and neglect of smallholders”28 and was chronically late with payments and transport.29 Indeed, “the absence of a clear and coherent framework for rural development”30 placed severe constraints on all of Zambia’s agriculturalists.

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The real beneficiaries of the state’s interventionist strategies, at least early on, were the urban populations. Given that Zambia had one of Africa’s highest levels of urbanization, this “urban bias” was seen as essential to both development and political stability. Kaunda’s Zambia became something of a textbook example of this phenomenon.31 The government supported urban consumers with direct and indirect subsidies that kept the price of the staple food, maize, affordable. The regime’s bias in favor of urban consumers, and to a lesser extent, peasant farmers, created serious disincentives to commercial agricultural production, because the prices paid to commercial farmers for their agricultural produce was far below export parity and frequently below the costs of production; this led many to abandon the sector. Protests from farmers’ associations were disregarded, and the CFB’s “suggestions that farmers needed to produce at a profit were rejected as unpatriotic and immoral” by President Kaunda.32 His minister of agriculture went so far as to declare CFB obsolete in 1980, arguing that it should be “discarded in favor of the government owned and controlled Zambia Cooperative Federation (ZCF),”33 then the principal representative of small-scale producers. ZCF became embedded in the party structure to such a degree that it was considered a wing of the party.34 It eventually assumed the NAMBOARD monopoly in 1989 with the passage of the National Agricultural Marketing Act, which gave purchasing power of “designated” crops to the ZCF. The marketing act actually made it criminal for growers not to surrender their designated crops to the ZCF and thereby drove down commercial production of vital consumer crops, including maize. Despite these obstacles, the CFB managed to persevere, changing its name to the Zambia National Farmers’ Union (ZNFU) in 1992 as part of a concerted effort to appeal to the entire domestic farming community. Yet the modicum of institutional strength enjoyed by ZNFU at independence eroded steadily thereafter. Correspondingly, the number of large-scale farmers declined steadily over time: in 1964, the CFB membership mirrored the number of white farmers at about 1,300; by 1971, members had dwindled to 412,35 and by the mid-1990s, the 350 large-scale members of the ZNFU included all the remaining white producers, as well as most black commercial farmers. In 2003 the union finally realized its long-term effort to unite small- and large-scale farmers under the ZNFU umbrella, but this did not result in newfound influence.36 The neglect of commercial agriculture by the Kaunda regime was part and parcel of the marginalization of private capital generally. The state moved into sectors and roles previously occupied by private actors and developed a massive bureaucracy to carry out its expanded functions. Zambia’s singular reliance on favorable world prices for copper to pay for this bloated state led to an inevitable collapse: by the late 1980s, Zambia’s economy was in free fall. Economic hardship was exacerbated by UNIP’s political monopoly. As a de jure one-party state since 1972, Zambia had no legal alternatives to UNIP and

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its ruinous economic policies. Following the disastrous experiences with structural adjustment programs in 1986 and 1990–1991, the UNIP regime faced substantial popular unrest. Although Kaunda suspended the programs in both cases, he failed to placate the demands of society; thus, once he lost the support of Zambia’s crucial urban populations, including organized labor, his demise was assured. Faced with lost internal legitimacy and international pressure, Kaunda acquiesced to multipartyism in 1990.37 The opposition MMD was launched in Lusaka in July 1990, although it did not become a legal political party until the end of that year, when the constitutional prohibition against multiple parties was abolished.

An Ephemeral Coalition: Business Associations in the MMD Transition As the preceding discussion makes clear, business associations in Northern Rhodesia did not possess the degree of institutional strength enjoyed by their Southern Rhodesian or South African counterparts, although white private sector interests did benefit from a privileged relationship with the colonial-era state. Under Kaunda’s rule, even that limited dimension of institutional strength ebbed, as the more established white business actors—and a nascent black private sector—saw their attempts at collective organization severely hampered as a result of the regime’s policies. Although BAs had density, or representativeness, within their respective sectors, their capacity to present a unified, collective voice to government proved almost immaterial. The sectoral interests the BAs represented still accounted for less than 20 percent of economic activity and far less than 10 percent of Zambia’s exports, so density failed to translate into real clout. Indeed, with few exceptions, the UNIP government awarded BAs no selective incentives such as access to policymakers.38 Not surprisingly, therefore, disaffected businesspeople, along with vast segments of civil society, were anxious for a political and economic alternative to UNIP. With a platform of democratic and economic renewal, the MMD had broad appeal, bringing together a cross-section of Zambian civil society, including commercial and manufacturing interests, farmers, legal and women’s organizations, and especially labor unions. Though labor took a leading organizational role and labor leaders assumed prominent positions in the new party (Frederick Chiluba, the former secretary general of the Zambia Congress of Trade Unions, was selected as the MMD presidential candidate), MMD adopted a liberal economic platform that called for the reinstitution of the structural adjustment program Kaunda had suspended in 1990. Criticizing Kaunda for practicing “too much socialism,”39 the business community helped to support the fledgling MMD financially, thus, as Lise Rakner argues, exercising some influence on its direction regarding structural adjustment.40 This is particularly ironic in that

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BAs still associated persistent inflation, unavailable credit, rapid devaluation, and import competition with Kaunda’s efforts at structural adjustment in the 1980s.41 The three leading national business associations, the Zambia Associated Chambers of Commerce and Industry (ZACCI), Zambia Association of Manufacturers (ZAM), and the ZNFU (representing commerce, industry, and agriculture), threw in their lot with the unabashedly neoliberal MMD, despite the party’s candor about the necessity for austerity measures.

Coalition Foreclosed: The MMD and the First Phase of Adjustment The October 1991 election saw Kaunda suffer a dramatic defeat: Chiluba won 76 percent of the popular vote to capture the presidency, and the MMD secured nearly 80 percent, giving it 125 of 150 seats in the National Assembly. Once in power, the MMD immediately acted on its pledge to renew relations with the IFIs and to reinstate structural adjustment. Thus, the party explicitly endorsed “economic liberalization as a means of attracting foreign investment—privatization, the abolition of monopolies, facilitation of regular consultation between government, chambers of commerce and labor leaders, incentives to investors and encouragement of private enterprise.”42 At this time, broad harmonies of interest were apparent between MMD and its business supporters, while the MMD’s constituents among labor unions, the poor, social activists, and students, though muzzled, were mostly willing to grant the new government a honeymoon period.43 Surprisingly, however, in spite of the alliance that undergirded the MMD and assurances of postelection cooperation, the relationship between BAs and the state deteriorated rapidly. Indeed, the relative unanimity on the need for reforms between business and the state, as well as among business associations themselves, did not last long after MMD’s inauguration in November 1991 and the formal reinstitution of SAP two months later. As discussed above, the BAs had amassed no reservoir of institutional strength under the ancien régime, since Kaunda had substantially marginalized business in his twenty-seven-year rule. However, in return for their contribution to MMD’s emergence and election victory, the business associations anticipated that the MMD regime would provide certain selective incentives—first and foremost, access—given the party’s platform, professed probusiness ideology, and assurances of consultation.44 Yet following the political transition, the BAs gained no new capacity to influence the state. If the BAs held any utility for MMD, it was solely of a political nature, limited to the time of the transition, when business support was valuable.45 After the MMD’s successful ascension to power, leading private-sector actors did not prove to be a valuable constituency, either for economically productive contributions or for the purpose of

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generating rents. Regarding the former, their numbers were limited, as was the business role in the economy overall. Indeed, economic reform exacerbated this problem, and by 2002 there existed “few companies of any size with more than 10 years track record—at least in a competitive environment”—who could contribute much to national economic performance.46 In terms of the latter, both business associations and the sectors they represented lacked the resources to provide a source of rents to the new state elites in return for patronage. For this, the state had the mining industry, however ailing, and a vast pool of other state-owned enterprises awaiting privatization that ultimately generated considerable rents for the regime.47 The consequences of business’s institutional weakness during the transition were long lasting. Notably, the private sector’s lack of access to the state was felt most acutely during the period in which some of the most critical aspects of the adjustment program materialized. In many respects, Zambia’s SAP initially adhered to a conventional orthodox formula, beginning with the stated emphasis on stabilization mechanisms. Yet in Zambia, as elsewhere in Africa in the 1990s, liberalization occurred without stabilization, to devastating effect on local producers. The fact that high interest rates and inflation were not arrested contributed to dampened consumer demand and countered many of SAP’s presumed benefits; business expansion was precluded by the prohibitive cost of borrowing. Most producers were also unable to expand exports as predicted, while domestically oriented firms were overwhelmed by new foreign competition because trade liberalization occurred too rapidly for the business community to adjust. Trade liberalization and the rationalization of tariff, tax, and export incentive regimes need to be sequenced carefully, but in Zambia too-rapid trade liberalization served to undercut locally produced goods with superior (and frequently cheaper) foreign substitutes.48 At the same time, currency devaluation rendered agricultural and industrial inputs more expensive. Unable to compete on export markets, Zambia’s already fragile manufacturing sector was devastated, although some commercial traders benefited somewhat.49 Indeed, this scenario was repeated all over Africa, including in Zimbabwe. In addition, whereas Zambia’s overall privatization effort in terms of the sheer number of firms gained international plaudits—mostly undeserved—the sale of the state-owned mines proceeded far too slowly and resulted in a significant drain on national resources.50 Business was also unable to influence fiscal policy or affect Zambia’s repeated budget crises. Finally, political missteps, as well as outright corruption, severely alienated the donor community that was essential to Zambia’s reform program.51 There were no mechanisms by which Zambian business could effectively communicate its policy preferences or its rapidly deteriorating condition. I address a number of these issues below, with a particular emphasis on debates over trade and privatization, two of the most contentious policy areas in relations between state and business in Zambia in the 1990s. They, in turn,

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illustrate the misplaced economic priorities of the MMD-led state and indicate some of the sources of corruption that undermined Zambia’s putative development goals.

The Impact of Trade Liberalization For Zambian business associations, liberalization was something of a vicious circle. The Kaunda period saw them deprived of institutional strength and faced with official indifference. At the time of the 1991 transition, BAs advocated liberalization because leaders assumed, despite the risks, that it would improve their lobbying and therefore their economic position. Although the defeat of the UNIP-led state essentially came at the hands of civil society groups, including business, the MMD quickly reestablished the primacy of the state. Although nominally “private sector oriented,” the MMD had little incentive to empower business. At the same time, business had neither the inherited historical institutional strength to counter this inertia, nor the utility to create the necessary incentives. Liberalization therefore posed at least as many risks for business associations and their constituents as the status quo ante. The acceleration of imports, coupled with the inability to seize opportunities in export markets, provide the clearest evidence of this conundrum. State-Business Responses to Import Competition Regional trade relations. Already weakened by years of statist policies, all

of Zambia’s productive sectors and the associations representing them suffered immediate decline in the wake of trade liberalization. The impact was not felt evenly across all sectors nor all organizations: manufacturing and agricultural concerns were most adversely affected by a flood of competing goods, chiefly from Zimbabwe and South Africa, whereas some in the trades, including some members of ZACCI, were able to avail themselves of the influx of new goods. On the whole, Zambian businesses were ill-prepared for trade liberalization at the product, firm, and sectoral levels, as well as at the level of associations. That is, they simply could not compete and were insufficiently organized to respond. In the 1990s, goods produced by the Zambian private sector scarcely contributed to export volumes. From the 1991 transition to 1995, metals, mostly produced by SOEs, accounted for between 92 and 83 percent of the dollar value of total exports.52 The balance of export items, largely primary agricultural products and processed foods, were of such low quantity as to be of marginal impact in the international marketplace.53 Neither could Zambian goods compete domestically, once exposed to international competition; when trade was liberalized, locally produced items were squeezed out by cheaper, yet often higher-quality, imports. In addition to quality issues, the tariff structure

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was also unfavorable to Zambian producers, as discussed below. At the same time, Zambia’s regional partners, particularly South Africa, continued to privilege their own producers by providing subsidies to their industry and imposing high tariffs on imported goods. Importantly, since the end of apartheid, Zambia has run substantial trade deficits with South Africa, which rapidly became the main supplier of Zambian imports: from less than 5 percent in 1995, to 28 percent in 1996, to 47 percent in 2000.54 This led to accusations from Zambian business associations of dumping by South African companies. (Zimbabwean BAs made similar complaints.) In this environment, the three major business groups, ZACCI, ZAM, and ZNFU, suffered both inter- and intragroup dissension. The collective-action problems of business, writ large, also hampered the prospects of the individual associations themselves. They frequently were unable to reach consensus among themselves about the appropriate structure of trade relations. ZACCI and ZAM began as staunch advocates of liberalization, but by the mid-1990s, ZACCI, along with ZNFU, began to adopt more unreservedly protectionist positions. Though each organization eventually concluded that certain aspects of the liberalization program itself were damaging to their members’ interests, they did not seem to reach this conclusion at the same time and thereby had less potential to act collectively. Only in 1996, for example, Gideon Phiri, then ZACCI’s chief executive admitted that “we are beginning to realize we need to do homework” regarding the potentially detrimental impact of trade liberalization—well after its ill-effects were already under way.55 Moreover, the associations’ lack of institutional strength—and, in the cases of ZACCI and ZAM especially, a diverse membership representing a range of sectors and firms—meant that even internal consensus proved difficult to reach. The unevenness of business association responses unwittingly provided a rationale to their state detractors for marginalizing the business community as a whole, however economically unwarranted such an action would prove. Although the evolution of the BAs’ positions was slow, it was far more nuanced than their critics allowed and was born of genuine threats to their respective sectors, but the government portrayed the associations’ positions simplistically and dismissively. Having charged that business associations were confused and inconsistent simply because “they don’t know what they want,” state officials felt no need to credibly respond to business concerns that the liberalization program, once lauded, was undermining the private sector.56 More specifically, the strategy of effectively blaming the victim absolved the state of responsibility for its increasingly problematic approach to trade liberalization as well as to structural adjustment more broadly.57 In fact, several Zambian businesspeople and BAs showed great concern about what they perceived as the government’s “unilateral disarmament” in relation to regional trade partners, whose industrial base was far superior.58 Still, the government’s agenda called for even further liberalization of trade. Zam-

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bian business leaders were particularly wary of proposed bilateral trade agreements with both Zimbabwe and South Africa, which emerged in the late 1990s. As noted, however, trade relations with South Africa were overwhelmingly skewed toward the richer country: Zambian exports to South Africa amounted to just R100 million in 1995, while imports from South Africa, at R1.1 billion, were more than ten times that amount. Accusing regional trade partners in both South Africa and Zimbabwe of dumping in contravention of regulations of the General Agreement on Tariffs and Trade (GATT) and its successor, the World Trade Organization (WTO), ZACCI proposed countervailing duties on imports of comparable goods to Zambia.59 The Farmers’ Union migrated even more strongly toward protectionism during the 1990s, perhaps in part because ZNFU had fewer illusions initially about its competitiveness on a regional scale; during the 1990s especially, there was little prospect of Zambian commercial farmers’ going toe to toe with Zimbabwe’s and South Africa’s highly diversified large-scale commercial farming sectors or Botswana’s beef production. ZNFU argued that since Zimbabwe’s and South Africa’s costs of production, including fuel, capital, and transport, were lower, “we would like to see some barriers [to trade erected] to protect us from Zimbabwe’s and South Africa’s dumping.”60 Such proposals were given sporadic and coincidental attention at best. ZAM’s position, which tended to eschew such protectionism, was generally more in line with GRZ liberalized trade policy, although the organization did clash with the government over tariffs. Implicitly endorsing the inherent competitiveness of Zambian industry, ZAM sought first to attack the balance of trade problem at its source, which ZAM chairman Mark O’Donnell perceived as South African tariffs of up to 90 percent for some goods.61 ZAM also argued that more effective enforcement of the existing customs regime through control of smuggling and a rationalization of tariff structures would permit Zambian industry to survive.62 However, ZAM got little traction on these matters with the government. Part of the reason was the aforementioned internal divisions within ZAM and ZACCI and between these organizations and ZNFU. According to several government representatives from different ministries, it was only in the middle of a joint 1995 meeting to discuss a proposed agreement with Zimbabwe that some of the business members present recognized that a bilateral trade agreement was in fact counter to their interests.63 Although this revealed a glaring lack of consensus as well as the inability of individual associations’ leaders to disseminate their viewpoints to members, the state’s response was effectively to punish BAs for their lack of preparedness by making access more difficult and policymaking even less responsive. The tariff regime. It should have been apparent at the time that the position held by ZAM chairman O’Donnell was intrinsically correct—that is, a measure of protection could have been achieved via changes to the tariff regime,

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which GRZ could orchestrate without running afoul of Zambia’s regional trading partners, the IFIs, or GATT/WTO restrictions. Nonetheless, notwithstanding the damage to Zambian businesses, the government failed to alter specific tariffs and was largely unresponsive to BA appeals for this modest protection. An obsolete tariff structure was common among formerly closed economies in Africa. Under Kaunda’s government, tight foreign-exchange controls kept imports at a minimum, and few imported products were sold in Zambian stores. Consequently, the tariff structure was largely irrelevant, especially for the small domestic private sector. By 1993, however, the end of import licensing and the substantial and rapid dismantling of foreign exchange controls left tariffs as the only means of protection for domestic producers, but Zambia’s tariff categories made little sense. If they had, raw materials and intermediate and finished goods would have been properly identified and would have attracted a progressively higher rate. Instead, the tariffs served to undermine local firms by increasing their costs and leaving them exposed to cheaper imports. As the decade progressed, import-sensitive firms and associations (exclusive of traders) insisted that changes be made to the tariff regime. Interestingly enough, in this case, state officials also acknowledged the necessity of rationalizing tariffs, but to little avail: despite the acknowledgment, GRZ failed to alter tariffs quickly or efficiently.64 As it had with other policy areas, the government suggested that its inaction on tariffs was the result of dissension within the private sector. But while traders and manufacturers and commercial farmers did indeed have divergent positions on the ideal tariff structure,65 these views could have been mediated, either through a collective business organization, which did not exist before the 2002 founding of ZBF, or within a national negotiating framework. Instead of seeking to reconcile these positions, the government simply did nothing, thus alienating and damaging all three sectors. The absence of policy proved a poor substitute for actual policy, and the lack of any discernible state leadership on this issue contributed to accelerated deindustrialization among both the private sector and SOEs. Manufacturing employment fell by 40 percent between 1990 and 1999 to 46,000, although the sector has added 8,000 jobs since 2000.66 Deindustrialization. According to the World Bank, “An ongoing process of

deindustrialisation manifests itself in significant persistent declines in industrial output, output share of GDP and employment, stagnant productivity, and a pace and pattern of investment that are impeding long-run industrial growth and transformation.”67 Falad Noorbakhsh and Alberto Paloni found manufacturing growth in sub-Saharan Africa to be “almost zero” in the mid-1990s, a level of stagnation “just short of deindustrialization,” and posited a link between this decline and structural adjustment.68 Zambia clearly fits this pattern. Although the “partial reform syndrome” surely contributed to Zambia’s indus-

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trial demise, the design and sequencing of SAP also played a role.69 More important perhaps was the widespread perception among business actors that SAP played a role, although they typically blamed the state for what they saw as its faulty implementation—for example, the distortion caused by taxing Zambian finished goods rather than setting an effective tariff for comparable imports—rather than the fundamentals of SAP itself.70 Import competition precipitated the discontinuation of domestic manufacture of a number of products, including, for instance, motor vehicle tires, which ceased in 1996 when the Zambian subsidiary of the multinational Dunlop disinvested in the face of cheaper imports from South Africa. Dunlop moved its entire tire production facilities to Zimbabwe in 1997, leaving only distribution operations in Zambia. Reckitt and Coleman and Lever Brothers also shut down their manufacturing facilities. Johnson and Johnson moved its operations to Zimbabwe in 1997, and Colgate Palmolive moved soap production, one of its major lines, to Nigeria in 1996. Similarly, Zambia’s clothing and textile industries, although long dominated by SOEs, faced extreme pressures, unable to compete with more efficient producers in Asia, Mauritius, and the region. The clothing sector collapsed completely, faced with competition from imports of new clothing, as well as used clothing, known locally as salaula. These events had the cumulative effect of turning Zambian businesses into primarily retailers and distributors rather than producers. Its widespread occurrence in sub-Saharan Africa notwithstanding, deindustrialization is not a fait accompli of economic reform programs. While much of the fault lies with the design of adjustment policies, states are also culpable. Thus, “while it is accepted that there may be certain manufacturing activities that stand little chance of becoming internationally competitive, there are many others that could, given the right kind of support, modernize and be able to reach the ‘best practice frontier.’”71 It is essential that such support entail not only financial commitments from the IFIs but political support from states as well. This was not forthcoming in Zambia, where business representatives in all sectors instead received, at best, rhetorical commitments from the state. Overall, the Chiluba government’s response to the crisis of deindustrialization, disinvestment, and widespread business closures was haphazard. The multinational affiliates that operated in Zambia lost their captive market after economic liberalization began, but they simply claimed the same advantage they had always enjoyed over their wholly domestic counterparts: the ability to exit. Long accustomed to controlling the private sector, the government was skeptical that resident multinational corporation (MNC) subsidiaries would relocate substantial portions of their operations elsewhere if they were unable to secure more favorable tariff policies. To the extent that the state did consider business exit a possibility, however, it was indifferent to the prospect. In the face of threats by Colgate, Dunlop, and others to withdraw—and furious lobbying

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efforts by ZACCI and ZAM on their behalf to prevent this—Muleya, then the permanent secretary, volunteered that they were at liberty to disinvest, noting simply, “They are not the future for industry in this country.” Without elaborating, he suggested that small-scale industries might replace them—indigenous or at least Zambian-domiciled firms.72 This is particularly ironic since domestic companies, for which the exit option did not exist, also bore the brunt of the MMD’s erratic policies, though they clearly lacked the capacity and resources to transform themselves. (The PSD initiatives of the IFIs and donors only began to target domestic small- and medium-scale enterprises [SMEs] after 2001, so it is not credible to suggest this is what Muleya had in mind several years earlier.)73 Moreover, at the same time, the government was appealing explicitly to foreign investors, especially MNCs, to acquire privatized state assets. Indeed, Zambian BAs have regularly complained that the state discriminates against them in favor of foreign firms (which may or may not be members of the associations).74 It is worth noting, however, that throughout the 1990s resident foreign firms hardly perceived an advantage over their domestic counterparts in terms of access to the state.75 Only in the wake of the 1990s privatizations, more recent accusations of differential treatment appear to have greater validity.76 Indeed, privatization, particularly that of the state-owned copper mining conglomerate ZCCM in 2000, through its sale to a number of foreign investors, changed the state’s calculus. The issue is addressed in greater detail later in the chapter, but it is worth noting here that new foreign investors gained a level of favor with MMD elites that longer-term investors, such as Colgate and Dunlop, did not enjoy. Moreover, whereas much of this new access was legitimate, much was not. A report for Transparency International argued that “the award of Luanshya mine to the Indian Company, the Binani Group in June 1997 exemplifies some of the worst forms of manipulation of the provisions of the Privatisation Act. The Binani Group, a company without any sound track record in the mining industry was selected in some very dubious circumstances,” including political interference in the bidding process.77 At bottom, the GRZ showed far less interest in stemming deindustrialization than in narrow rent-seeking opportunism. The textile and clothing sector illustrates the MMD-led state’s indifference to manufacturers, if not business as a whole. Although many observers, especially ZACCI and ZAM, point to unrestrained imports of salaula, or secondhand clothing, as the root of the problem, Karen Hansen argues that it is “too facile to blame salaula” (imported with lower duties than the raw materials required for domestic manufacture of clothes). Instead, Hansen suggests that we look to a range of structural problems within the textile and clothing industry, evident long before used clothing became an issue in the late 1980s.78 In any event, by the end of the 1990s “hardly any garment manufacturers were left in Zambia,” except very small-scale producers. Textile firms fared somewhat better: although one-third of the thirty-one firms operating in 1991 had

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closed by 1995, many of the surviving companies were actually exporting modestly in 1995, mostly plain cotton cloth and yarns and mainly to the European Union under the Lomé Accords.79 ZAM was an ardent critic of salaula. However, a commentary in the stateowned Times of Zambia newspaper offered clear perspective on the government’s loyalties and interests. “On this one, however, it’s better to put your smart money on issues of political expediency. After all, it is better to please the majority ‘salaula’ traders than the tiny minority Zambia Association of Manufacturers (ZAM) who may not even supply the demand of quality clothes as ‘salaula’ has so far faithfully done. Some ‘salaula’ clothes are unequalled on our local market. . . . They are incomparable clothes which Zambian manufacturers cannot match. . . . Can Zambian textile manufacturers produce such rich fabrics? This is where the friend of vendors (President Chiluba) as Christ Jesus was the friend of sinners, must be called to duty.”80 The ultimately one-sided debate over salaula reveals several important problems with the business-state relationship overall. Notwithstanding Hansen’s critique of the local textile and clothing sector, manufacturers clearly had little political clout; they were ignored in favor of importers, informal economy traders, and mostly urban consumers. The latter especially offered a much more valuable political constituency. In the words of the man responsible for the implementation of Zambia’s industrial policy: “poor people need salaula.”81 Whereas such statements are self-evidently true, they also illustrate the simplistic and dismissive approach to development practiced by the ministry. Indeed, representatives of the Ministry of Commerce, Trade and Industry (MCTI) at all levels were condemned for their failure to appreciate the negative externalities of deindustrialization, especially in regard to employment, the tax base, and potential for upstream and downstream linkages. As one ministry insider put it, “The ministry has no direction; it is renowned for buck-passing [because] responsibilities are unclear and no staff have job descriptions.”82 Although at one level this is a clear example of a bureaucratic capacity problem, it is equally a reflection of the utility, or lack thereof, of the private sector, or even the broader industrial sector that includes SOEs. Thus, the state engaged in industrial policymaking that typically went against the interests of organized business, but its choices seemed erratic at times. The 1998 budget finally responded to the crisis in the clothing and textile sectors, by calling for a vast increase in the minimum duty on salaula, from $1.50 per kilogram to $5 per kilogram; President Chiluba, “the friend of vendors,” reversed the duty barely a month after its announcement. The government moved to ban tire imports in September 1997, but only several months after Dunlop had made good on its threat to move its tire production to neighboring Zimbabwe. Similar policy contradictions plagued the commercial farming sector, including the banning and unbanning of various agricultural imports interspersed with rhetorical devotion to “free trade.”

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What appeared at first blush to be purely capricious behavior on the part of the state was revealed, upon closer inspection, to be a far more deliberate, even rational, strategy. GRZ had little incentive to take a leadership position on the tariff issue, in part because the existing tariff structure was an important source of revenue; lowering tariffs on putative raw materials such as those needed by manufacturers would result in revenue declines, at least in the short term. Individual self-interest also played a role in fostering disagreement between BAs and government over how specific imports should be classified. In this politicized context, the answer to the vital question “what constitutes a raw material?” was highly contested and remained unresolved. Indeed, although Zambia’s tariffs were lowered from the initially celebrated February 1996 budget—and ZACCI, ZAM, and the Textile Producers’ Association, TPZ, each claimed credit for the achievement—there was a lingering sense of arbitrariness about the classifications.83 This “resolution” of the tariff debate was therefore unsatisfactory to many. Numerous MMD ministers, including the party’s first commerce minister, Ronald Penza, and its finance minister, Emmanuel Kasonde, owned commercial enterprises prior to their involvement with the party and maintained these trade operations following their ascent to political office; others acquired businesses, often illicitly, through the privatization process.84 Many leading officials were able to ensure that inputs needed by their own companies were reclassified in order to attract a lower rate of duty, even though these were predominantly finished, consumer-ready goods that should have attracted the highest tariffs. Considering the highly individualized and personalized, preferential treatment in the designation of inputs, the potential role for formal business institutions such as ZACCI or ZAM was quite limited. The absence of a reform coalition in Zambia helped enable political and narrow rent-seeking objectives to trump long-term national economic interests. Diversifying Exports and the Role of the Private Sector The promotion of “nontraditional exports” was given great rhetorical importance after 1991, but this was not backed up by specific incentives or assistance for firms to actually engage in export development. Exporters and potential exporters alike suffered at the hand of a series of poorly designed policies, including the government’s slow reimbursement of duties under rebate programs, which exacerbated cash-flow crises; a weakly supported and poorly implemented export processing zones (EPZ) program; and, most damaging, the absence of a favorable tariff regime that would offer some measure of protection to local producers while rewarding local companies for exporting final products.85 As a result, firms’ economic performance failed to improve following SAP. Moreover, business associations’ utility to the state, already limited, diminished further as they lost members due to reduced activity

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and business closures. Although, as Table 3.1 indicates, the latter half of the 1990s did see measurable export diversification, the biggest gains were in gemstones and agricultural crops, mainly horticultural and floricultural products, cotton, and tobacco, rather than manufacturing. And at around $120 million in value in 2001, even these nontraditional farming exports are comparatively small. By and large, the contribution of manufactured goods to exports remained marginal or declined in the same period. Certainly there were several policy changes in the 1990s that benefited business or, more narrowly, current and potential exporters, but these reforms tended to be haphazard, lack coordination with the private sector, and suffer from poor follow-up on the part of the state, if any occurred at all. As a consequence, even policies that seemed beneficial for business were not always so. In October 2005 ZNFU president Guy Robinson lamented, “We are yet to find a formula that will induce quick response from Government on agreed programmes, as they have acted correctly sometimes but late when the damage has already been done.”86 A prominent example was the adoption of a value added tax (VAT) in 1995, itself part of larger adjustments to the tax regime that included a reconstituted Zambia Revenue Authority (ZRA). The VAT was intended to provide some aid to manufacturers that export.87 In fact, Zambian BAs helped to convince the state to adopt the VAT, which was intended to boost production and export of Zambian goods, by shifting the burden of taxation at last from the country’s struggling producers to consumers (although this brushed aside concerns for the struggling consumer). After trade liberalization, Zambian producers continued to be disadvantaged by a sales tax regime that favored consumption of imported goods: because Zambian manufacturers were taxed heavily on

Table 3.1

Composition of Zambian Exports, 1996–2001 (percent of total value) 1996

1997

1998

1999

2000

2001

Metal 75.7 Leading nontraditional exports 24.3 Engineering products 3.7 Floricultural products 1.8 Gemstones 1.1 Horticultural products 0.0 Primary agricultural products 3.8 Processed foods 3.4 Textiles 4.1

71.0 29.0 3.7 1.9 1.3 1.4 8.0 2.7 4.4

66.8 33.2 3.4 3.5 1.2 2.2 6.6 5.2 4.5

60.6 39.4 3.0 5.5 1.8 3.1 9.4 4.3 4.8

66.4 33.6 2.6 4.3 2.0 3.5 4.7 4.5 4.6

65.4 34.6 2.4 3.8 2.3 4.0 5.7 4.8 3.8

Source: World Trade Organization, Trade Policy Review: Zambia, Report by the Secretariat, WT/TPR/S/106 (September 25, 2002), 6.

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industrial inputs, locally produced goods were uncompetitive in both domestic and export markets.88 The adoption of VAT made those taxes reclaimable. Exporting firms were entitled to receive a refund of VAT on raw materials and other inputs from the ZRA. The government allowed itself up to ninety days to reimburse firms, however, and many companies complained that the process actually took far longer—in the worst cases, up to a year. The resulting cash flow crises could cripple a vulnerable business.89 Within months of the enactment of VAT, ZAM had called on GRZ to reduce the VAT from 20 to 15 percent, arguing that to do so would help manufacturing output, spur a multiplier effect, and encourage greater compliance with the program. Yet despite the unsustainable burden on manufacturers, the government resisted reducing its revenue stream, even if doing so made sense in the long run. Although the VAT general rate was subsequently reduced to 17.5 percent, the program continued to be characterized as “unpredictable” even by 2004.90 In the 2004 budget, agricultural machinery and goods that had attracted a “zero rating” (with VAT thus fully reclaimable) were reclassified so as to no longer be eligible for the refund. The ZNFU pleaded for reconsideration of this new effective tax and was thoroughly rebuffed; Finance Minister Ngandu Magande did not even bother to appear at a scheduled meeting with the ZNFU leaders.91 Although he enjoyed a generally better reputation than Chiluba, Zambian president Levy Mwanawasa repeated the same forty-year-old bromides uttered by each of his predecessors about the importance of farming. Thus, at the ZNFU annual congress in 2005, “Mwanawasa assured farmers that [his government] will maintain the policy of promoting agriculture and private sector development as effective and efficient public sector dialogue and partnership is essential. He promised the union that since they sacrificed as an industry, the Government would reward them by fulfilling [its] promise concerning VAT.”92 But Zambia’s commercial farmers, representing arguably the sector with the strongest potential for export, have long been disregarded, in practice, at the state level. Indeed, the indifference ZNFU encountered from Minister Magande in 2004 is far more typical of the body’s relationship with the state than is the encouragement, however platitudinous, offered by the president at the union’s centennial anniversary celebration. Notably, commercial farmers also encountered state indifference to other forms of export promotion. In the wake of the 1992 and 1994–1995 droughts, which required the importation of relief maize, the government instituted a ban on maize exports in 1995. This was intended to build up local stocks as a precautionary measure against further drought. Coupled with the establishment of the Food Reserve Agency (FRA) to warehouse the maize, the proactive maneuver was greeted enthusiastically by ZNFU, whose leaders assumed it to be temporary.93 When adequate rainfall returned, spurring increases in maize production, in the 1995–1996 marketing season, GRZ officially lifted the ban as of May 1, 1996. Yet rather than widely release export licenses, as had been the

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practice, the government subsequently required would-be exporters to undergo a complex approval and licensing process for export of certain commodities, particularly maize. ZNFU protested bitterly at this de facto continuation of the ban. In early 1996, ZNFU regarded world maize prices as quite favorable, although the window for export was very brief—roughly between April and August—after which time the entry of the large U.S. crop into the market was expected to dilute international prices.94 In the meantime, if Zambian produce was unavailable, regional buyers would look instead to Zimbabwe, Kenya, and Tanzania. Domestically, the ban contributed to an oversupply of maize, thereby reducing local prices even further.95 The debate over the export ban was a microcosm of larger disputes, driven chiefly by 1996 election-year politics. The relationship between the state and commercial farmers, already cool, declined precipitously that year. Notwithstanding the numerous historical constraints that impeded the development of the agricultural sector and of ZNFU, the absence of a state-commercial agriculture coalition in Zambia is particularly ironic, since a prominent objective of all SAP programs was reemphasis on Africa’s “comparative advantage” in agriculture, facilitated by its abundance of unskilled labor, land, and low input costs relative to industry. Yet by the mid-1990s ZNFU became disillusioned by this comparative-advantage rhetoric.96 As the dispute grew increasingly contentious, then–ZNFU president Ben Kapita spoke out openly about the “export ban,” while government officials countered that no such ban existed.97 Kapita insisted that his organization had tried in vain to settle the dispute privately by going up the chain of command in the agriculture ministry, and only after being rebuffed had he aired his criticisms publicly, in June 1996.98 At the time, the government countered that licenses would be granted when applied for, but this simply was not true. Indeed, permanent secretary for agriculture Austin Sichinga acknowledged that fewer than half of farmers applying for export permits received them, and added that government wanted to see the actual export results before granting further requests—an entirely superfluous exercise.99 Despite appearances, this was not simply a case of oversight or incompetence on the part of ministry officials. Instead, GRZ sought deliberately to punish the union for its outspokenness, which was resented by agriculture department bureaucrats and the ruling party. The more ZNFU complained about the treatment of farmers, the more the government derided the organization as “opposition.” The state did not seek to expand the organizational capacity of ZNFU and thus likely co-opt this putative opposition, as has been done in Latin America; instead, it weakened ZNFU still further. Second, and more indicative of the state’s actual political objectives, its interventions helped to reduce the price of maize, the staple crop. This was a critical strategy in a country where much of the populace depends on maize for survival, and particularly so in an increasingly contentious election year. In short, both state

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actions were inherently rational politically, despite serving to undermine largescale commercial farming (LSCF)—as well as the presumably national objective of boosting agriculture—precisely at a time they should have been best positioned to benefit from liberalization. Even if the government refused to abolish licenses altogether, granting export licenses is an economically costless function for the state (in fact, it generates modest revenue). The state’s strategy can only be understood, then, as an expression of political rationality: commercial farmers were politically and economically expendable, while virtually all Zambians, and all voters, eat maize. The impetus behind the abortive launch of the Crop Marketing Authority (CMA) in 2003 was ostensibly to depoliticize this process and to allow farmers access to higher profit margins than were generated through transactions with the FRA. Even this new entity, whose establishment ZNFU initially supported, promised only ambiguous benefit to commercial farmers. Since the CMA called for reintroduction of price floors for maize (for the first time since 1992) and was to act as buyer of last resort, the body would aid mostly small, rural producers who are not serviced by the private grain-trading companies that emerged in the early 1990s. The problem, of course, is that all such interventions remain vulnerable to exploitation by the state for political purposes, as in the past. Climatological conditions may exacerbate this problem. Severe droughtinduced food shortages in 2001–2002 and later shortfalls that have created a recurrent need for food aid (about 20 percent of the need in 2006, for example) arguably preserve a state (and donor) role in the agroeconomy that further unsettles domestic markets and deprives many of ZNFU’s mid-sized members of their autonomy. Given Zambia’s experience, particularly during past election years, the reassertion of a state role in agriculture raises numerous concerns.100

Business and the Privatization of State-Owned Enterprises In Zimbabwe, privatization, at least of agricultural marketing boards, highlighted the institutional strength of business associations, which were themselves poised to make acquisitions. In Zambia, in contrast, the privatization program revealed precisely the opposite: the institutional weakness of BAs and the marginality of the private sector as a whole. In addition, Zambia’s privatization, though lauded internationally, exposed the narrow distributional agenda of the MMD elites. As of January 2003, some 281 SOEs had been privatized or were in process, out of an original portfolio of more than 300 companies when MMD took power.101 Notwithstanding this impressive volume, Zambia’s privatization exercise was highly flawed and generated intense controversy. Immediately upon taking power in 1991, the MMD took a position on privatization that was captured in the oft-repeated phrase “There will be no sacred

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cows” in the disposal of state assets;102 Privatization Act 21 in 1992 established the Zambia Privatisation Agency (ZPA) to facilitate this process. Concomitantly, the BAs advocated an aggressive program, arguing that any delay would allow SOEs to continue absorbing precious capital.103 From an early date, GRZ officials insisted that, pending the development of a satisfactory strategy, the mining conglomerate ZCCM, which was by then absorbing massive state subsidies while performing well below capacity, would be privatized as well.104 The business community applauded this initiative. Zambia quickly gained a reputation internationally as an aggressive privatizer, yet this characterization was at best misleading. Within one year of the Privatization Act, ZACCI began to accuse GRZ of “failing to promote its program effectively” and slammed the MMD policy of selling off the smaller, less profitable firms first rather than stimulate the program and international interest by selling key assets such as ZCCM immediately.105 As with other issues, ZACCI’s entreaties were ignored; by year-end 1996, the ZPA had completed the privatization of about 114 SOEs, but with few exceptions, these were mostly small company transactions for modest financial consideration.106 Privately, some MCTI officials admitted that the process had been corrupted: “Contrary to the popular international view that Zambia struck fast and hard on its privatizations, [the process] has taken far too long. [Employee] apathy and asset-stripping have crept in. You can plan for years, but it’s the implementation that counts.”107 The extent to which MMD corrupted the privatization process, however, was not known until several years later.108 Controversy also arose over the illicit disposal of state-owned assets to sitting ministers and other government officials.109 This entailed corruption in the form of kickbacks from sales of privatized entities, discounted acquisitions by government elites, and “asset stripping” (disposal of the most valuable assets of companies awaiting privatization). The deliberately botched disposal of the copper mines, on the other hand, had even more severe consequences, illustrating not only the state’s shallow commitment to privatization but also its disregard for business input. The ZCCM privatization was undermined by endless deferrals, ultimately resulting in a vastly deflated sales price.110 Throughout the 1990s, the government was totally dismissive of private sector recommendations regarding ZCCM, as well as those of the donor community.111 By the time the sale of the “unbundled” ZCCM assets was completed in March 2000, with the giant conglomerate’s largest mining facilities sold to Anglo American in partnership with the International Finance Corporation and the Commonwealth Development Commission, a consortium composed of First Quantum Minerals and Glencore International, the Binani Group of India, and Avmin, the company’s (the state’s) debt had increased markedly, while asset value and production decreased. Asset deterioration, international conditions, and a pervading sense of uncertainty among managers about the anticipated privatization had caused

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copper production to fall to just 360,000 metric tons, half the level it had been twenty years earlier; by 1995, the figure had fallen to 308,000 metric tons.112 Having earlier accepted the “no sacred cows” pledge at face value, by the mid-1990s business leaders were openly questioning the state’s credibility.113 Whereas the sheer number of privatizations at that time (213 by year-end 1997) appeared to belie business associations’ growing criticisms and continued to impress some international observers, it is also worth noting that the combined yield from nonmining sales was a relatively small $70 million.114 According to estimates made in the early 1990s, ZCCM’s privatization had been expected to fetch a sales price of some US $2.2 billion. But in the end, the agreed-upon amounts for all transactions totaled just $274 million, and the actual cash payments received “constituted only a fraction of the total [agreed] amounts.”115 The return to the state, therefore, was negligible. The government’s recalcitrance on the ZCCM privatization in particular stemmed from avarice as well as economic and political nationalism. First, the delay was part of an effort to secure the best spoils for those in the inner circle of the ruling party. Evidence of profiteering by politicians in the case of ZCCM was largely circumstantial initially, but concrete evidence of outright fraud on the part of MMD insiders emerged late in the decade.116 Even a strong offer made by an international consortium in late 1997 was rejected; insatiable greed among some politicians and bureaucratic incompetence led MMD officials to believe that a higher price was achievable.117 Second, the political interests of the MMD were compatible with a latterday economic nationalism and reflected a relative unconcern with attracting international capital among a surprising number of political elites. Although considerable pressure existed to privatize ZCCM, the donors and the international community also were preoccupied with numbers. Therefore, privatization of many companies initially generated accolades internationally, while causing only limited social dislocation domestically, since these firms, by and large, were not major employers.118 The mining sector, on the other hand, employed nearly 68,000 people in 1991; copper accounted for over 90 percent of exports, as it had for many years, and ZCCM was still considered by many to be an integral part of the nation’s identity. In fact, university students, key civic organizations including the Zambia Congress of Trade Unions, and much of the general public emerged to oppose privatization, especially of “strategic assets” including ZCCM, the telecommunications company, and Zambia Electricity Supply Company (ZESCO).119 Faced with an increasingly energized political opposition in advance of the 1996 national elections, the MMD tapped into these sentiments by adopting a more populist message. By 1996, therefore, “no sacred cows” had become a pledge for “proportion and perspective” in privatization, including resistance to a privatization policy that “elongates further the tentacles of foreign ownership in the economy.”120 The government began to downplay the bene-

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fits of privatization, arguing in the state-owned press that income generated from sales, especially the mines, would not be sufficient to offset the loss of “national prestige” and economic sovereignty.121 Some members of the business community, including, not surprisingly, executives of the Zambian subsidiaries of international companies like Colgate, saw this as “misguided nationalism.”122 Importantly, however, Zambian business associations also objected to MMD’s apparent turn inward. At bottom, misguided or not, the nationalist impulse was hardly permanent: seventy of the firms acquired by yearend 1997, including some of the largest SOEs in Zambia, were bought by foreigners. By 2004, of the twenty-four largest corporate investors, nine were South African, none were Zambian.123 Paradoxically, once hailed, privatization ultimately evoked ambivalence in business associations. In an October 7, 2005, letter to Finance Minister Magande, the chairman of the ZBF, Wamulume Kalabo, complained of negative externalities of foreign direct investment (FDI), citing discrimination against Zambian employees, upstream and downstream industries, and suppliers by foreign firms: “In Zambia, foreign investors encourage their friends and relatives to come and set up warehouses, workshops and the like to actually displace those that are already operated by Zambian citizens and take contracts from Zambians and award them to these foreign-owned, Zambian registered companies. This is encouraging capital flight and sheer plunder.”124 Thus, though the nature of the debates has changed since the 1990s, Zambian business organizations continue to struggle. One lesson from the 1990s experience is that associations have only a limited range of options available that might allow them to access and influence Zambian state actors.

Politicizing Business-State Relations: Partnership or Provocation? From Openness to Cautious Engagement The 1990s were marked by both confusion and neglect in the BA-state relationship. Certainly the early signals from the MMD government suggested that the electoral/political coalition that gave rise to MMD would be transformed into a reform coalition and that business would be a partner in national development.125 The BAs initially took this promise of partnership to heart, but it proved ephemeral. Although the BAs were inspired by the rhetoric of none other than Chiluba himself, in fact, MMD officials deliberately sought to stifle or intimidate those individuals or institutions that it perceived as uncooperative, critical, and autonomous.126 The government showed little interest in formal dialogue with private sector counterparts. Following MMD’s electoral victory in 1991, monthly meetings were scheduled between ZACCI and the

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MCTI, but these soon broke down. A senior MCTI official claimed that his private sector counterparts had failed to produce adequate agendas, resulting in meetings that were deemed “too ad hoc.”127 There was a widespread belief among senior ministry officials that business association leaders were willing to meet only with them; yet instead of granting access to associations, senior bureaucrats sought to push BAs like ZAM and ZACCI into meetings with their subordinates, which fostered resentments on both sides. The result was the alienation of junior officials in the ministry, while BA leaders were left feeling adrift and marginalized by the state.128 When business leaders subsequently complained about this apparent disrespect, government officials insisted that “the private sector is not ready for dialogue.” Scheduled “monthly” business meetings eventually became just “quarterly,” and neither of these schedules was adhered to with any regularity; ZACCI complained of government indifference.129 Negative reaction from the state contributed to an atmosphere in which numerous association leaders became apprehensive about challenging the government. Considerable dissent was stifled as a result, although the relative quiescence of BAs was not echoed in all civil society organizations and cycles of protest occurred periodically in the 1990s. This was a marked shift from the climate following the 1991 transition, when Zambian business associations generally showed willingness to criticize the policies of the new government. Even by 1993, however, the ostensibly democratic MMD was displaying increasingly authoritarian tendencies that severely dampened civil society as a whole. In March 1993, an alleged coup plot, the “Zero Option,” was uncovered, a state of emergency was declared, and business associations, like most of Zambian civil society, grew more hesitant about openly criticizing the government. The state of emergency was lifted after two months, however, and over time, business associations’ need to challenge policies they perceived as harmful began to outweigh fears of possible government retribution. In mid-1994, for example, stung by what its leaders considered to be the unwillingness (or inability) of key ministries (namely Finance and MCTI) to cooperate fully with the private sector, ZAM ran an unprecedented advertisement attacking government industrial policy. The full-page advertisement, which appeared in government-owned and private newspapers alike, depicted a profile of the rhinoceros, an animal that is virtually extinct in Zambia.130 The bold-print headline asked, is Zambian manufacturing “Dead or Alive? . . . Will our manufacturing sector, like the Zambian rhino, just disappear?” Criticizing GRZ’s deleterious industrial policy and the inaction of then–finance minister Ronald Penza on the issues of excessive government taxation, pervasive tariff imbalances, and policies that encouraged imports over manufacturing for domestic and regional markets, ZAM insisted that “The Time for Government Action Is Now.” The association also blasted the government’s failure to recognize the multiplier effects of deindustrialization on the sociopolitical fabric of the

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country, specifically job loss, increased burdens on social welfare, and a shrinking tax base. As state–civil society tensions had eased since the emergency fifteen months earlier, government officials were taken aback by the ad’s forceful tone, which was certainly uncharacteristic of Zambian business groups in the period. The advertisement did not elicit a government crackdown (such as that visited on critical journalists, for example), but neither did it yield the kind of results sought by its sponsors. In fact, it may have had precisely the opposite effect, inducing the government to further marginalize BAs. Indeed, MMD’s unexpectedly restrained reaction was partly a reflection of ZAM’s already marginal status; the failure to elicit a policy response reflected ZAM’s lack of institutional strength and lack of utility in the form of a constituency that could actually follow through on its criticisms of state elites. Commercial Farmers: From Business Interests to Political Interests Conflict between the state and commercial farmers initially followed much the same path. The liberalized agriculture regime hurt farmers, and the combination of drought, a harsh policy environment, and financial hardship contributed to considerable conflict between ZNFU and GRZ. Continued economic hardship in the wake of MMD’s implementation of SAP, coupled with two severe droughts, had left Zambian farmers in dire straits; according to the executive director, an estimated 60 percent of ZNFU’s four hundred LSCF members were technically bankrupt even by mid-1994.131 Relations with GRZ were increasingly strained, and farmers were dissatisfied with then–agricultural minister Simon Zukas.132 Unlike its counterparts in ZAM, however, the organization chose to be circumspect in its dealings with government; commercial farmers remained heavily dependent on the state for marketing and financial assistance, so they worried that confrontational lobbying efforts, especially those of a political nature, would do the ZNFU more harm than good.133 Given their historical marginalization, ZNFU farmers were not poised to make rapid strides on their own with the advent of liberalization, and thus they required continued state intervention (especially in the areas of marketing and transport). Yet the association received no rewards from the state in return for its quiescence, and the reason is found in the ZNFU’s lack of utility to the state. Among the most prominent structural reforms, the elimination of marketing boards and price and export controls should appeal to agriculturalists, as it did in Zimbabwe, yet the ZNFU was uneven in its approach. Its endorsement of full liberalization was always highly conditional: even in 1985 it advocated both liberalization (market prices) and subsidization (price controls on inputs such as fertilizer).134 Given the latter, ZNFU members were ill-equipped to

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withstand the rapid pace at which state supports, including transport and marketing services and fertilizer subsidies, were discontinued. While not repudiating SAP entirely, ZNFU complained about the absence of safeguards to protect farmers. ZNFU leaders believed that the sector was indispensable for the success of economic reform; agriculture ministry officials, however, interpreted ZNFU criticism as an indictment of the entire government program. They dismissed the farmers’ union as disorganized, ungrateful, and antiMMD.135 Thus, by 1994–1995, the state was responding to the ZNFU with indifference; ZNFU lacked the institutional strength to assert a proagriculture position.136 By the mid-1990s, an increasingly insecure Chiluba government was disinclined to offer any means to empower the agriculture constituency under the auspices of ZNFU—and another potential rival. For their part, ZNFU leaders came to believe that they could circumvent the state, in effect, by empowering themselves institutionally and politically through appeals for unity with the peasant farming community. At that time, Zambia had an estimated 600,000 subsistence-level farmers, some 85 percent of whom owned less than one hectare of land; however, they produced an estimated 80 percent of the country’s crops.137 Whereas subsistence farmers constituted a substantial, if unrealized, reservoir of constituents upon which to draw, they were already represented, albeit poorly, in the Peasant Farmers’ Union of Zambia (PFUZ) and the small-scale commercial farmers’ bodies. In fact, the MMD government had created the PFUZ and National Association of Peasant and Small-Scale Farmers’ Union of Zambia in part to forestall an alliance of agricultural interests.138 At bottom, the Zambian government had demonstrated a deliberate neglect of agriculture since independence. The low regard for agriculture was revealed in the near-constant turnover of leadership in the Ministry of Agriculture, Food, and Fisheries (MAFF; since renamed the Ministry of Agriculture and Water Development), which had seven different ministers at the helm between 1991 and 1999 (one held the position twice); the permanent secretariat saw a similar degree of leadership turnover.139 ZNFU argued that the failure to appoint a competent, profarmer minister with a strong voice in the cabinet left farmers isolated and virtually unrepresented in government.140 Further, although MAFF billed itself as the government liaison for farmers, interviews with ministry officials have revealed that there was considerable resistance within the ministry to working with ZNFU, which the officials regarded as “too pushy and too political,” particularly in the mid-1990s. Under the leadership of then-president Ben Kapita, the ZNFU became increasingly politicized. The union’s Zambian Farmer magazine attempted to stress the link between farming and politics by arguing that “the production and supply of food is a political issue. Farmers everywhere wish that it were not so, then perhaps they could go about their business without the continual involvement of government. Nevertheless, for the present, we must accept that ‘food

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is politics.’”141 This course earned a rebuke from agriculture minister Suresh Desai at the ZNFU’s annual congress in 1996. Desai admonished the association for engaging too often in “hostile and misinformed criticism and strident public denunciations [of government]. Please do not wantonly and needlessly criticize government,” he urged farmers.142 The warning proved prescient, as the relationship between ZNFU and GRZ arguably reached its nadir in April 1997, when Desai’s successor, Edith Nawakwi, refused to attend ZNFU’s annual meeting—the first time a senior minister had snubbed the farmers. Nawakwi called George Gray, the ZNFU’s expatriate executive director, “a foreign dictator” and “a Briton who when things don’t work well, will buy a ticket and jump on a British Airways leaving my commercial farmers alone.”143 Under pressure, Gray left Zambia shortly thereafter, and new leadership in the ZNFU adopted a much more conciliatory approach to government. The fractious nature of the government’s relationship with the commercial farming sector, farming’s limited economic utility vis-à-vis exports and employment, and its relatively large “settler” composition and consequently limited political clout all augured poorly for at least two sectoral initiatives, the Agriculture Sector Investment Program (ASIP) and the Agricultural Consultative Forum (ACF). The 1995 launch of ASIP, an initiative of government and the donors totaling US $350 million, signaled a potential opportunity to enhance ZNFU’s relationship with the Ministry of Agriculture. ASIP’s mandate was to restructure MAFF and boost investment in the agricultural sector; in an unusual demonstration of cooperation, ZNFU was entrusted with the vice chairmanship of the program. This putative selective benefit proved of little value, however; ASIP stalled, partly because the government’s commitment to the program waned.144 Ultimately, ASIP merely increased debt rather than benefited farmers.145 Similarly, the ACF was established in June 1998, but this was a nongovernmental, donor-dependent initiative that yielded few results. Although designed to bring the state, agricultural associations, and others together, ACF was not registered as a legal entity until May 2003—yet another signal of the unpropitious environment for coalitions of commercial agriculture and the state in Zambia. The same obstacles—delay, lack of state commitment, and donor dependence—continue to confront the multisectoral Zambia Business Forum, mentioned at the beginning of the chapter.

Business and the “New Deal” Government The election of Levy Mwanawasa as Zambia’s third president in December 2001 ushered in a number of important changes. Although Mwanawasa’s election did not represent a change in regime, or even turnover from one party to another, it did represent a second period of transition in Zambian politics.146

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This has important, albeit tentative, implications for the prospect of a businessstate coalition for reform in Zambia. As the MMD candidate handpicked by President Chiluba, Mwanawasa faced an enormous credibility gap upon his ascent to office. He was elected by the slimmest of margins, with just 29 percent of the vote, in a campaign that was marred by accusations of fraud and illicit use of state resources. Thus, at the start of his tenure, Mwanawasa was hardly viewed as a reformer; his association with Chiluba, who by that time had become a much-reviled figure in Zambian politics, was a source of considerable popular skepticism. A lawyer by training, Mwanawasa had served as the first MMD vice president but had retired from active politics in 1994, in part due to frustration with corruption in government. Yet within a few months of his inauguration, he had cobbled together a working majority in the 150-seat parliament and ushered in what he termed the “New Deal,” emphasizing governance, transparency, economic growth, and poverty reduction. Supported by civil society and a majority in the parliament, Mwanawasa’s government oversaw the lifting of Chiluba’s immunity and initiated the prosecution of the former president.147 Under Mwanawasa, the government also facilitated a number of initiatives, mostly externally sponsored, which aimed to invigorate the private sector. President Mwanawasa’s relations with the donor community have, by and large, far surpassed those of his predecessor, particularly during the final years of the Chiluba regime, when balance-of-payments support was withheld and donor aid curtailed. Upon reaching the “completion point” in April 2005, Zambia qualified for debt relief under the Enhanced Highly Indebted Poor Countries (HIPC) initiative of $3.9 billion; together with additional debt relief of $2.8 billion, agreed to at the 2005 G-8 summit in Gleneagles, Scotland, Zambia’s international debt stocks by the end of 2006 may be as low as $300 million. The removal of all but a fraction of the debt overhang potentially frees Zambia to pursue a range of developmental policies, including concentration on private sector development (PSD). An outgrowth of the Poverty Reduction Strategy Paper (PRSP) and HIPC processes conducted under the auspices of the World Bank, PSD has emerged as a major focus of the donors and IFIs.148 Donor targeting of Zambia’s private sector actually began around 2002, although the country’s formal adoption of the World Bank–derived PSD program did not occur until 2004.149 In any event, donors, including the US, German, Swedish, British, and Dutch aid agencies, are directing their own resources toward PSD with increasing regularity.150 One outgrowth of these contributions is the Zambia Business Forum (ZBF), the country’s first genuine attempt to bring ZNFU, ZACCI, and ZAM, among others, under an umbrella organization aimed at “fostering a constructive partnership between Zambia’s business community on one hand and the Government and other stakeholders in Zambia’s economic development on the other.”151

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From multiple angles, then, the international community has focused extraordinary attention on PSD in Zambia. Government and private sector commitments to cooperation were dutifully voiced, and a number of organizational adjustments have been made. In addition to the establishment of ZBF, PSD desk officers now sit in a range of key ministries, including finance, commerce, agriculture, labor, and mining. According to the IMF, “Additional important steps to operationalize the PSD initiative would be: (i) to effectively deal with the fragmentation of the current institutional set up to facilitate the interaction with the private sector, in particular for new businesses; (ii) to implement key priority actions identified in collaboration with the private sector, as a way to establish credibility; and (iii) to set up an institutional framework which ensures private sector participation during the implementation and facilitates effective delivery of the actions agreed during the [June 2004 founding] consultations.”152 The effects of this flurry of domestic and international activity are somewhat difficult to determine. On the one hand, ZBF reports tangible gains in consultations with GRZ, resulting in accelerated VAT refunds, and pledges of cooperation on the issues of investment, privatization, and macroeconomic management.153 Moreover, the economy has grown at nearly 5 percent per year since 2000 (the drought year of 2002 excepted), and although its origins lie less in the private sector writ large than in mineral prices and the donors, a climate of growth generates positive externalities. The World Bank’s “Doing Business” series suggests Zambia has done a number of things right in terms of the overall business climate: its overall rank of sixty-seven places it in the top half of economies for doing business worldwide, and Zambia is competitive with the industrialized countries of the Organisation for Economic Co-operation and Development (OECD) along a number of measures, including protection of investors.154 On the other hand, the contemporary business-state relationship appears to be beset by both duplication and perhaps greater fragmentation at the institutional level. Compared with Ghana, for example, where PSD activities have all been centralized in a cabinet-level ministry, Zambia’s approach is decentralized. Yet institutional centralization is occurring too: Dipak Patel, minister of commerce since 2002, announced in early 2006 that the government intended to bring the Export Board of Zambia, the Zambia Investment Center, and the ZPA all under one body by mid-2007 to increase efficiency.155 At the same time, the Zambia International Business Advisory Council (ZIBAC), established in 2002, already performs several of these functions.156 Moreover, the exclusively private-sector associations continue to exist, but ZACCI is moribund, and ZNFU, despite its expanded purview, enjoys only erratic access. If the state, reconstituted under Mwanawasa, is going to lead a coalition, it had better get started soon.

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Notwithstanding the transition to Mwanawasa, substantial debt relief, demonstrated commitment by the donors, and recent growth, Zambia is not a tabula rasa. Indeed, each new initiative, however promising, must be considered in light of the history of the MMD and of business-state relations in the 1990s, and the structural factors that continue to constrain Zambia’s private sector, and, more broadly, development. Clearly, President Mwanawasa is a different leader, apparently less prone to clientelism and rampant corruption than Chiluba. However, many of the fundamental structures of the businessstate relationship have yet to change appreciably. The “private sector” has expanded markedly, but as a whole, it still lacks demonstrated utility. Formal business is now largely the domain of MNCs rather than the state. MNCs could be the key to enhanced private sector strength, but they are largely divorced from the local context, thereby contributing to the prolonged institutional weakness of BAs.157 PSD, meanwhile, appears to be more squarely focused on SMEs and entrepreneurialism. A 2002 study by the Norwegian aid agency NORAD highlighted some of the limitations on Zambian business going forward, the donor role notwithstanding. The SME sector and informal sector can be recruiting grounds for business development. However, the potential should not be exaggerated. Since liberalisation of the economy, Zambia has seen a large rise in the number of informal businesses, particularly in petty trade and services. These activities can potentially evolve into small or medium sized companies, and subsequently into larger companies. The potential for this to occur should not be over-estimated, though. The majority of informal-sector “entrepreneurs” have become self-employed because there is no formal employment to be found.158

Led by President Mwanawasa, the state will have to empower business in a manner not seen previously in Zambia in order to sustain PSD in a postdonor environment. The achievement of a reform coalition must overcome these constraints as well.

Conclusion Over the long term, the empowerment of BAs and the private sector as a whole in Zambia, and the corresponding enhancement of their utility to the state, was predicated on a change in the economic structure of the country. As long as the mining industry continued to provide the vast majority of state revenues and command the majority of its resources, however, the state had little practical need for the private sector and its associations. The contributions of copper and metals to the economy have been offset in recent years by a rise in non-

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traditional exports, but not yet to a degree that changes the relationship with the private sector, particularly domestic actors and associations; Zambia’s is still fundamentally a mining economy, though it is no longer dominated solely by the state. Moreover, Zambia’s donor dependence continues. Although this may be supplanted through debt relief after 2006, for the time being it also may obviate the need for coalitions. Zambian BAs generally endorsed fiscal restraint, a liberalized export environment, and tariff rationalization, as well as privatization and foreign investment, although there was a clear if belated strain of protectionism, especially within ZNFU, and a sense among all business actors that the interests of foreign firms were elevated over Zambian ones, particularly through the privatization process. As Tor Skalnes has noted for Zimbabwe, the support for stabilization and early liberalization often reflects years of frustration suffered by firms and their associations under closed economies. However, in regard to economic liberalization broadly, the apparent consensus reached between business and the state was extremely short lived in Zambia. Although BAs maintained their support for structural adjustment in principle, over time the adverse effects of the program and the overall political and institutional environment compelled BAs to reevaluate their earlier positions, often bringing them into conflict with the state. But the state also manipulated the IFIs and the donors, who only belatedly suspended their financial support for the reform program.159 At bottom, the Zambian case perhaps most clearly reveals that responsibility for the failure of reforms and liberalization generally is widely shared, which is precisely the point of this book: such projects can successfully contribute to development only if business and state engage in frequent, meaningful consultation. Instead, the growing gap between business and state in Zambia resulted in mutual recriminations that all but shattered the prospects for coalition. Thus, by just its second year in power, the MMD’s approach to economic governance appeared increasingly ad hoc rather than comprehensive. Among most business associations, this was felt most acutely concerning the issue of trade liberalization, but they also clashed with (and diverged from) the state over privatization, government spending, and corruption. Communication was required for a successful implementation of reforms, including the amelioration of some of their more damaging and often ill-considered features. As Lusaka-based businessman and ZACCI board member Theo Bull pointed out in 1993, 207 percent inflation in 1992 and prohibitive bank interest rates were leading “people to get scared of results they had not fully foreseen. . . . Not surprisingly, many of the same business people who were shouting for liberalisation are now crying ‘help! slowdown!’”160 Yet whereas individual firms often clamored for the rollback of some SAP policies, including the reinstatement of protectionist measures, ZACCI and ZAM opted to criticize GRZ’s economic management and lack of consultation while continuing to support the program.161 Indeed, few wanted to go back to

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the prior status quo. In 1994, Mark O’Donnell, the chairman of ZAM, characterized the economic program of the MMD as “a bloody mess, but it’s better than the previous mess.”162 Similarly, ZACCI’s chief executive Gideon Phiri insisted that “SAP is a necessity: short term pain but [there are] benefits ahead.” However, he added that “government should be seen as ‘the senior partner’ in business-government relations; they should lead.”163 Certainly business associations were not always “right” or developmentally oriented in their positions. On the other hand, the Zambian state proved unwilling to sustain the type of dialogue with BAs necessary for a coalition to develop, let alone succeed. Local business actors were inexperienced with competitive market conditions: most private sector firms were ill-prepared for new imperatives to compete in both domestic and international spheres and misunderstood what SAP entailed.164 They somewhat naively insisted that their members could compete if only the environment were fair and permitted “a level playing field.” Still, it was state actors who proved far more obstreperous despite their professed mutuality of interests. Throughout the 1990s, there was no concerted effort by government to put a cooperative policy in place or provide incentives for private sector industry or commercial agriculture to take the lead in a national development project. Institutional Strength BAs lacked both within-group institutional strength and collective strength. In regard to the former, the institutional strength of individual BAs, associations like ZACCI, ZAM, and ZNFU had member density but did not have the two additional critical components of institutional strength: internal mediation and measurable selective incentives. Unlike in South Africa and Zimbabwe, where states initially leaned on private sectors for their relative expertise in a competitive marketplace, the Zambian state eschewed such partnership.165 Indeed, it did not need to rely on the private sector, which, while never dominant, had been substantially weakened and marginalized over the two and a half decades of Kaunda’s rule. Due to historical endowments, three decades of nationalization, and lack of state support, the state declined to entrust private sector associations with valuable selective incentives, especially access. Moreover, disputes over particular dimensions of adjustment exacerbated the differences between members, for example, between ZACCI’s traders and manufacturers, which the BAs were ill-prepared to mediate. This generated problems articulating collective positions, thereby allowing the government to brand them as confused, disunited, and therefore not worthy of attention. Indeed, the state was able to exploit the internal tensions, where expedient, to its own political ends—an effective, if not wholly necessary, strategy of “divide and conquer.” These conflicting tendencies—toward fragmentation, in the

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case of ZACCI, and consolidation, in ZNFU—indicate that there is no institutional strength without selective incentives. This brings us directly to the problem of utility in its two dimensions, political and economic. Utility Political utility. At its naissance in 1990, the MMD was a broad-based politi-

cal coalition that included a wide cross-section of civic organizations, including business, that sought relief from Kaunda’s economic policies. The endorsement of MMD and its economic program by the business community, however small, lent the nascent party domestic and international credibility as genuine reformers. As Chiluba’s inner circle consolidated its hold on the state—virtually assured following the 1996 election—this political leadership was increasingly secure, politically and economically, as they turned to other sources of rents, namely, irrational tariffs, privatization, the aid regime, and the mining industry. Since the movement that brought MMD to power was so broad, and business so weak, the dominant MMD elites were not beholden to business associations, in spite of their earlier electoral support. Business associations’ narrow membership base meant then, as now, that they were incapable of delivering crucial political constituencies. Indeed, in order to deal with potential electoral threats—which in any event were mostly subdued between 1997 and the unexpectedly competitive environment that preceded the 2001 election—the MMD became increasingly authoritarian in its relationship with societal groups such as the media, NGOs, and labor as well as opposition parties. Unlike in Zimbabwe, however, the state was seldom overtly hostile to the business community. Indeed, such hostility was largely unnecessary given business organizations’ institutional weakness and limited utility: there was no alliance to spurn in order to make a populist appeal, and there was little for the state to take away. The specific needs of the independent business community are not widely sympathized with or shared by the general populace: the large informal sector is concerned with subsistence and the more immediate needs of survival, and the state is still the provider of the vast majority of formal sector employment. Government in Zambia can afford to marginalize certain business interests without suffering significant local political fallout. Economic utility. In countries like Zambia, where neither manufactured nor

agricultural exports were ever emphasized, business associations face extreme difficulties in penetrating international markets. Even though associations may express a genuine interest in expanding exports, their incapacity to devote resources to export promotion means that their export potential remains at best latent. In addition, Zambian business and commercial farming activities are

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not leading employers, so their economic utility is limited under the status quo. On the other hand, the state’s long-dominant role in the economy, epitomized by the delayed (and subsequently partially reversed) privatization of the mining conglomerate ZCCM, goes a long way to explain its historical disregard for business. As Stephan Haggard, Sylvia Maxfield, and Ben Ross Schneider have argued, “Wealth derived from state-owned property . . . frees government to pursue policies private mobile capital might dislike.”166 Simply put, since the Zambian state elites were able to rely on copper revenues historically, there has been little need to pursue strategies favorable to private business. The involvement of a handful of mining firms and other foreign companies with few local linkages does not alter this calculus appreciably. For the most part, Zambian capital lacks “mobility,” and thus its opportunities to exercise its role “as capital” and exit or threaten to exit Zambia fell on deaf ears. Dependence on copper as the sole source of export revenues and the primary source of national wealth greatly hindered Zambia’s development prospects. The dominance of copper (and other parastatal organizations, though now diminished) rendered the majority of private sector actors marginal to the policymaking process, if not irrelevant to it. Ironically, however, the privatization of ZCCM in 2000 for which the BAs rallied so fervently did little to alter the fundamental structural problems of the Zambian economy or the role of associations within it. Indeed, only the subsequent failure of the Anglo American investment in 2002 and its divestiture of the mines presented opportunity as well as hard choices for sectoral restructuring, business-state relations, and development. Yet as Zambia’s copper mines are largely back in private (multinational) hands since that 2002 debacle, with the Anglo American stake purchased by the Indian mining company Vendanta, sustainable economic diversification remains in its naissance. The donor and IFI-funded PSD initiatives and new institutions like ZBF face a substantial burden of proof before they can be considered meaningful departures from past lofty rhetoric about state–private sector “partnership.” To be sure, under Mwanawasa the economic utility to the state of some firms—the handful of mining companies as well as other international investors—has increased. However, the ability of domestic capital to act collectively continues to be constrained. Domestic business has the most at stake in Zambian development, yet institutional strength remains limited, and the state has largely eschewed a program of organizing business by directing selective benefits to key associations. Former ZACCI chairman David Matongo once asked, “Why would the MMD government want to strengthen the private sector?”167 Matongo recognized that rhetoric of partnership aside, the GRZ offered no evidence in its first decade that private sector strengthening was a priority. On the contrary, a weak business sector, and a climate that curtailed business access to state actors, al-

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lowed the MMD mainly to keep its own counsel across a range of politicaleconomic issues. Economic growth has occurred at relatively impressive rates in Zambia since the election of Mwanawasa in 2001. It is worth recalling, therefore, that reform coalitions are not necessarily prerequisites for growth. But Zambia’s recent growth does not on its own lay a suitable foundation for measurable, and sustainable, development in the country—fully fifteen years after the rise of the “probusiness” MMD. Although tentative, there are some indications that the Mwanawasa government has recognized that absent a consistent and cooperative relationship with the business community such as a reform coalition provides, genuine development in Zambia will remain elusive. More fundamentally, the Zambian experience, not unlike that of a significant number of other African countries, illustrates that low/high power relations are a poor basis for establishing lasting business-state coalitions.

Notes 1. A. J. Wills, An Introduction to the History of Central Africa (Oxford: Oxford University Press, 1964), 209. 2. L. H. Gann, A History of Northern Rhodesia, Early Days to 1953 (London: Chatto and Windus, 1964). 3. Wills, Introduction; see also Colin Leys and Cranford Pratt, eds., A New Deal in Central Africa (London: Heinemann, 1960). Richard Sklar notes, “There can be no question that the [Zambian] Copperbelt has been the financial backbone of the federal fiscal structure” (Corporate Power in an African State: The Political Impact of Multinational Mining Companies in Zambia [Los Angeles: University of California Press, 1975], 16, n. 46). Likewise, William Tordoff argues that under the federation, “Northern Rhodesia became the milch cow of predominantly Southern Rhodesian white interests” (introduction to Administration in Zambia, edited by William Tordoff [Madison: University of Wisconsin Press, 1980], 2). 4. Northern Rhodesia Constitutional Conference, “Northern Rhodesia: Proposals for Constitutional Change,” presented to Parliament by the Secretary of State for the Colonies by Command of Her Majesty, February 1961 (London: HM Stationery Office, 1961). See also Sklar, Corporate Power. 5. Following negotiations, which included certain electoral protections for whites during an interim period, African representatives were permitted to form a majority; Sklar, Corporate Power, 17. 6. The European population was 3,000 in 1920, 36,000 in 1950, and 73,000 by 1960 (ibid., 9, 16). The 1995 census indicated a total population of 10.2 million, of whom 30,000 were of European descent and 20,000 of Asian (primarily Indian) descent. 7. Ibid. 8. Among some seventy-three ethnolinguistic groups in Zambia, the largest, the Bemba, represents only about 20 percent of the population. This degree of pluralism substantially mitigates conflict. 9. Andrew Beveridge and Anthony Oberschall, African Businessmen and Development in Zambia (Princeton, NJ: Princeton University Press, 1979), 36–40.

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10. COMINOR, a predecessor of ZACCI, was established by several local chambers of commerce to serve as their umbrella organization. In 1957, after a brief collapse, COMINOR reemerged as the Associated Chambers of Commerce of Northern Rhodesia (ASCOM). In 1964, just prior to independence, ASCOM was renamed the Zambia Industrial and Commercial Association, which began to incorporate black business interests into its orbit. Later (in 1989) it became the Zambia Confederation of Industries and Chambers of Commerce (ZCICC), and, finally, ZACCI in 1992. 11. Sklar notes that white commercial farmers numbered 1,300 in 1964 and just 412 by 1971, yet these controlled most of the country’s marketed agricultural production (Corporate Power, 25). Copper was the principal focus of the economy, then as now. 12. Humanism was oriented toward collective and cooperative action and merged aspects of socialism and capitalism. The relative contribution of each was unclear, however, and accumulation of private wealth was frowned upon, leading to uncertainty for businesspeople (Beveridge and Oberschall, African Businessmen, 244–246). See also Cherry Gertzel, Carolyn Baylies, and Morris Szeftel, “Introduction,” in The Dynamics of the One-Party State in Zambia, edited by Cherry Gertzel (Manchester, UK: Manchester University Press, 1984), 10. 13. Beveridge and Oberschall, African Businessmen, 46–51. 14. Lise Rakner notes “that Zambia inherited 14 parastatals at independence. . . . After the major nationalization effort was completed by the mid-1970s, 147 parastatals were in existence and 121 under a single holding company, [the Zambia Industrial and Mining Corporation, ZIMCO]. ZIMCO became the holding company for all SOEs.” Lise Rakner, Political and Economic Liberalisation in Zambia, 1991–2001 (Uppsala: Nordiska Afrika Institut, 2003), 46. 15. Carolyn Baylies and Morris Szeftel, “The Rise to Political Prominence of the Zambian Business Class,” in Dynamics of the One-Party State, ed. Gertzel, 69. 16. The two foreign firms retained a combined minority shareholding of just over 34 percent. 17. D. Michael Shafer, Winners and Losers: How Sectors Shape the Developmental Prospects of States (Ithaca, NY: Cornell University Press, 1994); Julius Ihonvbere, Economic Crisis, Civil Society, and Democratization: The Case of Zambia (Trenton, NJ: Africa World Press, 1995). For background, see Sklar, Corporate Power. 18. Although prices rebounded somewhat by the end of the decade, production peaked in 1976 at 745,700 tons and has generally declined in the years since. Humphrey Mulemba, “The Mining Sector,” speech delivered to the Carter Center Conference on Democracy and Economic Recovery in Africa: Lessons from Zambia, Atlanta, GA, June 11–12, 1992. 19. Carolyn Baylies and Morris Szeftel, “The Fall and Rise of Multiparty Politics in Zambia,” Review of African Political Economy 54 (July 1992): 80. 20. Rakner, Political and Economic Liberalisation, 44. 21. No program was in place from 1987 to March 1991 or from September 1991 until MMD’s election in October; actual disbursements were not made until January 1992 (Ihonvbere, Economic Crisis, 78). Zambia’s tumultuous experiences with the IFIs in the 1980s are addressed in Matthew Martin, “Neither Phoenix Nor Icarus: Negotiating Economic Reform in Ghana and Zambia, 1983–92,” in Hemmed In: Responses to Africa’s Economic Decline, edited by Thomas M. Callaghy and John Ravenhill (New York: Columbia University Press, 1993); and Callaghy, “Lost Between State and Market: The Politics of Economic Adjustment in Ghana, Zambia, and Nigeria,” in Economic Governance and Policy Choice: The Politics of Economic Adjustment, edited by Joan Nelson (Princeton, NJ: Princeton University Press, 1990).

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22. Beveridge and Oberschall, African Businessmen. 23. Kaunda’s ministers and civil service representatives were compelled to adhere to a strict “leadership code” that prevented them from investing in business interests, although they often circumvented this by purchasing businesses in the name of a spouse or other relative. 24. Rakner, Political and Economic Liberalisation, 47. 25. Ibid. See also Beveridge and Oberschall, African Businessmen, 270. 26. Neva Seidman Makgetla, “Control in the Parastatal Sector in Zambia, 1976– 1986,” in State-Owned Enterprises in Africa, edited by Barbara Grosh and Rwekwaza Mukandala (Boulder: Lynne Rienner Publishers, 1993), 113. 27. Rakner, Political and Economic Liberalisation, 49. 28. Makgetla, 113. 29. Rakner, Political and Economic Liberalisation, 48. 30. Ihonvbere, Economic Crisis, 56–57, quoting ILO, “Narrowing the Gaps: Planning for Basic Needs and Productive Employment in Zambia” (Addis Ababa: ILO, 1997). 31. Robert Bates, Markets and States in Tropical Africa (Berkeley: University of California Press, 1981). Zambia’s population is variously estimated at 40–59 percent urban dwellers (Government of Zambia, Zambia in Figures [Lusaka: Central Statistical Office, 1996]). 32. John Hudson, “The MAFFia: Is It Really Necessary?” Profit 4, no. 8 (January 1996): 35. 33. Rakner, Political and Economic Liberalisation, 49. 34. Ibid., 21. 35. Sklar, Corporate Power. 36. “Farmers Union Celebrates One Hundred Years,” Times of Zambia, October 15, 2005. Only a small number of small-scale farmers participate in ZNFU, however. 37. See Baylies and Szeftel, “Fall and Rise of Multiparty Politics.” 38. Similarly, export management was in the purview of the state, except in the case of tobacco exports through the Tobacco Association of Zambia—these represented just 1 percent of exports in any event. Interview, Graham Wallace, executive director, Tobacco Association of Zambia, June 4, 1996, Lusaka. 39. Baylies and Szeftel, “Fall and Rise of Multiparty Politics,” 80. See also Martin, “Neither Phoenix Nor Icarus,” 139. 40. Rakner, Political and Economic Liberalisation, 65. 41. Martin, “Neither Phoenix Nor Icarus,” 139. 42. Baylies and Szeftel, “Fall and Rise of Multiparty Politics,” 87. 43. Martin, “Neither Phoenix Nor Icarus,” 138–139. 44. Interview, Theo Bull, ZACCI board member, June 22, 1992, Atlanta. 45. Even then, however, business was most relevant as part of a constellation of societal groups, including labor. Their cumulative weight afforded the MMD its electoral supremacy. 46. NORAD, “Study on Private Sector Development in Zambia,” Oslo, March 2002, 11. 47. Roger Tangri, The Politics of Patronage in Africa: Parastatals, Privatization, and Private Enterprise (Oxford: James Currey, 1999). 48. Gladstone Bonnick, “Zambia Country Assistance Review,” Report 15675 (Washington: World Bank, June 3, 1996). On sequencing of reforms, see Stephan Haggard and Steven B. Webb, eds., Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment (New York: Oxford University Press, 1994).

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49. Interview, Gideon Phiri, ZACCI chief executive, August 9, 1996. Clearly, overall economic stagnation has dampened consumerism, thus adversely affecting traders as well. 50. GRZ, “Report of the Parliamentary Committee on Economic Affairs and Labour on the Privatisation of Zambia Consolidated Copper Mines Limited for the Fourth Session of the Eighth National Assembly: Appointed on 10th February 2000.” November 2000, Lusaka, Zambia. 51. See Lise Rakner, Nicolas van de Walle, and Dominic Mulaisho, “Aid and Reform in Zambia,” in Aid and Reform in Africa: Lessons from Ten Case Studies, edited by Shantayanan Devarajan, David R. Dollar, and Torgny Holmgren (Washington, DC: World Bank, 2001); Rakner, Political and Economic Liberalisation. 52. IMF Staff Country Report No 99/43, Zambia Statistical Appendix (May 1999), 25. 53. Nontraditional exports increased from less than 9 percent of the total in 1990 to 36.4 percent in 2003, although some of this trend was due to a fall in the dollar volumes of metal exports (ibid.). Privatization in various sectors, including sugar and textiles, for example, as well as mining, has contributed to an increase in the private sector portion of exports. 54. World Trade Organization, Trade Policy Review: Zambia, Report by the Secretariat, WT/TPR/S/106, September 25, 2002, 7–8. 55. Interview, Gideon Phiri, ZACCI chief executive, August 9, 1996, Lusaka. 56. Interview, A. K. Banda, deputy secretary, Policy and Planning, Ministry of Agriculture, May 24, 1996, Lusaka. Other officials expressed similar sentiments about BAs regardless of sector. 57. In addition to dismissing BAs, GRZ manipulated and ignored donors, effectively insulating itself from both domestic interest group pressure and international pressure by the late 1990s. See Rakner, Political and Economic Liberalisation. 58. Interview, ZAM member, June 13, 1996, Ndola. 59. Interview, Phiri. Interestingly, Zambia accused both South Africa and Zimbabwe of dumping products on the Zambian market at below their marginal cost of production. 60. Interviews with members of the ZNFU Grain Committee, chaired by A. Nymann-Jorgensen, June 6, 1996. 61. Zambia’s MCTI tried in 1996 to negotiate a nonreciprocal preferential trade agreement with South Africa and the South African Customs Union, but initial consultations went nowhere. Subsequent discussions in 1997 and 1998 led to a preliminary trade agreement that ZAM supported, however. 62. Interview, Mark O’Donnell, ZAM chairman, August 9, 1994. 63. Joint interview with Kabeta Muleya, permanent secretary, Ministry of Commerce, Trade, and Industry (MCTI), and D. K. Mendamenda, director of policy planning and research, MCTI, July 3, 1996, Lusaka; interview with Mendamenda, August 6, 1996, Lusaka; interview with consultant to MCTI, August 2, 1996. 64. See Rakner, Political and Economic Liberalisation, 90–92. 65. Ibid. 66. Manufacturing employment stood at 54,006 in 2003. “Paid Employment by Economic Sector,” in IMF Staff Country Report, 99/43 (May 1999) and IMF, “Zambia: Selected Issues and Statistical Appendix,” IMF Country Report, 04/160 (July 2004). 67. Farhad Noorbakhsh and Alberto Paloni, “The De-industrialisation Hypothesis, Structural Adjustment Programmes, and the Sub-Saharan Dimension,” in Industrial Development and Policy in Africa: Issues of Deindustrialisation and Development

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Strategy, edited by Hossein Jalilian, Michael Tribe, and John Weiss (Cheltenham, UK: Edward Elgar, 2000), 127–128. The authors are paraphrasing World Bank policy here. 68. Ibid. 69. Rakner, Political and Economic Liberalisation, 168–169. 70. Interview, O’Donnell. 71. Paul Bennell, quoted in Michael Tribe, “An Overview of Manufacturing Development in Sub-Saharan Africa,” in Renewing Development in Sub-Saharan Africa, edited by Derkye Belshaw and Ian Livingstone (London: Routledge, 2002), 265. 72. Interview, Muleya and Mendamenda. 73. See, for example, USAID, “Zambia’s Private Sector Development Reform Programme: Objectives, Action Plan, Priorities, and Implementation Framework,” July 14, 2004. Available at www.usaid.gov/zm/docs/the_private_sector_development_plan .pdf. 74. Anthony Mukwita, “Economy Watch: Industry Laments Lack of Subsidies,” The Post (Lusaka), December 13, 2000. 75. Interview, David Small, managing director, Colgate-Palmolive, June 1996, Ndola. 76. “ZBF Writes to Government over Privatisation Legislation,” The Post (Lusaka), November 17, 2005. 77. Fredrick Mutesa, “Transparency and the Rule of Law in the Privatization of the Zambia Consolidated Copper Mines (ZCCM) Assets,” Research Report, Transparency International–Zambia, 2001, 23. See also Government of Zambia, “Report of the Committee on Economic Affairs and Labour on the Privatisation of Zambia Consolidated Copper Mines Limited for the Fourth Session of the Eighth National Assembly: Appointed on 10th February, 2000” (rejected by Parliament, November 28, 2000). 78. Karen Tranberg Hansen, Salaula: The World of Secondhand Clothing and Zambia (Chicago: University of Chicago Press, 2000), 233. 79. Ibid., 237. 80. Sylvia Mweetwa, “Salaula Dirge Persists,” Times of Zambia, February 10, 1998, quoted in ibid., 240. 81. Interview, Mendamenda. 82. Confidential interview, August 2, 1996, Lusaka. 83. Effective with Zambia’s 1996 budget, new rates were set at 0–5 percent for raw materials (from 15 percent), 15 percent for intermediate goods (from 25 percent), and 25 percent for finished goods (from 40 percent). 84. Mutesa, “Transparency and the Rule of Law.” 85. The EPZ Act was not adopted until late 2001, after several years of delay (“ZACCI, ZAM Ponder Export Processing Zones Act,” Times of Zambia, November 14, 2001). The act was criticized heavily by BAs, who had little input into its development, for discriminating against local manufacturers in favor of foreign investors (“Government to Improve Incentives for Investors,” Times of Zambia, October 15, 2004.) 86. Quoted in “Farmers Union Celebrates One Hundred Years.” 87. The 1994 launch of the Zambia Revenue Authority (ZRA), which would be responsible for customs as well as domestic taxation, was lauded as a significant milestone by all the major Zambian business associations. 88. By June 1996, 5,626 businesses had registered for the VAT, thus becoming eligible to receive VAT refunds as suppliers and purchasers, which increased backward and forward economic linkages. As of the 1996 budget, SMEs were allowed to claim refunds on purchases from their own suppliers.

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89. However, perhaps three to five companies in Zambia received their VAT refunds in far less than 90 days. The highly successful Swarp Spinning Mills, for example, had just a thirty-day refund period, reflecting both its size and personal relations with the ZRA: “it depends on how you approach the ZRA,” according to my interview with Christopher Matonga, Textile Producers Association of Zambia, June 13, 1996, Ndola. 90. “Investment Climate Is Governed by Scattered Legislation—Mutati,” The Post (Lusaska), October 7, 2004. 91. Kevin Chambwa, “Review New Measures Imposed on VAT-ZNFU,” The Post (Lusaka), February 20, 2004. 92. “Farmers Union Celebrates One Hundred Years.” 93. The FRA also was expected actually to create an additional market for farmers, who could sell to the agency rather than release the entire crop publicly and could thereby maintain higher consumer prices. 94. “Notes from the Boardroom,” The Zambian Farmer 1, no. 7 (June 1996): 11. 95. Interview, Ben Kapita, May 23, 1996, Lusaka. 96. As did more forthright state personnel. Interview, Mathias Mpande, deputy minister, May 14, 1996. 97. Interviews with staff at the Ministry of Agriculture, Food, and Fisheries, May 14 and July 3, 1996, Lusaka. 98. ZNFU claimed that it first approached the deputy minister of agriculture and then the permanent secretary and the donors. Only with these avenues exhausted did ZNFU issue a press statement (“Notes from the Boardroom,” 11). 99. Interview on ZNBC TV News, July 3, 1996. Sichinga’s comments followed earlier and equally implausible government explanations in June 1996 that export licenses would not be issued until the final crop forecasts were made. In light of the excellent rains in 1995–1996, however, a shortage was all but impossible. 100. EIU, Country Report: Zambia, December 2005. 101. See www.zpa.com.zm. 102. Ronald Penza, address to Overseas Private Investment Corporation mission, Intercontinental Hotel, Lusaka. September 10, 1992. See also Carter Center, Proceedings of the conference “Democracy and Economic Recovery in Africa: Lessons from Zambia,” Atlanta, June 11–12, 101. 103. ZACCI long devoted a recurring column to privatization in the magazine Profit (the unofficial journal of ZACCI, published from 1991 through 1999). Criticisms were directed at such issues as the degree and pace of privatization and the active involvement of government officials and their families in purchases. 104. Remarks by the minister of mines, Humphrey Mulemba, in Carter Center, Proceedings, 101. 105. Theo Bull, “ZCCM: Light at the End of the Tunnel,” computer printout, March 22, 1996. See also Theo Bull, “Bull’s Blueprint,” Profit 1, no. 5 (October 1992): 21–22. 106. Noteworthy exceptions included Zambia Sugar Company and Zambia Breweries, which were purchased by MNCs Tate and Lyle and South African Breweries, respectively. 107. Interview, MCTI official, August 2, 1996, Lusaka. 108. See “Report of the Committee on Economic Affairs and Labour”; Mutesa, “Transparency and the Rule of Law”; Rakner, Political and Economic Liberalisation. 109. The ZPA insisted that all of its tender and sales procedures were transparent, and it published the results of all tenders following a successful bid in full-page advertisements, press releases, and its website (interview, Leonard Jones, ZPA consultant, June 1996, Lusaka). Yet many continued to question the integrity of the deals with politicians, which involved either no transfer of funds or astronomical sums of ques-

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tionable origin. For example, Minister of Local Government Bennie Mwiinga purchased Lake Hotels for US $611,400 in 1996. See “Pitfalls of Privatization Hearsay,” Africa News, December 3, 1997, and Reuben Phiri, “ACC Probes Mwiinga,” The Post (Lusaka), July 9, 1997. The government’s own parliamentary report later confirmed the opacity of certain transactions and the breadth of corruption; hence the report was embargoed prior to its scheduled release in November 2000. 110. Mutesa, “Transparency and the Rule of Law.” 111. Rakner, Political and Economic Liberalisation. 112. Copper production peaked at 720,000 metric tons in the mid-1970s and began to decline thereafter. The 1990s witnessed the most precipitous decreases. GRZ, Quarterly Digest of Statistics, Fourth Quarter 1994, and Quarterly Digest of Statistics, Fourth Quarter 1996 (Lusaka: Central Statistical Office, 1996). 113. Interviews with ZACCI executives, Lusaka: Alex Mwila, information officer, May 8, 1996, and Phiri, August 9, 1996. 114. Such as the US Corporate Council on Africa. 115. Mutesa, “Transparency and the Rule of Law,” 2. 116. Ibid. See also “Report of the Committee on Economic Affairs and Labour.” 117. In late 1997 a bid for ZCCM was made by the Kafue Consortium (composed of Avmin of South Africa, Noranda of Canada, Phelps Dodge of the United States, and Britain’s Commonwealth Development Corporation) but was taken off the table due to government inaction. The consortium subsequently lowered its valuation of the company as copper prices dropped to an all-time low and ZCCM debts mounted. The deal collapsed completely by April 1998 (Sam Mujuda and Joe Kaunda, “Mines Sale Flops,” The Post, [Lusaka], April 3, 1998). 118. Retrenchments resulting from privatization were rather light: of the 61,000 formal sector jobs eliminated between 1992 and 1995, 3,000 were from privatized companies (“Is Zambia a Model for the Rich Only?” Africa News, December 2, 1997). There were 485,000 formal sector employees at midyear 1995 (GRZ, Quarterly Digest 1996, 43). 119. “Privatisation in Zambia,” Profit, October 1992, 16. 120. “Privatisation” (editorial), Times of Zambia, July 6, 1996. 121. Interview, Mendamenda. 122. Interview, Small. 123. See www.zpa.org. Citing costs, Anglo American divested from Zambia in early 2002. 124. “ZBF Writes to Government over Privatisation Legislation,” The Post (Lusaka), November 17, 2005. 125. Baylies and Szeftel, “The Fall and Rise of Multiparty Politics”; Rakner, Political and Economic Liberalisation. 126. Early in his tenure, Chiluba pledged on behalf of himself and his government, “We shall conduct our business openly, as we conduct our politics publicly, with accountability to the people, as embodied in our democratic ideals.” GRZ, “Zambia, Building a Firm Base,” paper presented at the Carter Center conference “Democratic and Economic Recovery in Africa: Lessons from Zambia,” Atlanta, June 11–12, 1992. The assertion about MMD officials’ actual way of operating comes from my interview with Theo Bull, ZACCI board member, Lusaka, September 17, 1992. 127. Interview, Mendamenda. 128. Interview, Muleya. Not surprisingly, this sharply contradicts ZAM chairman O’Donnell’s claim that ZAM operated “quietly and behind the scenes,” preferring to work with key individuals it had identified. O’Donnell explicitly stated that ZAM’s

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principal contacts were below even the permanent secretary level, in order to keep issues “apolitical.” The diametrically opposed interpretations are telling. 129. Interview, Mendamenda, August 6, 1996, Lusaka; interview, Mwila, May 8, 1996, Lusaka. 130. The advertisement even appeared in the state-owned Times of Zambia on August 10, 1994, as well as the independent Weekly Post on August 14, 1994. 131. George Gray, ZNFU’s executive director, said the only reason banks did not seize the assets of insolvent farmers was that they lacked the resources to carry out such repossessions or the market in which to dispose of seized farms. Interview, August 9, 1994, Lusaka. 132. Rakner, Political and Economic Liberalisation. 133. “We have to be circumspect”: interview, Gray. 134. Eve Sandberg, “The IMF Structural Adjustment Program for Zambia’s Agriculture Sector,” Pew Case Studies (Washington, DC: Institute for the Study of Diplomacy, 1995). 135. Interview, Simon Zukas, former minister of agriculture, June 27, 1996, Lusaka; Antony Mwanaumo, MAFF, August 3, 1996, Lusaka. 136. Conversely, Zambia’s small tobacco-producing sector, represented by the Tobacco Association of Zambia (TAZ), maintained its favorable stance on SAP. As growers of a highly profitable cash crop that enjoys high international demand, TAZ members sought to take advantage of favorable conditions, and have done so, albeit on a limited scale. 137. ZNFU, “Executive Director’s Report to Annual Congress,” Lusaka, April 25, 1996, x; Peter Gregory and Lovemore Simwanda, “Agricultural Biotechnology and Biosafety in Zambia,” report prepared for ZNFU by Zambia Trade and Investment Enhancement Project (ZAMTIE), June 2002, Lusaka, available at www.zamtie.org/ pdfreports/agribiotechandsafety.pdf. 138. In retrospect, this may have been due to election-year posturing in 1996 and the desire to impede the development of the nascent self-described “farmers’” party, the National Lima Party. NLP went nowhere, and after ZNFU expanded its umbrella to represent peasant farmers in 2003, it had little impact on organizational clout. 139. The first MMD agriculture minister, Guy Scott, is generally excluded from the harshest criticisms. Scott, himself a commercial farmer, was forced out of the new government early on. See also Hudson, “MAFFia.” The deputy minister of agriculture concurred with ZNFU’s criticism that MAFF is too big: “We owe it to the farmers and to the success of ASIP to make these cuts.” The inefficiencies and redundancies run all the way to the MAFF district office levels, he observed, lending credence to ZACCI’s claim (interview, Mpande). 140. Interview, George Gray, ZNFU, May 2, 1996. 141. “Political Union,” editorial, Zambian Farmer, August 1996. 142. Minister’s speech to ZNFU annual meeting, April 25, 1996. 143. “Nawakwi Snubs Farmers,” The Post (Lusaka), April 28, 1997. 144. Interview, Mpande. 145. “Chiluba’s ASIP was a Total Failure,” The Post (Lusaka), June 17, 2002. 146. Gretchen Bauer and Scott D. Taylor, Politics in Southern Africa: State and Society in Transition (Boulder: Lynne Rienner Publishers, 2005). 147. Scott Taylor, “Politico-legal Responses to Past Presidential Corruption in Zambia and Kenya: Catching the ‘Big Fish’ or Letting Him off the Hook?” Third World Quarterly 27, no. 2 (2006): 281–301. 148. World Bank, “Zambia: Poverty Reduction Strategy Paper and Joint Staff Assessment,” Report 24035-ZA (Washington, DC: World Bank, 2002). See also World

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Bank, Private Sector Development Strategy: Directions for the World Bank Group (Washington, DC: World Bank, 2002). 149. See, for example, NORAD, “Study on Private Sector Development.” 150. Kelvin Chambwa, “Donors Pledge $10M for Private Sector Development Programme,” The Post (Lusaka), February 2, 2006. 151. Zambia Business Forum, “ZAMTIE Facilitates the Formation of the Zambia Business Forum,” n.d., available at http://zamtie.org/zambsiforum.htm. 152. IMF, “Zambia Poverty Reduction Strategy Paper Second Annual Progress Report: Joint Staff Advisory Note,” Country Report 05/195, June 2005, 5. 153. Zambia Business Forum, “Update on the Issues That the Business Forum Has Dealt with to Date,” n.d., available at www.zamtie.org/news/zambziforumissues.htm. 154. World Bank Group, “Featured Snapshot Report: Zambia,” available at www .doingbusiness.org/ExploreEconomies/Default.aspx?economyid=207. 155. Chambwa, “Donors Pledge $10M.” 156. “ZIBAC Conference Acknowledges Zambia’s Positive Economic Strides,” Times of Zambia, September 10, 2005. 157. “ZBF Writes to Government.” 158. NORAD, “Study on Private Sector Development,” v, emphasis in original. 159. Rakner, van de Walle and Mulaisho, “Aid and Reform.” 160. Personal correspondence, March 2, 1993. 161. Principal criticisms focused on government spending, an outmoded tariff structure, and tax policy. 162. Interview, O’Donnell, August 9, 1994. 163. Interview, Phiri. 164. Interview, Joseph Richardson, commercial officer, US Embassy, April 24, 1996, Lusaka. Describing ZNFU’s response to liberalization, he noted, “They say, ‘We want government off our backs. So just give us our subsidies and leave us alone!’” See also Deborah Bräutigam, Lise Rakner, and Scott Taylor, “Business Associations and Growth Coalitions in Sub-Saharan Africa,” Journal of Modern African Studies 40, no. 4 (2002): 519–547. 165. Even where these firms previously enjoyed protectionist policies. 166. Stephan Haggard, Sylvia Maxfield, and Ben Ross Schneider, “Theories of Business and Business-State Relations,” in Business and the State in Developing Countries, edited by Sylvia Maxfield and Ben Ross Schneider (Ithaca, NY: Cornell University Press, 1997), 5. The reference was to Indonesian oil SOEs in the 1970s. 167. Interview, David Matongo, chairman, ZACCI, May 8, 1996, Lusaka.

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4 From Partnership to Enmity: Business, the State, and Economic Collapse in Zimbabwe

This is the best government for farmers that this country has ever seen. —CFU member, November 19841 It’s a fiction and a fraud. The government would have to make fundamental changes before anyone in their right mind could look at the proposition [to return to commercial farming]. —Former CFU member, May 20052

By late 2000, the relationship between the formal business community, represented by the established business associations, and the state in Zimbabwe was nearly dysfunctional, and the economy was teetering on the edge of collapse. At that point, Zimbabwe had experienced two successive years of significant economic contraction, yet faint hope still lingered within some segments of the business community that a turnaround might be possible.3 Most economic indicators, however, were heading in the wrong direction, and economic policymaking had become increasingly ad hoc, undermining already fragile business confidence and offering scant prospect for recovery. The once-vibrant manufacturing sector was on the verge of total collapse: substantial contraction earlier in the decade was followed by overall production declines of 23 percent between 1997 and 2001 in virtually every industrial subsector.4 Zimbabwe’s vital commercial agriculture sector, although still showing some growth in the late 1990s, faced a looming political threat from the government and its supporters bent on seizure and redistribution of white-owned commercial farms. By 2004, most businesspeople and informed observers saw little prospect for economic recovery, let alone a return to the status quo ante in which traditionally powerful, formal sector business interests had maintained both explicit and tacit linkages with state institutions. Indeed the Zimbabwe economy had collapsed, many formal sector enterprises had been shuttered, particularly those medium-sized firms lacking access to capital (in addition to the widespread closures in the 1990s, some 500 companies closed down between 2000 101

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and the end of 2002),5 the commercial agricultural sector was in shambles, and the relationship between traditional business associations and the state was virtually nonexistent. Such an outcome is particularly ironic considering that throughout much of the 1990s business-state relations in Zimbabwe, though hardly as cooperative as those in South Africa, were superior to those in Zambia, which it now trails in virtually every respect. In fact, in the early 1990s Zimbabwe could be characterized as a “high/high” state, with high levels of both business and state strength. Tor Skalnes argued at that time that despite occasional tensions, “close government-interest group cooperation nevertheless takes place and has been essential to the success of economic reform.”6 Yet as the decade progressed, the government of Zimbabwe (GOZ) generally turned a deaf ear to the economic interests that had once provided an important pillar of the national economy, while the country experienced accelerating business declines in all sectors. The one exception was commercial farming, but even this sector ultimately suffered decline. Skalnes’s conclusion, though accurate at the time, clearly lacked staying power. This chapter aims to explain the precipitous fall in business-state cooperation and the corresponding decline in Zimbabwe’s economic fortunes. The reform coalition in Zimbabwe, which was at its most inclusive from about 1988 to 1991, helped initiate a series of structural economic reforms. Although many of these proved problematic, the policies were designed, presumably, for growth. This formative coalition of the late 1980s deteriorated markedly, along with Zimbabwe’s economic health, in a remarkably short span of time. Thus the overall business-state relationship became unbalanced, as state power eclipsed the institutional strength of business associations in manufacturing and the trades, and eventually in commercial agriculture as well. Ultimately, for state actors, political survival outweighed the utility of maintaining an economically constructive coalition with business; business and the wider economy suffered as a result. The institutions established at the start of the economic transition were incapable of enduring amidst critical threats to the business-state relationship. We shall begin by examining the business-state relationship historically. An understanding of historical and contextual factors sheds light on the origins of BAs’ institutional strength, which, collectively at least, reached its zenith around 1990 with the promulgation of the Economic Structural Adjustment Programme (ESAP). This historical approach also elucidates the changing interests and capacities of the Zimbabwean state; the distribution of power between business and state actors is essential to understanding the coalition’s naissance, but it also contained the seeds of its demise. Thus, after examining the factors that led to the emergence of a reform coalition in Zimbabwe, the chapter turns to analysis of its relatively rapid decline in the face of largely exogenous threats. It concludes by examining the actors and interests that have

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supplanted the reform coalition and assessing the prospects for Zimbabwe’s embattled business institutions. Zimbabwe’s tortured path from reform coalition to distributional coalition offers a cautionary tale to countries that are similarly constituted demographically and economically, not least of all South Africa, as discussed in Chapter 5.

The Historical Context Colonial Origins Like Zambia and South Africa, the modern state of Zimbabwe is itself the product of business-state relations. Large-scale European penetration of the area commenced with the 1890 arrival of Cecil Rhodes’s British South Africa Company (BSAC), which was motivated by claims that the territory contained a “second rand” of gold deposits such as those discovered in South Africa a generation earlier. It quickly became apparent that the territory (later named Southern Rhodesia) lacked the mineral wealth of its southern neighbor; nevertheless, limited settlement of the area began almost immediately, chiefly centered on its rich agricultural potential. Over time, these settlers gained in population and influence, and eventually the period of BSAC “company rule” ended in 1923 when Southern Rhodesia was turned over to a settler government. What followed was a long period of economic diversification and a steady increase in the settler population, particularly after World War II. Instrumental in this process of development was the colony’s ten-year (1953–1963) federation with Northern Rhodesia and Nyassaland (Malawi), which essentially used Zambian and Malawian labor and raw materials to further fuel Southern Rhodesia’s industrialization. Despite the manifold economic advantages to Southern Rhodesia, the federation collapsed over the issue of the transition to independence under black majority rule. With the largest white settler population (270,000 at its 1961 peak) among British territories in Africa, Southern Rhodesia was far more resistant to pressure from London, and elsewhere in Africa, to accede to majority rule. Indeed, once Northern Rhodesia took clear steps toward independence, Southern Rhodesia experienced a sharply conservative backlash in its own 1962 elections.7 By 1965, Southern Rhodesia’s whites, led by the ruling Rhodesia Front party under Prime Minister Ian Smith—who vowed, “No African government in my lifetime”—issued the Unilateral Declaration of Independence (UDI) from Great Britain.8 Thereafter known simply as “Rhodesia,” the country had a strong economic foundation upon which to embark on the UDI experiment. Revenue flows, particularly from Zambian copper during the Federation, had substantially boosted Rhodesia’s agroindustrial capacity.9 The imposition, at British insistence, of

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United Nations sanctions in 1966 resulted in a small drop in national revenues, reduced access to imported industrial inputs, and a loss of export markets, but the effects were short lived.10 In fact, the sanctions regime compelled the Smith government to pursue an aggressive policy of import substitution industrialization (ISI) that saw considerable success, allowing the country to strengthen an already viable industrial base.11 Rhodesia also achieved self-sufficiency in a number of agricultural products, including wheat, sugar, and maize. Investment was ploughed back into industry between 1967 and 1974. Paradoxically, even international competitiveness improved due to fiscal prudence and low inflation, which the government pursued “in an attempt to maintain or even increase exports despite sanctions.”12 Sanctions evasion (of both imported inputs and exported goods, principally minerals), as well as a 1964 preferential trade agreement with apartheid South Africa, helped sustain Southern Rhodesia’s export volume.13 Therefore, by 1968–1969, the Rhodesian economy began to experience rapid growth: real GDP increased by 25 percent between 1965 and 1970, notwithstanding the initial drop after UDI; it rose another 34 percent between 1970 and 1975.14 Business and the Rhodesian State: The Origins of Institutional Strength Even well before the UDI period, the Rhodesian state took a major role in organizing business, adhering to an essentially corporatist strategy in which statesanctioned monopoly groups were allowed substantial input into policymaking. Although nominally voluntary, these business associations in the mining, commercial agriculture, and manufacturing sectors had considerable member density and were granted wide-ranging selective incentives by the state.15 For example, the chamber movement—which traces its origins to 1894, when two independent chambers of commerce were established in the cities of Harare (then Salisbury) and Bulawayo—amassed considerable institutional strength over time. The powers delegated by the colonial and Rhodesian governments to the chambers, united under the aegis of the Associated Chamber of Commerce of Rhodesia, included responsibility for vetting foreign exchange applications from members and determining distribution of import allocations, which attracted fees for the body.16 For the manufacturing sector, the Association of Rhodesian Industries (ARI—the predecessor to the Confederation of Zimbabwe Industries, CZI) performed similar state-delegated functions and was able to gain key concessions for its members as well.17 The Chamber of Mines, established in 1939, represented the country’s mining firms, which were predominantly foreign. As Jeffery Herbst notes, however, none of these associations had the lobbying clout and the internal cohesion of the commercial farmers’ organization.18 Commercial agriculture has consistently occupied a central economic

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role throughout Zimbabwe’s history. The BSAC first attracted white farmers to the territory with offers of cheap land and ample subsidies as early as 1890, and the first organizations of large-scale farmers were formed in 1902. The establishment of the Rhodesia National Farmers Union (RNFU) in 1942 cemented the privileged position of agriculture. Although the decision to unite under one umbrella body was made by the existing producer organizations, a major impetus for founding the RNFU was the state’s decision to grant selective incentives to the new body. Specifically, the Farmers’ Licensing and Levy Act (1942) required all commercial farmers to have licenses, a legislative maneuver that Herbst considers “a stroke of organizational brilliance because it eliminated any worries that the Union might have had that it would not get the full support of farmers, and it gave it an assured source of finance.”19 It also had the effect of making membership in the new union mandatory, since it was the only association empowered to grant licenses. The RNFU, renamed the Commercial Farmers’ Union (CFU) after independence in 1980, thus dominated the agricultural sector for decades, but it was not monolithic. Numerous satellite commodity associations affiliated to the CFU, including those representing dairy farmers, cattle producers, commercial grain producers, and cotton and coffee growers. (Zimbabwe’s most lucrative commercial crop, tobacco, fell under the auspices of the autonomous Zimbabwe Tobacco Association, ZTA.)20 Over the decades, the CFU amassed both horizontal and vertical strength. The agricultural lobby’s long history and close connections to the settler state helped it evolve into a powerful organization. In short, by the time of UDI, business associations and the state had built an extensive and cooperative framework, an effective industrial strategy, and a formidable commercial agriculture sector with substantial intersectoral linkages. Policy coordination characterized much of the UDI period and contributed to positive outcomes. Total exports, for example, grew some 280 percent between 1965 and independence in 1980.21 Such impressive results concealed a number of structural weaknesses that afflicted the Rhodesian economy, however, especially after 1975. First, much of Rhodesian export growth was in the mining sector, thereby masking the performance of other sectors. Further, as sanctions busting by Western nations diminished and regional neighbors closed borders, so did Rhodesia’s trade relationships, deepening the dependence on South African markets. Finally, although ISI policies resulted in substantial industrialization and local capacity—Herbst reports a 7 percent drop in manufactured imports between UDI and independence, for example—by the late 1970s the “easy” phase of ISI had clearly exhausted itself.22 Industrial competitiveness diminished due to aging capital equipment for which it became increasingly prohibitive to secure spares. Moreover, there was little if any international market for Rhodesian manufactured goods; exports were dominated by tobacco, minerals, and, to a lesser extent, textiles, clothing, and basic food processing (the bulk

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of which found markets in South Africa). As a result of these pressures, the benefits exporters had enjoyed during colonialism and earlier in the UDI period, including state incentive and marketing schemes and support from local financial institutions, declined sharply. Export subsidies were discontinued in the 1970s, as these and other forms of state assistance proved difficult to maintain in the face of mounting economic problems late in the decade.23 The growing economic crisis by the late 1970s was directly related to mounting political and security problems in the country. UDI precipitated the transformation of the two principal black nationalist movements, the Zimbabwe African National Union (ZANU) and the Zimbabwe African Peoples’ Union (ZAPU), into resistance groups, which later formed military wings. Sporadic, loosely organized armed uprisings beginning in 1966 had by 1972 evolved into a full-scale civil war, eventually claiming at least 27,000 lives, most of them black Zimbabweans. Thus, by “the late 1970s, intensified guerilla warfare led to an erosion of financial discipline, higher inflation and ultimately reduced competitiveness.”24 GDP fell by 11.3 percent between 1975 and the final year of Rhodesian rule in 1979.25 The pressures of sustained guerilla warfare, economic deterioration, and international diplomatic initiatives, led by Britain and the United States, eventually brought the Smith government to the negotiating table.26 By December 1979, after more than three months of face-to-face negotiations and more than three years of abortive international talks, a settlement was reached between the parties at Lancaster House in London.27 Although the Rhodesia government was forced to agree to full franchise elections, the settlement provided substantial political and economic protections for the white minority.28 In the elections, held February 27–29, 1980, ZANU captured 57 of the 100 seats in the new legislature. On April 18, 1980, the country was granted formal independence from Great Britain, and ZANU’s leader, the self-proclaimed Marxist-Leninist Robert Mugabe, became the first prime minister of the new Zimbabwe. Although part of a negotiated, decidedly political process, the Lancaster House agreement had a crucial impact on business-state relations. Not only did the accord place limits on the new government’s autonomy vis-à-vis whites’ political representation, but its property rights provisions ensured that white farmers could be displaced only on a “willing buyer–willing seller” basis, with purchases made in foreign currency. Eventually, this policy would have profound implications for the resolution of Zimbabwe’s gross inequities in land ownership. At the time, however, Herbst argues, it was essential to securing whites’ agreement on majority rule without further bloodshed.29 In addition, it revealed both the predominance of the liberal agenda promoted by the international mediators and the political and economic power of the white farming community, represented by the CFU.30 Britain and the United States, the key international actors at Lancaster, pledged resources to help in this effort, but Zimbabwe later accused the British of reneging on its commitment; the

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Reagan-Bush administration disputed that the United States had ever made a commitment to pay for land reform.31 The Privileged Position of (White) Business in the New State The political and economic environment in which business and state actors found themselves at independence was a fragmented and uncertain one. When ZANU took power in 1980, it was politically ascendant, though not hegemonic, thanks to the constraints agreed to in the Lancaster Constitution. The ZANU-led state began to consolidate its political power in the early 1980s by undermining black opposition parties, chiefly ZAPU, and placing tight restrictions on black societal interest groups such as labor. For most whites, the early 1980s amounted to a “wait and see” period, and business actors saw themselves as potentially vulnerable to the new political class. Although white BAs retained their monopoly as formal-sector business organizations, fears of economic redistribution within the white business class were not fully assuaged by the protections of the Lancaster Constitution. In fact, the constraints on the state were regarded as inviolable by the ZANU regime.32 Economically, the state was clearly weak and was dominated by leaders who were, at best, inexperienced economic actors. Moreover, the ruling party’s ostensibly socialist platform meant that most ZANU officials were illsuited, by ideology and experience, to manage an economy anchored by a powerful, minority market class. At the same time, state actors were both unwilling and unable to put their socialist rhetoric fully into practice, such as through nationalization of private (and overwhelmingly white-owned) assets. Hence, ZANU elites were quite dependent, paradoxically, on the expertise and acumen of the overwhelmingly white business community to help navigate the demands of what was in fact a substantially capitalist economy. Although the relationship between white business and the state was characterized, understandably, by initial mistrust, the appointment of Denis Norman, the former president of the RNFU, as ZANU’s first minister of agriculture signaled to the white farming and business communities that its positions and input mattered to the state. Beginning in 1982, the government’s overall economic policy was directed by finance minister Bernard Chidzero, who was instrumental in raising, over time, the state’s perception of its economic power and capability relative to the white business associations. By all accounts, Chidzero was one of few individuals with the technocratic capacity to oversee Zimbabwe’s postcolonial economy, was highly trusted by Mugabe, and was receptive to economic liberalization.33 Although Chidzero’s relationship with white BAs was occasionally cool, they generally viewed him as a helpful ally of the business community.34 Later in the decade, Chidzero emerged as the leading advocate for

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liberalization within the government, and he was largely supported by the BAs in this respect. In sum, the relationship between business and state throughout much of the 1980s could be characterized as “high/low”: the state’s reliance on the white private sector, the historical power of white-dominated associations, and the would-be socialist ruling party’s overwhelming dependence on the liberal Chidzero combined to lend a power advantage to the business community. As Zimbabwe entered deliberations over neoliberal restructuring beginning in 1987, the institutional strength of key BAs allowed them to make significant contributions to shaping policy.35 As the discussions advanced, the perception of state power vis-à-vis business reached a level of equilibrium. A surprising feature of the post-1980 business class was its demographic profile. Indeed, whereas the postsettler state accommodated dominant white capital and agricultural interests, it did little to benefit blacks, who in any case had scant representation in the lobbying organizations. Unlike white businesses, which were represented by powerful associations, black businesspeople had no historical power base. Under colonialism, black businesses had been long neglected or deliberately undercut through repressive legislation dating from the 1920s.36 Ironically, they were stymied further under black rule: the political ascendance of ZANU brought about a regime that, in its socialist aspirations, was inimical to the interests of nascent black capitalists.37 At the same time, however, the state was not only compelled but willing to sanction a continuation of the white status quo.38 The institutional strength white BAs had accumulated under white governments allowed these associations to continue to play a complementary role in economic governance. Moreover, the new ZANU government demonstrated little ability to determine or even influence organizational patterns in the predominantly white business community. With the exception of the chamber of commerce, ACCOZ, which was impelled by the state to merge with its black chamber counterparts and become the Zimbabwe National Chambers of Commerce (ZNCC), historically white associations faced scant pressure to “indigenize” (through either merger or expansion) and thus retained significant autonomy.39 Perhaps the best example of this is the Commercial Farmers’ Union, on which the transition to black rule had scant impact. Following independence, CFU and its affiliates remained the sole representatives of the interests of Zimbabwe’s largest export sector, and the CFU was consistently the association with the greatest institutional strength. As the exclusive grantor of farming licenses, CFU maintained member density. CFU had a substantial administrative staff, a large coterie of research and extension experts, and ample financial resources. It was able to draw revenues from three principal sources: licensing fees from farmers; levies paid to CFU by producer associations from proceeds on the sale of certain commodities; and commissions, affiliation fees, and interest and dividends on accumulated trust funds. In addition to its licens-

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ing authority, CFU enjoyed other selective incentives, especially access to and influence over the government, just as it had prior to independence. In fact, unlike many of its BA counterparts, including explicitly “indigenous” (that is, black Zimbabwean) associations, CFU enjoyed a consistently favorable relationship with the ZANU-led state until the late 1990s, when the coalition finally unraveled. Though much of its institutional strength predated independent Zimbabwe, it maintained the same selective benefits under the black government after 1980.40 While the private sector remained the preserve of whites, the public sector became the vehicle for black advancement, and a rapid expansion of the bureaucracy occurred under ZANU as the new government attempted to Africanize its ranks. The growth in the bureaucracy from 40,000 at independence to some 90,000 by 1989 corresponded with white flight from senior positions.41 The rapid depletion of skilled bureaucrats, coupled with the sociopolitical imperatives of Africanization, not only created opportunities for clientelism but also deepened the state’s dependence on the white private sector, which, after all, retained the principal reservoir of economic expertise. Notwithstanding the “euphoria” surrounding independence, international conditions were unpropitious in the early 1980s.42 Although GDP growth was initially positive, “the new government was hit by the triple shocks of low prices for commodity exports, drought, and high world interest rates.”43 Domestically, Zimbabwe faced enormous demands, including the explicit mandate to address the social welfare, employment, and land demands of the longneglected black populace. Not surprisingly, high government spending produced deficits, and monetary financing led to inflation.44 Global recession and domestic conditions, including severe drought in 1982, compelled Zimbabwe to sign its first standby agreement with the IMF in January 1983. Despite the fact that the economy managed to stabilize and even achieved average growth of 3.9 percent in the second half of the 1980s, its performance masked a number of structural problems, including persistent budget deficits, balance of payments problems, and per capita growth rates insufficient to keep pace with population increases.45 Zimbabwe’s deepening economic problems in the 1980s adversely affected the business community in a number of respects. “Zimbabwe’s currency became overvalued, hurting exporters of minerals and the [other] exporters.”46 Moreover, foreign exchange shortages made the financing of industrial and agricultural inputs needed to replace the outdated ISI period infrastructure difficult.47 Although unrestrained government spending fueled inflationary pressures, periodic price controls prevented firms from passing along higher costs. At the same time, wages were allowed to increase through “government interference in wage and salary negotiations.”48 Since the formal economy could not generate a sufficient number of jobs, however, unemployment hit 26 percent by 1989.49

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Faced with the second recession of the decade in 1987, key members of the business community began to press for genuine economic liberalization. Several BAs were instrumental in this regard, including CFU, as well as CZI, which Skalnes considers “the most influential such group” in the period.50 CZI’s resources, member density, and widespread support lent it measurable credibility on industrial and broader economic matters, including whether to adopt structural adjustment.51 As Pádraig Carmody notes, “While the CZI wanted deregulation of the foreign exchange allocation system and the elimination of price controls and restrictions on retrenchment, it was initially worried about the competitive threat posed by trade liberalization.” Nonetheless, the CZI head office was “converted to liberalization,” in part through lobbying by the World Bank, even if its rank-and-file members remained “dubious” about the program.52 In any event, according to CZI’s top economist at the time, the body engaged in a “considerable lobbying effort” in an attempt to move the government toward adoption of ESAP.53 For its part, the CFU was interested in price decontrols, promotion of export markets, and liberalization of trade primarily so that it could access capital, farm inputs, and equipment. The BAs also acted collectively through the Zimbabwe Association of Business Organisations (ZABO), an umbrella organization that was established in 1986 by the leaders of ZNCC, CFU, ZTA, CZI, and the Chamber of Mines to make joint representations to government. Although ZABO itself was not particularly strong—lacking, for example, any formal institutional structure—an important accomplishment was a jointly authored April 1988 letter to the government that called for, in part, gradual trade liberalization and the relaxation of price, wage, and investment controls, as well as of restrictions on labor practices deemed harmful to business interests.54 By 1988, government had become more favorably inclined toward the prospect of reforms.

A Short-Lived Coalition for Reform: Business, Government, and ESAP Zimbabwe’s path to liberalization, culminating in the adoption of ESAP in 1990, has been well chronicled by scholars. Although some disagreement exists about the degree to which Zimbabwe adopted ESAP as a result of external pressure or as part of a primarily internally driven calculus, clearly the organized business community, particularly the CFU and CZI, provided the domestic advocacy and an eager constituency.55 Business associations focused their demands for reform on the finance minister, Chidzero, who in any event was predisposed toward economic reforms.56 Named minister of economic planning and development at independence, Chidzero was given fuller reins in the Zimbabwean economy when he was given the finance portfolio in 1982, and still more sweeping authority in January 1988, when he was made senior min-

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ister for finance, economic development, and planning, a position he held until his retirement in 1995.57 In this latter role as one of only three senior ministers, Chidzero had “coordinating responsibility for all economic ministries” and thus considerable power.58 Importantly, the BAs found an ideological ally in Chidzero, although he criticized them publicly on numerous occasions.59 Chidzero was a major conduit for “marketing” the idea of economic liberalization to his socialist-leaning ZANU-PF colleagues, not least of whom was President Mugabe, who was initially quite skeptical.60 Much of the architecture for ESAP was actually drawn up by the World Bank in 1987 and revised with Chidzero as his ministry sought to gain the concurrence of the wider cabinet.61 As late as 1989, many members of the ZANU-PF inner circle, including Mugabe, remained tentative about the program.62 The logic of economic liberalization was unfamiliar to most within the party hierarchy, since their “technocratic” expertise was limited chiefly to Chidzero, the central bank, and a few others in government.63 The emphasis placed on Chidzero’s instrumental role in various analyses is revealing. Certainly the state cannot be reduced to one man. Yet whereas other state actors played important roles, in a number of key respects the state effectively ceded economic policymaking to a single individual, who served as the critical interlocutor between the private sector and international financial institutions. In so doing, Chidzero came to personify Zimbabwe’s economic reforms, although he arrived at ESAP as much out of personal conviction as of pressure from white capitalists. In power for seven years when economic adjustment was first floated, and for more than ten years when ESAP was finally adopted, the ZANU-led state had become fully entrenched politically and had vastly expanded its economic role.64 At the same time, however, as Zimbabwe moved inexorably toward implementation of ESAP and the abandonment of its official commitment to socialism, the state became increasingly reliant on the only national actors that could reasonably claim to possess market expertise, namely white business associations. For example, in November 1989, CZI and ZNCC were granted prominent roles on the Industrial Review Committee, which was charged with ascertaining the best way to implement ESAP.65 Later circumstances led the government to make significant concessions to CFU as well.66 GOZ officially adopted ESAP in December 1990, having signaled its intentions in the finance minister’s July 1990 budget speech.67 Formally launched in January 1991, the program actually had a long gestation period, since farmers and manufacturers in particular had begun making serious overtures to the government about liberalization at least since 1987.68 This roughly three-year period, from early 1988 through the initial months of ESAP in 1991, marked the apex of business-state relations in Zimbabwe: the respective actors were in sync with one another, and representatives of both sides were optimistic about the prospects for both the relationship and liberalization itself.

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At this time, ZABO offered a loose framework for expressing collective business interests, although in the early 1990s, at least, both GOZ and leading BAs preferred a pluralist arrangement instead. As a consequence, the reform coalition in Zimbabwe was more fluid and informal than that seen in many other developing countries, including South Africa. BAs enjoyed access and exercised influence over government decisionmaking, but they tended toward fragmentation along sectoral lines. From this, we can draw two conclusions. First, although counterproductive in hindsight, the divided approach was, paradoxically, a reflection of the institutional strength of individual BAs, whose leaders expressed confidence that their particular organization’s importance to the state would endure. Second, though the relationship between the state and some of its ostensible coalition partners, notably CZI, deteriorated in the early 1990s, a narrower coalition, which prominently included CFU, effectively continued throughout the decade.69 Despite the effective jettisoning of CZI, one of the leading BA architects of reform, business-state cooperation persevered.70 As discussed below, ESAP had the unintended effect of weakening sectors other than agriculture—industry was particularly hard hit—and their business associations correspondingly suffered, such that they no longer had sufficient clout to lobby the state effectively. Certainly the BAs’ own preferences for pluralism, illustrated by their neglect of ZABO, undermined their collective institutional strength and their capacity to redress mounting economic problems.71 These enduring divisions within the business community eventually worked to the advantage of a government increasingly seeking to tilt the scales in its favor. Although beset with economic problems of its own, many caused or exacerbated by ESAP, state power was clearly ascendant relative to business associations almost immediately after the program’s adoption.

Be Careful What You Wish For: Liberalization and Institutional Strength Business associations’ interest in economic reforms, writ large, remained strong following ESAP’s launch, although their enthusiasm for many specific components of Zimbabwe’s program clearly had waned by the mid-1990s.72 ESAP was adopted at a time when Zimbabwe’s economy faced structural constraints, but unlike much of Africa, it was not in financial crisis.73 Skalnes sees this as a virtue, while other scholars consider it evidence that ESAP was not only flawed in design and implementation but indeed wholly unnecessary.74 Moreover, critics note, Zimbabwe compounded its difficulties by actually exceeding the demands of the IFIs, implementing reforms such as highly sensitive—indeed damaging—trade liberalization ahead of schedule.75 Like Skalnes, I argue that the substantially collaborative effort that produced ESAP, notwithstanding its significant shortcomings, was a positive development for

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Zimbabwe. However, this represents only half the story. Indeed, the fragmentation and breakdown of the reform coalition in the wake of ESAP led to an inability to redress the inherent flaws in the program’s design and implementation, which were felt more acutely over time. Business-state dialogue occurred only in the initial stages, with disastrous long-term consequences. Zimbabwe’s track record for the first phase of ESAP, scheduled to end in 1995, indicates that problems with sequencing and pace of reforms proved particularly acute.76 For example, Zimbabwe initiated full trade liberalization even more rapidly than the program required, with predictably dire effects on local industry.77 A World Bank performance audit conducted in conjunction with Zimbabwe’s Monitoring and Implementation Unit (housed in the Ministry of Finance) confirmed this, albeit post hoc, noting that “failure to give top priority to eliminating the fiscal deficit is likely to compromise the overall objectives of a reform program. In addition, trade liberalization, and the rationalization of tariff, tax and export incentive regimes need to be sequenced carefully. The failure in Zimbabwe to properly synchronize these measures and to establish the conditions for rapid expansion of exports early on, placed many domestic firms at a disadvantage and delayed supply response.”78 Thus, whereas the government ultimately gave its backing to ESAP, all actors in the business-state coalition, as well as the IFIs, made critical missteps. Business associations displayed an inopportune combination of naiveté and hubris, leaving them ill-prepared for the “shock treatment” of ESAP.79 Once ESAP was under way, BAs lacked capacity to effect meaningful changes to the program. The legacy of import substitution, attendant protectionism, and a tradition of subsidization left the business community uncompetitive in a liberalized environment. The business sector’s lack of preparation was revealed in a series of extensive interviews with representatives from all major subsectors of industry conducted by the government and consultants between December 1989 and January 1990, the purpose of which was to assess industry’s readiness for liberalization.80 Peter Robinson notes that “it was very clear from the interviews that few if any industrialists appreciated what a structural adjustment programme, including trade liberalisation, would involve.”81 Instead, industrialists expressed “exasperation” about “endless bureaucratic procedures and delays” regarding access to and allocation of foreign currency. Robinson observes: “They thus welcomed a change in direction in economic policy more on the basis that any innovation would have to be an improvement than on a rational assessment of likely programme components and associated costs and benefits. . . . There was also little appreciation of the likelihood of much higher interest rates than had been experienced previously, and the possibility of significant changes in the exchange rate.”82 As noted above, trade liberalization, pushed by business associations, had the most damaging impact on BA members. The largely unsuccessful attempts to expand manufacturing exports following independence had led CZI officials

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to believe that trade liberalization would both permit unfettered access to imported industrial inputs and unlock the export potential of Zimbabwean firms; in fact, there was considerable initial success with the latter.83 Notwithstanding concerns raised by some CZI members representing certain industrial subsectors like textiles, many industrialists supported the dismantling of import restrictions.84 “They unambiguously welcomed the concept of OGIL [open general import license] for the importation of inputs not manufactured in Zimbabwe, but were often bemused at the suggestion that trade liberalisation would also in due course imply allowing competitive imports into the country.”85 Robinson explains that “such an attitude has to be understood in the context of 25 years experience of rigid import control.” Still, CZI’s successful contribution to the trade liberalization bandwagon came back to haunt its members, who severely overestimated their competitiveness.86 “The phasing of liberalization was designed to be gradual in order to give domestic producers time to adjust before facing import competition from imports. Thus the importation of production inputs was to go onto OGIL before consumer goods, with priority for inputs to sectors in which ‘export volumes are assured or for “linkage” sectors which do not directly export but are important in the export chain.’”87 As Patrick Bond notes, however, this did not occur. Instead, the assignment of products to OGIL (that is, the category no longer requiring an import license) in the 1991–1994 period was “haphazard,” leading to the easy importation of finished products, especially luxury goods, that were not helpful to local production.88 Moreover, “by July 1994, all import restrictions (with the exception of a limited list of ‘negative’ imports) were removed resulting in full liberalisation 18 months ahead of ESAP schedule.”89 Not only did this strategy undermine local manufacturers, but inflation, declining real wages, and labor retrenchments hurt nonelite consumers as well, further fueling a downward spiral.90 Problematically, tariff structures remained substantially unchanged from the UDI period, when they had been assigned more or less arbitrarily (and import quotas were imposed), until March 1997.91 Prior to liberalization, the tariff structure was largely irrelevant; local manufacturers enjoyed virtual monopolies, and import quotas and tight foreign exchange controls kept imports at a minimum. The demise of import licensing and the substantial dismantling of foreign exchange controls by mid-1994, however, left tariffs as the only means of protection for domestic industries. The UDI-era tariff regime was clearly untenable for firms. With the advent of import liberalization, “all of a sudden, tariffs became important,” as CZI’s chief economist observed, and lobbying for a change in tariff structures began in 1993 and intensified thereafter.92 In general, business leaders supported lower overall tariff rates in the initial years of ESAP; thus they endorsed the government’s plan to reduce average tariffs to 30 percent by 1995. But they also advocated a rationalized tariff structure, in which imported goods would be properly classified as finished, partial, or raw materials. When tariffs on a range of goods were lowered with-

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out this necessary rationalization, domestic industries were overexposed to import competition. BA appeals to government to reclassify tariffs were largely met with indifference. ZNCC chief executive Wonder Maisiri found this inexplicable, concluding, “Robert Mugabe just takes his time.”93 Actually the explanation for government inaction goes beyond official procrastination and lies instead in at least three factors. First, there was a growing appetite for imported luxury goods among ZANU-PF politicians and other elites; a tariff regime that made little distinction between many luxury items and industrial inputs benefited this emergent consumer class.94 Second, tariffs and surcharges applied to imported products represented a measurable percentage of government revenues, at 11.4 and 12.5 percent in 1992 and 1993, respectively.95 Third, by the latter half of the 1990s, it was apparent that nonfarm BAs like CZI had become too weak to effect immediate change in policy, and delayed revision of tariff protections simply weakened CZI further by hurting its members. In short, Zimbabwean business associations lost their capacity to act as a bulwark against capricious behaviors of the state. The state’s unwillingness to even attempt to reach consensus on tariffs illustrates both its disregard for manufacturers and its perception of increased power vis-à-vis the sector’s principal association, CZI. After a number of false starts, the government finally altered the tariff structures in March 1997, but, perhaps predictably, that step failed to resolve a number of problems.96 Notably, the slightly more protectionist new rates were of little use to the firms that had closed in the intervening period. Some forty textiles and clothing manufacturers collapsed between 1992 and 1997, including more than thirty companies in 1996 alone.97 The detrimental impact of ESAP on industrial firms had a knock-on effect on CZI’s institutional strength. As ESAP moved from promising proposal to problematic policy, CZI members, particularly those in the textile, clothing, and metals industries, whose problems began as early as 1991, encountered great difficulty.98 Carmody attributes the decline (and collapse after 1995) in the textiles, clothing, and footwear sectors to the financial, exchange rate, and trade liberalization that accompanied ESAP.99 As an organization, CZI became rather quickly disenchanted with ESAP, stemming from the unanticipated impact of import competition not only on its members but also on CZI’s own institutional relevance and priorities. Market liberalization deprived CZI of a number of its historical functions—such as helping companies secure foreign exchange, which was allocated by the state before the Zimbabwe dollar was fully convertible—and thus the selective benefits it had enjoyed previously. Density also decreased, as CZI membership fell by nearly five hundred firms by the mid-1990s.100 Thus began a self-reinforcing spiral of decline for CZI: as its capacities and resources diminished, so did its ability to access the state, which precipitated still further member defections, thereby all but ending the prospects for reconstituting its relationship with the state.101

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In ESAP’s Wake: State Power Resurgent As business associations on the whole grew weaker, state strength effectively increased; that is, state actors from the president down displayed growing confidence in their power vis-à-vis the business community. Absent a formal institutional mechanism for business-state interaction, BAs employed direct private contacts and sponsored conferences, each with the goal of improving business-government relations by establishing channels for consultation—a particular concern as the first phase of ESAP came to a close in 1995. In the past, the annual meetings of each of the BAs had attracted substantial government representation. By the mid-1990s, however, a growing number of GOZ officials no longer even found it necessary to attend CZI’s annual general meeting, a critical indicator of the decline of the organization and its onceprivileged position with the state.102 After liberalization began, the relationship between business and government seldom went beyond rhetorical flourishes about the virtues of cooperation; sometimes BA efforts to attract government interest were simply rebuffed. In the 1980s, CZI could command an audience with the state. In the 1990s, the state incurred little direct cost for ignoring an organization it increasingly regarded as marginal. The leaders of once-prominent organizations were, of course, acutely aware of the loss of prestige and institutional strength suffered by their organizations, particularly the reduced access to senior government officials. In response, BA executives endeavored to recapture their organizations’ earlier stature, for example, by sponsoring several forums on economic issues, but these generated less than spectacular results. Whereas both sides agreed that mistrust between government and the private sector was responsible for the problematic implementation of ESAP, each blamed the other for causing that mistrust. Hence, reaching consensus on how to overcome it proved impossible. Government officials argued publicly that the private sector was interested only in narrow profiteering, not the greatest good for the largest number of Zimbabweans. Privately, these officials attributed the frustrated relationships between BAs and bureaucrats and politicians to personal resentment and individual animosities, particularly against CZI.103 Private sector representatives, for their part, believed the government to be incompetent. The government’s apparent unwillingness to engage in meaningful consultation with the business community, prior to rendering policy decisions, led business leaders to feel “ambushed,” thereby jeopardizing prospects for coordinated economic reform. Maisiri, chief executive of ZNCC, asked rhetorically, “How can we, as business, be expected to implement the [new] reforms when we have not even been consulted or [had] input into their design?” Echoing similar complaints from CZI, Maisiri admitted that ZNCC had held “no consultations” with government over successor policies to ESAP, which were under consideration in 1995–1996. Since the program initially dubbed

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“ESAP II” was also a liberal donor- and IFI-supported platform intended, in part, to address some of the shortcomings of the first phase of adjustment, the contrast to the negotiated process that preceded the initial launch of ESAP in 1991 appears quite stark.104 In short, following the initial consensus reached on ESAP’s adoption, there was little visible subsequent partnership between government and business in Zimbabwe. Only CFU maintained its privileged access, at least privately. Most of the historically white associations came to be regarded as politically impractical allies, beginning after the March 1996 presidential election, which was infused with antiwhite rhetoric. As the 1990s progressed, the state eventually distanced itself from all BAs, and ultimately from economic reforms altogether. The argument that “state strength” increased in this period indicates that the coercive powers of the state—in effect, its “hard” power—increased relative to societal actors. It does not imply, however, that state capacity increased. On the contrary, following the adoption of structural adjustment, the industrial and commercial BAs’ principal connection to government remained the Ministry of Industry and Commerce, which lost much of its own mandate as a result of ESAP. Its senior staff described themselves as inexperienced and unfamiliar with industry.105 The Ministry of Finance effectively became the locus of economic and industrial policy (a typical consequence of African adjustment programs), although it too was plagued by shifting mandates, frequent leadership turnover, and interference by the president’s office. For BAs, both formal and informal links to the finance ministry became highly tenuous, and CZI reported waiting months to secure meetings with even junior-level staffers.106 CZI consultations with ministers did not cease altogether, but they became largely ad hoc, and responses to policy demands and sectoral needs followed at a glacial pace, if at all.107 Furthermore, the hand of liberalizers both in the finance ministry and elsewhere was weakened not only by ESAP’s failure to deliver the expected positive results but by exogenous forces as well. Notably, the occurrence of drought in 1992 and 1995 precipitated declines in agricultural output of 23.2 and 7.6 percent, severely affecting all sectors.108 Second, the 1995 retirement of reformist finance minister Chidzero meant the loss of ESAP’s greatest champion in government and introduced a lasting period of rudderlessness in the economy’s most vital ministry.109 These developments certainly dampened the political commitment within ZANU-PF to the program, especially the already questionable enthusiasm of President Mugabe. The prevailing environment by the mid-1990s was inauspicious, as the government became ever more isolated from formal BA influences and increasingly capricious in all aspects of its policymaking. The state’s argument that business had only narrow “profiteering” objectives was disingenuous; state actors were hardly so naive as to believe that. And the view expressed by some business associations that the state was “incompetent” was equally misleading,

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because it denied agency to state elites. Rather, the state’s actions—not least the organizational chaos in the Finance Ministry after 1995 and the numerous unqualified personnel in Commerce—reflected a different set of priorities. It is worth noting that this was a fragile period for the ruling party, which was faced with growing political and economic pluralism and an uncertain economic policy environment. If successful, ESAP fundamentally threatened ZANU-PF hegemony by targeting state spending and the bureaucracy. The government grew increasingly reactionary as a result, and business unwittingly helped facilitate this trend in failing to act collectively. It cannot be known whether a united front via ZABO could have preserved Zimbabwe’s high/high pattern, but it is clear that the separate strategies pursued by individual BAs played into the state’s hands at a critical juncture. In a context in which political power trumps development concerns, fragmentation within the business community and its associations provides the state with a political foil, as well as diffusing the collective strength of business.110 Nonetheless, the precipitous decline of the manufacturing sector and of business associations’ power was not duplicated in the large-scale commercial farming (LSCF) sector. Indeed, the CFU seized upon market liberalization and new trade opportunities, particularly in cash crops, including tobacco and horticulture products. Ironically—given the land seizures begun in 2000—the state’s endorsement of liberal property rights norms in the 1990s served to maintain the CFU’s position vis-à-vis the state, as policies on privatization and land tenure benefited CFU’s constituents. CFU therefore maintained its support for ESAP and the bulk of state policymaking. Hevina Dashwood suggests that the state shielded commercial farming because of common class interests and argues that many senior ZANU-PF politicians both owned commercial farms and were members of CFU. Yet this fails to account for the precipitous collapse of the coalition between CFU and the ZANU-led state in 2000; if Dashwood were correct, the presence of highlevel ZANU politicians should have insulated CFU indefinitely. In fact, in the period from liberalization until 2000, state power was not disproportionate to CFU power. On the contrary, this relationship persevered so long because the institutional strength of the CFU was formidable and durable, a force to be reckoned with; ESAP further enhanced CFU’s position. Equally important, the white-dominated CFU had both economic and political utility for the government. These patterns are discussed in the following section. In many respects, the state dependence on the LSCF sector deepened in the 1990s as the performance—and influence—of other productive sectors declined, as indicated in Table 4.1. Thus, the period between 1994 and 2000 marked the preservation of a narrower coalition between commercial farming associations and the state. Yet whereas it was narrower in terms of the number of sectors and associations represented, it was not significantly smaller in economic importance.

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Table 4.1

Contribution of the Zimbabwe Agriculture and Manufacturing Sectors: Key Indicators 1992

1993

1994

1995

1996

1997

1998

1999

2000

2001a

2002

36.4 31.2 32.4 100

41.5 32.5 26.0 100

36.3 39.6 24.1 100

32.4 42.3 25.3 100

36.6 40.1 23.3 100

32.4 37.4 30.2 100

37.1 33.9 29.0 100

36.6 37.1 26.3 100

41.2 34.0 24.8 100

43.7 32.3 24.0 100

39.0 37.1 23.9 100

51.8 19.5 28.7 100

52.0 18.6 29.4 100

Contribution to GDP (%), based on constant 1990 Z$ Agriculture 16.5 16.1 13.1 Manufacturing 22.8 22.7 22.0

16.3 19.9

16.6 20.8

15.5 18.4

17.5 17.9

16.4 17.1

17.7 17.1

18.4 20.5

20.0 19.0

19.3 18.9

17.3 18.3

Percent of exports, based on US$ Agricultureb Manufacturing Minerals Total (percent)

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Employment, in 000s and percent of total Agriculture 290 304 300 324 329 334 347 355 345 338 325 290 221 (percent) (24.3) (24.5) (24.3) (26.1) (26.0) (26.9) (27.2) (26.8) (25.6) (25.7) (26.4) (24.5) (19.8) Manufacturing 197 205 197 188 200 186 184 198 208 201 181 179 171 (percent) (16.5) (16.5) (15.9) (15.2) (15.8) (15.0) (14.4) (15.0) (15.4) (15.3) (14.7) (15.1) (15.4) Governmentc n/a 231 229 226 216 219 225 236 241 225 227 238 n/a Other 705 503 510 503 519 501 518 534 554 552 499 476 722 Total employment 1,192 1,243 1,236 1,240 1,263 1,240 1,274 1,323 1,348 1,316 1,232 1,183 1,114 Sources: IMF, “Statistical Appendix,” 1999, 2002, 2003; EIU, Zimbabwe Country Profiles: Main Report, December 20, 1996; July 1, 1998; June 18, 1999; August 11, 2000; February 4, 2005. Notes: a. IMF estimates, 2001, 2002. b. Agriculture includes forestry and fishing. c. Public administration, health, and education.

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Strength Versus Strength: The CFU-State Coalition Privatization was perhaps the only area of liberalization in which the state proceeded slowly, by design, despite pressure for a more rapid approach from BAs and the IFIs.111 Initially, state elites eschewed full-scale privatization in favor of a strategy of “commercialization.” This included the ending of state monopolies but called for SOEs to compete, presumably on a market basis, with their new private-sector rivals. In principle, competition and the elimination of public subsidies would necessitate efficient and profitable operations, notwithstanding continued state ownership; such policies would also preserve a semblance of black ownership, albeit in the hands of the state. Parastatals that achieved economic success would later be considered for privatization at a time when their market valuation became more favorable, which was not specified. Importantly, a scheme to warehouse shares for eventual acquisition by blacks was also developed. In general, BAs criticized commercialization as inadequate and a continued drain on state resources. Despite the presence of strong firms and private sector associations, the state played a significant role in Zimbabwe’s economy, as its Rhodesian predecessor had. The ZANU-led state inherited SOEs in sectors as diverse as energy, telecommunications, transportation, and broadcast media, as well as agriculture, where the state controlled the marketing and distribution of several key crops, including cotton, maize, and grains. Given the controversy surrounding race and agriculture, which originated well before the forcible seizure of white-owned land that began in 2000, it is particularly surprising that these agricultural marketing boards were the only enterprises put on a rapid privatization track in the 1990s. Moreover, those state-owned enterprises that ZANU-PF did consent to sell were substantially sold to white domestic investors affiliated with CFU. Thus the state began to inculcate a strong private property culture, which paradoxically cemented rather than called into question white dominance of the private economy. The CFU’s privileged access to privatized state assets beginning in the early 1990s illustrates the association’s enjoyment of selective incentives not made available to other private sector organizations. Viewed within a coalitional framework, however, this development is rather uncomplicated. First, the long-dominant agricultural associations such as the CFU and its sectoral affiliates were the only domestic private-sector organizations with the capacity, resources, and expertise to actually invest in the former agriculture parastatals. Secondly, notwithstanding its rhetoric, the state maintained close coalitional ties with the CFU and its affiliates. Thus, state elites remained inclined to cooperate with these pivotal economic actors, particularly when sales of SOEs could generate revenue and bring an end to costly subsidization. Some marketing-board functions were liberalized beginning in 1994, such as those serving the wheat and dairy subsectors. Concurrently, the CFUaffiliated commodity associations representing cotton and cattle producers es-

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tablished their own buying, marketing, and distribution companies to compete directly with the state marketing boards.112 The emergence of buyers in addition to the state was an obvious benefit to producers.113 Nonetheless, although marketing liberalization offered putative benefits to both white and black, large-scale and small-scale farmers, privatization—even at a measured pace— was not race neutral for the reasons noted above, and it sparked fears of discrimination in the black farming community. Indeed, by early 1996 the Indigenous Commercial Farmers’ Union (ICFU) demanded government action to preserve state ownership of both the marketing boards and the Agricultural Finance Company (AFC), which provided lowinterest loans to farmers. Arguing that the state should grant preferential treatment to black commercial farmers just as the Rhodesian state had provided for white agriculturalists, the ICFU leadership insisted, “It is only fair that [our] black government look out for us.”114 Although the AFC privatization plan eventually stalled, it said a great deal about ZANU-PF’s allegiances when it promptly rejected ICFU overtures, electing not to deviate from its overall commercialization-privatization strategy. Despite the fact that Mugabe publicly appeared sympathetic to the farmers’ demands, his agriculture minister, Denis Norman (himself a white commercial farmer), dismissed any nonmarket alternatives and merely invited interested farmers “at the time of privatization . . . to step forward with their cash.”115 By 1997 the Cotton Company of Zimbabwe and Dairibord Zimbabwe had been privatized. Similarly, GOZ refused to reconsider its decision to eliminate subsidized agricultural loans and convert the AFC into a private commercial bank. Thus, with scarcely a nod to Zimbabwe’s pre1980 past, even the deputy minister of finance rejected the notion that these “anti-competitive” colonial-era institutions should be maintained. In fact, he argued that “we [ZANU-PF] did not create these institutions. Therefore, black people should not argue against their dismantling because they never would have had, nor should have had them in the first place.”116 It was a testament to the importance of the GOZ-CFU relationship that ICFU’s stance—which was shared by other indigenous BAs, such as the Indigenous Business Development Centre (IBDC) and the Affirmative Action Group (AAG)—did not generate an “anti-market backlash” among a wider swath of the populace.117 In fact, outside of the indigenization lobby, the issue failed to gain traction. The government itself was well aware that the only domestic actors with the capacity to acquire privatized SOEs were whites and predominantly white BAs. Given this, privatization in this environment amounted to another selective incentive granted principally to CFU and to other actors with cash. This effectively “prowhite,” status quo–preserving agenda, which persisted throughout this period, suggests convincingly that a firmly capitalist development project, rather than a racially based, redistributive, and statist one, was being pursued in Zimbabwe. It is worth noting that the principal impediment to Zimbabwe’s LSCF sector in the 1990s was climatic rather than policy

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based. As seen in Figure 4.1, agricultural productivity expanded by nearly 4 percent per year (excluding the effects of drought and drought recovery) from 1991 through 2000, and exports grew at a similar annual rate over the entire decade before falling precipitously after 2000.118 In contrast to its relationship with the CFU, the state did not act to enhance the institutional strength of the black, so-called indigenous associations like ICFU and IBDC. Indeed, the government took extraordinary steps to thwart the capacity of these organizations and the incipient middle-class interests they represented, often by co-opting their leaders.119 Crony capitalism thrived in the late 1990s, as certain black individuals—including ruling-party elites, relatives of the president, and military commanders—were awarded various tenders and contracts; nonetheless, the government was innately hostile to the emergence of autonomous centers of wealth in the black community.120 The state’s hostile maneuvers against prominent independent black businesspeople such as cellular phone entrepreneur Strive Masiyiwa and later prominent financier Nigel Chanakira sent a chilling message, particularly to aspiring black capitalists, that ZANU-PF had little tolerance for black business activity occurring outside its ambit. Black entrepreneurs unconnected to the state were seen as a potential political threat, whereas this was not the case for white businesses and BAs. Although the nurturing of a black middle class would appear to be in the best interests of Zimbabwe’s development over the long term, and in fact was consistent with stated national objectives, the state went to great lengths to ensure its political hegemony. Whereas such treatment of black capital might have foreshadowed ZANU-PF’s similar abandonment of its white allies later in the decade, Zimbabwe’s history suggested that white business interests enjoyed substantial immunity from such political interference. It is worth noting as well that although historically white, nonagricultural business associations like CZI were clearly neglected by the state in the 1990s and suffered a loss of selective incentives, there is little evidence that they were deliberately targeted by the state or were particularly vulnerable politically. The net effect of these machinations, at least in the short term, was to leave CFU as the state’s principal private-sector partner. In fact, the state’s relationship with the CFU and its affiliates was mutually beneficial, conferring economic and political utility on both parties. The economic utility of the relationship was straightforward. Commercial farms provided employment for over 350,000 laborers and, with their dependents, the well-being of more than two million Zimbabweans; agricultural extension research and projects; and significant contributions to exports and GDP as well as downstream sectors such as food processing and light manufacturing.121 The relationship also had political utility, because the fewer than 4,000 white farmers who composed the CFU could never represent a political threat to ZANU-PF. In other words, for at least seventeen years the CFU offered considerable reward, occasionally as government foil, at minimal risk to government.

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Zimbabwe Economic Trends by Sector, 1991–2002

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Endorsing the argument advanced by Dashwood, Carmody suggests that in the course of their accumulation in the 1980s, the class interests of black politicians in ZANU-PF became aligned with those of white farmers; indeed, Carmody observes, “in 1994 more than half of the members of cabinet were also members of the CFU.”122 According to him, this “élite cohesion between members of the ruling élite . . . and the agrarian élite” helps explain why ZANU-PF ultimately was willing to adopt ESAP—with its promised benefits for commercial farmers. As I have argued above, many aspects of liberalization did in fact benefit commercial farmers and, by extension, CFU. Yet the idea of convergent class interests cannot explain the state’s more direct role in preserving, and indeed enhancing, the institutional strength of CFU, essentially a racially unitary organization. Although some 800 of the organization’s approximately 4,500 members were black in the late 1990s, most black members were quite unconnected politically, and at least 80 of them were insolvent.123 Further, no blacks ever rose to leadership positions within the CFU hierarchy. Finally, the presence of twenty-odd cabinet members in CFU is itself unrevealing: throughout the 1990s, CFU was the only licensing authority for commercial farmers in Zimbabwe, and thus even ZANU-PF elites were technically required to join if they participated in LSCF activity. At bottom, despite the fact that CFU is an LSCF advocacy organization, it is not a foregone conclusion that black commercial farm owners politically affiliated with ZANU-PF would see their own interests as convergent with an organization widely—and not unjustifiably—considered “white.” In short, “shared class” largely fails to explain how CFU’s hand was strengthened, for example, in regard to privileged opportunities to acquire privatized SOEs. For this we must look to coalitional factors. At the same time, considering that the major beneficiaries of privatization in Zimbabwe were white-controlled firms and associations, the regime’s about-face on land seizures by the year 2000 appears doubly ironic. It also marked the final abandonment of what had been a consensus position on economic liberalism that emerged between the government and BAs—especially LSCF organizations—in the 1990s and signaled the collapse of the coalition. Had class been the defining feature, shared economic interests would not have been trumped so rapidly and so completely by the “false consciousness” of racial politics. In short, reliance on economic explanations masks the role of explicitly political utility in coalitions.

Threats and Diminished Utility: Coalition Unraveling By 2004, as a result of a deliberate state-sponsored campaign to dispossess white farmers of their land, fewer than 600 white commercial farmers remained on the land, and only half of those were still farming.124 Discarding al-

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together liberal preoccupations with property rights, Mugabe presided over the seizure of over 3,500 commercial farms, most of them white owned, beginning in February 2000. In light of this dire situation, the fact that CFU and the ZANU-PF-led state were bound together in a reform coalition just a few years earlier seems rather incredible. In the 1980s and 1990s, coalition with large-scale farmers had outweighed any benefits that might be gained by severing ties. Yet coalitional links notwithstanding, President Mugabe periodically raised the specter of land seizures, ostensibly for the purpose of redistributing white-owned farms to landless blacks.125 The incendiary rhetoric had been particularly acute in the 1995 parliamentary election and the 1996 presidential contest, when Mugabe used “the land issue” in an attempt to mobilize rural constituencies.126 This proved little more than a smokescreen intended to divert popular attention away from ZANU-PF’s own failings in government, including a flagging economy; the ploy did not work, as indicated by the record low turnout of 32 percent.127 Although one chief executive of a CFU affiliate described the rhetoric as “scary,” both he and the CFU director expressed well-founded confidence that the “personal relationships” and the “apolitical” methods employed by the union were sufficient to navigate the electoral season.128 Their experience provided a reliable barometer; in fact, following the elections, the hue and cry over seizures quickly subsided, and no perceptible steps were taken to follow up on it.129 The CFU-state relationship reached a critical juncture in 1997, but the collapse of the coalition actually occurred gradually over several years; the relationship was not irretrievably lost until late 2000. Faced with a series of new, interrelated political and economic threats, ZANU-PF jettisoned this longterm, productive partnership. In its place, the ruling party openly cultivated a narrow distributional coalition consisting of regime cronies. Certainly the state’s relationship with white farmers had been problematic at many levels.130 Yet by virtually all objective measures, the status quo ante was far superior to current realities in Zimbabwe (refer to Table 4.1 and Figure 4.1). The Economic Collapse and Emergent Threats to the ZANU State In 1997, a series of events—having little to do with business, BAs, or even whites—helped to undercut the coalition and initiated the spiral of political and economic decline that has come to characterize Zimbabwe. In August 1997, the Zimbabwe National Liberation War Veterans Association (the so-called War Vets) instituted mass protests against the ruling party and President Mugabe himself, “when it was discovered . . . that the War Victims Compensation Fund had been looted, to the tune of Z$450 million by senior officials in ZANUPF.”131 A mass demonstration at the national Heroes Day celebration was ex-

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traordinary; the fact that it was spearheaded by one of ZANU-PF’s most symbolically important constituencies sent shockwaves through the party hierarchy. Historically, the War Vets had not been politically well organized, although many liberation war leaders were represented in the ZANU-PF’s elite. Mugabe could not afford to lose the support of the rank-and-file War Vets, on whom much of his legitimacy as a “liberationist” rested. Moreover, a politically mobilized veteran community could pose a formidable electoral threat to ZANU-PF by staking out the ideological space to which the ruling party long laid claim.132 The president responded to this emergent threat by unilaterally awarding tax-free pension payments to the vets: lump-sum payments of Z$50,000 each, plus Z$2,000 per month lifetime pensions. In addition, he pledged free education for dependents, free health care, free land, and interest-free loans of up to Z$20,000.133 Mugabe’s short-term political expediency unleashed a series of events that eventually destroyed the very fabric of Zimbabwe’s economy. The immediate effect of this unbudgeted largesse, estimated at a total cost of some Z$4.5 billion, was the collapse of the Zimbabwe dollar, which lost 75 percent of its value in one day.134 A tax proposed by Mugabe’s government to pay for these expenditures precipitated a series of strikes by the increasingly outspoken trade-union congress, the Zimbabwe Congress of Trade Unions (ZCTU), which sensed an opportunity to press labor demands on the rattled regime. Newly beholden to the long-quiescent but essential constituencies on his left—the liberation War Vets and their mostly rural sympathizers—Mugabe revived his previously hollow pledge of land reform through seizure and subdivision of white-owned, large-scale commercial farms. In early November 1997, he announced that the state would seize nearly 1,500 commercial farms, covering some 4.8 million hectares. Undeterred by domestic and international market reaction, Mugabe argued that he was merely correcting an historical injustice done to blacks and warned that “if constitutional safeguards to private property and the Land Acquisition Act barred the swift takeover of land, they [would] be abolished.”135 Predictably, while claiming it “understood and accepted the need for land reform,” the CFU immediately condemned the plan and reiterated its long-standing position that the seizure and forcible redistribution of land by GOZ would trigger a dangerous drop in agricultural output and national wealth.136 Calling for consultation and negotiation with the government, CFU ironically found itself defending the approach laid out in the 1992 Land Acquisition Act, which it had once condemned as too extreme because it allowed the state to pay for acquired farms—but pay nonetheless—over a ten-year period.137 The tobacco lobby, ZTA, also weighed in, since about 700 of those listed were tobacco farms. Of the more than 327,000 people then employed on Zimbabwean commercial farms, nearly half, 152,178, were at that time employed in the tobacco sector, according to officials, and an additional 763,000 were immediately dependent on them and the tobacco industry alone.138 Both CFU and ZTA argued that labor levels would suf-

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fer and that damage to the sector might imperil tobacco’s approximately US $2.5 billion contribution to foreign exchange earnings.139 From independence, CFU had adhered to a nonconfrontational strategy, which it was determined to uphold.140 Representing, in Amy Chua’s expression, a “market-dominant minority,” CFU was sensitive to its vulnerabilities, particularly its precarious position among the political class. Thus, historically CFU scrupulously avoided arguments that might be construed as attacks on its erstwhile government partners, and it stuck to this strategy in 1997.141 This measured approach appeared to pay off when the number of farms was eventually reduced and compensation was assured for the remainder.142 Mugabe’s 1997 land seizure threat was not his first, and as in previous instances, the episode eventually passed without any farms’ changing hands. The long-standing coalition between ZANU-PF and the CFU, which facilitated the consistently favorable policy on trade and privatization, helped to reinforce the status quo on land as well.143 The CFU thus retained, if momentarily, its capacity to exert influence over its state counterparts. In any event, the CFU could count on legal remedies, if necessary.144 Until the Mugabe government began to routinely disregard judicial decisions beginning in March 2000, the courts offered a genuine counterpoise to the capricious use of state power.145 Still, the events of 1997–1998 altered the status quo: both CFU and ZANU-PF were damaged, and their hegemonic positions in their respective spheres, the economy and politics, were undercut. Although this occurred as a result of exogenous threats, the relationship between CFU and the state was a major casualty. What distinguished the 1997–1998 friction between these state and private actors from previous episodes of apparent tension was that, this time, the external threat grew over time, rather than dissipated. In retrospect, then, the origins of the government’s Fast Track Land Resettlement Programme of 2000 lay in President Mugabe’s November 1997 speech.146 The Threat of Political Opposition If the War Vets can be characterized as “internal” opposition from within ZANU-PF’s own traditional ranks and therefore had be to cajoled, co-opted, bribed and, to some degree, succumbed to, the ZCTU can be seen as a major source of external opposition to the regime. Its urban base, links to other civil society groups, and history of confrontation with the government precluded partnership with the state. Indeed, the policies that GOZ pursued to mollify its war-veteran and rural constituencies served only to further alienate ZCTU and other socioeconomic organizations, such as human rights groups, legal associations, and many businesspeople. In September 1999, joined by other disaffected groups among business, NGOs, academia, and some farmers, ZCTU leaders spearheaded the formation of independent Zimbabwe’s first credible opposition party, the Movement for Democratic Change (MDC).

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The unprecedented popularity of this opposition party was a direct reflection of ZANU-PF’s own political vulnerability. Yet the ZANU-led state was stronger than its erstwhile business allies CZI and ZNCC, which it had marginalized. Moreover, the rough balance of power that characterized the “high/high” relationship with CFU had begun to tilt decidedly toward government, even if government’s advantage was not immediately exercised. Thereafter, the continued utility of ZANU-PF’s relationship with CFU was offset by the liability of maintaining a relationship with a small, white agriculturalist minority at a time when civil society, including the War Vets, was its most restive since independence. The economic utility of even a tacit reform coalition with CFU began to incur unacceptably high political costs; the break had to be public and complete. By February 2000, ZANU-PF had effectively abandoned its already waning commitment to a liberal economic agenda and instead embraced a populist approach.147 Land invasions by supporters of the government, most prominently the War Vets and various state-sponsored militias, began in February 2000. Initially regarded as temporary, these gave way to outright land seizures and dispossession of nearly 50 percent of white farmers by mid-2002. By 2004, only 300 of these were still actively farming.148 Having played an instrumental role in agricultural and macroeconomic policy formation for at least six decades, the CFU had now become a marginal player. By 2003, its membership had dropped to 1,824, from its pre–land invasion level of 4,300. Most of the remaining members were no longer farming and had ceased to be active in the association.149 The CFU was also plagued by internal struggles about whether the organization should continue its quiet negotiation with government, a strategy that had always worked in the past, or pursue a more confrontational strategy. When the organization opted to maintain its traditional approach, it effectively split the remaining membership. Thus, when Joseph Made, the minister of agriculture, described CFU as “irrelevant” in 2003, this was not empty rhetoric.150 A large faction broke away from CFU in 2002, and the Matabeleland chapter defected in September 2003.151 Observers noted that CFU members “are fighting each other when they should be uniting to fight the real enemy.” They were allowing themselves to be “divided and not protecting each other or themselves.”152 By 2004, an annual meeting that once attracted thousands of farmers had an attendance of just a hundred.153 CFU’s institutional strength, measured by density, rules enforcement capacity, and selective incentives, had eroded at a remarkable pace.

“Corporatism” Without the State Skalnes has suggested that Chalmers Johnson’s portrayal of postwar Japan as “corporatism without labor” applies to Zimbabwe’s business-state relationship in the late 1980s and 1990s; indeed, if this “labor-less” variant of societal cor-

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poratism ever applied to Zimbabwe, it was in the context of the ESAP coalition. Nonetheless, such favorable assessments of a cooperative state were short lived. In fact, the situation in the post-ESAP period could be characterized as corporatism without the state. Here, the state shows nominal concern with organizing societal channels of interest representation, even establishing tripartite bodies in which societal groups eagerly, even desperately, enroll. However, state endorsement of such activities proves ephemeral, if not altogether misleading. Unlike state corporatism, there is no clear evidence of state interest in controlling such groups, and contrary to societal corporatism, there is little commitment to institutionalized bargaining and explicit class compromise between the state, business, and labor. Instead, Zimbabwe’s “corporatism without the state” was designed to elicit BA quiescence while giving the organizations the illusion of a relationship with the state. The outcome has been the further marginalization of formal sector associations. As discussed earlier, overall relations between the government and noncommercial agriculture associations had begun to deteriorate shortly after ESAP’s launch. By 1997, faced with persistent decline and the potential demise of entire subsectors—and steady depletion of membership—some BAs explored collective means to access and influence the state. These joint efforts marked something of a departure for some associations, like CZI, which had largely eschewed collective action when, in an earlier era, it had possessed institutional strength.154 In the wake of the post-1997 collapse, three separate approaches were taken in attempts to establish more institutionalized channels of interaction between state and business, as well as labor. The first of these, dubbed Team Zimbabwe, was actually initiated by ZNCC in 1995, and ZNCC and others attempted to infuse it with new energy after the 1997 decline. Two other bodies, the National Economic Consultative Forum (NECF) and the Tripartite Negotiating Forum (TNF), were established by the government. Attempts at Collective Action As early as 1995, then–ZNCC president Danny Meyer attempted to initiate a tripartite forum consisting of labor, BAs, and government in a plan called Team Zimbabwe. Although the idea persisted for several years, neither GOZ nor other BAs demonstrated enthusiasm for the initiative. Respected economic commentator and longtime University of Zimbabwe business professor Tony Hawkins lambasted the enterprise, arguing, “Those championing a Team Zimbabwe solution must explain how [the] irredeemably, irretrievably, compromised . . . government and the present leaders of the business community . . . who have failed in the past, will somehow change their spots sufficiently to make a market economy work. Maybe Team Zimbabwe is the solution, but it will need different teams from both government and the private sector, along with a different set of rules.”155 Team Zimbabwe fizzled.

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The state’s launch of the National Economic Consultative Forum (NECF) in July 1997 was an ostensible effort to fill this lacuna. The 180-member NECF was designed as a forum in which all stakeholders—business, labor, and government as well as other members of civil society—could engage in policy dialogue, debate, and negotiation on a wide range of issues including macroeconomic reform, industrial and fiscal policy, black empowerment, land reform, and education, among others. NECF’s formation appeared to be an acknowledgment of the growing litany of economic problems in the country and a response to complaints from the increasingly restive business and labor communities that the GOZ was uninterested in their input. From the outset, however, NECF lacked the capacity and the resources to fulfill its stated mandate and had no statutory authority to enforce its directives. Further, the NECF was not convened until January 1998, and although meetings throughout 1998 were relatively frequent, they seldom amounted to more than the “talk shop” scorned by critics, who found the sessions a waste of time.156 Absent the investment of resources, authority, or sustained support of key political actors, the NECF failed to develop into a meaningful forum. The scant commitment to NECF was interpreted as an indicator of government unwillingness to decentralize meaningful decisionmaking authority.157 While it is impossible to determine whether NECF was intended as an elaborate ruse, the business community certainly believed that it had been misled.158 For their part, the labor unions boycotted the forum, “on the grounds that Mugabe’s government could not be trusted.”159 It was a particular irony, then, when the commerce ministry declared in July 1999 that “the NECF has been instrumental in the enhancement and cultivation of a culture of dialogue in the efforts to resolve the country’s economic problems. The relationship of mistrust that prevailed between the public and other sectors is gradually dying out.”160 Such a conclusion can only be regarded as either a bold-faced lie or self-delusion. In fact, NECF did nothing to slow the state’s growing isolation from civil society, including business.161 Elizabeth Hart writes that as early as 1998, “the NECF was considered too moribund and politically tainted to be a useful vehicle for the urgent discussions”; hence a new body, the Tripartite Negotiating Forum (TNF), was established.162 In Hart’s view, in response to “deepening economic crisis [that] precipitated extended strikes and social unrest, labor and business were able to push government into more serious consultations under the rubric of the TNF.”163 The TNF negotiated some tax relief for businesses in the late 1990s, but other successes in fact were rare.164 In January 2003, for example, the TNF revised the Kadoma Declaration, which pledged cooperation and coordination between the three social partners, particularly on price stabilization, but repeated attempts to sign the declaration failed due to disagreements among the three parties. CZI claimed credit for drafting an economic recovery plan that it submitted to the cabinet for approval in late 2002 and that emerged in 2003,

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through the TNF process, as the National Economic Recovery Programme (NERP).165 Other sources, however, attribute the NERP to finance minister Herbert Murerwa.166 Whatever its provenance, the provisions of NERP, which included ministerial spending limits and quarterly review of the exchange rate (fixed since 2001 in an attempt to reregulate foreign exchange), were scarcely adhered to, and the program proved incapable of reviving the economy. Thus, Hart’s assessment that the TNF was more successful at negotiating short-term agreements appears valid only when measured against the barely discernible achievements of its counterpart, the NECF.167 Regardless of the fact that the state was the principal architect of both the TNF and the NECF, both reveal a kind of a pseudo-corporatism in which the nominal structures were present but the state was effectively absent. As with NECF, participation in the TNF was voluntary, and its decisions nonbinding. The state showed sporadic interest in business concerns, and situating the TNF under the auspices of the labor ministry—notwithstanding its broad mandate “to identify and deal with all macroeconomic issues affecting the well being of Zimbabweans and those concerned with social development”—seemed to signify its marginality to the policymaking process.168 The inability to make headway via state-sponsored forums prompted the BAs to revisit the collective action problems that had bedeviled them since ZABO.169 This became especially critical in the aftermath of a February 2000 constitutional referendum, which sought public blessing for radical land reform and expanded presidential powers. When its referendum was resoundingly defeated, the government decided to accrete powers to itself, thus beginning Zimbabwe’s rapid descent into authoritarianism and economic collapse. The first land invasions began in February, but as of March 2000 business still thought it possible to affect policy. Hence, the presidents of the Employers Confederation of Zimbabwe, Zimbabwe National Chamber of Commerce, Confederation of Zimbabwe Industries, Commercial Farmers’ Union, Chamber of Mines, Bankers Association of Zimbabwe, Zimbabwe Council for Tourism, Zimbabwe Farmers Union, and Institute of Bankers broke with NECF to form the Business Leaders’ Forum (BLF) “with a view to advising government on ways of rescuing the economy from [at that time] its worst economic crisis.” These “captains of industry” were intent on engaging president Mugabe in high-level talks.170 Initially, the BLF attempted to talk tough to Mugabe on issues of land invasions, the failing parastatals, macroeconomic policy, and Zimbabwe’s expensive military intervention in the Democratic Republic of Congo.171 Yet though the BLF was formed in the earliest stages of the regime’s descent into lawlessness, the government’s toleration of criticism proved short lived. The BLF was cowed into quiescence and, in any event, proved entirely ineffective at both influencing government and cementing collective action within and across the business community; by late 2002, BLF was “dying a slow death.”172

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On the whole, business spent the early years of the 2000s decade facing existential threats: hyperinflation, collapsing infrastructure, the widespread closure of businesses and commercial farms, unavailability of foreign exchange, as well as a new range of draconian laws aimed at curtailing the press, NGOs, opposition parties, and other interests. In an atmosphere of political repression, measures taken by business associations, and even state elites such as the governor of the reserve bank and the various ministers of commerce and of finance, to address the economic crisis have met with steadfast political resistance. Contemporary Zimbabwe sees economic priorities routinely subverted to political objectives.173 In this environment, BAs found themselves refighting battles won years earlier and celebrating meager achievements—such as increased foreignexchange allocations—that most considered resolved in 1990. Once GOZ committed fully to a program of land seizures, economic populism at home, and increasingly isolationist economic policies vis-à-vis its erstwhile international partners, its relationship with the business community appeared irreparably fractured. Whereas much of this community was white, represented organizationally by CFU, CZI, and the others, it included a number of prominent black business enterprises as well. All those firms and associations whose existence depended not on the state but on a rational, functioning marketplace were imperiled by the economic and political chaos that ensued following the February 2000 constitutional referendum and the June 2000 parliamentary elections, in which ZANU-PF narrowly and controversially won a slim majority. With the status quo on land and property rights abandoned and CFU’s ability to negotiate, even surreptitiously, with its government counterparts in good faith foreclosed, the last vestiges of the statebusiness reform coalition were shattered.174

The State’s New Distributional Coalition “There’s big money to be made here,” the son of a former cabinet minister told a journalist. “We’ve all become like the Mafia. I don’t know anyone who pays tax.”175

The Indigenous Business Associations Starting in 1997, as economic policies turned increasingly capricious and linkages evaporated with the formal BAs that had traditionally dominated the private sector, political elites fostered and consolidated relationships with a set of economic actors that have been variously described as “briefcase businessmen,” “the bureaucratic bourgeoisie,” and “crony capitalists.”176 Business actors concerned more with rent seeking than productivity are scarcely a new phenomenon in Zimbabwe, or elsewhere, but the early twenty-first century

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saw this group evolve into a far more potent political and economic force. Now dominant, they have supplanted the formal business sector. This is not to suggest that business-state relations in the past did not include elements of corruption and collusion, including between white business actors and the state. Nevertheless, under the relationships of the 1980s and 1990s, a positive reform coalition was at least achievable, and a discernible, if at times problematic, pattern of economic policymaking was present. The current constellation of policies and ZANU-PF political elites and their clients render economic growth, as well as the reforms necessary to achieve it, almost unimaginable. Policymaking today smacks of crisis management. For most Zimbabweans the parallel, black-market economy has superseded the formal economy as a means of survival. The business-state relationship—however imperfect and imbued with racial contradictions—has been supplanted by a mafialike structure in which the prerequisite for policies favorable to a company or association is not developmental potential or institutional strength but connectedness to the regime. Though such patterns also existed in the 1990s, at that time they were not so debilitating that the private sector was precluded from functioning with reasonable effectiveness. As noted, for a time the state maintained both its narrow productive coalition with CFU and a nascent distributional coalition with “indigenous” business associations. The emergence of the latter can be traced to the March 1996 presidential contest, in which the leading indigenous business associations, IBDC, ICFU, AAG, and ZFU, representing medium-scale farmers, used a series of advertisements that attempted to link their cause to President Mugabe’s reelection bid.177 In this they echoed the thinly veiled racism of Mugabe’s own campaign, which sought, disingenuously, to lay Zimbabwe’s economic problems at the feet of the white business community. Moreover, the indigenous BAs were unapologetic over the nature of their appeals to the state: racial solidarity. In name and mandate, at least, each association represented constituents severely weakened by actual racism, inadequate financing, environmental hardship, and years of official and unofficial neglect; these associations, like their members, were unable to support themselves financially. Much as for their white counterparts during the colonial era, recourse lay in the common racial and ethnic backgrounds they shared with functionaries of the state elites.178 Although it had long ignored them, the ZANU-PF state was eager to engage—and employ—these groups once it was faced with mounting threats from key political constituencies in the 1990s. Notwithstanding its long-standing relationship with the white large-scale commercial farming community, deeper engagement with the indigenization organizations provided a visible opportunity for ZANU-PF to shore-up its bona fides as a problack, proindigenization government. These indigenous associations thus acted as “autonomous” representatives of the private sector and railed against white racism—both real and imagined—on the government’s behalf.

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Ultimately, however, indigenous BAs became little more than political tools for the state and vehicles for the personal and political advancement of the associations’ leaders. Although, as noted above, their mandates (often selfimposed) were rooted in legitimate demands for equal treatment and reversal of a century of discrimination, the interests of rank-and-file members (to the extent that they existed in any measurable number) were regularly betrayed by their leaders. At the same time, indigenization associations helped to lend a veneer of legitimacy to the government’s proindigenization credentials. This is particularly ironic, given that ZANU-PF’s record on private sector indigenization through nearly two decades, whether in manufacturing, mining, or agriculture, was actually quite dismal.179 The potential rewards to BA leaders of this growing symbiosis between their organizations and influential members of the ruling party are clear, but the possible advantages for members were far less so.180 With the exception of the War Veterans (which in any event was never a business interest association), it appears unlikely that any of the institutions were offered a quid pro quo in return for their support of Mugabe. Importantly, since the rank-and-file members of the indigenous BAs were never enumerated or identified, to some degree these entities were always personal vehicles.181 As allies of President Mugabe, several of the leaders became quite wealthy and influential. Among the most prominent was the leader of the AAG, Philip Chiyangwa, himself a relative of Mugabe. Starting with little capital or expertise, Chiyangwa was able to parlay his proximity to the political leadership into a business empire, and in 2000 he was elected MP for Chinoyi for ZANU-PF.182 Similarly, the secretary general of the IBDC, Enock Kamushinda, was named to the leadership of Mugabe’s 1996 presidential campaign. Kamushinda expanded his business holdings considerably, and in 2001 he became the chairman of the Grain Marketing Board, which had by then restored its monopsony as liberalization was rolled back.183 None of these relationships could even remotely conform to our definition of reform coalition. In fact, over time some began to resemble the components of a state-sanctioned mafia operation. Certainly no meaningful policies emerged in the 1990s or thereafter to advance genuine indigenization through wealth creation. Again, the AAG serves as a notorious illustration. Established in 1993 by music producer Chiyangwa and his partner, Peter Pamire, the AAG’s modus operandi in the 1990s was apparently to shake down local and foreign companies operating in Zimbabwe, certifying them affirmative action “compliant,” typically in return for an ownership stake or a contracting arrangement with the company. Leaders of traditional BAs branded AAG “extortionists in suits.”184 Thus, threats and side payments became part of coerced “partnerships” with local and foreign companies, although some firms were able to resist the pressure.185 With the support of President Mugabe, Chiyangwa’s business holdings eventually came to include some of Zimbabwe’s most established companies.186

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The high institutional strength that characterized the majority-white BAs at the inception of the coalition was not replicated among indigenous associations, and such was not their objective. Indeed, none of the organizations, whether IBDC, AAG, ZFU, or ICFU, benefited from their Faustian deal with ZANU-PF.187 Interestingly, there appeared to be some risk for the principals as well. Many of those who attained considerable, and public, power and autonomy in politics or economics, or both, soon found themselves out of favor with Mugabe. Chiyangwa himself experienced such an Icarus-like fall, as did key politicians seen as aspiring to succeed Mugabe.188 A Coalition Lacking Partners By the end of the 1990s, the state had become a business actor in its own right, to such a degree that it had diminished need to cooperate with private sector organizations of any racial or economic stripe. New business and patronage opportunities were created by President Mugabe’s decision to send some 12,000 Zimbabwean troops in August 1998 to the Democratic Republic of Congo (DRC), where they remained until 2003. The intervention was requested by embattled DRC president Laurent Kabila, who was desperate for assistance in defending his precarious rule from Rwandan and Ugandan–backed rebel movements, but Zimbabwean political and military elites found economic opportunities there as well. “The declining exchange rate, the failing Zimbabwean mining industry, and the critical energy shortage in Zimbabwe have left few sources for personal enrichment by government officials. These officials started looking to the Democratic Republic of the Congo.”189 Kabila offered many concessions to the Zimbabweans, and the principal beneficiaries were senior military officers, ZANU-PF politicians, and politically connected businesspeople, including several foreigners, using numerous interlocking holding companies.190 Although this created profit opportunities for individuals, it was not a recipe for creation of reproducible wealth or viable national policy. By late 1999, Zimbabwe’s operations in DRC were already extensive and included timber, mining, and transport concessions as well as contracts for provision of other services. These companies included Zidco Holdings, ZANU-PF’s commercial arm; Osleg (Pvt), “officially the commercial unit of the ZDF [Zimbabwe Defence Forces] but in reality privately owned” by four Zimbabweans involved in the defense and mining sectors; and several other holding companies and joint venture arrangements.191 Despite the enrichment of certain individuals, the DRC gambit proved a disaster for Zimbabwe as a whole, costing the Zimbabwean national treasury as much as US$1 million per day for several years and severely worsening the domestic economic situation.192 Moreover, the illicit siphoning of resources from Congo attracted global condemnation and sanctions.193 For a time, the DRC became a major source of rents for the ZANU-PF regime, helping to alleviate

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patronage compression at home—given sharply reduced domestic resources— and placating an increasingly restive military.194 By 1999–2000, these illicit business-state relationships were generating political utility for the state by satisfying the demands of a clearly ascendant constituency, the military—much as the seizure of commercial farms from politically expendable white farmers was necessary to placate the War Veterans and mobilize them against the rising threat from the opposition MDC. The challenge of maintaining distributional coalitions based largely on rent seeking and illicit contracts rather than on reform coalitions centered on productive enterprise is one Zimbabwe must soon confront.

Conclusion Institutional strength was the critical factor affecting the ability of key business associations to gain membership in the state’s economic reform coalition. Whereas continued utility helped maintain a narrower alliance until the end of the decade, Zimbabwe’s high/high status in 1990 helped foster conditions of rivalry rather than partnership. In the standoff that developed later between state and business, the latter was, predictably, victorious. Zimbabwe’s lesson for other countries that reach the unstable equilibrium associated with high BA institutional strength opposed by high state power is that such high/high relationships must be actively managed. This is particularly vital in divided societies like Zimbabwe or neighboring South Africa. There must be a functioning mechanism through which state and business actors may continue to dialogue, even in the face of severe economic and sociopolitical threats. This was fundamentally lacking in Zimbabwe, where bilateral and trilateral structures were either neglected or intentionally deprived of resources by the state. After the first phase of ESAP concluded in 1995, only the Commercial Farmers’ Union and its affiliates could claim that it still possessed financial muscle and a position of primacy within the economy. Certainly a number of individual firms in various sectors continued to have access to the state, but the CFU and its counterparts were the only collective organizations to enjoy consistent success in negotiating the interests of their sector in Zimbabwe. Key commercial farming organizations thus maintained their institutional strength and demonstrated their continued utility to the state. Other Zimbabwean business associations, particularly CZI, experienced a rapid erosion of institutional strength following ESAP, and the state began to ignore this once influential bloc. Although shortsighted, ongoing industrial concerns in practice became unimportant to state elites. The many short-lived successors to ESAP—none of which secured external support from the IFIs after 1997—served only to deepen the divide. Where these programs took business into account at all, their implementation was weak; the programs were abandoned nearly as quickly as they were

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adopted, so that firms had insufficient time to develop predictable business plans.195 Lobbying was rendered more difficult by the state. Rather than coordinating with its erstwhile private-sector partners and channeling selective incentives, especially access, to their business-association representatives, the government sought to exploit racial as well as sectoral tensions within the business community, ignoring collective appeals and often those from individual firms as well. As a consequence, all Zimbabwean business associations in the 1990s, with the exception of those in large-scale commercial agriculture, tended to be recipients of policy rather than influential shapers of it. Ironically, the overwhelmingly white CFU was the last entity to exit the flagging reform coalition; its institutional strength permitted the association and its affiliates to continue to play an influential role through most of the decade. To the wider economy, and indirectly to the state, therefore, CFU and its members provided construction of an extensive agroindustrial infrastructure and employment and contributed to national development as the leading source of export earnings. In return, the state consistently reinforced this institutional strength by granting continued access (though this was seldom publicized) and by providing other selective incentives, such as CFU’s licensing monopoly; ready access to export markets; opportunities to benefit from privatization; and, for seventeen years, inertia on land reform. It was on the latter issue that CFU may have been most useful to the state—as a scapegoat for government’s inability to deliver meaningful land reform in particular and indigenization of the economy in general, despite two decades of black rule. As long as CFU and its white farmer members were present and powerful, government could point to them as the problem. Although this argument failed to gain traction among much, perhaps most, of the black electorate, it did help mobilize ZANU-PF stalwarts to rail against white economic hegemony and preserved at least some party support from rural peasants.196 President Mugabe’s populist rhetoric alone did nothing to shake the stateCFU coalition. He had a pattern of giving “radical, anti-business speeches before government [made] major pro-business decisions or announcements.”197 Although this pattern endured until 2000, in hindsight it is clear that GOZ initially signaled its abandonment of this approach in 1997 with the announced land seizures. The period after 1997 also witnessed the state’s steady, if gradual, withdrawal of key elements of the agricultural groups’ institutional strength—farmers’ licensing, monopoly control over tobacco sales, and ready access to state elites. By 2000, then, the state had displaced CFU’s institutional strength and undermined the hegemony of the white farmers’ lobby, which subsequently fragmented; having located new sources of patronage in DRC, GOZ could now sanction land invasions, thus repudiating its erstwhile allies once and for all.198

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White Farmers, Straw Men Some of the friction in business-state relations was wrapped in racial rhetoric, especially surrounding the CFU and its constituents, and the land issue. Yet, whereas race forms a major societal cleavage in Zimbabwe, the failure to sustain the broadly inclusive coalition much beyond 1990, and the narrower one beyond 2000, was related to race only indirectly. Race became “fungible” chiefly because of the declining utility of the relationship as a result of the government’s political crisis and potential alienation from its principal constituencies. The relatively long duration of the commercial agriculture–state coalition in Zimbabwe compels us to reject simplistic explanations of “racism” for Zimbabwe’s present malaise. Indeed, throughout most of the decade, the relationships between the state and BAs with substantial black representation (e.g., ZNCC) were not better but in fact worse than those between the state and white concerns.199 The government had an uncooperative and at times hostile relationship with explicitly black business associations, including the Zimbabwe Farmers’ Union (ZFU), ICFU, and IBDC, at least prior to co-opting them into its orbit.200 The government did little to advance the cause of these once relatively autonomous black business associations by empowering black business or supporting its development. Ironically, then, at least until 1997, race predicted outcomes that were precisely opposite of the actual outcomes: white business was favored, black business was routinely disfavored. Indeed, the state deliberately eschewed the role of midwife to the black private sector and a development program that would involve a rational and well-planned strategy of reallocation of selective incentives to black business associations.201 This is a complaint heard frequently from critics of the ruling party–big business alliance in South Africa, although both business and state actors have taken some steps in recent years to address this issue, as discussed in the following chapter. In Zimbabwe, the seemingly inexorable march of neoliberalism reinforced the reform coalition in the early 1990s by steering the state toward the internationalized, export-capable commercial agriculture sector with linkages to the global economy. But unmitigated neoliberalism also had severe consequences for a majority of Zimbabwe’s population. The mostly white businessstate coalition was too socially and economically narrow and was therefore inherently susceptible to exogenous threats. Certainly the social and even long-term economic benefits of white agroindustrial hegemony are open to question. Yet the overall economic consequences of the rapid destruction of the remaining coalition have proved an unmitigated disaster. In the wake of this productive relationship, we today find the onset of complete capriciousness of the regime and a substantial gulf between the “legitimate” business community—black as well as white—and the Zimbabwean state. Threatened and vulnerable from its left, ZANU-PF could no longer afford to “talk left and act right” after 1997.202 It was entirely rational, politically, to

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take steps to shore up its political base in the impoverished rural areas and act against a vulnerable, economically liberal white constituency. The result, we now know, was economically and politically disastrous, but it did have an unassailable short-term logic. To employ the framework of this analysis: the state’s calculation of utility shifted, and it became preoccupied with political survival, even at the expense of a coherent economic program. Again, it is worth noting that the path chosen by Zimbabwean and Zambian state actors is precisely the opposite of that chosen by their counterparts in Latin America, where, according to Schneider, threats were generally conducive to better business-state relations. Latin American states responded to threats by organizing business, and the consequences included not only political survival but periods of economic stability as well as strong prospects, at least, for policy coordination throughout the twentieth century. In Zimbabwe, part of the state strategy involved distancing itself from historically dominant, largely white business associations and interests, and instead embracing a more “radical” indigenization agenda, which included land seizures. Thus, declining utility and institutional strength, coupled with the rise of a largely exogenous threat, combined to push the regime in a profoundly antibusiness direction. The deliberate disempowerment of, or more accurately, unwillingness to empower, the various tripartite structures helped ensure that business objections were disregarded. A functioning framework for negotiation was decidedly absent, as the NECF and TNF were largely powerless—or worse, cynical—bodies that lacked capacity to formulate necessary economic changes, let alone authority to enact them. What Lies Ahead Legitimate businesses continue to struggle in the hostile macroeconomic and political environment that prevails in contemporary Zimbabwe. Meanwhile, their representative associations like CZI have been accused of complacency in the face of government hostility and economic mismanagement. According to Zimbabwean economist John Robertson, “The organization needs to be more proactive but it is not. Whatever it says is completely ignored.”203 Worse still, the private sector is “blamed for perpetuating a culture of bad governance by taking a soft stance against the government [which] is being accused of gross human rights violations and economic plunder.”204 Yet private actors’ capacity to organize effectively through associations has been severely compromised. Indeed, it is hard to argue that Zimbabwe’s private sector could have been more “proactive” and less “soft,” given the disparities in institutional strength between state and private sector at the end of the 1990s. It is precisely because the state was unwilling to share economic power that such admonitions critically overstate the capacity of business organizations to act, particularly after the February 2000 land invasions triggered the descent into the lawlessness that

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prevails currently. By 2000 it was clearly necessary for business associations to take action, yet they no longer had sufficient institutional strength to do so. As Zimbabwe’s private sector actors, now largely without effective interest organization, look to the future, near-term options appear limited. Given the erosion of institutional strength that has taken place since 1990, the context for business-state relations in Zimbabwe is in many ways a tabula rasa: business associations are no longer able to draw on inherited institutional strength and organizational resources. Henceforth, it is in the purview of the state to provide resources, commitment, and selective incentives to business associations, in short, to restore institutional strength. This is, of course, unlikely; the political climate in Zimbabwe remains hostile, exacerbated by conflict and the political uncertainty over who will succeed Mugabe as president, presumably after the election in 2008. ZANU-PF remains threatened politically both from opposition groups and internally. A transition may provide an opening for the reemergence of a reform coalition in Zimbabwe. The intervening period, however, bodes well only for the furtherance of narrow political concerns at the expense of much-needed sectoral and macroeconomic reforms. The collapse of first the business-state coalition and subsequently the entire economy in Zimbabwe is not necessarily a harbinger for South Africa. Nonetheless, there are a number of important parallels, most obviously in the historical power of white-dominated businesses and associations. In fact, white control of the private sector in South Africa exceeds that of Zimbabwe at a comparable period. The South African economy is far larger and more diversified than Zimbabwe’s prior to its collapse. Moreover, South Africa has enjoyed a durable coalition, marked by general consensus between the state and key business organizations, for more than a decade. Though Zimbabwe’s coalition was narrow and shorter lived, however, contemporary South Africa—with its black political class closely allied with a substantially white economic elite in a context of overwhelming poverty and deprivation—is reminiscent of Zimbabwe as recently as the mid-1990s. The demographics of race and class alone were not sufficient to break the back of the coalition in Zimbabwe and turn the state toward its ruinous brand of economic populism; that required the catalyst of threat. South Africa’s ANC-led state has yet to face the kind of existential threats Zimbabwe began to encounter in 1997. The following chapter examines how well the business-state coalition is prepared to withstand such threats or, more beneficially, avert them altogether.

Notes 1. Personal comment, quoted in Michael Bratton, “The Comrades and the Countryside: The Politics of Agricultural Policy in Zimbabwe,” World Politics 39, no. 2 (January 1987): 174–202.

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2. Joe Whaley, a tobacco farmer who relocated to Zambia, quoted in Andrew Meldrum, “UN to Check on Zimbabwe Food Crisis,” Guardian (London), May 23, 2005. 3. GDP fell by 2.7 and 4.8 percent, respectively, in 1998 and 1999. EIU, Zimbabwe Country Profile (London: EIU, February, 2005). 4. EIU, Country Profile: Zimbabwe (London: EIU, 2003), 50. 5. CZI, annual report, 2001/02, June 2001; “One Hundred Companies Close Shop,” Business Tribune, August 1–7, 2002. 6. Tor Skalnes, The Politics of Economic Reform in Zimbabwe (London: St. Martin’s, 1995), 145, emphasis added. 7. George M. Houser, “Rhodesia to Zimbabwe: A Chronology, 1830 to 1976” (New York: Africa Fund, 1976), 5. 8. Rhodesia Herald, May 11, 1964, quoted in Masipula Sithole, “Zimbabwe: In Search of a Stable Democracy,” in Democracy in Developing Countries, edited by Larry Diamond, Juan J. Linz, and Seymour Martin Lipset (Boulder: Lynne Rienner Publishers, 1988). UDI was declared in November 1965, following a referendum with 58,000 whites in favor and just under 7,000 opposed (Houser, “Rhodesia to Zimbabwe”). 9. Skalnes, Politics of Economic Reform, 40. 10. Ironically, British oil companies’ illegal sales to Zimbabwe allowed the country to endure sanctions for a dozen years (Colin Stoneman, introduction to Zimbabwe’s Inheritance, edited by Colin Stoneman [New York: St. Martin’s, 1982]). South African and US sanctions-busting activities also supported the Rhodesian regime. See also Houser, “Rhodesia to Zimbabwe.” 11. Rhodesia’s open economy until UDI permitted the inflow of required inputs and substantial industrialization so that manufacturing exports accounted for 40 percent of the total by 1965 (Skalnes, Politics of Economic Reform, 57). 12. Ibid., 59. Moreover, he writes, “Exports of primary goods started to rise again after an initial downturn in the first years of UDI. The disinflation policy of Ian Smith’s government constituted a significant departure from a model ISI approach.” 13. Ibid. 14. Colin Stoneman and Rob Davies, “The Economy: An Overview,” in Zimbabwe’s Inheritance, edited by Stoneman, 97. 15. Skalnes, Politics of Economic Reform; Jeffrey Herbst, State Politics in Zimbabwe (Berkeley: University of California Press, 1990). 16. Skalnes, Politics of Economic Reform, 64. 17. Ibid., 49. The manufacturing sector established its formal lobbying organization, the Federation of Rhodesian Industries, in 1949. A federal-level association, the Association of Rhodesia and Nyasaland Industries (ARNI), was created in 1957. After the federation collapsed in 1963, it was renamed the Association of Rhodesian Industries (ARI), which it remained until independence (Herbst, State Politics, 110). 18. Herbst, State Politics, 137. Both CZI and ZNCC were seen as too diverse. For example, the manufacturing sector itself consisted of some 11 subsectors, the largest of which was metals and metal products, represented by 197 firms in 1993, followed by chemicals (86), foodstuffs (50), and paper (35); Pontus Braunnerhjelm and Gunnar Fors, The Zimbabwean Manufacturing Sector (Stockholm: Swedecorp, 1994). The Chamber of Mines could not rival CFU because its membership was substantially international and it lacked a full-time, permanent leadership, Herbst, State Politics, 142–149. 19. Herbst, State Politics, 4. The act’s repeal in 1996 came too late to substantially weaken the CFU, which greatly diversified its finances over the intervening half-

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century. Further, licenses still required purchase, and the CFU remained the leading source. 20. In the 1980s, ZTA became almost completely independent of CFU, only maintaining a place on the CFU board. Due to multicropping and overlapping memberships, however, CFU was effectively the “face” of commercial farming. 21. Herbst, State Politics, 113. 22. Ibid., 113. 23. Skalnes, Politics of Economic Reform, 59. 24. Ibid. 25. Stoneman and Davies, “Economy,” 37. 26. Stephen John Stedman, Peacemaking in Civil War: International Mediation in Zimbabwe, 1974–1980 (Boulder: Lynne Rienner Publishers, 1991). 27. Ibid., 171–201. ZANU and ZAPU participated in the Lancaster House talks as part of a loose coalition, the Patriotic Front (PF). 28. Jeffrey Davidow, A Peace in Southern Africa: The Lancaster House Conference on Rhodesia, 1979 (Boulder: Westview, 1984). 29. Herbst, State Politics, 46–47. 30. Ibid., 40–42. 31. Houser suggests that the amount pledged to resettle whites was $2–3 billion. President Mugabe reiterated this in a series of news articles appearing in October 1997. See Reginald Austin, “Constitution-Making, Peace Building, and National Reconciliation: Zimbabwe,” paper delivered at United States Institute of Peace, Project on Constitution-Making, Peace Building, and National Reconciliation, Washington, DC, April 26, 2002. 32. Herbst, State Politics, 46–47. 33. Ibid.; see also Skalnes, Politics of Economic Reform; Hevina Dashwood, Zimbabwe: Political Economy of Transformation (Toronto: University of Toronto Press, 2000). 34. Dashwood, Zimbabwe, 119. 35. This partly contradicts Skalnes (Politics of Economic Reform), who argues that the state was “strong” at least until 1987, after which point interest groups experienced a resurgence; see his chapters 6–7, esp. p. 118. See also Herbst, who holds a similar view. I contend that state deference to BAs, especially CFU, for several years prior to 1987, and to an economic policy that was anathema to many political elites, suggests otherwise. Although it was certainly stronger than most of its counterparts in other African countries, its perceived weakness was evidenced by its deference to BAs on economic issues. 36. Michael O. West, “Africa Middle Class Formation in Colonial Zimbabwe,” Ph.D. diss., Harvard University, 1990. 37. Aspiring black businesspeople were victims of “class suppression” by ZANU elites, who saw them as the vanguard of a black capitalist class and potential political rivals: Scott D. Taylor, “Race, Class, and Neopatrimonial Politics in Zimbabwe,” in State, Conflict, and Democracy in Africa, edited by Richard Joseph (Boulder: Lynne Rienner Publishers, 1999). See also Tom Ostergaard, “The Role of the ‘National’ Bourgeoisie in National Development: The Case of the Textile and Clothing Industries in Zimbabwe,” in African Capitalists in African Development, edited by Bruce Berman and Colin Leys (Boulder: Lynne Rienner Publishers, 1994). 38. Taylor, “Race, Class.” 39. The Associated Chamber of Commerce of Rhodesia (ACCOZ following independence) merged with two African trader groups, the Zimbabwe Chamber of Commerce and the Zimbabwe United Chamber of Commerce in 1982. By acceding to state

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pressure to amalgamate with the substantially weaker black chambers, however, ACCOZ underwent a dilution of both its autonomy and its institutional strength. It also revealed ZNCC to be pliant, if not expendable; ZNCC’s ability to influence the ZANUPF government thereafter proved limited. See L. M. Sachikonye, “State, Civil Society, and Democracy in Zimbabwe,” paper presented to the African Association of Political Science conference, Lagos, August 1995. Skalnes includes ZNCC in his listing of interest groups that were strengthened after independence, but this appears to be contradicted by the evidence (Politics of Economic Reform, 92). 40. Bratton, “Comrades and the Countryside.” Also Herbst, State Politics, 85. 41. Pierre du Toit, State Building in Southern Africa (Washington, DC: US Institute of Peace Press, 1995). 42. Skalnes, Politics of Economic Reform, 104. 43. Deborah Bräutigam, Lise Rakner, and Scott Taylor, “Business Associations and Growth Coalitions in Sub-Saharan Africa,” Journal of Modern African Studies 40, no. 4 (2002): 534. 44. Ibid. 45. Skalnes, Politics of Economic Reform, 103–107, 118–124; see also Patrick Bond and Masimba Manyanya, Zimbabwe’s Plunge: Exhausted Nationalism, Neoliberalism, and the Struggle for Social Justice (Trenton, NJ: Africa World Press, 2002). 46. Bräutigam, Rakner, and Taylor, “Business Associations,” 534. 47. Bond and Manyanya, Zimbabwe’s Plunge; Pádraig Carmody and Scott Taylor, “Industry and the Urban Sector in Zimbabwe’s Political Economy,” African Studies Quarterly 7, nos. 2 and 3 (2004). 48. Skalnes, Politics of Economic Reform, 114. 49. Ibid., especially 118–124; see also Herbst, State Politics. 50. Skalnes, Politics of Economic Reform, 119. This view is challenged by Herbst, State Politics, and Pádraig Carmody, Tearing the Social Fabric: The Impact of Structural Adjustment in Zimbabwe (Portsmouth, NH: Heinemann, 2001). 51. Interview, Mike Humphrey, former chief economist for CZI (1988–1992), January 31, 1996, Harare. 52. Carmody, Tearing the Social Fabric, 89–90. Carmody reports some dissent among CZI’s subsector members, particularly the clothing and textile associations. 53. Interview, Humphrey. On Humphrey’s instrumental role, see Patrick Bond, Uneven Zimbabwe (Trenton, NJ: Africa World Press, 1997), 159–161, 221 n. 14, 370–371. 54. World Bank, Performance Audit Report: Zimbabwe (Washington, DC: World Bank, 1995), 18 n. 5; see also Skalnes, Politics of Economic Reform, 102. 55. Bond, Uneven Zimbabwe; Bond and Manyanya, Zimbabwe’s Plunge; Colin Stoneman and Lionel Cliffe, Zimbabwe: Politics, Economics, and Society (London: Pinter, 1989); and Carmody, Tearing the Social Fabric, emphasize external pressure, particularly from the World Bank. Dashwood, Zimbabwe; Herbst, State Politics; and Skalnes, Politics of Economic Reform, give more weight to the internal dynamics. Virtually all observers, however, note the instrumental role of Bernard Chidzero. 56. Bond devotes several pages to a short biography of Chidzero in his Uneven Zimbabwe, 207–216. In 1960 Chidzero left Rhodesia to join the UN system, where he held posts in UNDP and UNCTAD; he rose to deputy secretary general of UNCTAD in 1976 (ibid., 211). 57. Ibid. 58. Stoneman and Cliffe, Zimbabwe, 95. 59. Bond argues that Chidzero was “fluid” ideologically, and although he proved to be a “champion” of white capital, “he was outwardly ambiguous toward many white businesspeople” (Uneven Zimbabwe, 211). Chidzero was a sometime critic of white

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farmers and CFU, as well as of white industrialists, even though he rewarded them in terms of policy (ibid., 211–212). 60. See Bräutigam, Rakner, and Taylor, “Business Associations”; Skalnes, Politics of Economic Reform; Dashwood, Zimbabwe; Bond, Uneven Zimbabwe; Bond and Manyanya, Zimbabwe’s Plunge; Colin Stoneman, “Lessons from Zimbabwe for South Africa,” in South Africa in Southern Africa, edited by David Simon (Cape Town: David Philip, 1994); and Pádraig Carmody and Scott Taylor, “Industry and the Urban Sector in Zimbabwe’s Political Economy,” African Studies Quarterly 7, no. 2 (2003). 61. Bond and Manyanya, Zimbabwe’s Plunge, 31. 62. Skalnes, Politics of Economic Reform, 136. 63. See Herbst, State Politics. 64. Colin Stoneman, ed., Zimbabwe’s Prospects (London: Macmillan, 1989). 65. Skalnes, Politics of Economic Reform, 137. 66. Ibid., p. 179. 67. Godfrey Karoro, “Industry Urges Speedy Implementation of Policies,” Inter Press Service, July 27, 1990. 68. Lynda Loxton, “Zimbabwe Looks for Ways to Insure Sustained Growth,” Inter Press Service, December 18, 1987. 69. Manufacturing actually exceeded the contribution of agriculture to GDP, although given that a large percentage of manufacturing volume relies on agricultural inputs, and agriculture generates greater foreign exchange (in nondrought years), and accounted for 50 percent more official employment in the 1990s than manufacturing, it can be argued that agriculture was the backbone of the Zimbabwean economy. 70. See Herbst, Zimbabwe, 85–109. Carmody argues that the CZI role has been overstated (Tearing the Social Fabric, 89–92). 71. Interview, Edmore Tobaiwa, July 1999, Harare; Danny Dube and Edmore Tobaiwa, “A Feasibility Study on the Creation of a National Business Organisation with Statutory Membership,” consulting report, Harare, July 13, 1999. 72. Bräutigam, Rakner, and Taylor, “Business Associations.” 73. Skalnes, Politics of Economic Reform, 118. 74. Colin Stoneman, “Lessons Unlearned: South Africa’s One-Way Relationship with Zimbabwe,” in South Africa in Southern Africa: Reconfiguring the Region, edited by David Simon (Cape Town: David Philip, 1994); Carmody, Tearing the Social Fabric; Bond, Uneven Zimbabwe. 75. Bond and Manyanya, Zimbabwe’s Plunge; Carmody and Taylor, “Industry and the Urban Sector.” 76. On sequencing of reforms, see Stephan Haggard and Steven B. Webb, eds., Voting for Reform: Democracy, Political Liberalization, and Economic Adjustment (New York: Oxford University Press, 1994). 77. Erik Blytt, “Can Poverty Be a Comparative Advantage? A Study of Export Strategies Based on Low Labour Costs: The Case of Zimbabwe,” M.A. thesis, University of Oslo, 2002. See also Bond and Manyanya, Zimbabwe’s Plunge, 37. 78. Interview, Monitoring and Implementation Unit, Ministry of Finance, March 6, 1996, Harare; World Bank, Performance Audit Report: Zimbabwe (Washington, DC: World Bank, 1995), 13. See also Bond and Manyanya, Zimbabwe’s Plunge. 79. Bräutigam, Rakner, and Taylor, “Business Associations”; Skalnes, Politics of Economic Reform. 80. The study was chaired by the Ministry of Industry and Technology (which later merged with Ministry of Commerce to form MIC). Control over the study was later transferred to the Reserve Bank of Zimbabwe. Peter Robinson, “Will Zimbabwe

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Industry Survive ESAP?” paper presented to the Institute of Bankers of Zimbabwe, Twenty-fifty Winter Banking School, Harare, July 16, 1993. 81. Ibid., 13. 82. Ibid. 83. A series of failed export promotion programs, some of which predate ESAP, dot the landscape (Braunnerhjelm and Fors, Zimbabwean Manufacturing Sector, 80). Overall manufacturing exports increased sharply between 1990 and 1997—over 10 percent annually (IMF, “Zimbabwe: Selected Issues and Statistical Appendix,” IMF Staff Country Report, June 1999). 84. Carmody, Tearing the Social Fabric, 89–93. 85. Robinson, “Will Zimbabwe Industry Survive ESAP?” 13. Note that as a replacement for the foreign exchange rationing and import licensing system, Open General Import License (OGIL) was adopted in January 1990 and slowly expanded. Effective January 1, 1994, all goods (with seven major exceptions) were placed on OGIL. 86. Ibid. 87. Blytt, “Can Poverty Be,” 44, quoting Daniel Ndlela and P. Robinson, “Zimbabwe,” in Exporting Africa: Technology, Trade, and Industrialization in Sub-Saharan Africa, edited by S. Wangwe (New York: Routledge, 1995), 146, emphasis added. 88. Bond, Uneven Zimbabwe, 391. 89. Blytt, “Can Poverty Be,” 44. 90. According to the Central Statistical Office, the manufacturing sector lost 18,178 jobs by the end of 1995, although Chipika, Chibanda, and Kadenge suggest the actual figures are double that. Effects of Structural Adjustment in Southern Africa: The Case of Zimbabwe’s Manufacturing Sector during Phase 1 of ESAP, 1991–1995 (Harare: SAPES Books, 2000), 57. Real wages fell by 32 percent between 1991 and 1994: A. S. Mlambo, E. S. Pangeti, and Ian Phimister, Zimbabwe: A History of Manufacturing, 1890–1995 (Harare: University of Harare Press, 2000), 119. 91. Stoneman and Cliffe, Zimbabwe, 136. 92. Interview, Farai Zizhou, chief economist, CZI, December 6, 1995, Harare. 93. Interview, Wonder Maisiri, chief executive, ZNCC, January 10, 1996, Harare. 94. Bond, Uneven Zimbabwe, 390–393. 95. GATT, Trade Policy Review: Zimbabwe (Geneva: GATT, 1995), 26. 96. The revised tariff schedule contained moderately higher rates for finished goods, although these were set on a sliding scale, allowing for possible manipulation by specific product, as in Zambia. The higher and “rationalized” tariffs were as follows: raw materials and books: 5 percent (from 0 to 40%); spares, 15 percent (from 0 to 56%); inputs, 15 percent (from 0 to 55%); finished goods, 40–85 percent (from 0 to 85%—the highest rates, applied to electronics, textiles, and clothing). 97. Paul Jackson, “What Is the Enabling State?” Journal of International Development 16, no. 6 (2004): 772. The thirty firms in 1996 were chiefly in the clothing and textiles subsector: “Strikes, Strikes, and Strikes,” Insider, July 27, 1997. 98. Braunnerhjelm and Fors, Zimbabwean Manufacturing Sector. 99. Carmody, Tearing the Social Fabric, 109–118. 100. According to CZI president Joe Foroma, firms left CZI for four major reasons: (1) they were unable to get CZI to advocate protectionism for their specific firms; (2) the high cost of membership, coupled with redundant memberships in sectoral and regional industry chambers; (3) the lack of perceived benefit after the lifting of foreign exchange controls; and (4) the emergence of overwhelmingly black leadership and staff in CZI headquarters alienated some white businesspeople. Interview, February 27, 1996, Harare. By the late 1990s, accelerating bankruptcies became another factor in membership losses; interview, Bernard Mufute, senior economist, CZI, July 13, 1999, Harare.

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101. Carmody, Tearing the Social Fabric, 90. 102. As noted by senior officials within the Ministry of Industry and Commerce (MIC) secretariat: interviews, January 31, March 15, and April 12, 1996, Harare. 103. Confidential interview, Ministry of Finance, Monitoring, and Implementation Unit, December 12, 1995, Harare. 104. Interview, Wonder Maisiri, director, ZNCC, January 10, 1996, Harare. 105. Interview, Owen Tshabangu and V. Kwenda, Ministry of Industry and Commerce, Permanent Secretariat, March 1996, Harare. 106. Interview, Farai Zizhou, chief economist, CZI, October 30, 1995, Harare. 107. CZI chief executive Joe Foroma and his colleagues at CZI were consulted by GOZ on the tariff rationalization issues and the export zones legislation, for example. 108. IMF, “Zimbabwe: Statistical Appendix,” Country Report 99/49, June 1999. 109. Chidzero was replaced by the ailing former businessman Ariston Chambati, who died in 1996 only months after taking over. After nearly a year, Chambati was replaced by Herbert Murerwa, whose background lay in the education field, although he had previously held the Industry and Commerce and Tourism portfolios. Murerwa was replaced in 2000 by the well-regarded Simba Makoni, but he was sacked and replaced by Murerwa in a July 2002 reshuffle. Murerwa’s successor, Chris Kuruneri, was brought up on charges in 2004 after serving just four months. In any event, economic authority appears to be vested today in the Central Bank governor, Gideon Gono, a close confidant of President Mugabe. 110. Interestingly enough, this lament came from business leaders themselves: interview, Foroma; interview with E. S. Makoni, former president of ZNCC, February 6, 1996, Harare. 111. Bond and Manyanya, Zimbabwe’s Plunge, 31. 112. Groups like the CCGA-affiliated Cotpro, for example, actually offered higher prices to commercial and peasant producers than the state-owned Cotton Company in the 1994–1995 season. Scott D. Taylor, “Business and Politics in Zimbabwe’s Commercial Farming Sector,” African Economic History 27 (1999): 195. 113. In the cotton sector, the state-owned Cotton Company still controlled 70 percent of the market even after commercialization. However, international firms, including Cargill, were also allowed to compete in the market. 114. Interviews with ICFU leaders, November 15, 1995, and January 18, 1996. 115. Mugabe speech, March 15, 1996; ICFU Inaugural Congress, Harare, November 9–10, 1995. 116. Interview with Misheck Chinamasa, deputy minister of finance, November 14, 1995, Harare. 117. Amy Chua, World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability (New York: Doubleday, 2003). 118. IMF, “Zimbabwe: Statistical Appendix”; IMF, “Zimbabwe: Selected Issues and Statistical Appendix,” IMF Staff Country Report 03/225, July 2003. 119. Taylor, “Race, Class.” 120. Ibid. 121. Manufacturers also were dependent on agriculture, which accounted for at least “60 percent of the manufacturing sector’s input requirements.” Eric Chiriga, “Challenges Abound despite Policies: ZNCC,” Zimbabwe Independent, June 10, 2005. See also n. 69. 122. Carmody, Tearing the Social Fabric, 91; see also Dashwood, Zimbabwe. 123. Interview, David Hasluck, CFU director, January 11, 1996; interview, Levy Sithole, commercial officer, Agricultural Finance Corporation, February 20, 1996.

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124. ICG, Blood and Soil (Washington, DC: International Crisis Group, 2004). 125. Taylor, “Business and Politics.” 126. Taylor, “Race, Class.” 127. Geoffrey Nyarota, “Zimbabwe: The Rule of Thuggery,” in The Corruption Notebooks (Washington, DC: Public Integrity Books, 2004). 128. Interview, Doug Pascoe, chief executive, Commercial Cotton Growers’ Association, March 18, 1996, Harare; interviews, David Hasluck, director, Commercial Farmers’ Union, January 11, 1996, and June 11, 2001, Harare. 129. See Gretchen Bauer and Scott D. Taylor, Politics in Southern Africa: State and Society in Transition (Boulder: Lynne Rienner Publishers, 2005). 130. Taylor, “Business and Politics.” 131. Carmody and Taylor, “Industry and the Urban Sector.” 132. Brian Raftopoulos argues that Mugabe’s rapid capitulation to the War Vets occurred because he feared the prospect of an electoral alliance between the ZCTU and the War Vets that could undermine his government; see Brian Raftopoulos, “The Labour Movement and the Emergence of Opposition Politics in Zimbabwe,” in Striking Back: The Labour Movement and the Post-colonial State in Zimbabwe, edited by Brian Raftopolous and Lloyd Sachikonye (Harare: Weaver, 2001), 12. 133. Alfred Nhema, Democracy in Zimbabwe: From Liberation to Liberalization (Harare: University of Zimbabwe Press, 2002), 143–144. 134. Ibid., 144. 135. Robert Mugabe, quoted in Deutsche Presse-Agentur, November 6, 1997. 136. Nick Swanepoel, “CFU President’s Press Release,” Harare, November 28, 1997; earlier expressed in interview with Kuba Ndoro, senior agricultural economist, CFU, February 16, 1996, Harare. This premise is challenged with authority by Sam Moyo, The Land Question in Zimbabwe (Harare: SAPES Books, 1995), and by government officials involved in planning future resettlement (interview, Joseph Made, Agricultural and Rural Development Authority, November 22, 1995). 137. Characteristic of the confusion at the time, however, the CFU reported that Mugabe had assured them that the law would be adhered to. CFU, “Summary of the Meeting Held at the State House Offices with President Robert Mugabe on 26 November 1997,” compiled by David W. Hasluck, Harare, 1997. 138. “Farm Designation to Cost Foreign Currency,” Zimbabwe Independent, January 9–15, 1998. 139. CFU estimated at the time that seizures would cost 147,000 jobs (Swanepoel, “CFU President’s Press Release”). Although subsequent employment might be available on the seven-hundred-odd new indigenous commercial farms, in the past such farms had employed only twenty-five to thirty people. Naturally, ICFU leaders countered that these numbers would increase commensurate with production increases on black-owned farms. Interview with ICFU senior executives, November 15, 1995, Harare. In hindsight, CFU’s estimates were probably correct. 140. Interview, Hasluck, June 11, 2001. 141. For example, CFU cited only “numerous anomalies and inconsistencies” in the criteria used to develop the controversial list of 1,500 designated farms and requested, in a most nonconfrontational manner, that GOZ adhere to the provisions stipulated in the Land Acquisition Act of 1992 (Swanepoel, “CFU President’s Press Release”). 142. As reported Donald McNeil Jr., “Zimbabwe Squatters: Land Claims on White Farms,” The New York Times, June 22, 1998. 143. Taylor, “Politics and Business.” 144. Interview, Hasluck, January 11, 1996.

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145. Bauer and Taylor, Politics in Southern Africa. 146. The analysis of Zimbabwe’s “land question” has been well covered elsewhere. See Moyo, Land Question; T. A. S. Bowyer-Bower and Colin Stoneman, eds., Land Reform in Zimbabwe: Constraints and Prospects (Aldershot, UK: Ashgate, 2000); Margaret Lee, ed., Unfinished Business: The Land Crisis in Southern Africa (Pretoria: Africa Institute of South Africa, 2003); ICG, Blood and Soil: Land Reform in Southern Africa (Washington, DC: ICG, 2004). “Land reform” per se is not the problem and could be socially and economically beneficial. State recalcitrance resulted at least partly from the strength of the LSCF lobby and the benefits to the state of the status quo. 147. An IMF standby agreement was suspended following the 1997 budget crisis precipitated by the pension issue. 148. See ICG, Crisis Watch reports on Zimbabwe, various; also Jennifer Cooke, Steven Morrison, and John Prendergast, “Averting Chaos and Collapse in Zimbabwe: The Centrality of South African and US Leadership,” CSIS AfricaNotes, no. 15 (April 2003). 149. “CFU Membership Drops,” Daily News (Harare), April 21, 2003. 150. “Commercial Farmers Union Now Irrelevant, Says Made,” Herald (Harare), August 7, 2003. 151. Basildon Peta, “Blow to Zim Farmers as Union Splits,” Cape Argus, September 10, 2003. 152. “Split in Commercial Farmers’ Union,” Financial Gazette, October 31, 2002. 153. “End Political Meddling, CFU Urges Members,” Herald (Harare), August 4, 2003. 154. ZABO, of course, was an exception to this in the late 1980s. 155. Tony Hawkins, “Government Has Killed Investment,” paper presented at a Chartered Institute of Secretaries luncheon, January 1998, reprinted in Zimbabwe Independent, January 23–29, 1998. 156. In its first year, however, NECF actually met in January, February, April, and November 1998. Interview, Danny Dube, financial consultant and ZNCC adviser, July 8, 1999, Harare. 157. Interview, Mufute. Astoundingly, then–ZNCC president Nhlanhla Masuku let GOZ off the hook, arguing that the existence of an NECF should not “preclude government from governing in whatever way it deemed suitable” (“Economic Forum Fails to Live Up to Expectations,” Zimbabwe Independent, July 23, 1999). Masuku, who had known links to the ruling party, was out of step with ZNCC members. Moreover, Masuku’s eagerness to endorse arbitrary decision-making yielded few benefits for his organization. 158. “ZCTU to Continue Boycotting NECF,” Zimbabwe Independent, January 7, 2000. 159. Bond and Manyanya, Zimbabwe’s Plunge, 88. 160. “Economic Forum Fails to Live Up to Expectations,” Zimbabwe Independent, July 23, 1999, quoting Jemister Chininga, acting permanent secretary, MIC. 161. Among the NECF’s output was the anemic “Framework for Industrial Development” in 1999, a vague, ten-page communiqué devoid of content useful to struggling manufacturers. 162. Elizabeth Hart and USAID, “Participation, Consultation, and Economic Reform in Africa: Economic Fora and the EG-DG Nexus,” Occasional Papers Series PNACM-002 (Washington, DC: USAID, October 2001), 8. 163. Ibid. 164. Ibid., 15.

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165. CZI, CZI Industrial Agenda 2, no. 1 (March 2003), states that NERP was derived by government, business, and labor. 166. “Makoni Says State Crafts Useless Plans,” Zimbabwe Standard, July 4, 2004. 167. Hart and USAID, “Participation, Consultation,” 15. 168. Constantine Chimakure, “Social Partners Clash: Differences Emerge in Tripartite Negotiating Forum,” Business Tribune, January 22–27, 2003. Hart argues that the involvement of the labor movement—which became closely allied with the political opposition in the late 1990s—diminished ZANU-PF’s willingness to participate in a forum that might benefit its political adversaries (Hart and USAID, “Participation, Consultation,” 16). That business was not a concern simply reinforces its marginality regarding both politics and policy. 169. Dube and Tobaiwa, “Feasibility Study on the Creation.” 170. Marvellous Mapininga, “Last-Ditch Effort to Save Economy,” Business Tribune, August 29–September 3, 2002. 171. Africa News Service, “Business Leaders Seek to Confront Mugabe over Crises,” March 17, 2000. 172. Mapininga, “Last-Ditch Effort.” 173. Hence valuable members of the economic policy team have been routinely run out: Leonard Tsumba (governor of the Reserve Bank), Simba Makoni (Ministry of Finance), Nkosana Moyo (minister of industry and international trade). 174. Interview, Hasluck, June 14, 2001. 175. Quoted in Nyarota, “Zimbabwe,” 390. 176. See Scott D. Taylor, “The Challenge of Indigenization, Affirmative Action, and Black Empowerment in Zimbabwe and South Africa,” in Black Business and Economic Power, edited by Alusine Jalloh and Toyin Falola (Rochester, NY: University of Rochester Press, 2002). 177. Ibid.; Michael Bratton, “Micro-democracy? The Merger of Farmer Unions in Zimbabwe.” African Studies Review 37, no. 1 (April 1994): 9–37. 178. In fact, most of the leaders were Shona and often Zezuru—Mugabe’s clan. 179. Taylor, “Challenge of Indigenization.” 180. Sachikonye, “State, Civil Society.” See also Bratton, “Micro-democracy?” On the “personalization” of BAs to the advantage of leadership and staff, see Mick Moore and Ladi Hamalai, “Economic Liberalisation, Political Pluralism, and Business Associations in Developing Countries,” World Development 21, no. 12 (1993): 1895–1912. 181. In a series of interviews with the principals, I was unable to establish the identity or even the existence of the members. 182. “Zimbabwe’s New Breed of MP,” BBC News, July 20, 2000, available at http://news.bbc.co.uk/2/hi/africa/839676.stm. See also Helen Suzman Foundation, “Uncle Bob Lends a Hand,” Focus 23 (September 2001). 183. In December 2001, the GMB issued an order for all maize stocks to be delivered or they would be seized. Farmers were unwilling to deliver maize (as with wheat, earlier) because of nonpayment. “State Seizes Maize in Desperate Attempt to Contain Shortages,” Farmer, January 14, 2002, available at www.thefarmer.com.zw/headlines _14_january_2002.htm. 184. Interview with a former ZNCC president, February 6, 1996, Harare. 185. Emboldened by indigenization advocates, even President Mugabe in 1996 tried to pressure Lonrho to appoint a black general manager to fill a top vacancy. Lonrho refused. Similar pressure by AAG against Coca-Cola in 1997 was also rebuffed. 186. Helen Suzman Foundation, “Uncle Bob Lends a Hand.” 187. Taylor, “Business and Politics.”

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188. Chiyangwa was briefly imprisoned in 2004 and faced charges of fraud, although he reclaimed his economic clout. Emmerson Mnangagwa, speaker of Parliament and once the presumptive heir apparent to the presidency, was marginalized within the ruling party. The powerful minister of information Jonathan Moyo was sacked in December 2004 for challenging Mugabe’s choice of Joyce Mujuru as second vice president. 189. UN, “Addendum to the Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo,” S/2001/1072, November 13, 2001, 17, quoted in T. Addison and L. Laakso, “The Political Economy of Zimbabwe’s Descent into Conflict,” Journal of International Development 15, no. 4 (2003): 457–470, at 462. 190. Michael Nest, “Ambitions, Profits, and Loss: Zimbabwean Economic Involvement in the Democratic Republic of the Congo,” African Affairs 100 (2001): 469–490. 191. Ibid., 480. 192. Ibid.; UN Security Council, “Final Report of the Panel of Experts on the Illegal Exploitation of Natural Resources and Other Forms of Wealth of the Democratic Republic of the Congo,” S/2002/1146, October 16, 2002. 193. UN Security Council, “Final Report”; Global Witness, “Branching Out: Zimbabwe’s Resource Colonialism in Democratic Republic of Congo” (London: Global Witness, February 2002). 194. Addison and Laakso, “Political Economy.” 195. The Zimbabwe Programme for Social and Economic Transformation (Zimprest) eventually emerged in 1996, after a long debate. Zimprest was followed by the Millennium Economic Recovery Programme (MERP) in 2000. Intended only as an eighteen-month program to stabilize the economy, it met with little success (“Merp Not Dead, Says Makoni,” Daily News [Harare], May 10, 2002). A short-lived and littlepublicized “10-point economic plan” briefly held sway in 2002, before a successor to it, named the National Economic Revival Program (NERP), was announced in 2003 (“Makoni Says State Crafts Useless Plans”). 196. R. W. Johnson, “Political Opinion in Zimbabwe, 2000” (Johannesburg: Helen Suzman Foundation, March 2000). See also Taylor, “Business and Politics.” 197. Financial Gazette editorial, quoted in Bond and Manyanya, Zimbabwe’s Plunge, 27. 198. CFU density and enforcement continued, however, at least until the 2002 formation of the rival Justice for Agriculture (JAG) group. 199. Taylor, “Challenge of Indigenization.” 200. Taylor, “Race, Class”; Bratton, “Micro-democracy?” 201. Peter Evans, Embedded Autonomy (Ithaca, NY: Cornell University Press, 1995). 202. Bond and Manyanya, Zimbabwe’s Plunge. 203. “CZI: Is It an Effective Voice?” Zimbabwe Independent, February 23, 2001. 204. “Business Chiefs to Meet Mugabe on Economy,” Financial Gazette, May 3, 2002.

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5 South Africa: Both Model and Cautionary Tale?

In terms of sharing a common vision of South Africa’s economic future, the relationship between business and government is unquestionably at its best since 1948.1

Perhaps as recently as 1992, the notion that business-state relations in South Africa could be characterized as better under a democratically elected, majority government of the African National Congress (ANC) than under its National Party predecessors would have struck most observers as outrageous. As the National Party negotiated the end to four decades of apartheid and more than three centuries of colonial domination, many businesspeople greeted the prospect of ANC rule with great apprehension. After all, business and state had been closely intertwined in South Africa from the earliest stages of European settlement in the seventeenth century through the turbulence of the apartheid era. South African history was in many ways even more of a white capitalist project than that which gave rise to colonialism in Zambia and Zimbabwe. Moreover, as a nationalist movement opposing the white minority–ruled state, the ANC had long rejected market capitalism and sought to alter the trajectory of this three-hundred-year history; the party’s manifesto, the 1955 Freedom Charter, called for reorientation of the state toward social democracy and shared resources, rather than the continued concentration of wealth in white hands, and it suggested that nationalization would be a means to these ends. By 1990, therefore, businesses had genuine concerns, as apartheid was finally dismantled and the National Party entered into a process of political negotiation with the ANC. Many white business and political actors feared that should the ANC emerge triumphant in South Africa, aided by its allies in the labor movement and the South African Communist Party, the country’s large conglomerates would be targeted for nationalization, and state socialism would ensue. Contrary to expectations, however, the ANC government that came to power in 1994 entered into a coalition with the entrenched, overwhelmingly white business community whose ranks included both tacit and vociferous supporters of apartheid. Effectively gaining independence in 1994, the new South 151

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African state faced a global context in which neoliberalism was the hegemonic development paradigm. Political elites in the ANC rapidly bought into the liberal model, yet their unfamiliarity with a market-dominant approach—both as a new government and especially as erstwhile left-leaning nationalists—provided strong incentive to engage the resident business community for assistance. In post-1994 South Africa, therefore, the state had neither the incentive nor the autonomy vis-à-vis the forces of globalization or of local capitalists to undermine or nationalize businesses, as Zambia had in the 1960s or as the ANC’s own Freedom Charter had suggested. In other words, the new state’s perception of its strength was low, relative to the business organizations in South Africa, and the ANC’s dependence on business was unchecked. In the wake of the country’s transition to majority rule, President Nelson Mandela, Deputy President Thabo Mbeki, and the ANC hierarchy were extremely accommodating of the interests of white-owned capital. The leadership did not accommodate liberalism grudgingly, as Mugabe did in Zimbabwe, but fully vested their authority in critical brokers such as Trevor Manuel and Alec Irwin, who very clearly represented the wishes of the new state president. At the same time, unlike Zimbabwe’s Bernard Chidzero, who had a decade’s head start (and a long prior career in international economics), the ANC’s economic representatives were relatively inexperienced in confronting South Africa’s established business actors. Politically speaking, as an ascendant ruling party, the ANC was also vulnerable: almost by definition, competitive democratic states—such as South Africa clearly was in 1994—would perceive themselves as weaker. Zimbabwe, by the time of its 1990–1991 economic transition, was quasi-democratic and politically uncompetitive, giving ZANU-PF little reason to question its political hegemony, at least. With the institutional strength of business already well established, South Africa’s “high/low” distribution of power at the outset of the transition facilitated the emergence of a reform coalition imbued with features that favored its durability. The duration of this coalition, which began to emerge amidst the political and economic transition that preceded the 1994 election, owes itself to both the lasting institutional strength of business and the continued utility of the private sector as the engine of the South African economy. Thus, the long-standing privileged position of business was not usurped by the ANC-led state. On the contrary, the negotiations that preceded the 1994 transition included the development of institutional frameworks for dialogue between business and the ascendant ANC, including the quasi-corporatist body the National Economic Development and Labour Council (Nedlac), as well as the establishment of less formal networks, all of which reinforced business power. The access enjoyed by business groups has contributed to a policy environment that many business actors describe as favorable. Although economic performance has lagged behind targets and enormous wealth disparities persist, thus far South Africa has avoided crisis. Indeed, the country has achieved

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important, if modest, economic goals, partly as a result of programs and policies emanating from its reform coalition. While the South African economy’s performance since the end of apartheid has so far been inadequate to alleviate pervasive inequality and the structural legacies of colonialism and apartheid, it enjoys, in stark contrast to its coalitionless neighbors, an iterated dialogue that offers continuous opportunities to adjust reform priorities. Thus, where institutional strength and utility eroded in Zimbabwe, eventually contributing to coalition collapse, in South Africa these features have been substantially maintained. Owing in part to the ANC’s seemingly insuperable hold on power, legitimized through three national elections, political threats to the state itself have been minimal, so there is little risk of the sort of politically inspired backlash against business allies witnessed, for example, in Zimbabwe. Although the country’s business-state coalition has become narrower (in terms of the number of participants—particularly those representing traditional business associations such as chambers of commerce), it has also become deeper (in terms of frequency of access and favorability of results). The nature of contemporary business-state relations in South Africa has provoked criticism from analysts on both the left and the right. Deriding what they regard as the uncomfortably close relationship between business and state, critics on the left argue that the ANC abandoned its principles and, in the process, its erstwhile social partners.2 Observers on the right, meanwhile, contend that the ANC has not gone far enough with its policies; they suggest that a strong populist current in the party, and perhaps in the president himself, continues to threaten capital and investment, and they may even decry the business-state relationship as insufficiently robust.3 Few analysts argue, as in the Goldilocks tale, that business-state relations are “just right.” Yet based on the evolution of the relationship since 1994, policy negotiation and output, surveys of business opinion, and even economic performance, a credible argument can be made that this is the case, at least within the many constraints on the South African polity, and certainly relative to its neighbors. South Africa, with its durable coalition and business-friendly policies, offers a countervailing case to Zambia, Zimbabwe, and much of the rest of subSaharan Africa, where such entities are uncommon. The logic of comparison between South Africa and its two neighbors is explained in Chapter 2. Whereas it certainly possesses many “Third World” characteristics, South Africa clearly differs in important respects from the Zambian and Zimbabwean cases.4 Among the most important distinctions is the relative size of its economy. With a 2004 GDP of $213 billion, the South African economy is five times larger than those of Zimbabwe and Zambia combined, and nearly 40 percent of that of subSaharan Africa as a whole.5 South Africa is also one of the most diversified economies in Africa, with a substantial base in manufacturing, financial services, mining, energy, and agriculture; although its principal exports remain primary commodities—minerals, particularly gold and, increasingly, platinum—it

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also exports automobiles, metals, and chemicals. In addition, South Africa’s private sector, more than 900,000 enterprises, is far larger than that of its counterparts.6 In 2003, for example, the private sector received domestic credit equal to 142.1 percent of GDP, on par with high-income countries.7 South Africa’s private sector provided 76 percent of gross capital formation, 55 percent of formal sector employment (including agriculture), and 21 percent of tax revenues.8 Not surprisingly, business associations mirror this in number and complexity: by the mid-1990s, there were some 191 registered employers’ associations, of which at least 20 had a sectoral emphasis; each urban area contained at least one multisectoral trade or peak association; and finally, there are the national peak associations.9 Given this diversity, limitations of time and space preclude an examination of the full scope of these sectors and interest associations. Hence, the analysis in this chapter is concerned mainly with macrolevel issues, although it does draw on sectoral information for the purpose of making comparisons within and across cases. Little attention is given to agriculture, for example; although agriculture is increasingly the site of some of South Africa’s greatest redistributional pressures, it represents just 10 percent of employment and 4 percent of GDP.10 A full survey of the associational environment is also beyond the scope of this chapter. The discussion of BAs is largely limited to the South African Chamber of Business (SACOB), die Afrikaanse Handelsinstituut (AHI), and the National African Federated Chamber of Commerce (Nafcoc), three of the leading national multisector peak associations, as well as Business South Africa (renamed Business Unity South Africa, BUSA, in 2004), an umbrella association, and the South Africa Foundation (SAF), a small but formidable association of South Africa’s leading corporate executives.11 Notwithstanding this rather elaborate associational environment, all these associations except SAF are generally comparable in form to leading entities found in the other countries. Even SAF, the collective body representing South Africa’s most influential companies, is not an especially uncommon type of entity in business-state relations broadly. The SAF acts as “an executive committee of the bourgeoisie,” in a manner not unlike the Consejo Mexicano de Hombres de Negocios (CMHN) in Mexico, a thirty-member elite group of that country’s most influential businessmen.12 Another important feature distinguishing formal business-state relations in South Africa is the existence of a large coterie of strong firms that act as additional intermediaries. These firms, leading multisectoral conglomerates, participate in the business-state coalition both collectively through SAF and other forums and as firms. It is worth noting, however, that several of these conglomerates display characteristics found in multisectoral national business interest associations in other contexts. South Africa’s leading firms—including Anglo American, Sanlam, Rembrandt (renamed Remgro in 2000), Old Mutual, Liberty Life, and Anglovaal—are in some ways akin to the multisector

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chaebol that dominate South Korea’s economy. These South African conglomerates possess characteristics that in some ways approximate the kinds of institutional strength identified in conventional associations: selective benefits (access, the capacity to influence preferential policies), density (as vertically and horizontally integrated multisectoral entities), and internal cohesion/ mediation (these functions are absorbed at the firm level through cross-cutting board memberships).13 South African business-state relations occur on multiple levels simultaneously. Although the main focus of the chapter is on the state’s relationship with large-scale business interests, both firms and associations, this emphasis does not suggest that the actors, interests, and interactions at lower levels do not play an important role in South Africa’s wider political economy. For example, the discussion here largely excludes informal exchange based on neopatrimonial or clientelist ties, which of course are found in all polities; yet these have not become the defining feature of business-state relations in South Africa, as in Zimbabwe after 2000, for instance. Moreover, the phenomenon of black economic empowerment (BEE) is treated only peripherally in the chapter. Although it is a pivotal policy issue in contemporary South Africa, the role of the so-called BEE companies as yet remains far more political than economic.14 And to the extent such companies and groups participate in reform coalitions, increasingly it is as part of big business. Lastly, what can be called the “conventional” or “traditional” BAs (such as the national chamber of business, SACOB, or Nafcoc, which encompasses small- and medium-scale enterprises) maintain their own avenues of access to the state. However, the state tends to subordinate these to its relationship with big business interests, and as a result, many small and medium-sized companies, and the associations representing them, are left to free ride (or in some cases, suffer under) the policy achievements of their larger counterparts. Thus, the analytical focus recognizes the wider context in which business-state relations occur in South Africa. Its bias toward big business notwithstanding, South Africa might be considered something of an ideal type for business-state relations in Africa, on the basis of its economic might and business development and its achievement of a functional reform coalition with demonstrated capacity for performance. Yet as the preceding discussion implies, certain characteristics suggest that the model designation is perhaps both premature and inappropriate. Most notably, the features of its economy and its peculiar history of apartheid capitalism and industrialization cannot easily be replicated elsewhere. Nevertheless, the South Africa case contains several valuable lessons that inform the investigation of other states and perhaps serve as a cautionary tale for the establishment of reform coalitions elsewhere. The elevation of “big business” controlled by a market-dominant minority, and a substantially neoliberal model in the context of tremendous income inequality, poses significant risks for long-term stability.15 Whereas few African countries are home to South Africa–style conglomerates,

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market-dominant minorities are a ubiquitous phenomenon in developing countries.16 One important lesson, therefore, is that reform must take place at more than simply the macroeconomic level. Following the patterns established in the examinations of Zambia and Zimbabwe, this chapter begins with a brief history of business-state relations in South Africa. As noted above, the very origins of statehood in South Africa, like those of its counterparts in the region, lie substantially in the links between business and capital. The political character of contemporary South Africa actually began to take shape with the expansion of large-scale diamondand gold-mining operations beginning in 1867 and 1886, respectively. In short order, the essential parameters of the South African political economy were laid down, parameters that were to endure for more than a century. The 1870s and 1880s were characterized by the emergence of big capital, including mining magnates like Cecil Rhodes, the institutionalization of the wage economy, and with it entrenched racial discrimination. The most intense period of modern capitalist consolidation in South Africa, however, began in the early twentieth century and accelerated through the greater part of the apartheid era, from its establishment in 1948 through the 1980s. This period witnessed the cementing of institutional strength and the emergence of powerful business actors that not only proved capable of engaging the state but actually contributed to shaping the South African state. The chapter then turns to analysis of the business-state relationship in the wake of the 1994 transition to majority rule. It explains why a reform coalition emerged between these unlikely partners and why it has endured. The chapter concludes with an assessment of the current and latent threats to the prevailing relationship between business and the state.

The Origins of South African Business Strength Business and the State in Colonial South Africa The first major European encounters with South Africa began when the Dutch East India Company landed in what is today Cape Town in 1652. By 1672, the first formal settlements had taken hold, eventually expanding with the arrival of other Europeans, including Germans and French and Belgian Huguenots, as well as slaves from the Dutch East Indies. The Khoi peoples, who were indigenous to the Cape, were decimated through their encounter with the Europeans, while Bantu-speaking groups, mostly in the interior, were displaced and eventually subjugated. The arrival of the British, who by 1806 had established permanent political and military control over the territory, laid the foundations for more than a century of hostilities between the descendants of the Dutch settlers, who became known as Afrikaners, and the English-speaking latecomers.

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For the first 150 years of settlement, the Europeans penetrated relatively little of the country’s interior. By the 1830s, however, intensified competition and clashes between Afrikaners and Anglo South Africans precipitated a mass migration of Afrikaners from the Cape, known popularly as the Great Trek. This population shift led to the establishment of the autonomous Boer (farmer) republics, the Orange Free State, and the Transvaal (known as the South African Republic from 1856), and brought whites into far greater confrontation with Bantu-speaking black inhabitants. Farming was the principal engine of the colonial economy from its earliest stages. As the alienation of Africans from their ancestral lands and traditional economies accelerated, whites engaged in increasingly expansive farming activity. From 1672 until the discovery of vast exploitable quantities of diamonds in the Boer republics in 1867, South Africa’s economy was based almost entirely on agriculture. The discovery of diamonds and especially gold in 1886, however, transformed South Africa from an agriculturally based “white colonial settlement of only marginal importance in the British Empire to a regional center of mining industry.”17 The inherent conflict between British imperial ambitions and Afrikaner economic and cultural nationalism resulted in two wars, both won by Britain, which permitted the Crown to extend its control over the entirety of South African territory. Nonetheless, the establishment in 1910 of the self-governing Union of South Africa, between the former Boer republics and the two colonial territories of the Cape and Natal, actually preserved many Afrikaner cultural and economic interests. Even prior to the resolution of political conflicts, overall industrial, mining, and financial-sector development continued apace, securing the state’s economic foundation. In the period between 1870 and 1936, British interests invested heavily in mining operations, facilitating the rapid expansion of the sector. “British financier-entrepreneurs such as Rhodes, Barnato, Robinson and Beit gained a virtual monopoly over these industries with the help of the South African colonial government and the Republic of the Transvaal.”18 The expansion of mining operations, in turn, led to the rapid development of other sectors: rail and road infrastructure, manufacturing, commercial agriculture, and energy, particularly coal resources.19 Such development tended to be highly centralized around the principal areas of mining operations; therefore, most of South Africa’s urban-industrial infrastructure was established on the Rand—the cities of Pretoria, Johannesburg, and Vereeniging. The expansion of industrial enterprise and white commercial farming in South Africa forced blacks into the wage labor system as miners and unskilled laborers. It also fostered an increasingly repressive series of laws intended to restrict blacks’ economic competition with whites, as well as to eliminate blacks’ already tightly circumscribed political rights. The marginalization of the black population was physical as well as economic, as blacks were forced into “native reserves” or townships adjacent to the major urban centers, their

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movements regulated by a series of pass laws and other discriminatory legislation. Serving as a ready supply of cheap labor, these reserves served to “subsidize capitalist growth in South Africa.”20 The long-standing conflict between Afrikaners, many of whom were initially poor, and English speakers was mitigated somewhat by the 1910 Union Agreement, as well as their common subjugation of blacks and other nonwhites. Nonetheless, political and economic as well as cultural competition persisted between whites of Anglo-British and Afrikaner origin. Afrikaner nationalism found its expression in the Afrikaner-dominated National Party, which narrowly won the 1948 South African election and immediately set about implementing its policy of apartheid, calling for rigid racial classification and separation. Although Anglo South African businesses maintained significant power thereafter, English-speaking pro-British parties would never again rule South Africa. The Expansion of Business and Institutional Strength Under Apartheid Paradoxically, the discriminatory, often brutal policies that characterized apartheid were both good and bad for South African firms, depending on their primary sector of operation. Different sectors—largely divided on the lines of manufacturing, mining, and agriculture—had conflicting views on the efficacy of some of apartheid’s fundamental tenets, although it is important to point out that no firm or business association ever directly challenged the South African state under the National Party. Although there is some disagreement among scholars about whether apartheid was driven by ethnocultural motivations or by material interests,21 apartheid and National Party rule indisputably were important factors in the elevation of the Afrikaner capital-owning class.22 Additionally, apartheid accelerated both the concentration (monopoly control and vertical integration) and the conglomeration (horizontal integration) of both Afrikaner-dominated and English-speaking enterprises, processes that had begun earlier under Rhodes and his contemporaries. Nonetheless, as apartheid took hold, several important fault lines remained or became more evident in “settler” capital, both along an ethnolinguistic dimension and of a sectoral nature. As Hein Marais notes, two years before apartheid manufacturers (whose contribution to GDP had actually exceeded that of mining by 1943) wanted relaxation of pass laws, the color bar, and restrictions on urban in-migration (so-called “influx control”) so they could reduce labor costs. Mining capital, however, felt that an end to the reserve system would undermine “their cheap migratory labour supply,” and commercial agriculturalists “wanted influx control and the pass laws tightened so as to stem the outflow of African labour towards the cities and towns.”23 After 1948, of course, pass laws, influx control, and the reserve system were

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all further codified, despite the fact that labor restrictions, and many other costs associated with apartheid, generated major economic inefficiencies. Yet manufacturers, like their counterparts in other sectors, essentially remained loyal to the National Party—and implicitly, if not explicitly, supportive of apartheid. For many of apartheid’s ideologues, Afrikaner nationalism, the racist ideology of apartheid, and the fear of class competition between poor whites and black laborers were complementary, mutually reinforcing features. The state’s economic intervention expanded markedly in this period, constituting “a concerted affirmative action programme” designed to augment the Afrikaner capitalist class.24 In addition to receiving subsidies in the private sector, Afrikaners were given jobs in an expanded state bureaucracy. Moreover, the South African state pursued aggressive ISI policies and used tariffs and nontariff barriers (NTBs) to protect local industries.25 Finally, the state played the demiurge, developing or expanding large state-owned enterprises such as ISCOR (Iron and Steel Corporation), ESKOM (Electricity Supply Commission), and SASOL (South African Coal, Oil, and Gas Corporation).26 The early decades of apartheid generally proved good for business. Even as the political environment became increasingly repressive and the international environment increasingly hostile, from 1960 to 1969 the economy grew at almost 6 percent per year. Foreign direct investment (FDI) inflows increased substantially, especially to the manufacturing sector, which itself was growing at nearly 12 percent annually and becoming increasingly capital- rather than labor-intensive.27 The leading private-sector beneficiaries were South Africa’s six largest conglomerates: Liberty Life, Sanlam, and Old Mutual (primarily financial services) and Anglovaal, Anglo American (principally mining and manufacturing), and the Rembrandt Group (tobacco). By the mid-1970s, the top 5 percent of companies dominated these respective sectors, accounting for 63 percent of manufacturing turnover, 69 percent of turnover in the wholesale and retail trades, 76 percent of turnover in the transport sector, and 63 percent in the construction sector.28 Swallowing up smaller firms at a rapid pace, the conglomerates continued to consolidate ownership throughout the remaining years of the apartheid era, such that “literally a handful of companies [came] to exert a decisive influence over the direction of South Africa’s economic life.”29 By the 1980s, the six largest companies controlled some 80 percent of the shares traded on the Johannesburg Stock Exchange.30 Business Against Apartheid Throughout the apartheid years, South Africa’s principal exports remained minerals and primary products, indicating an inability to diversify exports.31 Despite the marked growth in manufacturing output during apartheid, the sector’s market remained overwhelmingly domestic. South Africa did not follow the Asian model, that is, transition to export-led growth: it had a captive domestic

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and regional market, and beginning in the 1960s, it began to deepen its ISI strategies. Furthermore, although real wages declined between 1985 and 1991, South African labor costs were actually high due to low productivity.32 Hence, most South African manufactures were both internationally uncompetitive and dependent on capital imports, which became increasingly expensive and a significant drain on foreign exchange.33 Over time, tensions emerged between agricultural and industrial capital, each dependent on state subsidies and protection, and mining capital, which was free-trade in orientation.34 Concurrently, the emergence of an armed black resistance, both within and outside South Africa, increased the cost of security, as the state developed extensive intelligence, counterinsurgency, and weapons procurement and manufacture programs. As the costs of state repression increased, along with regulation, labor, and production costs, and the international marketplace became more hostile to South African products, apartheid began to affect business more adversely. Scholars mark the early 1970s as the beginning of the economic downturn; not only was economic growth impaired by the 1973 oil crisis and the ensuing global recession, but chronic structural imbalances began to take their toll, and corporate profit rates began to decline along with the economic growth rate.35 The oil crisis imported inflation, the international sanctions regime made the acquisition of inputs prohibitive and promoted capital flight, and the decline in global gold prices eventually undid the South African economy.36 After 1975, South Africa experienced rising unemployment, and private sector investment in plants and equipment began to decline from 1976, such that by 1976–1977 “the economy had entered a period of stagflation.”37 (See Table 5.1.) Black unemployment was rampant, contributing to significant un-

Table 5.1

South Africa’s Average Annual Economic Growth (Decline), in percent

Real GDP Real GDP per capita Manufacturing output Mining output Real fixed capital formation Exports Inflation

1948–1973

1973–1981

1981–1994

4.8 2.2 7.3 3.5 5.3 4.7 3.6

3.5 1.2 5.2 (3.3) 4.3 0.3 12.7

0.8 (1.3) (0.1) (0.9) (2.3) 2.4 14.5

Sources: Charles H. Feinstein, An Economic History of South Africa: Conquest, Discrimination, and Development (Cambridge: Cambridge University Press, 2005), 147; SARB (South African Reserve Bank) Quarterly Bulletins, nos. 143 (March 1982)–195 (March 1995); Government of South Africa, Central Statistical Service, “Gross Domestic Product at Constant Prices, First Quarter 1993,” Statistical Release (May 1993), Pretoria; Government of South Africa, Central Statistical Service, “Gross Domestic Product at Constant Prices First Quarter 1988, Statistical Release (May 1988), Pretoria.

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rest and simultaneously dampening the existing and potential consumer base represented by that community. The local market was too small to sustain, and a number of firms closed down; many others were acquired by the conglomerates. Predictably, given the differential impact of apartheid policies, the emergence of business opposition “occurred at a different pace both within and between the various capitalist groups.”38 Manufacturers, for example, called for greater incorporation of blacks as workers and potential consumers earlier than mining and commercial agriculture; manufacturers required skilled labor and expanding domestic consumption, whereas mining and large-scale farmers relied heavily on low-cost semi- and unskilled black labor.39 Economic and political pressure from business leaders did coalesce sufficiently to influence state actors such that certain apartheid labor policies—the job color bar, trade union recognition, and restrictions on black mobility—as well as limits on black business ownership, began to be eased in the late 1970s.40 Despite continuing to pressure the state, particularly on labor policies, most of the business community welcomed the National Party–state’s response to declining security in the 1980s and 1990s. Indeed, when P. W. Botha became prime minister (later president) in 1978 and emphasized security and military issues, business actors were generally supportive, even of Botha’s draconian “Total Strategy” of 1979–1984.41 “Botha went out of his way to project his administration as the government of a broad alliance of all sections of capital,” and some business leaders asserted that relations between business—including both Afrikaner- and English-controlled firms—and government had “never been better” than in Botha’s early tenure.42 Yet although apartheid may have been beneficial initially, by the late 1970s and 1980s it had become a significant drain on private sector profitability. Some studies calculated that apartheid had cost the economy R78 billion by 1985 and that gross national product would have been a remarkable 50 percent higher without the racist policies.43 Thus, by the mid-1980s, amidst a rapid deterioration in national security, a brutal state response (including the declaration of a second state of emergency in 1986), the imposition of global sanctions, and deepening economic decline, some segments of the white business community began to distance themselves from the government, though the relationship in these years was marked by ebb and flow. In September 1985, leading businesspeople led a delegation to meet with the ANC in exile in Lusaka, Zambia. Three years later, in August 1988, a number of progressive organizations and a group of about fifty white business executives formed the Consultative Business Movement (CBM), whose goal was the promotion of a “fair and just society and a successful economy in a united nonracial democracy.”44 A number of other business leaders began to take a similarly proactive role.

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Given this environment, by early 1987 the financial press was arguing that “the once-cosy relationship between government and the business community . . . has steadily deteriorated . . . to the point where business leaders now exhibit excessive cynicism about virtually everything the government does.”45 In fairness, such sentiments were somewhat overstated, for even at the height of the emergency, business unanimity did not exist. In general, Afrikaner-based business interests regarded the state differently from the way their Englishdominated counterparts did. The Federated Chamber of Industries (FCI), a national peak association and forerunner to SACOB, was among the most critical of Botha’s policies, particularly following the state of emergency in 1986, though this criticism came at a cost: Botha responded by exerting financial and political pressure on FCI.46 In contrast, the Afrikaner business community and its principal business association, the AHI, remained unreservedly supportive of the government. The raison d’être of AHI, which was established in 1942, was to represent and promote Afrikaner business, and as such it was a staunch and largely unapologetic supporter of the National Party.47 In short, during the waning days of apartheid, the business-state relationship was beset by centrifugal and centripetal tendencies simultaneously. As Harold Wolpe argues, the relationship between apartheid and capitalism was “historically contingent and Janus-faced, being simultaneously functional and contradictory.”48 While the National Party’s economic management was increasingly questioned, escalating social unrest and labor action drove business to support many of the state’s security measures and its efforts to repress labor activism, including amendments to the Labor Relations Act declaring strikes illegal.49 The business community appears to have been mainly reactive in this period. Though business was able to exercise some influence over the state, Merle Lipton and Charles Simkins describe their relationship as an “uneasy” one. Business leaders maintained access to state policymakers, and the state appeared willing to respond to demands for reforms, although the state’s responses “each proved inadequate,” whereupon the lobby effort would start anew.50 By late 1988, business “as a whole seemed to withdraw from the political arena,” preferring a lower profile. “Yet despite this new political acquiescence, almost no capitalist believed that the crisis had been resolved or even that the government was on the right track.”51 Only with the installation of F. W. de Klerk as president in September 1989 did the broader business community begin to reengage the political sphere, particularly as de Klerk began to unravel apartheid and commit the regime to a negotiated political settlement with the ANC. Although only shortly thereafter the real prospect “of an ANC government had to be faced squarely,” the de Klerk “government and (most factions of) big business were at one in respect to” a neoliberal agenda, forming “an informal ‘triple alliance’ among themselves and the IFIs” in opposition to the ANC economic platform.52

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Regime Transition and Coalition Emergence By February 1990, President de Klerk had authorized the release of all political prisoners, including Nelson Mandela; the unbanning of previously outlawed organizations such as the ANC; and the dismantling of more than four decades of apartheid. At the same time, de Klerk announced publicly that his ruling National Party would commence negotiations for a transition to democracy. The dimensions of South Africa’s elaborate democratic transition are investigated in a rich and comprehensive literature, employing a broad range of analytical and disciplinary perspectives.53 Rather than revisit this research, this section addresses the narrower issue of state capacity, or strength, in the run-up to and the aftermath of the 1994 election. Recognizing that any number of dates could qualify as “the transition period” in South Africa, I peg the start of the economic transition as May 1992, coinciding with the promulgation of the ANC’s “Ready to Govern” document, which effectively repudiated the socialist tenets of its Freedom Charter, and the end point as the June 1996 announcement of the new neoliberal reform program Growth, Employment, and Redistribution (GEAR).54 This is the period when the economic transition became virtually irreversible. Despite the monumental scope of political change in South Africa, de Klerk and the National Party actually had little choice, given the nature of pressures then faced by the state, including rising political violence, international isolation, and an economy that had grown by only 1.5 percent annually in the 1980s (declining on a per capita basis). From 1990 to 1992 the country experienced three consecutive years of negative real GDP growth.55 Notwithstanding this environment, however, National Party leaders initially believed that it would be possible for the party to manage the process of negotiation and thereby retain some measure of power, and possibly even control, in a new political dispensation. Among the most urgent priorities that any postapartheid government would be forced to confront was the country’s economic stagnation and structural imbalances. The National Party advanced a supply-side solution, which it argued would be aided by an improved domestic-security environment. The National Party’s economic program, eventually articulated through the 1993 Normative Economic Model (NEM), was an orthodox neoliberal program that, in Jonathan Michie’s view, “correctly identified a number of defects” in the South African economy but “also included a number of naïve assumptions and assertions.”56 The NEM sought to eliminate inefficiency, promote greater liberalization and deregulation, and reduce government spending. Further, the National Party continued to champion privatization, which had been introduced haltingly since the early 1980s and was endorsed, unsurprisingly, by the business community. The ANC, of course, saw a very different economic landscape. By the end of apartheid, whites, representing just 13 percent of the population, controlled

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nearly all industrial production, dominated the management and technical spheres, owned almost 80 percent of the land, and produced some 75 percent of the nation’s food among some 12,000 farmers.57 Thus, among the explicit goals of the ANC was to reverse the injustices of three centuries of white socioeconomic domination, including through nationalization of industrial and mining assets and land redistribution. Each side was compelled to rethink its calculus when, as early as 1992, it had become apparent that not only would the National Party be unable to dictate the course of negotiations but if a peaceful transition could be consummated at all, the ANC would inherit the reins of the state. By 1993, though the country was still wracked with politically related violence, the path to majority rule was inexorable. Yet despite being heir apparent to the levers of state power, the ANC clearly was disadvantaged in relation to business. The party’s inexperience, and resultant weakness, is discussed below. Equally noteworthy, as Lipton and Simkins note, the capacity of the state itself was in decline, even as early as the 1980s.58 In short, the transformation of the state that coincided with ANC rule gave rise to the high/low character of the business-state relationship, a power perception that persisted through the transition and only began to show signs of balance more than two years later. Roots of Partnership: State Reliance on (Big) Business In the final decade of National Party rule, state actors became increasingly receptive to pressures for political moderation, tariff and some trade liberalization, monetary stability, reduced government spending, deregulation, privatization of state-owned enterprises, and so on. Big business actors were the primary advocates, although SACOB was also an important supporter of these reforms. As the transition accelerated and the ANC emerged as the clear favorite, the same private-sector representatives prevailed upon the ANC to shift rightward, increasingly accommodating business and capitalism, notwithstanding the party’s Freedom Charter and its political alliance with the Congress of South African Labour Unions (Cosatu) and the South African Communist Party (SACP). In the 1990s, the business community met the prospect of ANC rule with a mix of arrogance on the part of some and a sense of opportunity elsewhere. As described by Princeton Lyman, former US ambassador to South Africa, much of business’s participation in the early forums established to map out the economic transition was “disjointed and reactive.” “The corporate sector as a whole, and its principal organization, the South African Chamber of Business (SACOB), were not contributing as they could have” to the process of economic reform and overall transition.59 Other business groups, such as the CBM, were more engaged in the process. The executives of the leading conglomerates proved particularly adept at influencing ANC policy positions, a

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fact that indicated the party’s susceptibility to such influences, as well as its shallow economic foundations. These private-sector “missionaries,” who also included IFI representatives, sustained both formal and informal interaction with their political counterparts throughout the transition. The number of policy forums ballooned to more than 250 after de Klerk began to dismantle apartheid in 1990. At least two warrant highlighting here. For the business community, bodies like the National Economic Forum (NEF) served to build familiarity with both policy alternatives and key political and private actors, in the process establishing critical precedents for the businessstate cooperation that continued after the election. The NEF was initiated in 1992, actually at the insistence of labor, and included political and business representatives. With the objective of achieving consensus on economic issues, including trade and industrial policies, the NEF’s output favored business, serving as another important influence on the ANC’s transformation.60 Another entity, operating in a slightly different vein, was the Brenthurst Group, which was composed of some fifteen big business executives. Brenthurst was constituted in 1993 by Anglo American chairman Harry Oppenheimer at the request of Mandela. Its purpose was to foster dialogue on the economic challenges facing postapartheid South Africa; Brenthurst was later reconstituted to form the SAF, which I discuss later in the chapter.61 Business and the ANC’s Ideological Evolution Capitulating to business and the international community, the ANC’s economic platform underwent an evolution that proceeded in several stages. Following the effective abandonment of the Freedom Charter, the next phase of the ANC’s ideological metamorphosis was marked by the establishment of the MacroEconomic Research Group (MERG) in 1991. It was made up chiefly of top South African academics who were aligned with the ANC, though not empowered to make policy for the party. MERG’s December 1993 publication “Making Democracy Work: A Framework for Macroeconomic Policy in South Africa,” enumerated a set of Keynesian proposals that attempted to balance radical and moderate economic positions within the ANC.62 Briefly considered a blueprint for ANC economic policy, “Making Democracy Work” was superseded, however, by the ANC’s official macroeconomic policy declaration, the Reconstruction and Development Programme (RDP), which first emerged in February 1994.63 The RDP became ANC policy after the national elections. Detailed in a government white paper issued in November 1994, the RDP called for targeted, if limited, state intervention in the economy in order to counter long-standing racial economic disparities. Responding to the ANC’s labor constituency, the RDP included demands for a living wage and worker training for South Africa’s poor. Moreover, it pledged to guide the delivery of

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one million new housing units, 2.5 million electrifications, clean water and sanitation, and the redistribution of 30 percent of quality agricultural land, most of which was to be completed within the first five years of ANC rule.64 Another of its objectives, obviously threatening to South Africa’s entrenched business empires, was deconglomeration (“unbundling”) and deracialization of corporate ownership patterns.65 Whereas the ANC did make strides in several of these areas, much of the RDP agenda proved unworkable absent increased inflows of private and international investment, which failed to materialize. In fact, Jonathan Michie and Vishnu Padayachee argue that RDP “came too late in the transition process to stop the ANC’s steady slide into neo-liberalism.”66 As the ANC assumed power, its key economic policy advocates such as Alec Irwin and Trevor Manuel, despite their labor background, became converts to market liberalism as the optimal way to alleviate South Africa’s poverty and development problems. Unlike in Zimbabwe, however, this view quickly gained consensus in the highest circles of the ANC government, including President Mandela and Deputy President Mbeki, though the RDP initially served as a means of preserving the credibility of the ANC’s expressed commitment to fundamental socioeconomic restructuring. Within two years, of course, GEAR would advance a far more neoliberal program. There are many superb analyses of the ANC’s ideological malleability during this tumultuous period. A consistent theme running through these investigations is that the business community, supported by the IFIs and donors, put relentless pressure on the ANC to adopt more liberal policies, and they had the resources to sustain this effort.67 Yet the ANC also was a particularly susceptible target for several reasons, including its lack of economic experience, either in planning or in governing; divergent views within the party ranks about appropriate strategy; a perceived need to appeal to a broader political base than the black poor and working class; the cooptation, and consequent quiescence, of labor and labor sympathizers through their inclusion in both the ANC alliance and later Nedlac; and the party’s willingness to compromise with the National Party over the parameters for the transition, which saw not only property rights enshrined in the Bill of Rights but also the appointment of neoliberal National Party stalwarts to key posttransition ministries, including Finance, Mining, and Energy, as well as to the Reserve Bank.68

The ANC and Business: (Re)Defining Roles After 1994 The preceding discussion has explained how the ANC, as political party-cumgovernment, could perceive itself as weaker relative to business. Certainly at the time of the transition, and for sometime thereafter, as James Hentz observes, “the level of economic expertise within the ANC was limited, making

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it susceptible to external (and internal) advice or ideas.”69 The retention of the previous government’s finance minister, Derek Keys, and the governor of the Reserve Bank, Chris Stals, in the postapartheid administration is evidence of this vulnerability, though it also signaled to both domestic and international audiences the ANC’s willingness to compensate for its own incapacities. However, the ANC also inherited a weakened state. Surely bureaucratic continuity—the ANC consciously preserved many white bureaucratic positions—helped ensure a smooth transition. Yet since the white-dominated bureaucracy was “entrenched,” it could not necessarily be counted on to do the bidding of the ANC.70 After all, “the NP [had] treated the state sector as its private fiefdom, openly using government contracts, licencing and subsidies to promote Afrikaans [sic] enterprises.”71 Whereas the business community had pressured the National Party for reforms since the 1980s and a liberalization initiative launched by de Klerk had garnered praise from business, the state itself had been slow to transform the long-held model of protectionism and whites-only socialism. Moreover, the bureaucracy had endured years of decline but arguably was never efficient in the first place. It was “generally recognized as bloated,” and its capacity to implement a liberalization program was open to question.72 In short, at the time of the transition, South Africa found itself in a doubly unfamiliar position: neither its old bureaucracy nor its new government was versed in the vagaries of market liberalism. Bureaucratic capacity was further eroded by a relatively rapid process of Africanization, which increased inexperience within its ranks.73 By the beginning of 1997, the Afrikaner bureaucracy had been substantially replaced, and though “many of the old guard (NP bureaucrats) still haunted the halls of government, ANC loyalists were making the important decisions.”74 Yet even as recently as 2005, Deputy President Phumzile Mlambo-Ngcuka was stating that the program of “transformation” had severely weakened bureaucratic capacity, despite the fact that it had become even more essential in the current period of promising economic growth.75 The combination of these factors rendered the ANC-led state highly dependent upon powerful resident business actors within firms and the various economic policy forums that bring state and business together. That the economic perspectives of ANC became almost indistinguishable from those of its private sector counterparts alone speaks volumes about the capacity of South African business; it also illuminates the high/low origins of the reform coalition. In the postapartheid period, institutional strength continued to accrue to large corporate interests to a greater degree than to the conventional national associations, and new associational configurations emerged that enhanced big business influence. Thus, at the individual executive, firm, and collective level, business reasserted itself under de Klerk and in the run-up to the 1994 transition. Despite the opportunity to make inroads with inexpert political actors, however, traditional business associations like the then 40,000-member SACOB were not

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in an especially advantageous position. Their institutional strength had been shaken, dating even from conflicts with President Botha.76 They were perceived as obstructionist during the transition, and many leading executives regarded them as unwieldy, even “insipid,” when contrasted with more mobile and innovative, if narrower, bodies like Brenthurst and CBM or even more fruitful individual meetings.77 Certainly South Africa’s traditional associations were not beset by the institutional weakness and organizational disarray of their Zambian counterparts, but their secondary standing clearly contrasts with Zimbabwe’s experience, in which key national BAs such as the Commercial Farmers’ Union (CFU) and Confederation of Zimbabwe Industries (CZI) possessed significant institutional strength at the time of that country’s economic transition in 1991. For its part, South Africa’s big business in particular maintains important structural advantages, including as the major source of tax revenues, technical and market expertise, particularly about export markets, and employment.78 Only 1 percent of the 906,690 private-sector enterprises in South Africa are considered “large” (in most sectors, defined as more than 200 employees), but such firms employed 3.2 million workers—or 43 percent of all 7.4 million private-sector employees, both formal and informal.79 Therefore the private sector, led by big business, was a critical and ascendant economic actor as it became clear that the ANC would in fact deepen the market reforms started by the National Party. The Implied Promise of Nedlac Institutional strength allowed business to influence the evolution of the ANC’s economic platform. Yet that institutional strength became truly saleable, and sustainable, only once the ANC committed irreversibly to a business-friendly model, signaled by the publication of “Ready to Govern” in 1992. In addition, the establishment of well-defined statutory channels for interaction helped initially to build trust between actors and provided vital assurances to the broader business community that its interests would be accommodated by the ANC. As noted above, the transition process gave rise to a number of such bodies, each of which was endowed with important functions that helped to mediate between business and state interests. These included the NEF, which was transformed into the National Economic Development and Labour Council (Nedlac) after 1994. As Timothy Sisk observes, such institutions were seen as “important not just for the opportunity they provide South Africa to create a stable industrial relations system, but for the clear rules of the game they set for regulating economic conflict.”80 Although Nedlac did not become the sole channel for business-state interaction as some clearly anticipated, its existence, and the mode of its establishment via statute, was a critical confidencebuilding measure.

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The new body was formally launched in February 1995. Its mandate was far reaching: “Seek to reach consensus and conclude agreements pertaining to social and economic policy; Consider all proposed labour legislation relating to the labour-market policy before it is introduced in Parliament; Consider all significant changes to social and economic policy before it is implemented or introduced in Parliament; Encourage and promote the formulation of coordinated policy on social and economic matters.”81 Nedlac was designed as a transparent forum for policymaking, with equal representation from business, government, and labor.82 As such, Nedlac appeared to embody a state commitment to business-government interaction that was glaringly absent from Zambia and Zimbabwe, and indeed from much of sub-Saharan Africa. ANC leaders repeatedly emphasized the party’s commitment to business-state cooperation and partnership, citing Nedlac as “the institutional expression of this partnership.”83 The Nedlac model explicitly assumed that each of the four constituencies supported “the broad goals of creating jobs, economic growth, equity and participation by civil society in the political and economic reconstruction process. . . . Cooperation is envisaged on the basis of shorter term tradeoffs.”84 For many observers, therefore, Nedlac was regarded as the foundation for societal corporatism.85 But the trend toward corporatism in Nedlac was “highly uneven,” and instead a looser system of concertation prevailed, in which interest organizations have played an institutional role in formulation, implementation, and regulation of some state policies.86 Nedlac served an important function at a particularly sensitive time in postapartheid South African history; however, it fell short of many of its goals. Even Jayendra Naidoo, the director of Nedlac from 1996 to 1999, acknowledged that the body was constrained by the policy debates within its purview, which did not include, for example, the politically charged issues related to redistribution and the RDP, such as health, welfare, water, electricity, housing, telecommunications, education, or infrastructure.87 Moreover, several of its business constituents grew disenchanted, including Business South Africa (BSA). Founded in 1994, BSA, an umbrella body of the country’s peak business associations, was supposed to be business’s sole representative in Nedlac.88 Business regarded much of the legislation that did emerge through the Nedlac process as “too labor friendly.”89 Yet while Nedlac’s affiliation to the Labour Department did result in a principal focus on labor legislation, other departments were well represented. The entire government delegation initially included ministers, deputy ministers, directors general, and senior officials from several ministries and departments, including Labour, Finance, Trade and Industry, and Public Works. Certainly, however, the landmark labor laws that were negotiated through Nedlac—such as the Labour Relations Act (1995), the Basic Conditions of Employment Act (1997), and the Employment

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Equity Act (1998)—“represent a triumph of hard bargaining and the use of mass power by unions, particularly those affiliated to Cosatu.”90 Yet despite this supposed abundance of “labor-friendly” legislation, scholars like Patrick Bond question its overall impact, in light of the government’s turn toward liberal orthodoxy, cemented in 1996 with the adoption of GEAR.91 GEAR, which quite famously circumvented the Nedlac process, provided an extraordinarily labor-unfriendly neoliberal blueprint for South African economic development and would seem to offset the putative prolabor bias within Nedlac.92 It is also worth noting that although Nedlac was not connected to GEAR, Nedlac’s importance began to decline in the years following GEAR’s release and certainly after the passage of the three labor acts that were Nedlac’s crowning achievement. By 1999, Nedlac representatives were complaining that, with a budget of R6 million and a fifteen-person staff, the organization received insufficient resources from the state.93 Business and government alike pulled back from the body, sending only midlevel officials to its meetings. It would be a mistake to conclude, however, that the state’s initial commitment to Nedlac was disingenuous, as was the case with the NECF in Zimbabwe. On the contrary, not only did the state repeatedly offer statements affirming its support and enshrine the body in a legal framework, but Nedlac actually produced output. However, whereas Nedlac was an important institution endowed with a clear set of responsibilities, it was neither the sole institution for bargaining nor the only means of access to the state; its corporatist framework was a limiting factor in an otherwise pluralist environment. Thus, the well-meaning attempt to unite business under the BSA umbrella proved particularly problematic. Importantly, however, this did not preclude business actors’ seeking their own interest constellations. The following discussion examines big business as the essential locus of power within South African business, before returning to this issue of fragmentation, which afflicts “everybody else.” The Institutional Strength of Big Business The white business community as a whole—including firms and associations represented in BAs like SACOB, with its substantial membership diversity, as well as those such as AHI and the smaller regional chambers, which tend to represent primarily medium-sized firms—supported most aspects of liberalization. This had as much to do with the political realities at the time (i.e., a politically ascendant ANC, itself still confronting its populist impulses) as economic ones, since the detrimental impact of neoliberal policies, particularly those related to trade and subsidization, was not fully appreciated within wide sections of the South African business community or its associations. Thus, in the throes of economic and political transition, the business community, writ large, tended to support the initiatives spearheaded by its largest members.

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Truly “big business” constitutes only about 100 firms, which are themselves dominated by the handful of conglomerate companies, as well as South African affiliates of MNCs. Certainly the conglomerates are self-interested and increasingly externally oriented or even domiciled (including SAB-Miller, Anglo American, and Old Mutual, among others). Yet their multisectoral nature means they are deeply embedded in the national economy, and the external relations pursued by the government stand to benefit South African corporate investors.94 And whereas these individual companies have the ear of state actors—Anglo American, for example, has been a dominating influence with South African governments for a century—they also act collectively in a number of associational structures such as the SAF and several specialized forums, including the Business Trust and the Big Business Working Group. Formed in the mid-1990s as the successor to the Brenthurst Group, the SAF has as its principal objectives “to enable South Africa’s major corporations to formulate and express a coordinated view on macroeconomic and other significant issues and to promote the interests and further growth of South Africa’s private sector both domestically and internationally.”95 Although some black company executives are represented in SAF, the sixtymember organization is a bastion of traditional white capital, both English and Afrikaner, representing South Africa’s largest and most prominent corporations, including several multinationals. Unlike other national peak associations in South Africa, SAF’s direct members are the dominant firms, which are represented in the body by their senior executives. Though this organizational structure does not necessarily suggest that the whole of the SAF is less than the sum of its parts, it is also important not to exaggerate its capacities. The SAF has a simple institutional infrastructure: an office and a small research and administrative staff, which maintains a website, produces regular policy documents, and holds meetings. Though it can legitimately claim the title “the voice of business leadership,”96 the SAF lacks the statutory capacity of the putative national peak association, BSA (now Business Unity South Africa), of which it is a member. But partly because BSA/BUSA privileges associations over firms, the large corporations prefer to influence policy by dealing “directly with the state, or through informal gatherings, or through the South Africa Foundation.”97 The SAF therefore should be seen as one of at least five major avenues by which big business approaches the state: indirectly, as a participant in BUSA; as a member of a regional or national chamber; through the appropriate sectoral chamber; or directly, either as a firm or as part of SAF. This range of options—particularly at the executive and SAF levels, which are unfiltered by the institutional architecture of Bas—is not generally available to smaller firms. Maintaining this multifarious and privileged access to the state is critical for SAF and its member firms. As in other African and non-African cases in which the hegemony of “market-dominant minorities” tends to be reflected in

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associational life, SAF’s principal liability is its monochromatic nature. Indeed, because it is dominated by firms with predominantly white ownership and management structures, it is imperative for the association that SAF be perceived as proactive on the issues of particular political importance to the ANC, such as black empowerment and, more narrowly, jobs and wealth creation. Of course, the need for greater inclusion of blacks in business management generally is widely acknowledged—although concerns about any vulnerability created by the paucity of blacks in SAF in particular tend to be aired less publicly. Zimbabwe’s white-dominated BAs made similar claims but took scant action; SAF officials, in contrast, were keen to recruit prominent black businessmen, especially CEOs from the so-called black economic empowerment (BEE) companies, to the organization.98 They have made modest progress: in 1999, only two of fifty SAF members were black, Patrick Motsepe of African Rainbow Minerals and Tokyo Sexwale of Mvelapanda Holdings; in 2005 there were eleven of sixty, although this included executives of several public enterprises. Concomitantly, SAF and the big business community have sought rather aggressively to cultivate an image of social responsibility and racial progressiveness. One example of such positioning is the Business Trust (BT), an initiative launched in 1999 by 145 companies in partnership with the state. The BT was itself an outgrowth of the National Business Initiative (NBI), which was formed in 1994 to focus on education, small enterprise development, crime prevention, and environmental issues, also in partnership with the government.99 Although such extramarket activities have a long history in South Africa and reveal substantial duplication, these programs assumed added importance after Mbeki became president in 1999 (see Table 5.2).100 In contrast to Mandela’s almost singular emphasis on reconciliation, Mbeki was regarded as less willing to accommodate continued white economic hegemony. Thus, by 1999 relations with business were far more hostile, at least publicly, than during the transition. The BT was among the responses to Mbeki’s allegations that the business community insufficiently engaged in poverty alleviation. In the BT’s first four-year phase, participating companies allocated R1billion to the Business Trust for Employment Creation and Human Capacity Building, a joint venture with the government, emphasizing job creation and channeling resources to social projects such as education, health, and crime reduction.101 Importantly, the government has embraced the BT, and five ministers (and three other Mbeki appointees) sit on its twentymember board of trustees.102 Beginning with its second phase from 2005, the BT’s mandate is to “focus exclusively on enterprise development, assisting the unemployed and providing community rehabilitation programmes,” while the management of existing tourism and education projects were turned over to other organizations.103 Beyond its financial contributions, Business Trust’s “most significant contribution may have been to help smooth what were [in 1999] fairly acrimonious re-

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Table 5.2

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Selected South African Business Forums and CommunityOriented Activities in Partnership with the State

Name of Entity

Years Active

Socially Oriented Urban Foundation 1976–1994

Principal Founders and Primary Participants

Objectives

Established by Harry Oppenheimer and Anton Rupert

Housing; black land ownership; organize opposition to influx control

CBM

1988–1994

50 leading progressive business executives

Facilitate stable transition to nonracial democracy; define role of business in it

Brenthurst Group

1993–1995

Harry Oppenheimer with urging from Nelson Mandela

Dialogue about economic and political transition, especially between ANC and business

Business Trust

1999–2004; renewed until 2009

SA Foundation and NBI, with participation of 145 companies and government

Public-private partnerships; job creation (tourism sector); education; crime prevention; small-scale enterprise development

Urban Foundation and CBM

SME development; crime prevention; environment

Organized labor, business, and government representatives

Offer policy advice on labor issues after recognition of unions in 1979

NBI

1994–present

Economically Oriented National 1979–; Manpower restructured, Commission 1992–1994 National Economic Forum

1992–1994

Labor, business (including Tripartite negotiation on job CBM), government, and security and creation, opposition collective bargaining, FDI, and the public sector

Nedlac

1995– present

Combined NEF and NMC: Negotiate economic and labor labor, BUSA, government policy

Big Business Working Group

1999– present

President and cabinet ministers; executives from big business

Informal policy dialogue up to twice annually

Black Business Working Group

1999– present

President and cabinet ministers; leaders of black business groups

Informal meetings up to twice annually; not as fruitful as Big Business WG

Commercial Agriculture Working Group

1999– present

President, cabinet ministers, black and white farmers

Informal meetings up to twice annually

lations between government and big business.”104 Indeed, projects such as the Business Trust must be sustained and visibly successful to contribute to genuine social stability in South Africa—a point to which I return in the conclusion to this chapter. In a more strictly economic-policy vein, big business also interacts with the state through the Big Business Working Group, which was established in

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1999 by President Mbeki at the urging of the BT.105 Executives participate as individuals and representatives of their companies; the SAF is the only BA that participates. Meeting with its state counterparts at least once per year and as many as three times annually, the working group’s agenda centers on “a nine-point investment framework put forward by business,” including constitutional and legal protections; fiscal, monetary, trade, and industry policy; and labor and privatization policies, as well as safety and security, education and training, and local and international confidence.106 The government delegation reflects the seriousness the ANC has placed on government-business dialogue; President Mbeki as well as senior ministers from the departments of finance, trade and industry, and agriculture and various deputy ministers all participate in the BBWG.107 While the vast majority of companies under the rubric of “big business” continue to be white owned and/or controlled, a number of BEE companies, such as Real Africa, New Africa Investments, Limited (NAIL), Johnic, and HCI, increasingly are considered part of this category.108 Although BEE companies lack the deep financial roots of their white counterparts—BEE companies typically involve a black ownership stake (at least 50 percent is required under current legislation to be considered black-owned) in a holding company created for the purpose of acquiring shares, while the underlying operating company, or companies, remain mostly white—BEE executives have cultivated extraordinary influence with the state, which is at least on par with most representatives of white big business. Having joined the ranks of the “super rich,” and through their participation in groups like SAF, the BBWG, and the BT, many of these black elites (mostly erstwhile ANC stalwarts) increasingly identify as a class with white senior executives with whom they regularly interact.109 As seen in Table 5.2, black business groups also have a direct channel to the state through the president’s Black Business Working Group. At bottom, the state has consistently supported large-scale business interests and has sought to ensure the preservation of their extant institutional strength. As the discussion below reveals, however, the organization and influence of big business are not replicated at the level of smaller firms and associations, regardless of race. Many have struggled to maintain cohesion, while the state has enhanced its strength, both directly and indirectly, relative to this section of capital.

Fragmentation: The Dis-Organizing of South African Business In the postapartheid period, the role and strength of traditional business associations diminished. Surprisingly, even those associations representing predominantly black, small businesses like Nafcoc and Fabcos, have not been di-

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rect beneficiaries of the various forums and groups that have emerged since the transition. Indeed, none of the traditional associations has the high-level access of the conglomerates in the BBWG, participates in business-state partnerships through the BT, or has collective interests represented through elite, tight-knit associations like the SAF. Certainly groups such as SACOB, which includes the conglomerates among its membership and which historically represented the English-speaking, relatively liberal strand of capital, believed they were well positioned to assert themselves with the ascendant ANC.110 Most of these BAs were broadly representative; that is, they had member density. The creation of bodies like Nedlac further appeared to offer a vital institutional platform from which BAs could bargain with the state and labor. Yet neither BAs like SACOB, AHI, the sectoral chambers, or the black chambers nor the peak association BSA could meaningfully offset state strength long after 1994. Ultimately, they have not enjoyed the same level of sustained access to the ANC-led state as has big business. It also became more difficult for these groups to rein in members via internal mediation. Part of the challenge facing these actors since the transition has been their tendency toward fragmentation along sectoral lines, which is common to business associations, and racial lines, which is typical of postsettler societies; in South Africa, as in Zimbabwe, these cleavages tend to overlap. Of course, South Africa’s business divisions are also linguistic, between Afrikaans speakers and English-speaking capital. SACOB continues to be associated with white, English-speaking capital, whereas the AHI remains self-consciously oriented toward Afrikaner-owned business. This continued divisiveness certainly has further impaired BAs’ ability to influence either politics or policy. Debates about whether to preserve or curtail this associational pluralism have tended, ironically, to produce the opposite result: further fragmentation. Thus, although SACOB remains the largest BA in South Africa with a total membership of some 20,000 businesses, 80 direct members consisting of South Africa’s largest corporations, and 20 national sectoral associations, this represents as much as a 50 percent reduction in recent years. Convinced that they could be more effective independently, large regional chambers in Johannesburg, Cape Town, and Durban withdrew from SACOB following disputes with its Johannesburg-based leaders.111 Competition between BAs has frustrated the various, and not infrequent, attempts to unite them in common cause. For example, BSA was intended to be the umbrella organization for BAs, yet SACOB’s director of economic policy complained that BSA’s activities were largely “redundant” with SACOB’s functions and expertise, although SACOB remained, grudgingly, in BSA.112 The main African chamber, Nafcoc, withdrew from BSA within a year of BSA’s 1994 founding, claiming that it was not equipped to effectively represent the interests of black business. Afrikaner business organizations like AHI

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also appear anxious to defend their autonomy in a pluralist associational environment. Figure 5.1 provides an illustration of this organizational pluralism (made only slightly more comprehensible following the 2003 combination of the Black Business Council [BBC] and BSA, as discussed in the next section). As the figure indicates, race, as much as collective business interests, remains an important organizing principle for business in South Africa, as it does in much of the region. Interestingly, however, the South African state has shown only sporadic interest in cultivating racial linkages between itself and black businesses broadly. Contrary to state rhetoric, race appears to confer little advantage on black BAs and black businesses, other than the BEE companies. (This is much like what was seen in Zimbabwe.) Of course, Nafcoc was allowed to maintain its own representation within Nedlac after its split from BSA, but this is hardly the stuff of extraordinary selective benefits. The decision simply mollified Nafcoc’s leadership, rather than elevating the position of the association. Moreover, not only did this fragmentation not lead to any discernible benefits for Nafcoc, it also affected the predominantly white business associations remaining in BSA by diminishing their leverage within Nedlac and, by extension, with the state. Unable to present at least a facade of racial harmony, BSA was hamstrung: its “survival depended on a change in its racial make-up, which was undermining its ability to operate as the principal mouthpiece of organised business.”113 The response was seen in two parallel developments geared toward uniting BAs divided by race, size, and language. The first endeavored to bring together the different (and often competing) national chambers of commerce at the functional or operational level. The second sought to unite broader business interests in a more encompassing BSA in order to participate more effectively in Nedlac. The Prospects for Business Unity in South Africa A 2001 merger agreement between SACOB and Nafcoc unraveled quickly. Despite this failure, a wider range of BA leaders continued to press for cooperation among the various groups.114 These efforts appeared successful when, at Nafcoc’s October 2003 annual convention, four of the largest peak associations, Nafcoc, SACOB, AHI, and Fabcos, agreed to combine some of their activities under the umbrella of a new organization, the Chambers of Commerce and Industry of South Africa (CHAMSA). Eschewing a full merger, however, each member organization planned to maintain its identity and agenda within CHAMSA.115 Yet within two days, SACOB leaders insisted on revisiting negotiations. Seeking again to achieve a single unified chamber, SACOB argued that a loose confederation through CHAMSA could be only a partial step toward unification and that the costs of maintaining redundant operations within each separate peak organization might actually decrease incentives for

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Figure 5.1

National-Level Business Associations in South Africa, 2000

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177

Notes: *The BEEC—the Black Economic Empowerment Commission, or BEECom—is an NGO established in 1997 to dovetail with the nascent Black Economic Empowerment initiatives of the government. The NBBC—National Black Business Council—was originally established to build a bridge between Fabcos and Nafcoc. It was not institutionally connected to the BBC, which was established by the Department of Trade and Industry to act as a black business umbrella body. The BMF—the Black Management Forum—is a body that aims to promote the interests of black managers.

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business cooperation.116 Nafcoc’s rank and file objected to CHAMSA on the grounds that the new organization would be hijacked by white business interests and that the interests of black small business consequently would be subverted to big business—a replay of earlier objections to BSA.117 Clearly, CHAMSA could not achieve its principal objective—to act as a bridge between black and white business—absent Nafcoc’s full participation. As a result, lacking even a coherent common agenda, CHAMSA remained of questionable effectiveness.118 A parallel effort sought to make BSA a more encompassing voice within Nedlac. But what does it mean to be “the voice of business” in South Africa? Obviously sensitive to the criticism that the organization was dominated by its big business members, BSA determined that its voice must be a more inclusive one, capable of speaking for smaller, more numerous—and more black— companies.119 Hence, a merger was proposed with the Black Business Council, the umbrella body for black businesses and associations. But while the BBC’s October 2003 merger with BSA to form Business Unity South Africa (BUSA) bestowed greater prominence on black business, it failed to shift the center of power away from big business. The persistent collective action problems within traditional peak associations appear insurmountable absent additional selective incentives from the state. Even before it became BUSA, BSA struggled to maintain or reach consensus. Given its diversity, the policy positions emerging from BSA generally represented watered-down programs palatable to all members and sectors. Although this focus on generic issues ensured that members were granted equal representation and prevented the hijacking of the BSA/BUSA agenda by any one of its member associations, it also gave sectoral and other organizations the incentive to retain their separate identities and instead endeavor to deepen bilateral channels for negotiation with government.120 As the promise of corporatism receded, the net winners, therefore, became big business and the state. Under ANC rule, as under its predecessors, the South African state has shown largely sporadic interest in organizing business, at least those outside of its traditional allies among the large-scale conglomerates. Certainly smaller firms and associations are well represented within several state-sanctioned bodies, including BUSA, and organized to a degree, but they tend to occupy an outer orbit of access, with the inner circle occupied by their big business counterparts. Nonetheless, South Africa has among the most business-friendly policies of any country in the region, achieved not through some “amorphous” market entity, as suggested by at least one observer, but via clear channels of influence.121 The conglomerates, with their chaebol-like features, behave much in the same way as Mancur Olson’s encompassing organizations, that is, in the interests of the wider economy. Business-state relations can continue to be successful under a numerically narrower coalition, as long as a broad swath of the productive base of the economy is represented (as seen with the CFU in

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Zimbabwe). There are, of course, limits, not least within areas such as trade policy. Yet whereas individual firms and associations may be marginalized on occasion, in general the broad interests of their respective sectors are addressed through policies achieved by the large players. In other words, the collective action dilemmas at the lower levels are moderated by the presence of the conglomerates, and their own collective action through bodies like SAF and BBWG. Thus, there are opportunities to free ride on the economic gains achieved by big business conglomerates in partnership with the state.

The ANC Ascendant, the State Resurgent: GEAR and Beyond From its early weakness and inexperience prior to the election, as the party became increasingly comfortable with governing, the ANC steadily accumulated power relative to the traditional BAs, such as SACOB, AHI, and Nafcoc, and even BSA. Perhaps the most significant illustration of the ANC-led state’s coming of age was the adoption of GEAR in June 1996. GEAR had at least two major impacts on business-state relations in South Africa. First, it marked the final repudiation of any remaining vestiges of the Freedom Charter as well as the RDP. The party’s specific and seemingly unshakable embrace of GEAR’s neoliberalism is the subject of several excellent studies, which, though they disagree on specific business input, are generally consistent in arguing that business was a key influence on the state’s decision to adopt the GEAR program.122 Second, the launch of GEAR revealed a newly empowered, or in a way, reempowered, state. This paralleled the diminution of Nedlac as an influential policy forum and the effective marginalization of traditional BAs and labor, along with an important symbolic, if temporary, assertion of state power visà-vis the numerically smaller segment of the business community, namely the conglomerates. Paradoxically, though the method by which GEAR was adopted suggests a newly assertive ANC state, the commitment to unbridled neoliberalism actually deepened the government’s dependence on large-scale capital as both the engine of the economy and the fount of market expertise outside of the state. In this sense, the state-business coalition that prevailed after GEAR bears many similarities to the relationship between ZANU-PF and the white corporate farmers in CFU after 1991, though South Africa has thus far avoided Zimbabwe’s calamitous denouement. As discussed above, Nedlac and BSA were enfeebled by the fact that GEAR was made policy without any input whatsoever from the forum. Instead, GEAR emerged entirely from the Department of Finance, albeit with the contributions of two economists from the World Bank.123 When GEAR was introduced in June 1996, it was as a fait accompli—“nonnegotiable” even with any of the ANC’s putative allies in business and labor.124 As Heribert Adam,

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Frederik Van Zyl Slabbert, and Kogila Moodley comment, “Government’s greater confidence to implement macroeconomic legislation without lengthy consultation, [signaled that] the role of Nedlac [was] being diminished” within just two years of the ANC’s rise to power.125 The state’s self-perceived weakness in relation to its business counterparts early in the transition was one of the main factors in the emergence of the reform coalition in the first place. It was inevitable, however, that the South African state would regain some of the expertise it had ceded to business and display increased autonomy and confidence in its policymaking capacity, though this may have occurred more quickly than anticipated. Importantly, greater equality in the relationship also precipitated new tensions. Writing in 1998, for example, Francis Kornegay and Chris Landsberg argued that “since 1995, the government-business relationship has become more conflictual, and it now seems to be in jeopardy.”126 (And in fact, the ANC did attack the conglomerates in late 1995 for not doing enough to attract FDI or to promote black entrepreneurship.)127 University of Cape Town economist Nicoli Nattrass reached similar conclusions, although she dated the apparent strain between business and the state to the advent of the “business hearings” conducted by the Truth and Reconciliation Commission in November 1997.128 Antoinette Handley even suggests that tensions between business and political actors meant that business, including big business, had only limited or indirect influence on state policymaking in the late 1990s.129 Yet whereas these events certainly inflamed the government’s public rhetoric and they obviously marked a period of tension, any predictions of the demise of the relationship were, in the words of Mark Twain, “greatly exaggerated.” Rather, the late 1990s marked a time when the ANC was able to assert itself vis-à-vis societal actors, a reflection of its increased strength. GEAR’s adoption did not signal the demise of the reform coalition but rather its transformation into a narrower entity in terms of the number of business groups represented (although not in terms of their economic role). The deterioration of the big business–state relationship was ephemeral, therefore, and the increasingly public conflict, which has persisted to some degree into the current decade, was offset by private consensus relatively quickly. Indeed, since the adoption of GEAR in 1996, the state actually has become more dependent on big business, and the range of policies favorable to that constituency has expanded significantly. Moreover, both survey and macroeconomic data used to determine levels of business confidence from the 1990s to the present have consequently demonstrated business satisfaction with economic fundamentals and economic policy, increasing over time. All Bark and No Bite? Several factors support the contention that friction between government and business had little practical long-term impact. First, business, and particularly

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big business, appears to have played a pivotal role in the government’s adoption of GEAR. In March 1996, nearly three months prior to GEAR’s June launch, and even several weeks before the government’s de facto abandonment of the Keynesian RDP on March 28, SAF issued its own policy initiative, entitled “Growth for All” (GFA).130 “Growth for All” was a neoliberal corporate manifesto, which rested on several key “pillars” of reform and called for a solid legal framework, including property rights protections; sound macroeconomic policy, including control of inflation, deficit reduction, and low real interest rates; government efficiency, including low taxes and government spending; and export growth and trade promotion.131 Of course, these were policy (if not ideological) positions toward which the ANC, led by Mbeki, Manuel, Erwin, and others, had been steadily migrating, partly through earlier business pressure. With a decade of hindsight on the contentious political climate that gave rise to GFA and to GEAR, it is clear that not only were the tenets of the former substantially reflected in the latter but this marked an important turning point for the business-state relationship.132 The ANC responded by attacking the proposals in “Growth for All” as “aimed at shifting economic policy to the rightwing” and not sufficient to address “key developmental issues.”133 Yet this was, at best, disingenuous, given that the ANC had already “shifted to the right wing” itself: at the time, the ANC was engaged in deliberations with key sections of the business community over economic policy planning; the SAF had briefed President Mandela on the GFA before its release; and the government was already preparing to downgrade the RDP, and did so a few weeks later. Yet though “Growth for All” correctly foreshadowed the ANC’s own policies, clearly SAF had misjudged the politics of economic policymaking. Received as condescending and overly critical of the ANC, the GFA document was unpalatable politically. The SAF’s sin was not the substance of GFA but its delivery; the tenor of GFA made the ANC appear to be taking direction from white capital, which, in effect, it was.134 Moreover, the timing—at SAF’s choosing rather than the ruling party’s—was equally ill-conceived. Both of these maneuvers risked compromising the ANC’s legitimacy within its core political constituencies, labor and the poor. Precisely because of the state’s reaction, SAF came to regard GFA as an “unfortunate document” that should never have been publicly released, especially at a time early in the ANC’s tenure when conciliation was required.135 Following the public discord, SAF adopted a more circumspect, less combative approach to its relationship with the state, eventually leading to the formation of the Business Trust. By rebuffing SAF, the ANC sent clear signals that its power relative to business (and the wider society) was on the ascent. By 1996, the ANC had secured firm control of the state; SAF had to learn how to properly navigate the new politics. Still, the institutional strength of big business was not diminished by this episode. In fact, SAF constituents saw their ability to influence the state enhanced after 1996, particularly as the ANC substantially harmonized its

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interests with those of the same big businesses represented by SAF. Interestingly, by 2004, “Growth for All” had regained its legitimacy; the once “unfortunate” document was posted prominently on the SAF website.

Business-State Relations in a Neoliberal Environment By the end of the 1990s, GEAR, which largely abandoned the social tenets of the RDP, had also fallen short on a number of its explicit aims, including the promise of new jobs and a halving of the deficit, and the left responded with widespread criticism.136 A number of GEAR’s economic targets were later reached, however. Indeed, by 2004, nearly a decade after GEAR’s promulgation, and facing the launch of a new economic program, the Accelerated and Shared Growth Initiative (ASGI), the economic picture was far more mixed, and even substantially positive by some measures.137 Some analysts point out that South Africa is “in the longest cyclical upturn since World War 2” and that “even with population growth since 1994, the GDP growth has been consistently higher.” Similarly strong indicators were noted for inflation, interest rates, and exchange rate of the rand.138 It is widely accepted that the South African economy needs to grow by more than 5 percent per year to put downward pressure on unemployment, poverty, and income inequality.139 Yet economic growth was sluggish from the launch of GEAR: after reaching 3.2 percent in 1996, GDP growth averaged just 2.0 percent per year from 1997 through 1999. South African businesses and BAs were less likely to retreat from their commitment to liberalization, however, despite mediocre performance at both the firm and the macroeconomic level. Regarding the latter, at least, it appears that patience has paid off, as the South African economy has seen steady, significant upward growth trends since 2001, as indicated in Table 5.3. Although GDP reached the muchballyhooed 5 percent target only in 2005, by December of that year the economy had experienced twenty-eight consecutive quarters of growth; forecasters expected the economy to be in this range for the rest of the decade.140

Table 5.3

% change

Constant South African GDP Growth Since GEAR (%) 1997

1998

1999

2000

2001

2002

2003

2004

2005

2.6

0.7

2.7

4.4

2.7

3.7

3.0

4.5

5.0a

Sources: Statistics South Africa Statistical Release P0441 Gross Domestic Product (November 2005) 60–61, http:www.statssa.gov.za/publications/P0441/P04413rdQuarter2005.pdf. EIU, Country Report: South Africa (London: EIU, December 2005). Note: a. EIU estimate.

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Clearly, this economic performance cannot be attributed solely to the state–big business coalition. But neither did it take place in a vacuum. Performance was aided by a prevailing policy environment focused around dialogue, albeit with a relatively narrow cross-section of the business community in recent years. South Africa’s conglomerates, particularly those that control leading operating companies in the mining and financial services sectors, were reassured by GEAR. They solidified their position within the new economic milieu, benefiting especially from trade liberalization, investment incentives, and reductions in tax rates. These corporate interests continued to have the ear of ANC policymakers. The patterns of economic performance tend to mirror the levels of influence each of these business constituencies has on the government. Thus, smaller business actors and their representative associations and industries in import-sensitive sectors suffered adverse performance effects of GEAR, at least in its initial years. Many manufacturers, particularly those in the textile and automotive industries, bore the brunt of monetary policies and tariff reductions. Small businesses, which were inherently less competitive, were particularly vulnerable to import competition, although the substantial decline in the value of the rand between 1999 and 2002 helped shield manufacturers from imports to some degree. In contrast, the conglomerates, with their core businesses in sectors such as financial services, mining, and large-scale manufacturing, tended to perform at significantly higher levels. Interestingly, however, national BAs such as SACOB and BSA, whose members include many associations that represent import-sensitive sectors and, indirectly, smaller-scale enterprises, also tended, paradoxically, to maintain institutional support for neoliberal policies. SACOB’s claim to be “totally democratic” would seem to orient it more toward the interests of its more numerous smaller-scale members. Yet when push comes to shove, SACOB not only “is opposed to tight government regulation” but “eschews promotion of the interests of specific sectors,” choosing instead to invite its sectoral association members to “make their own case.”141 In practice, this was tantamount to siding with big business, and indeed, SACOB’s approach to national macroeconomic policy was essentially neoliberal, even in the late 1990s, when the South African economy was at its lowest point since the end of apartheid. Furthermore, quite apart from BAs, support for economic policy among non–big business interests began to increase substantially starting in 2002, according to direct surveys of business confidence.142 By 2005, the quarterly survey of executives conducted by the Bureau for Economic Research (BER) found that business confidence “remained at an extraordinarily high level” across a broad range of sectors.143 Similarly, SACOB’s monthly measurement, the Business Confidence Index (BCI), revealed that business confidence was 25 percent higher in September 2005 than in 2000.144 Since each of these instruments examines manufacturing, retail wholesale, automobile, and building

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sectors but excludes mining or financial services, they give some indication of the support mid- and small-sized firms and sectors have for ANC policy.145 Although absent from the BCI results, the strong performance of mining, financial services, and parts of the manufacturing sector over the same period suggests that most representatives of these industries are similarly confident.146 The overall satisfaction with the direction of the South African economy is somewhat ironic, given that trade liberalization was one of two areas in which reforms were fullest. This of course was an exercise that decimated industrial sectors throughout sub-Saharan Africa, including Zambia and Zimbabwe; it also affected many South African firms negatively.147 The Impact of Trade Liberalization Despite the risks to certain sectors, tariff reduction was an intrinsic part of the GATT/WTO free trade regime, and it was certainly consistent with GEAR, although the ANC actually endorsed it earlier, in 1994.148 Duplicating the errors of Zimbabwe and Zambia, the ANC pursued aggressive trade liberalization— it lowered tariffs more quickly than the WTO required—despite the stated preference for “a phased reduction of import tariffs with the specific goal of making South African industry more internationally competitive.”149 Big business, especially the mining firms, but also corporations and collective organizations such as the SAF that had export capacity or potential, lobbied for trade liberalization. Thus, even before GEAR, the government began to reduce tariffs; between 1990 and 1998, tariffs were reduced from an average of 30 percent to 14 percent, and the once “highly protected industries such as motor vehicles and textiles and clothing bore the brunt of these reductions.”150 Coupled with the dismantling of capital controls, this contributed to severe reductions in these labor-intensive sectors. Some big business representatives were dismissive of the impact on smaller counterparts, noting that “it will be necessary for existing businesses to accept the discomfort caused by the phasing out of tariffs required to enhance competitive conditions.”151 Consistent with the “rush to free trade,” South Africa signed a controversial free-trade agreement with the European Union (EU) in 1999. Among other provisions, it requires that 89 percent of EU industrial imports to South Africa be liberalized by 2012 (including 62 percent at zero tariff levels) and 81 percent of agricultural imports.152 Similar trade agreements have been proposed with China and the United States.153 Part of this emphasis is a general reorientation of South African trade relationships from a regional (southern Africa and African base) to a Northern/Western focus (especially the EU and the United States), at the urging of South Africa’s global partners and its big business constituency.154 Though such an orientation has potential benefits for major South African mining/industrial conglomerates, it poses significant risks for small and medium-sized firms in other sectors, notably textiles and

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motor vehicle assembly, which, though competitive on a regional basis, cannot realistically hope to compete with European or US imports on cost, quality, or, especially in the case of Chinese imports, price.155 Chinese textile imports, which have accelerated since January 2005, have already contributed to an estimated 55,000 job losses in the clothing and related sectors. Although the Clothing and Textile Federation and unions have lobbied the government to invoke WTO safeguards, the government believes that this might provoke retaliation, particularly in the areas of iron ore, steel, and chemicals.156 Not only are these areas in which South Africa’s leading exporters enjoy financial dominance, but their executives also have the greatest ear of government. Particularly for large conglomerates in the primary and service sectors, trade liberalization has opened new markets, resulting in increased exports of platinum, iron, and coal, particularly to Asia. Vehicles, automobiles, and chemicals are also expected to rise, at least to southern Africa regional markets.157 Yet as Jeremy Seekings and Nicoli Nattrass argue, trade liberalization also compounded problems for many sectors because without corresponding labormarket reforms, South African firms’ high labor costs contributed to deindustrialization.158 Indeed, two Nedlac achievements, the Labor Relations Act and the Basic Conditions of Employment Act, raised labor costs by instituting a more rigorous regime for hiring, firing, and providing for workers. Hence many local producers became even less competitive on the domestic market against more cheaply produced foreign substitutes. “Under these conditions, it is not surprising that many [smaller] manufacturing firms felt beleaguered rather than supported by government.”159 Even larger businesses expressed some dissatisfaction with aspects of the trade regime. This is fairly typical of postliberalization manufacturers’ associations and reflects the same “be careful what you wish for” dynamic witnessed among Zambian and Zimbabwean associations. An SAF-authored report admonished the Department of Trade and Industry (DTI), suggesting that it does not adequately consult business regarding trade negotiations and does not take advantage of greater capacities (research, for example) within the private sector: “Government-business collaboration in preparing negotiating positions is haphazard at best. Currently such collaboration that takes place is infrequent and focused on inappropriate forums [i.e., Nedlac and parliament]. . . . Intervention from business is urgently needed.”160 The implications of such disagreement are not entirely clear. Some have suggested that South Africa might have acted sooner to slow its integration into the world economy by maintaining or strengthening trade barriers or continuing rather than dismantling exchange rate controls.161 But this underestimates the dominant influence of primary commodity export sectors; indeed, “the overall incentive structure for export promotion largely, if not exclusively, favored large capital-intensive industries.”162 Moreover, as Hentz points out, “resisting the winds of globalization was extremely difficult,” especially in that

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period.163 “Postapartheid South Africa was not a highly indebted country, but it was deficient in domestic savings and needed to attract foreign capital and keep domestic capital from fleeing. [Hence] the foreign exchange regime developed under Chris Stals supported the status-quo industries. . . . The more open economy . . . at once reflects the preferences of South Africa’s international-oriented actors and reinforces their influence over state policy.”164 In short, overall capital mobility, the need to attract investment—the exchange rate policy, currency liberalization, and financial policies—all led to policies that continued to privilege big business and strengthen its relationship with the ANC. The Challenges of Investment and Employment From the state’s perspective, the linchpin of GEAR was investment: provide the context for investment, and this will lead to growth. However, the ANC’s policy apparatus did not generate expected investment early on. The South African Reserve Bank’s (SARB) commitment to positive real interest rates in order to “maintain the internal and external value of the rand, through fighting inflation,” resulted in rates that were still too high, according to labor and some sections of capital.165 Some big business executives argued, however, that the South African market demands a real long term interest rate premium of around 6–8 percent; these executives were in accord with the ANC, arguing that significantly lower short-term rates could lead to a surge in borrowing for consumption that “sucks in imports and results in a deficit on the current account.” High interest rates, they contended, are the only way to compensate for South Africa’s poor domestic savings.166 Yet in the late 1990s, these policies contributed to “hot money” flows and further exacerbated the perceived risk of investment in the South African economy.167 Moreover, they did not prevent and in fact contributed to the sharp fall in the rand, in part due to factors exogenous to South Africa’s economy, although this did dampen import consumption and the possibility of the Dutch disease. At the same time, with nominal rates hovering around 25 percent in the late 1990s, one BEE executive suggested that this “draconian monetary policy” was not only “costing half a million jobs a year” but choking off BEE by raising the cost of borrowing prohibitively.168 Citing the arguments of Joseph Stiglitz, Seekings and Nattrass note that “there is mounting evidence that pursuing anti-inflationary policies undermined growth in the developing world (Stiglitz 1998), and South Africa is unlikely to have been an exception to the rule.”169 Nonetheless, the SARB has maintained this policy, keeping interest rates within its 3–6 percent target, averaging just 4.3 and 4.0 percent in 2004 and 2005, respectively.170 Furthermore, GEAR gave new tax incentives (including six-year tax holidays) for new manufacturing investment projects. The problem for South Africa was that investment did not materialize. 171 South Africa’s proinvestment strategies through GEAR failed to acknowledge

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that investment might not come because the market to sell goods was so poor: “If the government holds back on spending, and if private sector incomes are growing slowly, then firms will worry about poor market conditions. They will lack confidence to invest, no matter what signals the ministry of finance tries to send them about sound fiscal policy.”172 In fact, Bond notes, because of the domestic market weakness, firms reduced labor instead, despite the costs imposed.173 Even where GEAR ostensibly failed, however, big business often derived benefits. As Seekings and Nattrass point out, once companies had to reduce labor, the economy saw a corresponding increase in labor productivity for the remaining workers. Firms that survived downsizing benefited from greater labor productivity and saw a return to profitability. The problem was that those retrenched lacked both the skills and the opportunities to find any other jobs, thus contributing to mushrooming unemployment—South Africa’s Achilles’ heel—and the economy lacks the capacity to create jobs. Thus, catastrophic deindustrialization may have been avoided as firms coped through layoffs, but this increased the size of the underclass. Despite plentiful data, it is difficult to determine the precise number of jobs lost and jobs created since South Africa’s adoption of neoliberal policies, because of the use of various, sometimes contradictory measures. For example, in early 2004, Trade and Industry minister Erwin claimed that 2 million formal sector jobs had been created since 1997. But as the publication South Scan points out, the official government definition of “employment” included anyone who had worked for an hour in the previous week, which suggested that the minister’s claims were less than illuminating. Regarding the number of job losses, there are also competing claims.174 What is clear is that employment in certain sectors—mining and agriculture—has declined sharply in recent years, whereas others, such as construction, trade, and finance, have added substantial numbers of jobs.175 Equally clear from the data is that notwithstanding a net increase of more than 1.1 million in jobs in the first five years of the twenty-first century, a sizable percentage of the South African population remains jobless, and the number has increased in the years since 1994. The Labour Force Survey reported unemployment in September 2005 as 26.7 percent, virtually unchanged from the previous year (26.2 percent).176 However, as seen in Table 5.4, this figure captured only what Geeta Kingdon and John Knight refer to as the “narrow definition” of unemployed, or those actively seeking work. A more revealing figure is the total number of unemployed South Africans as a percentage of the working-age population, which is a startling 41.4 percent.177 The foregoing discussion reveals that GEAR hurt predominantly small firms and organized labor. Labor was successful in piloting the Labour Relations Act (LRA) and Basic Conditions of Employment Act (BCEA) through Nedlac and subsequently through Parliament, but these may have been pyrrhic

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Table 5.4

Unemployment in South Africa, 1993–2005

Year September 1993 October 1994 October 1996 October 1998 September 2000 September 2002 September 2004 September 2005

Percentage of Working Age Unemployed

Actively Seeking Employment

31.2 31.5 35.6 38.6 36.9 41.8 41.0 41.4

13.0a 20.0 21.0 26.1 25.8 30.5 26.2 26.7

Source: Adapted from Geeta Kingdon and John Knight, “Unemployment in South Africa: A Microeconomic Approach,” Center for the Study of African Economies, Oxford, 2004 (www .csae.ox.ac.uk/resprogs/usam/default), and Government of South Africa, Labour Force Survey, www.statssa.gov.za/publications/P0210/P0210September2005.pdf. Note: a. One-week search; subsequent figures based on four-week job search.

victories, because they contributed to labor cost increases and added to other pressures on business toward deindustrialization and, ultimately, retrenchment of workers. Although the economy has created new jobs since GEAR, the quality of those jobs is open to question. Johan Maree, a prominent scholar of South African labor issues, observed that the rate of “casualisation” was showing a marked increase as employers try to circumvent legislation by limiting benefits, hiring only short term, and evading restrictions on hiring and firing of workers.178 Larger firms, paradoxically, were able to operate with a more productive workforce and in a liberalized domestic and international environment in which they were better able to compete. As Seekings and Nattrass point out, this is hardly the stuff of which income equality is made. And whereas reducing inequality is not, in the first instance, the chief priority for business as it engages the state, South Africa’s history gives this dimension added resonance: the deepening disparities in wealth and employment have potentially dire implications for long-term social stability.179 Business initiatives like NBI and the BT are necessary but not sufficient to ameliorate these conditions and preempt a societal backlash against big business, capitalism, or both. In sum, the liberal anti-inflationary strategy did not produce, or rather attract, the expected investment (South Africa’s high ranking in the “Doing Business” surveys notwithstanding), and it contributed to deepened poverty in South Africa. Moreover, trade liberalization damaged many smaller industrial concerns, which were incapable of competing with lower-cost imports. Nonetheless, the substantial upward trend in business confidence suggests a stronger foundation for development in South Africa. GEAR, like other adjustment programs, contained numerous flaws. However, the importance of GEAR was the oppor-

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tunity it provided for big business and many BAs to “sign on” to a reform program in a way that the RDP did not. Political appeals to, or for, a “patriotic bourgeoisie” are more naive than clear incentives and disincentives to business; hence, in spite of periodic critical rhetoric from the ANC, particularly President Mbeki, actual economic policies have either remained favorable or improved. Rhetorical nationalism remains politically important, at least insofar as it reflects concern for popular constituents in the absence of tangible advances in their economic station. At the same time, new institutions have emerged to mitigate conflict and manage relations between state and business.

Conclusion: Whither the Coalition? The reform coalition emerged concurrent with the wider transition in South Africa because the institutional strength of key business actors—both firms that constitute “big business” and nascent and established associations—allowed them to unite behind various organizations in order to devise a new economic framework for the postapartheid state. The corresponding perception by the state (both the late National Party state and the emergent ANC-led one) that it lacked the power to bring capital to heel was also a vital factor in contributing to a new business-state coalition. Ultimately, the ANC acquiesced to the demands of big business, even to the exclusion of smaller business actors, both white and black, not to mention its SACP and Cosatu allies. Although this strategy produced “winners” and “losers,” it is not at all clear that alternative coalitions would have produced wider social and economic benefit for South Africa and prevented wider political instability during a very fragile period in the country’s transition. Business and the emergent ANC-state needed each other; each conferred legitimacy upon the other. Nonetheless, it would be imprudent to suggest that “what is good for big business is good for South Africa,” to paraphrase the mid-twentieth-century American aphorism. Although such thinking surely contributed to the decline and eventual demise of apartheid, it also provided the logic that underpinned apartheid itself, not to mention the years of discrimination and violence that preceded it. Thus, this chapter should not be read as an apologia for South African capital. Certainly South Africa’s embrace of GEAR, and big business, has not sufficiently addressed the myriad socioeconomic problems the country continues to face, although various other strategies, legislative and market based, have been pursued to try to ameliorate these problems. Investment, employment and income equality, and overall economic performance have not approached the levels that neoliberalism’s adherents predicted, although “low but positive” economic performances have often (perhaps too often) been celebrated elsewhere in Africa as a triumph of economic adjustment.180 We would do well to ask, are these “low-but-positive” results ultimately an indication of

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the inadequacy of the reform coalition, or is the current status quo preferable to what would have occurred in the absence of GEAR? Many scholars have suggested that the ANC should have adhered to the more heterodox policy prescriptions that emerged from the RDP, or even the MERG.181 Those Keynesian programs were, by definition, inherently more attentive to the kind of social investment projects that could be tailored to South Africa’s black majority.182 As Nicolas van de Walle has observed for other cases of more conventional, IFI-authored adjustment programs on the continent, however, the counterfactual—what might have happened absent reform programs—cannot be determined. It does seem likely that the costs in terms of foregone or even disinvestment, international support, or business-state cooperation as a whole would have been significant. It is worth noting, moreover, that many of the most vociferous criticisms of GEAR were leveled between its launch and the end of the 1990s; South Africa’s economic performance since 1999, though uneven, appears stronger across most macrolevel indicators, with the notable and admittedly critical exception of employment creation. In short, there are no assurances that had South Africa followed a less intrinsically big business–friendly strategy, more positive economic results would have ensued.183 Since the turn of the century, there has been a movement among scholars and practitioners toward a “post-Washington consensus” that tolerates more select interventions in the marketplace with the sanction of the IFIs and the donor community.184 Reform coalitions, as observed in Chapter 1, must be more than simply the handmaidens of neoliberalism. As a post-Washington consensus emerges, the reform coalition becomes all the more essential in South Africa. Few would argue with the view that business will be indispensable to South Africa’s future; where the foundation for dialogue with the state already exists, a more comprehensive range of strategies may be pursued that can promote greater intervention and foster development, without necessarily threatening entrenched political and economic interests. Certainly, the lessons of other states with reform coalitions would suggest a greater balance of statist and market mechanisms is appropriate for South Africa, as well as moderation in trade liberalization.185 At the same time, the extant coalition has overseen genuine reforms that may contribute to genuine growth and development in the future. As noted in this chapter, not all members of the business community are enamored of ANC policy or with their (in)ability to affect that policy. Overall, however, the business-state relationship and the existence of a coalition has endured because it continues to offer utility for key participants on each side: profitability, new trade opportunities, public-private partnerships, the preservation of ANC political dominance, and, not insignificantly, the enrichment of erstwhile ANC elites through BEE.186 Increasingly, the generation of positive economic growth offers some additional validation for this alliance.

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The immediate beneficiaries are admittedly rather few—big conglomerates, ANC-state elites, and a small but visible black business class—but the overall benefits may yet be shared sufficiently broadly to forestall the kinds of threats to the state that caused Zimbabwe’s government to jettison its economically beneficial relationship with business. As Seekings and Nattrass and others argue, such sharing cannot be done without major investment in human capital and education. In South Africa, the costs to the state of maintaining the business-state relationship remain manageable, and no credible threat to ANC has yet emerged, unlike in Zimbabwe in 2000. As long as the state is able to placate labor and the left, it will continue in its relationship with predominantly white capital while witnessing the steady expansion of black empowerment companies. The emergence of pockets of black wealth via BEE may help to create a “tunnel effect” that insulates the state from popular pressures, at least for the time being.187 Thus in the intermediate term, at least, the utility of the state’s relationship with key businesses and BAs remains secure. Threats, Real and Potential The integration of business into the policymaking process can result in more beneficial economic policies than in situations in which business is marginalized; however, business-state coalitions in developing countries must eventually deliver tangible dividends to the population as a whole. Early in the ANC tenure, Mbeki himself noted the precarious position that business and state share in modern South Africa. Addressing a business gathering in 1995, Mbeki said: “This audience does not need any educating by me on the fact that unless we create employment, we provide clean water to rural and periurban residents, we provide homes for the homeless and we effectively reduce the income inequalities between blacks and whites, then surely must we expect that at some point in the near future, our society will be torn apart by a major and catastrophic racial explosion.”188 Businesses and business associations also recognize the risks and acknowledge that “business leaders would do well to take the initiative in tackling deep-rooted social problems, from the development of a more skilled labor force to the destruction of discriminatory employment patterns.”189 For the most part, business groups appear much more willing to address these issues through voluntary philanthropic initiatives and partnerships like NBI and the BT than through advocacy of macroeconomic policy changes that would pose a challenge to the neoliberal logic of GEAR, or the new ASGI, for that matter. But as Michie argued shortly after GEAR, policies oriented toward reconstruction and development are also “in the long term interest of private sector business itself, regardless of the negative attitude they inevitably display to the idea of policies seen as too interventionist.”190

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Of course, it is unreasonable to attribute South Africa’s relatively strong macroeconomic performance (as well as the performance of some sectors) to date solely to the existence of a coalition for reform between state and business, although certainly this plays a role. Moreover, whatever the coalition’s merits, such a framework cannot, in and of itself, ensure that South Africa will undergo the economic and political transformation necessary to ensure social stability in the long term. Although it is important not to overstate the comparison to Zimbabwe, the low growth rates in the first ten years of democratic rule in South Africa suggests that the ANC’s overwhelmingly probusiness policies may work too slowly to foster the widely shared development benefits that would help insulate the state from various threats. Yet like Zimbabwe, the state is to a certain extent sandwiched between the privileged position it has accorded business on one hand and the demands of a long-neglected black majority on the other. These demands may, to some extent, prove irreconcilable. Prospects for a Durable—but Narrow—Reform Coalition The commitment to broad business-government cooperation, demonstrated through the creation of a forum like Nedlac, gave South African business a unique incentive for collective action and cooperation with the state. However, the ANC’s inconstant commitment to Nedlac certainly compounded mid- and smaller-scale businesses’ collective action problems and fostered ambivalence about the value of BSA/BUSA and Nedlac and, by extension, the wider reform coalition itself. Today the business-state relationship in South Africa is far narrower than the negotiations of the early 1990s would have led one to expect.191 The state’s principal private sector allies are the numerically few but powerful segment of big business whose collective—and encompassing—interests are expressed through the SAF, the BBWG, and the leading firms themselves. The state’s alliance with large, still predominantly white-owned capital has given rise to a business-state reform coalition that generates, thus far, modestly productive growth-inducing policies. The South African case bolsters the argument that the continued utility of business—undergirded by a structured transition in which formal institutions are established—will contribute to coalitional endurance. As in Zimbabwe, white control over key economic sectors and interests makes this a mutually beneficial relationship as long as credible political threats to the ruling ANC remain only latent. Equally, however, as in Zimbabwe, the narrow social base of white capital may render this arrangement unsustainable and antidevelopmental over the long term. The South African case acts as a bridge of sorts to investigations of business-state reform coalitions in a wider comparative—African and global—context. The potential pitfalls of the South African case are especially pertinent for a more select group: those states with a significant settler history, such as Namibia, as well as those with measurable market-dominant minori-

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ties outside of Africa, such as Malaysia and Indonesia.192 Yet the reach of those benefits has been limited, and the fragile racial architecture on which the coalition rests suggests extreme caution before we celebrate, once again prematurely, the achievement of a South African “miracle.”

Notes 1. Leslie Boyd, Michael Spicer, and Gavin Keeton, “Economic Scenarios for South Africa: A Business Perspective,” Daedalus 130, no. 1 (Winter 2001): 91. 2. John Saul, “Cry for the Beloved Country: The Post-apartheid Denouement,” Monthly Review 52, no. 8 (January 1999): 1–51; Patrick Bond, Elite Transition: From Apartheid to Neoliberalism in South Africa (London: Pluto, 2000). 3. See S’thembiso Msomi, “Mbeki Lashes Out at Anglo CEO,” Sunday Times (Johannesburg), September 12, 2004; Boyd, Spicer, and Keeton, “Economic Scenarios.” 4. See Samir Amin, preface to Hein Marais, South Africa: Limits to Change (Cape Town: University of Cape Town Press, 2001). 5. World Bank, World Development Indicators (Washington, DC: World Bank, 2005). 6. SAIRR, South Africa Survey 2000/01 (Johannesburg: SAIRR, 2001), 411. 7. World Bank, World Development Indicators. 8. SAF, “Business in South Africa in 2003,” report compiled by Genesis Analytics, December 2003. Figures are for 2002. 9. Sonia Bendix, Industrial Relations in the New South Africa, 3rd ed. (Kenwyn, SA: Juta, 1996), 237; Nicoli Nattrass, “Business and Employer Organisations in South Africa,” Occasional Report 5 (Geneva: International Labour Office, 1997), 35–47. 10. African Development Bank/OECD, African Economic Outlook (Paris: African Development Bank and OECD, 2005), 414. 11. In November 2005, the South Africa Foundation changed its name to Business Leadership South Africa. Because the new name is not yet widely recognized and several documents referenced in this chapter were published by SAF, I continue to refer to the organization by its original name. 12. Ben Ross Schneider, Business, Politics, and the State in Twentieth-century Latin America (Cambridge: Cambridge University Press, 2004), 76–81. 13. Jos Gerson suggests that South Africa’s are not true conglomerates “because they consist of many companies, held by different sets of shareholders,” although board relationships lend them internal cohesion across operating and holding companies: Jos Gerson, “Should the State Attempt to Reshape South Africa’s Corporate and Financial Structures?” in State and Market in Post-apartheid South Africa, edited by Merle Lipton and Charles Simkins (Boulder: Westview, 1993), 169. 14. See Okechukwu C. Iheduru, “Black Economic Power and Nation-Building in Post-apartheid South Africa,” Journal of Modern African Studies 42, no. 1 (2004): 1–30; Alan Hirsch, Season of Hope: Economic Reform under Mandela and Mbeki (Ottawa: University of KwaZulu-Natal Press and International Development Research Council [IDRC], 2005). 15. The Gini coefficient measured 0.77 in 2001 (up from 0.69 in 1996); by some estimates, South Africa is the most unequal society on earth. Craig Schwabe, “Poverty in South Africa,” Fact Sheet 1 (Pretoria: Human Sciences Research Council, July 26, 2004).

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16. Amy Chua, World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability (New York: Anchor, 2004). 17. Ronald Libby, The Politics of Economic Power in Southern Africa (Princeton, NJ: Princeton University Press, 1987), 20. 18. Ibid., 21. 19. Ibid., 23–24. 20. Marais, Limits to Change, 10. 21. See for example, Pierre du Toit, State Building and Democracy in Southern Africa (Washington, DC: US Institute of Peace Press, 1995); Timothy Sisk, Democratization in South Africa (Princeton, NJ: Princeton University Press, 1995), 10 n. 10; Dan O’Meara, Forty Lost Years: The Apartheid State and the Politics of the National Party, 1948–1994 (Athens: Ohio University Press, 1996). 22. See also Marais, Limits to Change, 11, on getting white labor to buy into racial rather than class identities in the 1920s. 23. Ibid., 18. 24. Ibid. 25. Ibid., 21. 26. ISCOR and ESCOM were established in 1925 and 1922, respectively (Duncan Innes, Anglo American and the Rise of Modern South Africa [New York: Monthly Review Press, 1984], 120, 122). The origins of SASOL date to a 1927 government white paper, while the South African Coal and Gas Company, which manufactures synthetic fuels from coal, was not launched until 1950. It was privatized in 1979 (www .sasol.com). 27. Marais, Limits to Change, 30. 28. Innes, Anglo American and the Rise, 221. 29. Ibid., 221. 30. In 1987, Anglo controlled 60.1 percent of the JSE’s market capitalization, followed by Sanlam at 10.7 percent, SA Mutual (8.0 percent), Rembrandt Group (4.3 percent), Anglovaal (2.4 percent), and Liberty (2.0 percent). See Gerson, “Should the State Attempt,” 165. 31. Mining accounted for approximately 60 percent of exports (of which threefourths were gold) through the apartheid years (SARB Quarterly Bulletin of Statistics, various years). 32. Marais, Limits to Change, 11. See also Stephen Gelb, “South Africa’s Economic Crisis: An Overview,” in South Africa’s Economic Crisis, edited by Stephen Gelb (Cape Town: David Philip, 1991). 33. Marais, Limits to Change, 30. 34. Ibid., 10–11. 35. Bond, Elite Transition, 24; Gelb, “South Africa’s Economic Crisis,” 6. 36. Marais, Limits to Change, 31. 37. Ibid., 32. 38. Jesmond Blumenfeld, “Class, Race, and Capital in South Africa Revisited” (review of Merle Lipton, Capitalism and Apartheid: South Africa, 1910–84), Political Quarterly 57 (January/March 1986): 79. 39. Ibid. 40. Lipton and Simkins, introduction to State and Market, 7. 41. These saw South Africa attempt to increasingly externalize apartheid, fomenting instability throughout southern Africa, while deepening the dependence of neighboring economies on itself (O’Meara, Forty Lost Years). 42. Ibid., 294. 43. Ibid., 365.

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44. Nattrass, “Business and Employer Organisations,” 21. 45. An unnamed financial daily, quoted in O’Meara, Forty Lost Years, 360–361. 46. Eventually, this precipitated its 1990 merger with Associated Chambers of Commerce (Assocom), also dominated by English-speaking capital, to form SACOB (ibid., 361). 47. Ibid., 360. 48. Harold Wolpe, “Race, Class, and the Apartheid State (London: James Currey, 1988), 8, quoted in Marais, Limits to Change, 19 n. 26. 49. Following the state of emergency, the main black labor body, the Congress of South African Labor Unions (Cosatu), became increasingly radicalized, resulting in some 9 million workdays lost to strikes in 1987, seven times the number the previous year (O’Meara, Forty Lost Years, 362–363). 50. Lipton and Simkins, introduction to State and Market, 12. 51. According to survey research cited in O’Meara, Forty Lost Years, 364–365. 52. Vishnu Padayachee, “The Evolution of South Africa’s International Financial Relations and Policy: 1985–95,” in The Political Economy of South Africa’s Transition, edited by Jonathan Michie and Vishnu Padayachee (London: Dryden, 1997), 41. 53. See for example, Steven Friedman, ed., The Long Journey: South Africa’s Quest for a Negotiated Settlement (Johannesburg: Ravan, 1993); du Toit, State Building and Democracy; Nelson Mandela, Long Walk to Freedom (Boston: Little, Brown, 1995); Sisk, Democratization in South Africa; Allister Sparks, Tomorrow Is Another Country: The Inside Story of South Africa’s Road to Change (London: Heinemann, 1995); O’Meara, Forty Lost Years; Tom Lodge, South African Politics since 1994 (Cape Town: David Philip, 1999). On the economic transition, see Marais, Limits to Change; Michie and Padayachee, eds., Political Economy. 54. Padayachee, “Evolution,” 46. As early as 1990, some ANC leaders showed a willingness to abandon the Freedom Charter; John Battersby, “ANC Tempers HardLine Rhetoric on Economic Policy,” Christian Science Monitor, May 10, 1990. 55. Jonathan Michie and Vishnu Padayachee, “South Africa’s Transition: The Policy Agenda,” in Political Economy, ed. Michie and Padayachee, esp. 12–17. 56. Jonathan Michie, “Developing the Institutional Framework: Employment and Labour Market Policies,” in Political Economy, edited by Michie and Padayachee, 158. 57. du Toit, State Building and Democracy, 85. 58. See Lipton and Simkins, introduction to State and Market, 9–13. See also, Marais, Limits to Change, 125–136. 59. Princeton L. Lyman, Partner to History (Washington, DC: US Institute of Peace Press, 2002), 101. 60. David Lewis, Kabelo Reed, and Ethel Teljeur, “South Africa: Economic PolicyMaking and Implementation in Africa; A Study of Strategic Trade and Selective Industrial Policies,” International Development Research Centre, Ottawa, available at www .idrc.ca/fr/ev-71254-201-1-DO_TOPIC.html. See also David Lewis and Jayendra Naidoo, “Social Partnership in South Africa: Is It a Sustainable Mode of Governance?” in Between Unity and Diversity: Essays on Nation-Building in Post Apartheid South Africa, edited by Gitanjali Maharaj (Cape Town: Idasa/David Philip, 1999), 216; James J. Hentz, South Africa and the Logic of Regional Cooperation (Bloomington: Indiana University Press, 2005), 154. 61. Nattrass, “Business and Employer Organisations,” 22. 62. Herbert Jauch, “Economics after Apartheid,” Canadian Dimension, 31, no. 4 (July/August 1997): 28, available at http://faculty.vassar.edu/tilonma/jauch.html. 63. Many of MERG’s ideas reappeared in the RDP; Lyman, Partner to History, 97. 64. Bond, Elite Transition, 92.

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65. Hentz, South Africa and the Logic, 69. 66. Jonathan Michie and Vishnu Padayachee, “The South African Policy Debate Resumes,” in Political Economy, edited by Michie and Padayachee, 228. 67. Padayachee, “Evolution,” 46. 68. See esp. ibid., 46–48, and Michie and Padayachee, “South African Policy Debate,” 227–230. Similar arguments are voiced in Gelb, ed., South Africa’s Economic Crisis; Ian Taylor, Stuck in Middle GEAR: South Africa’s Post-apartheid Foreign Policy (Westport, CT: Praeger, 2002), 164; Marais, Limits to Change, 122–159; Bond, Elite Transition. 69. Hentz, South Africa and the Logic, 151. 70. Ibid., 52. 71. Lipton and Simkins, introduction to State and Market, 6. 72. Michie, “Developing the Institutional Framework: Employment and Labour Market Policies,” in Political Economy, edited by Michie and Padayachee, 167. 73. See Padayachee, “Evolution,” 46. 74. Hentz, South Africa and the Logic, 161. 75. EIU, Country Report: South Africa (London: EIU, December 2005), 25, 27. 76. “Botha was careful to include individual business leaders rather than employers’ organisations (such as Assocom [Sacob], the AHI, etc.)” in his negotiations with business (O’Meara, Forty Lost Years, 294–295). 77. Nattrass, Business and Employer Organisations, 22. 78. See Padayachee, “Evolution,” 48; Hentz, South Africa and the Logic; and Gelb, ed., South Africa’s Economic Crisis. The manufacturing sector was the largest formal sector employer with 1.5 million (representing 19.3 percent of the workforce), followed by agriculture, mining, and the financial sector, which accounted for 11, 7.4, and 6.4 percent of formal employment, respectively. As of 2000, manufacturing represented 20.2 percent of GDP, and the agriculture, mining, and financial sectors composed 4.5 percent, 6.5 percent, and 17.6 percent, respectively. SAIRR, South Africa Survey 2000/01, 45. 79. Ibid., 411. 80. Sisk, Democratization in South Africa, 281. 81. Nedlac, “Report to the Annual Summit,” Johannesburg, May 16, 1998, 2. 82. Nedlac is sometimes considered “quadripartite” because on issues pertinent to the community, community groups were also represented in negotiations. See Lewis and Naidoo, “Social Partnership,” 213. 83. Thabo Mbeki, address at SACOB Annual Banquet, Johannesburg, September 14, 1995; see also Essop Pahad, address to South African Chamber of Commerce (SACOB) Tenth Annual Convention, Gallagher Estate, Midrand, October 11, 1999, available at www.gcis.gov.za/media/minister/991011.htm. 84. Heribert Adam, Frederik Van Zyl Slabbert, and Kogila Moodley, Comrades in Business: Post-liberation Politics in South Africa (Cape Town: Tafelberg, 1997), 147. 85. Nicoli Nattrass, “Collective Action Problems and the Role of South African Business in National and Regional Accords,” South African Journal of Business Management 28, no. 3 (1997): 105–112; Adam, Slabbert, and Moodley, Comrades in Business, 143. 86. Glenn Adler, “Engaging the State and Business: Labour and the Deepening of Democracy in South Africa,” in Engaging the State and Business: The Labour Movement and Co-determination in Contemporary South Africa, edited by Glenn Adler (Johannesburg: Wits University Press, 2000), 3–4. 87. Lewis and Naidoo, “Social Partnership,” 224–225; see also Adler, “Engaging the State”; Karl Gostner and Avril Joffe, “Negotiating the Future: Labour’s Role in Nedlac,” in Engaging the State and Business, ed. Adler; Bendix, 1996, 242–243.

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88. In 2003, the Black Business Council agreed to become part of BSA, and the enlarged organization became known as Business Unity South Africa (BUSA). 89. Interview, Friede Dowie, secretary general, BSA, July 22, 1999, Johannesburg. 90. “Union Gauntlet Awaits Labour Reform Ideas,” Business Day (South Africa), May 16, 2005. 91. Bond, Elite Transition. 92. Interview, Wendy Dobson, general coordinator, Office of the Executive Director (acting director), Nedlac, July 30, 1999; interview, Johann Maree, Department of Sociology, University of Cape Town, July 26, 1999. See also Lodge, South African Politics since 1994. 93. Interview, Dobson. 94. Hentz, South Africa and the Logic. 95. Quoted in Nattrass, “Business and Employer Organisations,” 42. 96. SAF, “Business in South Africa,” emphasis added. 97. Nattrass, “Business and Employer Organisations,” 8. In addition, a handful of powerful black businesspeople, many of whom have long-standing political ties to the ANC, are able to appeal directly to ANC officials without utilizing vehicles like Nedlac, BSA, or SAF. 98. Interview, Philip Black, research director, SAF, July 30, 1999, Johannesburg. 99. Interview, Gillian Hutchings, Executive Membership and Communications, NBI, January 20, 1999, Johannesburg. Hutchings noted that some large corporations, such as Rembrandt, eschewed membership in NBI, contending that business best contributes to development in South Africa by sticking to its core economic activities. 100. NBI was the result of a combination of the Urban Foundation, founded by Harry Oppenheimer in 1976, and the CBM. 101. See Boyd, Spicer, and Keeton, “Economic Scenarios,” 93. 102. Mzwandile Jacks, “Business Trust: A Matter of Perception,” Financial Mail (South Africa), March 25, 2005. 103. Ibid. 104. Ibid. 105. “Government, Business Continue Partnership,” BuaNews, November 14, 2003. 106. “Government and Business Discuss Building Investor Confidence in SA,” Business Day (South Africa), October 17, 2002. 107. SAPA, “Big Business ‘Broadly Satisfied’ with Government Policies,” Global News Wire, March 30, 2003. 108. Black-controlled companies (often with considerably less than 50 percent ownership) numbered just twenty-one in 2003, down from thirty-eight in 1999. BusinessMap Foundation, Empowerment 2004: Black Ownership—Risk or Opportunity? Johannesburg: BusinessMap Foundation, March 2004, 55. 109. Jeremy Seekings and Nicoli Nattrass, Class, Race, and Inequality in South Africa (New Haven, CT: Yale University Press, 2005), 343–345. See also Iheduru, “Black Economic Power.” 110. Interview, Ben van Rensburg, director of economic policy, SACOB, July 21, 1999, Johannesburg. 111. See http://safrica.info/doing_business/sa_trade/help/sachambers.htm. 112. Interview, van Rensburg. 113. Rene Grawitzky, “Business SA Considers the Road Ahead,” Business Day, January 21, 2000. 114. “South Africa Inches Towards Business Equality,” BBC News, April 8, 2002, available at www.bbc.co.uk/2/hi/business/1917170.stm.

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115. Patrick Wadula, “Unified Chambers Set Image Task,” Business Day (South Africa), October 13, 2003. 116. Patrick Wadula, “SACOB Leadership Asked to Push for Unified Chamber Movement,” Business Day, October 15, 2003. 117. Patrick Wadula, “Black Business Body in a Stew over Future,” Business Day, September 9, 2004. 118. “SA Organized Business Dragging Its Feet on Unity,” Business Day, October 5, 2004. 119. Interview, Dowie. 120. A good example is the National Association of Automobile Manufacturers of South Africa; interview, Anthony Black, economist, July 26, 1999, Cape Town. 121. Antoinette Handley, “Business and Economic Policy: South Africa and Three Other Cases.” Occasional Paper 2 (Johannesburg: South Africa Foundation, February 2002), 15. 122. For example, Taylor, Stuck in Middle GEAR; Michie and Padayachee, South Africa’s Economic Transition. 123. Taylor, Stuck in Middle GEAR, 64. 124. Lodge, South African Politics since 1994, 6. 125. Adam, Slabbert, and Moodley, Comrades in Business, 148. 126. Francis Kornegay and Chris Lansberg, “Phaphama iAfrika! The African Renaissance and Corporate South Africa,” African Security Review 7, no. 4 (1998), available at www.iss.co.za/Pubs/ASR/7No4/Phaphama.html. 127. Padayachee, “Evolution,” 37. 128. To the ANC’s dismay, instead of admitting complicity, or at least benefit, from apartheid as part of the national reconciliation process, most businesses and BAs denied culpability and in fact claimed that they had been victimized by apartheid as well. See Nicoli Nattrass, “The Truth and Reconciliation Commission on Business and Apartheid: A Critical Evaluation,” African Affairs 98 (1999): 373–391. 129. Handley, “Business and Economic Policy,” 15. 130. The RDP ministerial portfolio was reassigned on March 28, 1996, and placed under the auspices of the Department of Finance and then deputy president Mbeki (Hentz, South Africa and the Logic, 153). 131. Jauch, “Economics after Apartheid,” 26. 132. See Taylor, Stuck in Middle GEAR, 77–79. 133. ANC, “Statement on the South Africa Foundation Document, ‘Growth for All,’” press statement, March 12, 1996, available at www.hartford-hwp.com/archives/ 37a/024.html. 134. Reflecting this resistance, an ANC discussion document a year later expressed fear of agenda setting by monopoly companies and TNCs, suggesting that “the real danger exists that political and economic policy of governments throughout the world can be dictated to by these corporations.” ANC, “Nation Formation and Nation Building: The National Question in South Africa,” Discussion Documents for the ANC National Conference, 1997, 50–58, quoted in Kornegay and Landsberg, “Phaphama iAfrika!” 135. Interview, P. Black. 136. Bond, Elite Transition, 78. 137. Many of the deficit-to-GDP target ratios were met or exceeded: it was 6.5 percent in 1994 but reduced to just 2.1 percent of GDP in 2001 (surpassing the budget target of 2.5 percent). Maureen Marud, “A Long, Sure Walk to Economic Stability,” Cape Argus, February 18, 2004, based partly on data from the Bureau for Economic Research, Stellenbosch.

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138. George Kershoff of the Bureau for Economic Research in Stellenbosch, quoted in ibid. 139. Boyd, Spicer, and Keeton (“Economic Scenarios,” 73) argue that reaching growth targets requires an expansion in fixed investment from 18 percent of GDP in the 1984–1993 period to 26 percent of GDP. 140. EIU, County Report: South Africa, 26. See also George Kershoff, “Measuring Business and Consumer Confidence in South Africa” (Stellenbosch: Bureau for Economic Research, December 2000). 141. Interview, van Rensburg. 142. Ibid.; interview, Dowie. 143. SAPA, “Business Confidence Remains Strong,” November 29, 2005, available at www.SouthAfrica.info/doing_business/businesstoday/businessnews/627046.htm. The two other major indices of business confidence are released by SACOB and the Reserve Bank, which provide business cycle indicators based in part on key statistical measures. 144. Based on an index of 100, SACOB’s monthly Business Confidence Index is calculated from movements in thirteen subindices, including retail sales, new vehicle sales, exports, imports, inflation, and average exchange rates. It has trended strongly upward since mid-1999, reaching a record high of 130.9 in September 2004 and settling in the 125 range for 2005. See SACOB, “Business Confidence Index” (various), available at www.sacob.za; “Business Confidence Index Reflects Stable Mood,” Mail and Guardian, December 6, 2005. 145. The sectors that compose the BER Business Confidence Index represent some 40 perfect of GDP. Kershoff, “Measuring Business and Consumer Confidence in South Africa.” 146. EIU, Country Report: South Africa, 26. 147. See Seekings and Nattrass, Class, Race, and Inequality, 350. 148. Bond, Elite Transition, 79. 149. Ibid., 49; Mbeki, address at SACOB banquet. 150. Boyd, Spicer, and Keeton, “Economic Scenarios,” 76. 151. Ibid., 91. 152. Ibid., 76. 153. Richard Gibb, “Globalisation and Africa’s Economic Recovery: A Case Study of the European Union–South Africa Post-apartheid Trading Regime,” Journal of Southern African Studies 29, no. 4 (2003): 885–901. 154. On this issue see Ian Taylor and Philip Nel, “‘New Africa,’ Globalisation, and the Confines of Elite Reformism: Getting the Rhetoric ‘Right,’ Getting the Strategy Wrong,” Third World Quarterly 23, no. 1 (February 2002): 163–180; Margaret Lee, The Political Economy of Regionalism in Southern Africa (Cape Town: University of Cape Town Press, 2003); Taylor, Stuck in Middle GEAR; Bond, Elite Transition, 48. 155. As a result of the lifting of WTO clothing/textile quota restrictions, in effect from January 2005. 156. EIU, Country Report: South Africa, 35. 157. Ibid., 12. 158. Seekings and Nattrass, Class, Race, and Inequality, 350. For a slightly differing view on both trade and labor reform issues, see Hirsch, Season of Hope. 159. Seekings and Nattrass, Class, Race, and Inequality, 351. They contend that the only other issue on which business failed to extract policy concessions from the state is privatization, which had been substantially slowed by the late 1990s. In Zambia and Zimbabwe, where the private sector was far smaller, BAs had greater incentive to continue to pressure the state, however ineffectively, to privatize and reduce spending on public enterprises. South Africa’s exponentially larger private economy, however, partly

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lessens the urgency of privatization and affords both state and private actors greater flexibility. 160. Peter Draper, “SA Business and Trade Negotiations: Findings from a Survey of SAF Members,” Occasional Paper 1 (Johannesburg: South Africa Foundation, 2004), 5. The survey reflected the views of thirteen domestic and South African–based MNCs. 161. Pádraig Carmody, “Between Globalisation and (Post) Apartheid: The Politics of Economic Restructuring in South Africa,” Journal of Southern African Studies 28, no. 2 (2002): 255–275; Hentz, South Africa and the Logic, 116. 162. Hentz, South Africa and the Logic, 101. 163. Ibid., 117. 164. Ibid., 122, emphasis added. 165. Boyd, Spicer, and Keeton, “Economic Scenarios,” 79–80, quoting the SARB. 166. Ibid., 80–81. 167. Hirsch, Season of Hope, chap. 5. 168. Interview, Real Africa Durolink Investment Bank executive, January 21, 1999, Johannesburg. 169. Seekings and Nattrass, Class, Race, and Inequality, 351. 170. EIU, Country Report: South Africa, 28. 171. Boyd, Spicer, and Keeton (“Economic Scenarios,” 77) note that an experiment with targeted tax incentives from 1996 to 1998 for foreign investment was unsuccessful. 172. Seekings and Nattrass, Class, Race, and Inequality, 349. 173. Bond, Elite Transition, 80. 174. The Department of Minerals and Energy reported 193,891 jobs lost in the mining industry between 1994 and 2002, but the National Union of Mineworkers countered that the figure was 250,000 between 1999 and 2004 alone. Other industrial subsectors fared as poorly: engineering 158,000 jobs (1991–2000); basic metals 47,521 (1994–2000); and so on (“Mbeki Stresses ‘Developmental State’ in Further Economic Swing,” South Scan 19, no. 4 [February 20, 2004]: 2). 175. Government of South Africa, Labour Force Survey, Report P0210, September 2005, iv, available at www.statssa.gov.za/keyindicators/lfs.asp. According to official statistics, between September 2001 and 2005, agriculture and mining employment was down 21.5 percent and 26.0 percent, respectively. The corresponding increases in construction, finance, and trade were 47.3, 25.1, and 23.2 percent. 176. Ibid. 177. Geeta Kingdon and John Knight, “Unemployment in South Africa: A Microeconomic Approach” (Oxford: Center for the Study of African Economies, 2004), available at http://www.csae.ox.ac.uk/resprogs/usam/default.html. 178. Interview, Johan Maree, Department of Sociology, University of Cape Town, July 24–25, 1999. 179. President Mbeki has very staunchly committed to a halving of poverty and a commitment to the Millennium Development Goals. 180. Thandika Mkandawire and Charles Soludo, Our Continent, Our Future: African Perspectives on Structural Adjustment (Trenton, NJ: Africa World Press, 1999). 181. Carmody, “Between Globalisation,” 257. 182. Indeed, as Bond notes, GEAR had no provision for social development, transforming the public sector, preventing crime, or infrastructure development (Bond, Elite Transition, 83). See also Steven Friedman, “South Africa: Entering the Post-

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Mandate Era”; Robert Mattes, “South Africa: Democracy Without the People?” 2002; Saul, “Cry for the Beloved Country”; Taylor, Stuck in Middle GEAR. 183. Note that GEAR facilitated the disbursement of IMF loans totaling $850 million (Taylor, Stuck in Middle GEAR, 72). 184. See Joseph Stiglitz, Globalization and Its Discontents (New York: W. W. Norton, 2002); also see Z. Onis and F. Sentes, “Rethinking the Post Washington Consensus,” Development and Change 36, no. 2 (2005): 263–290. 185. Deborah Bräutigam, Lise Rakner, and Scott Taylor, “Business Associations and Growth Coalitions in Sub-Saharan Africa,” Journal of Modern African Studies 40, no. 4 (2002): 519–547; Peter Kingstone, Crafting Coalitions for Reform: Business Preferences, Political Institutions, and Neoliberal Reform in Brazil (University Park, PA: Penn State University Press, 1999). 186. See Taylor, Stuck in Middle GEAR, 83; Seekings and Nattrass, Class, Race, and Inequality. 187. Myron Weiner, “Business in Ethnically Divided Countries,” in Business and Democracy: Cohabitation or Contradiction? edited by Ann Bernstein and Peter Berger (London: Pinter, 1998), 117, following Albert Hirschman, Exit, Voice, and Loyalty: Responses to Decline in Firms, Organizations, and States (Cambridge, MA: Harvard University Press, 1973). 188. Mbeki, address at SACOB banquet. 189. Boyd, Spicer, and Keeton, “Economic Scenarios,” 91. 190. Michie, “Developing the Institutional Framework: Employment and Labour Market Policies,” in Political Economy, edited by Michie and Padayachee, 157. 191. Sisk, Democratization in South Africa. 192. See Chua, World on Fire.

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6 Crafting Business-State Coalitions: Lessons for, and from, Southern Africa

The emergence of reform coalitions in South Africa and, briefly, in Zimbabwe reveals the possibilities such entities hold for fostering dialogue between business communities and states. Yet these cases also demonstrate the limitations of coalitions, in terms of both what kind of benefits they can actually deliver and the likelihood of their duplication elsewhere; indeed, beyond South Africa currently, examples are few and far between. Research by Deborah Bräutigam has shown that a coalition has become part of the fabric of the political economy in Mauritius.1 Namibia, too, with its structural similarities to pre-2000 Zimbabwe, has seen a substantial degree of cooperation between state and private sector, although their relationship perhaps has served more to preserve the status quo than to manage “reform” per se.2 Developments in countries such as Ghana provide some indication of the applicability of such institutional arrangements elsewhere in Africa. Clearly, there remain substantial obstacles to the widespread establishment of reform coalitions on the continent. Despite the dearth of cases, however, where reform coalitions have existed, they have played an important role. The instrumental role of Zimbabwean business organizations such as the Confederation of Zimbabwe Industries (CZI) and others in the adoption of economic reforms has been well documented.3 So too has the lasting influence of the Commercial Farmers’ Union (CFU) following the enactment of those reforms, evincing a coalition that was, for a time, both cooperative and productive. Thus, Zimbabwe’s private sector, particularly the powerful associations representing commercial agriculture, enjoyed sustained access to the state and an influence over key policies. Moreover, as discussed in Chapter 5, the initial economic transition in South Africa was unmistakably influenced by business actors possessing a level of institutional strength that state elites, whether linked to the ANC or to the National Party, found both formidable and useful. In South Africa, these relationships go on, and business, through various entities both formal and informal, continues to have a voice in shaping policy there. 203

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In both Zimbabwe and South Africa, states sought policy response and input from business at key junctures in a transitional political-economic environment. Business enjoyed access to state counterparts at the highest levels and frequently demonstrated satisfaction with the array of policies that emerged from various forums through statements affirming their support and, perhaps more importantly, through their investment decisions. These elements of the South Africa and Zimbabwe cases bear a number of important similarities to the kinds of “growth coalitions” that were the subject of copious research, especially in Asia, in the 1980s and 1990s. Yet beyond the relative handful of subSaharan African cases identified above, such global comparisons are difficult. In a 1996 study of business-state relations in Tanzania, Michael F. Lofchie and Thomas Callaghy warned of committing the “fault of analytic hurry” in examining business, and state, capacities in Africa, wary of the risk of assigning to them too many attributes of, say, their Asian and Latin American counterparts.4 Clearly, in spite of the fact that virtually every sub-Saharan African government has felt compelled to offer platitudes about its “commitment” to business and the private sector more broadly, even the “actually existing” reform coalitions described in this book—which admittedly differ from the Asian ideal type, as discussed below—can hardly be described as indelible features of the African economic landscape. But demonstrating that the “developmental state” had come to Africa was not the goal of this book; certainly that quintessentially East Asian developmental state experience has not been replicated on the continent.5 Although there is no shortage of attempts to apply this mode of thinking to Africa, offering such prescriptions, however creditable they may be, was not my principal aim.6 If anything, this analysis demonstrates the difficulty of replicating the South Africa experience—let alone a model fashioned on the Asian one. Instead, proceeding from the assumption that channels of communication between business actors and state are crucial to development, which is now widely accepted as axiomatic among scholars and practitioners alike, my objective was to demonstrate that reform coalitions, centered on shaping and refining the institutional environment in which policy is enacted, have been possible in Africa and to understand key environmental features that have given rise to them. Where such coalitions have emerged, their existence has helped to regularize economic policy dialogue and delimit policy choices. This was the case even in Zimbabwe, before its coalition succumbed to threats born of a drastically changed political and economic context.

Where Do Coalitions Come From? The Problem Revisited Chapter 2 highlighted a range of interpretations of business-state coalitions in the developing world, from the Asian ideal-typical “growth coalition” to the

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narrower issue-oriented coalitions common to the Latin American context. Given these variations, it becomes clear that not only is the way in which stakeholders construct coalitions an inexact exercise but so too is the way that we have analyzed them. I have tried to impose some precision on this analytical confusion by distilling the emergence of a business-state reform coalition down to two principal factors: institutional strength on the part of business organizations and a state that perceives itself to be on par with, or in a weaker position than, business. The emergence of a reform coalition requires an implicit or explicit recognition by the state that, in effect, it needs the cooperation, if not the guidance, of its private sector to achieve development goals. When strength favors the business side, or what I have described as a “high/ low” distribution of power, durable coalitions are more likely; when state power is low relative to business, the former’s greater incentive to cooperate can underpin lasting coalitional partnerships. This finding is paradoxical, inasmuch as it is at odds with the literature on bargaining and pact making, which suggests that a balance of power, where neither side sees an advantage, is most favorable to the achievement of negotiated settlements or for that matter, coalitions.7 In 1990, the Zimbabwean state perceived itself as coequal to business, and in this “high/high” example, state actors tended to view business instrumentally. Although state goals include the achievement of certain policy results, the state’s embrace of business also serves to appease World Bank and IMF “minders” in key ministries and to satisfy or at least placate particular cliques or forces within their own governing group. Such high/high relations, therefore, are prone toward more expedient and uneasy coexistence within temporary arrangements. In the Zimbabwe case, state elites were inclined to view business actors more as rivals that they were unable to vanquish, at least momentarily, than as prospective partners in a larger development process. Conversely, where the state is in a weaker position vis-à-vis business at the outset of the economic transition process, characterized by a “high/low” configuration, it is more receptive to influence, and pressure, from the business community. Like South Africa circa 1993–1994, state leaders in such environments regard the business community as a whole, if not reverentially, then at least as a credible set of economic actors and prospective partners. In an inversion of Peter Evans’s characterization, then, this scenario finds business in the role of “midwife” to the state, except instead of inducing entrepreneurship and investment, well-established business actors help to complete the transformation in state thinking about the role of entrepreneurs and of markets.8 The state is thus shepherded through a process of reforms, all the while cementing both formal and informal ties with business interests. Where the business community can claim inherited institutional strength, such as in South Africa and (formerly) Zimbabwe, it nurtures the state’s initial adjustment to domestic and international markets.

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Clearly, however, a high/low power distribution must entail more than simply the effective surrender of economic sovereignty to so-called settler capital or to foreign business interests. To follow such a course to its (il)logical conclusion is to risk fostering an environment characterized by neodependency and to risk the proliferation of local compradors. In this scenario, business must be partners—even if briefly senior partners—to weaker state actors in a way that enhances state capacity and furthers development, writ large. This is not to naively ascribe universally principled motives to business actors, nor to deny their self-interest: strong associations and business sectors can act to constrain state capriciousness, which includes protecting themselves from political pressure for populist redistribution of capital and resources. South African business groups and associations have managed these conflicts with relative success thus far. Yet most African countries lack the auspicious combination of inherited institutional strength stemming from a strong business tradition and with state actors who perceive the public sector, that is, themselves, as weak relative to their private sector counterparts. More countries are like Zambia, with its low/high configuration, than like South Africa. Indeed, outside of the cases of South Africa, Mauritius, and Namibia, which has many attributes of a reform coalition, and earlier Zimbabwe, this combination of characteristics is not necessarily found even in countries where it might reasonably be expected, for instance in other former settler societies, like Zambia, Kenya, and Mozambique, or in a broader group of states that includes Botswana and Tanzania, which remain home to “market-dominant minorities,” or in countries with strong traditions of capitalism and relatively vibrant private sectors, among them Nigeria and, to a lesser degree, Senegal. Although it is beyond the scope of this chapter to review these cases in much detail, it is worth noting that whereas each of these countries shares numerous traits with South Africa and Zimbabwe, the absence of reliable institutional strength among business organizations means that probably none has achieved a reform coalition; the regular interaction and policy coordination efforts characteristic of reform coalitions are generally absent. This lacuna has not precluded opportunities for economic growth, as Zambia’s performance in the early 2000s suggests. Nonetheless, only in rare cases, such as Botswana, where the state has effectively played the demiurge role, have states had scant need for the kind of reform coalition described in this book. The prospect that other African states will encounter the distinctive combination of structural, demographic, and geologic features that gave rise to Botswana’s economic development arguably is far more remote than the prospect for the replication of reform coalitions on the continent.9 Certainly, countries that inherit strong business institutions face certain inherent social and socioeconomic problems, not least the presence of a large nonindigenous bourgeois class; Zimbabwe’s experience reveals the dangers

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involved in such cases. At the same time, however, settler capital and its institutions embody an important established resource that can be tapped by the state and deployed for transformational purposes. For those countries that did not inherit strong business institutions, the challenges are substantial, as are the prospects for vicious circles in which state power is unquestioned while business remains institutionally weak and disorganized. The following section addresses some of the intrinsic problems faced by African countries that did not inherit institutionally strong business associations and the implications of this legacy for business state relations broadly and coalitions more narrowly. It then turns to the state. In the “typical” African country, the state’s high perceived power relative to business has had severe repercussions for the prospect of reform coalitions. Yet low/high power relations do not necessarily mark the death knell for coalitional prospects. Indeed, a brief overview of developments in Ghana reveals that it has acquired many of the attributes of a reform coalition in the wake of its 2000 transitional election. Certainly, both business and state actors in Ghana face a far steeper learning curve than their counterparts in Zimbabwe and South Africa at the time of their respective transitions; mindful of “the fault of analytic hurry,” therefore, we must not rush to declare Ghana a “successful” case. Yet the case augurs positively for the emergence of coalitions in similarly constituted states and provides some tentative signs that vicious cycles may be turned into virtuous ones.

The “Typical” African Case If we may assume, for analytical purposes, that a “typical” African state exists, it is possible to identify at least three interrelated characteristics that affect business-state relations in Africa and impede reform coalitions; these obtain in many countries. First, the private sector remains weak, due to colonial inheritance, postcolonial policy, and factor endowments that favor an outsized role for the state in the economy. Second, and usually related, is the propensity for weak business associations and organizations that lack measurable institutional strength. Third is the pervasiveness of what many scholars label neopatrimonialism.10 Many of the attributes of neopatrimonialism, including the personalization of politics and of the state itself, the elevation of the “big man,” and so on, may be as much symptoms of overall institutional weakness as a cultural predisposition.11 Whether or not neopatrimonialism is effective as a “master concept,” it involves genuine dilemmas—the prevalence of state predation, facadelike bureaucracies, clientelism, and corruption—all of which serve to create an environment inhospitable to (yet paradoxically, most in need of) the emergence of reform coalitions.

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Weak Private Sectors Despite Zambia’s many distinctly southern African qualities, its small, historically marginalized private sector perhaps has more in common with the rest of Africa, where in many economies the business community remains weak. Partly this is attributable to historical inertia. Where the state assumed a dominant position in the postcolonial economy, private sector development was retarded. This was typically an ideological choice, but given the constraints on postcolonial economies and the near-complete absence of indigenous private sectors in the wake of colonial-era restrictions on African accumulation, it was one made in the context of limited alternatives. The widespread failure of state-led development in Africa left the landscape littered with the detritus of underutilized industrial capacity, arcane property rules, and scant private investment. Notwithstanding massive privatization efforts in the 1990s, both as a result of genuine ideological conversion and in response to changing international realities, many African private sectors continue to lack deep local roots in the political economy. Quite often this is compounded by the country’s continued dependence on primary sectors and control of export markets—in Zambia’s case, the copper and mining industry, in Ghana’s cocoa, gold, and timber—in which the state has been the dominant player, thereby crowding out private sector investment. Beyond privatization, other aspects of liberalization have had a contradictory effect on a wide cross-section of the private sector. The prevailing international environment further disadvantages African business actors, especially those in the manufacturing and agricultural sectors. Some of these constraints are of a structural nature, but some are of business’s own making, either wittingly or unwittingly. As discussed in each of the country studies, trade liberalization, ironically championed by most BAs, systematically weakened the already low capacity of many firms and their business associations by driving them into bankruptcy; thereafter, they have lacked any residual capability to counterbalance states, or even to act as credible advisers and critics on this issue. The ability of African farmers and manufacturers alike to access export markets, already limited, is further constrained by globalization. As we have seen, there was a marked tendency among firms and associations to overestimate their competitiveness. On the other hand, proliberalization African businesses often were sold a bill of goods by the global promoters of neoliberalism. A few examples highlight the dimensions of the problem. Notably, commercial farmers and small-scale farmers are severely threatened by agriculture subsidies in the European Union and the United States. The potential for massive expansion of China’s global clothing and textile exports under the aegis of the WTO from January 2005 threatens to undermine Africa’s precarious manufacturers. At the same time, short-term preferential trade agreements like the United States’African Growth and Opportunities Act (AGOA) and the

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European Cotonou Agreement appear insufficient, either to promote substantial diversification in Africa or to offset the international competition. Conversely, FDI in Africa, though substantially increased in some countries, remains largely concentrated in the extractive sectors, particularly energy and petroleum but also in mining, such as in Zambia. Although the expanded presence of multinationals arguably increases the aggregate power of business in any given country, the spillover benefits to local firms and associations is unclear: transnational capital, by definition, is highly mobile, and the fact that the number of companies is typically small and sectorally based means that they often do not engage weak local business counterparts on a meaningful level. Of course, this too has implications for the institutional strength of business associations. The “Low” Institutional Strength of African Business Organizations A second constraint on reform coalitions in sub-Saharan Africa relates to the weakness of typical African business associations, which, all else being equal, tend to be regarded as unsuitable prospective partners for states. Whereas it is not surprising that fragile private sector firms beget business associations without institutional strength, an environment of weak associations often prevails even in countries with relatively vibrant private-sector activity and strong firms. In such cases the failure of collective action frequently results from the unwillingness of the state to directly or indirectly encourage business organization by providing selective incentives. In Tanzania, for example, the Asian (Indian) merchant class has persevered, even thrived, for a century, surviving even the socialist experiment of President Julius Nyerere. Yet whereas Zimbabwe’s minority-dominated BAs played key roles in influencing sectoral and macroeconomic policy, Tanzanian BAs as a whole were “relatively weak and not firmly established,” and splits between strong Asian-owned businesses and newer, weaker African ones hampered prospects for BAs to systematically and productively influence policy.12 State indifference was both cause and consequence. In contrast to Tanzania, Nigerian businesses were not hampered by state socialism, and an African business class proliferated. Many formed or joined BAs that offered glimpses of institutional strength. In the early 1990s, their access and influence vis-à-vis the state enabled them to gain a number of policy victories on such issues as electrical power rates and adjustments of tariffs. A closer examination reveals, however, that the forte of associations was delivery of service to members primarily at the local level and that access to the military-ruled state was quite irregular.13 As Jon Kraus allows in his otherwise sympathetic evaluation of Nigerian associations in the period, ultimately “rampant corruption” in both civilian and military regimes “severely limited

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the ability of BAs or others to exercise influence. . . . [Former military head of state Sani] Abacha seductively attracted pro-business support, while he wrecked the economy.”14 Under civilian rule since 1999, Nigeria’s vaunted entrepreneurial class continues to demonstrate firm and group capacity at the local level, yet available evidence suggests that the ability of associations to affect national policy remains limited. Neopatrimonialism A third factor inhibiting reform coalitions, regarded as institutions that contribute to developmental ends, is a context of neopatrimonialism, which is intrinsically hostile to those ends. Absent incentives to cooperate through associations, Africa’s businesspeople, like those anywhere, often have found it advantageous to pursue other channels by which to influence state actors. Systems characterized by patron-client relationships, weak legal and bureaucratic institutions of restraint, and a corresponding acute lack of transparency tend to be self-replicating. In this instance, business-state relations are built on illicit, narrow distributional ties, favoring corruption rather than development. These neopatrimonial linkages discourage the more collective, probably more transparent, and certainly more productive interactions that characterize reform coalitions. The presence of state actors narrowly interested in accessing rents and preserving power further undermines legitimate private-sector actors, as seen in Zimbabwe between 1997 and 2000. There even business associations with a history of institutional strength, like the CFU, were progressively disempowered in favor of cronies of the ruling party. These conditions generate vicious circles in which the establishment of reform coalitions becomes increasingly unlikely. Each of these conditions affecting or describing business explicitly or implicitly returns us full circle to the state and its incentives to cooperate with business. Weak States with “High” Power Africanist scholars and practitioners differ about the causes of state weakness in Africa, but little disagreement exists that the state, generally speaking, lacks capacity.15 As noted in Chapter 1, however, such state weakness in objective terms hardly precludes its perception of strength vis-à-vis societal actors, including business. Given the near universal criticism of “the state” in Africa, therefore, low/high (and possibly high/high) power configurations would tend to make unstable foundations for reform coalitions at all, let alone durable ones. My examination of the Zambia case suggests that a low/high dispensation favors the preservation of the status quo in which firms and business organizations are marginalized. As externally driven private-sector development (PSD)

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initiatives would do well to recognize, the alteration of this pattern requires that state actors actively seek to empower a social actor and potential rival. It is a rare state in Africa that has attempted this course, of which perhaps Korea in 1961 stands out as the exemplar.16 In the “typical” case, a state that perceives itself as strong, if not dominant, vis-à-vis societal actors (that is, a “high” perception of power) at the inception of a transition is inclined toward the accretion of more power, resulting in the further concentration of political and economic resources. In addition to Zambia, examples of low/high dispensations in which state power accumulated and collective action by business gained little traction include, among others, Nigeria, Tanzania, and perhaps Ghana, although developments since 2001 suggest this last case warrants closer scrutiny. In these states, the intersection of economic reforms and state neglect of the 1990s rendered the existing weak private-sector institutions progressively weaker and therefore less able to contribute in a meaningful, coordinated way. High state power at the transition does not foreclose the possibility of reform coalitions, but most states in Africa thus far have been disinclined to pursue such imperatives. Ghana’s recent experience, however, indicates that such conditions are not necessarily intractable. Indeed, with important implications for other polities, not least Zambia, Ghana suggests that state leaders may overcome the burden of past ideology and organizational weakness among business groups, as well as structural constraints and an unfavorable international environment, in an effort to construct a partnership with the business community. An Alternative Route to Coalition? The Case of Ghana A few months after he defeated John Atta Mills, candidate of the long-ruling National Democratic Congress (NDC) in the 2000 election, Ghana’s president John Kufuor launched the Ministry of Private Sector Development (MPSD). The new ministry’s brief was to coordinate all private-sector activities in various ministries, including mines, forestry, agricultural, trade, and industry. The MPSD aims to address the problems affecting the private sector and government– private sector coordination and eliminate institutional bottlenecks created by the previous setup of multiple ministries with contradictory mandates. On the business side, the main vehicle for interacting with the government is the Private Enterprise Foundation (PEF), an umbrella body actually created years earlier, whose governing council meets bimonthly with MPSD. Taken together, the creation of the MPSD and the effective empowerment of the PEF by granting it regular access to senior officials served as immediate recognition that Kufuor’s New Patriotic Party (NPP) government would take the private sector seriously and would not only coordinate and promote private sector development but incorporate business input into decisionmaking. President Kufuor has declared a “golden age of business” and foresees development in Ghana inextricably linked

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to sustained private sector–led growth. In and of itself, this was a remarkable departure for a country in which business-state coordination was nearly nonexistent for more than a generation, despite the embrace of an SAP/neoliberal model as early as 1983.17 Historically in Ghana, as in Zambia, the business sector had little input into economic policy. Particularly during the tenures of both President Kwame Nkrumah (1957–1966) and Jerry Rawlings (1979 and 1982–2000), business was at times extremely critical of state policy and came to be identified with the opposition. In response, the government either ignored business demands or, in some cases, imposed punishments upon the private sector.18 Thus, despite the fact that business associations in Ghana were relatively broad based and organized and generally supported the government’s liberalization program dating from the mid-1980s, their advocacy—primarily for access to credit finance and trade opportunities—was largely ineffectual. Rawlings’s prominent and highly regarded finance minister Kwesi Botchwey, himself a staunch advocate of neoliberalism, was nearly inaccessible to business associations. Following the transition to democracy in 1992–1993, which saw military ruler Rawlings elected as civilian president, Rawlings himself finally met with BA leaders in 1993, but even “fruitful dialogue” produced “no follow up,” partly because the Rawlings regime continued to view the business community as a part of the opposition, with some justification.19 In 1994, in this climate of overall hostility toward the private sector, the PEF was established with support of the donor community, including USAID, the Danish International Development Agency (DANIDA), and the Konrad Adenauer Foundation. As an umbrella body representing various business interests, the PEF was organized to participate in the National Economic Forum (NEF), ostensibly designed to facilitate discussion between business and the government. The impetus for the forum actually came from the private sector, which, while generally supportive of the liberal direction of economic policy, sought to moderate the more harmful effects of adjustment. The government cooperated with the business community by hosting the forum, yet despite bimonthly meetings with Ghana’s vice president, the private sector was unable to affect policies in its two principal areas of concern, government spending and private credit.20 The NEF therefore became yet another “talk shop,” reminiscent of many such efforts in the late 1990s, including Zimbabwe’s National Economic Consultative Forum and the Zambian Business Forum. Moreover, the NEF was marked by continued political squabbles between the participants due to their history of mistrust. When Kufuor became president in 2000, therefore, Ghana was a classic low/high scenario. The business community was fragmented and dominated by small- and medium-scale enterprises, which posed little collective threat or capacity; 99 percent of manufacturing is small- and medium-scale enterprises (which together employ 66 percent of the industrial workforce), and 60 per-

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cent of private sector activity occurs in the informal sector.21 Production of the predominant export crop, cocoa, is carried out mainly by peasant farmers on low-yield landholdings of one to three hectares each. Furthermore, as in Zambia, the formal private sector historically lacked utility in Ghana: as Kraus points out, “business-government relations were conditioned by the fact that the PNDC government did not require . . . private sector investment, apart from gold mining, in order to generate its high rates of economic growth and reconstruction.”22 Over 70 percent of foreign exchange was then and continues to be generated by gold, cocoa, and timber exports, and the government remains dependent on substantial donor funds for budget support. Certainly, Ghana’s organized private sector remains weak in terms of size and capacity, but the Kufuor government has taken important steps to expand its institutional strength through access at the highest levels of government, thereby establishing a foundation for coalition. Business-friendly officials hold prominent positions in the bureaucracy and government; they include Kwabena Bartels, who heads the MPSD, and the minister of finance, Yaw Osafo-Maafo, a former banker who served as trade and industry spokesman for the NPP in the previous parliament. Thus, unlike Zimbabwe’s economic transition period between 1988 and 1991—during which time Finance Minister Bernard Chidzero was the essential actor and often one of few government voices supporting liberalization and business—Ghana’s technocrats advocate a position already championed by the president. It is too early to tell whether these initiatives will bear fruit in regard to performance or whether the influence enjoyed by leading private-sector actors will be maintained. Kufuor and NPP face growing pressure politically within Ghana, though it seems unlikely that latent or actual threats are sufficiently severe to lead him to undermine “the golden age of business,” his signature platform.23 For now, Ghana’s rank—82 out of 150 countries—in the World Bank’s 2005 Doing Business survey offers one useful, albeit preliminary, indicator of the effectiveness of the government’s commitment to private sector development.24 Less clear is the role of business in Ghana’s strong economic growth, which has averaged nearly 5 percent annually in the past five years. In some respects, this growth and the larger policy environment continue to bear the imprimatur of the IFIs and the donor community, which funded approximately 32 percent of the 2005 budget and provide support for related programs through the Enhanced Highly Indebted Poor Countries (HIPC) and PRSP process, known locally as the Ghana Poverty Reduction Strategy (GPRS).25 Thus, there is some risk that the changes initiated by Kufuor’s government will be insufficiently institutionalized. Nevertheless, although Ghana’s recent economic performance is due largely to the strength of gold prices, aid, and the effects of debt relief, all of which are of dubious sustainability, growth reinforces the government’s overtures to business and lowers the sociopolitical risk of forging a coalition.

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Notwithstanding the business sector’s limited size, the signals sent by the Kufuor government augur positively. The elevation of a private sector liaison to cabinet level is significant, as is the launch in early 2005 of the Presidential Special Initiative (PSI), which explicitly seeks to expand nontraditional exports and the private sector role in export markets and to increase capacity through training and credit.26 Perhaps the most telling departure from both Ghana’s own experience and the “typical” African norm, however, is the government’s willingness to shoulder the blame for past failures, noting, for example, that “most of the constraints on the efficient operations of the market in Ghana are caused by the government. They are due either to poor service, or to the imposition of undue costs on the private sector. Weak, inefficient administration by the public service, translates into time, money, risk and inefficiency for individual businesses. This in turn affects Ghana’s competitiveness in global and regional markets”27 In sum, recent developments in Ghana suggest that low/high distribution of power, which is quite common, is not necessarily an insurmountable obstacle to coalitional emergence in Africa. External actors—donors and IFIs—can lend material and ideological support to this process, but their assistance in institutionalizing interactions between business and state will be ineffective without explicit state and political commitment. Democratization also may have played a role in Ghana’s nascent coalition, but only insofar as genuine democratization entails a process of transition, in this case from the hostile Rawlings NDC government to that of Kufuor, whose approach to the private sector’s role in development is considerably more accommodating. Here democratization was incidental to the emergence of new leadership, although as other cases show, new leaders do not necessarily pursue coalitions.

Threats to Coalitions Most scholars suggest that southern African states, particularly South Africa, are unique on the continent because of their long settler heritage and their peculiar economic histories.28 I have isolated these key differences and explained why nonstate actors in the region can also be well organized and strong.29 Several of the region’s former settler states have, or had, in the case of Zimbabwe, business associations that can claim residual institutional strength. Yet this did not render Zimbabwean associations impervious to a sustained assault by their erstwhile partners. Notwithstanding the presence of relatively autonomous and self-sufficient business associations, like the CFU and other commercial farming organizations, and initially the CZI, the state ultimately exhibited deliberate hostility toward them. Both the potential and realized benefits to the state gained from tapping this local private-sector capacity clearly were insufficient; the state opted to undermine private sector actors

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rather than continue to promote their interests within a collaborative reform coalition. In Zimbabwe, the coalition collapsed because the established institutions that bound state and business together were insufficiently strong to withstand threats, even threats that were largely exogenous to their relationship. The more significant lesson of the Zimbabwe case, however, is that, institutional strength notwithstanding, it is exceedingly difficult for business to achieve cooperation, let alone a reform coalition, when the state faces threats that cannot be mitigated through its relationship with the business community. Under ZANU-PF, the Zimbabwean state responded to a set of threats it regarded as existential by targeting a vulnerable business class. This perhaps illuminates another unexpected aspect of the state response. Building on a hypothesis advanced by Philippe Schmitter, Ben Ross Schneider finds that a common state response to economic crisis in Latin America was to organize business, thereby enhancing the institutional strength of associations and helping the state deal with crisis. Thus, business broadly is considered an asset to the state, even if previously untapped.30 However, the logic behind Schneider’s thesis—that the collective organization of business actors can help the state restore economic performance and shore up key constituencies—presupposes that the private sector is worth organizing in the first place; in Zimbabwe, even in an economy where business had long played a decisive role, the state came to the opposite conclusion. It is not possible to resolve that such targeting is an African phenomenon per se. On the other hand, as Nicolas van de Walle argues, in Africa “a common state response to economic collapse appears to have been to protect its own position and to lessen instead its developmental ambitions.”31 It is difficult to think of examples—outside of the handful of countries that inherited associations with high institutional strength—in which the state responded to crisis by empowering business in the way Schneider observed in Mexico, for example.32 If business associations that achieved rough parity with their state counterparts at the time of transition can eventually be thwarted, as happened in Zimbabwe, it is quite possible that those that never attained such a privileged position are perpetually vulnerable to the kind of dis-organization suffered by the Zimbabwean associations. Of course, in the South African and Zimbabwean examples, the same variable that correlates with their intrinsic strength also contributes most to their vulnerability: race. Minority status made Zimbabwe’s business groups easy scapegoats. Although heretofore characterized by stability, Namibia, with its predominantly white private sector, bears some important similarities.33 South Africa shares many of Zimbabwe’s and Namibia’s demographic features. Among the most important lessons to be derived from its experience pertain to divided societies with “market-dominant minorities”—not simply the white descendants of settlers—in which the holders of private economic wealth are of a different race or ethnicity from those who hold political power. A flexible reform coalition makes it possible to navigate this difficult terrain.

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At the same time, complacency is ill-advised. South Africa also demonstrates that even with a reform coalition, the economic development expected to emerge from such relations is hardly instantaneous; it cannot occur rapidly enough to placate popular demands for jobs, social welfare, and security, or even to forestall populist political sentiments. Writing on Zimbabwe in the early 1990s, the political scientist Tom Ostergaard posed the following question: “What difference does it make . . . if such domestic capitalists are not of the same color, religion, language group, or whatever as the dominant elements that control the state?” He concluded, in fact, that “outsider” status conferred certain economic and political advantages for both the capitalists themselves and the state in which they reside.34 Less than a decade later, it had become all too apparent how dangerously flawed was that conclusion. Zimbabwe’s subsequent collapse revealed in the starkest terms how vulnerable interracial business-state coalitions can be. South Africa’s big business associations apparently have recognized that their access to continued profits in South Africa are only as good as their linkages not solely to the state but to the wider society as well. Outreach programs such as the National Business Initiative and the Business Trust and partnership opportunities with BEE investors at least serve to foster the image of a proactive business sector, quite unlike that in Zimbabwe before the 2000 collapse.35 Racial and ethnic factors certainly complicate the prospects for coalitions in other African states. Neither Namibia nor Botswana, with their heretofore rational states, progrowth policies, and small populations, has faced formidable threats to its economic status quo. Yet in each state, the private sector is overwhelmingly dominated by nonblacks: in Namibia, the formal sector agriculture (principally ranching), service, and manufacturing sectors are nearly all white controlled. In Botswana, whites and Asians control the formal sector businesses in the manufacturing and service industries.36 With massive privatization in Mozambique, white and Indian businesspeople, both locally and foreign based, have regained their once controlling interest in manufacturing—although they are joined now by Frelimo elites and those connected to the ruling party.37 Similarly, the Asian business classes of Kenya and Tanzania, and the Levantine business interests of West Africa—Senegal, Nigeria, Sierra Leone—dominate the formal sectors in those economies. Nearly all of these actors have channels to the state, often through monochromatic business associations, but no reform coalition.

The Politics of Africa’s Private Sectors Since the late 1980s, Africa’s formal private sectors have undergone incredible development. Whereas before liberalization the private sector was often at the margins of the economy, it is now increasingly considered an important actor.

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Certainly “African capitalism” can no longer be considered an oxymoron, and Africa’s private sector is not going to be swept aside by some twenty-firstcentury variant of Zambia’s Mulungushi Accords or Tanzania’s Arusha Declaration (even those state socialist experiments failed to eliminate the private sector altogether). Increasingly, research by the United Nations, the World Bank, the donor community, and scholars acknowledges the African marketplace not only as a target for FDI but also in terms of the climate for local capital, whose existence and transformative potential has been widely recognized.38 Moreover, a steady stream of funding is being directed at realizing that potential. It is astounding, to be sure, that such developments could take place when barely a generation ago some observers were questioning the very existence of African capitalism.39 But the scarcity of coalitions remains a persistent problem, raising genuine concerns about the sustainability of growth without the reforms upon which development ultimately depends. This book has shown how former settler states like Zimbabwe, briefly, and South Africa were able to circumvent this problem and develop coalitions; Zambia, whose state-business relations are more akin to other African countries, was unable to do so. However, the case study chapters, coupled with the very condensed survey above of other African cases, particularly Ghana’s, suggests at least three possible alternative routes to realizing reform coalitions in low/high environments over time: through donor pressure and assistance, the transformation of crony capitalism, and the emergence of strong leadership. Carrots and Sticks: The Role of the International Community International pressure may play some role in convincing state leaders to act, though the record, at least vis-à-vis adjustment lending and donor aid through the 1990s, appears mixed.40 Incentives, such as those provided by the UN’s Millennium Development Goals and the Global Compact, the World Bank’s PSD initiatives, the American Millennium Challenge Corporation, donor programs such as USAID’s private sector initiative, or even the African Union’s African Peer Review Mechanism through Nepad, may have an impact on political elites’ decisionmaking about whether to incorporate business into their ambit. The evidence that such programs have gained traction thus far is limited, however. Ghana’s private sector initiatives receive donor support and, under the leadership of President Kufuor and PSD minister Kwamena Bartels, new institutions like the MPSD and the PSI, and revitalized bodies like PEF, appear to have made enormous strides in raising the profile of the private sector and enhancing institutional strength. Nonetheless, as noted above, the extent to which such programs are effective has more to do with leadership than with donor support per se, given the mixed track record of other initiatives and the tendency, as van de Walle notes, for African state recipients of aid to manipulate

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the donor community. Democratization, specifically democracy promotion, may also have a salutary impact on state-business collaboration by facilitating transparency, enforceability of contracts, and property rights. It is equally possible, however, that greater participation will lead, however problematically, to amplified popular demands for redistribution rather than the long-term commitment required of reform coalitions. The Transformation of Crony Capitalists It is possible that firms and associations that enjoy insider access to the state solely based on patronage relations will begin to play a reformist role themselves, as their economic interests broaden and become more legitimate, outwardly focused, and dependent on predictable access to capital, markets, and labor. Where patronage resources are limited, the position of favored groups is impermanent: patronage compression compels even rent seekers to seek change to protect their interests. Reconstituted associations that include firms tied to the state may seek to alter the political economic status quo.41 In many countries, the leading beneficiaries of business-state relations are cronies of the regime. In Zambia, senior members of the MMD were able to avail themselves of illicit access to privatized SOEs, as well as rent seeking, to carve out a relatively small niche for themselves. In Zimbabwe, many of these politically connected elites supplanted the business class altogether. Such trends are less apparent in South Africa, where institutions are stronger, but plainly, favoritism, name recognition, and one’s relationship to the ANC has had an impact on the Black Economic Empowerment process. Yet even Zimbabwe’s and Zambia’s crony capitalists, or “bureaucratic bourgeoisie,” are not precluded from eventual metamorphosis into “legitimate” business interests that are no longer dependent on kickbacks, extortion, and other illicit means.42 Indeed, although such BAs as the Affirmative Action Group and Indigenous Business Development Centre came to exemplify Olson’s “distributional coalitions” in the 1990s—because they merely consume and redistribute wealth (appealing to the rhetoric of “indigenization”) rather than create it—it is worth recalling that the white business organizations themselves in both Rhodesias and certainly in apartheid South Africa were also distributional and benefited first from race-based patronage. This massive “antimarket” subsidization, either of members or of organizations themselves, was based on ascriptive categories rather than on sound economic principles. Only later did they become viable going concerns, but today these groups are almost universally regarded as “legitimate” business actors. Contemporary “indigenous” BAs expected and solicited similar state patronage in Zimbabwe and since 1994 in South Africa. Zambian “firms”—some of which were only loose approximations thereof—circumvented BAs altogether in order to seize opportunities. In short, cronyism is as common to ex-

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isting capitalism as is the profit motive.43 It remains to be seen, however, whether such distributional business actors in African polities can reproduce themselves as a class. Part of this transformation is inevitably a function of time. As Colin Leys has argued: “The formation of a politically influential and productive capitalist class, with a solid and mature bourgeois culture to support and focus its economic and political projects, has never been the work of a generation or two.”44 The Role of Leadership Finally, leadership matters, whether to effect coalition emergence in nonpostsettler economies or to sustain coalitions, such as in South Africa. As the cases of Zimbabwe and Zambia, as well as others such as Nigeria, suggest, business interest associations are not going to be effective advocates for reform in the face of an intransigent executive. Yet even good leaders require a salutary mix of sound policies, a favorable international environment, a keen sense of timing, and good luck to be judged by history as great leaders. Those rare few who would aspire to lead developmental states are even more constrained today—and therefore unlikely—given an international context that leaders like Botswana’s Seretse Khama or Korea’s Park Chung Hee would no doubt find inhospitable. Africa’s increasingly regular democratic elections hardly guarantee the emergence of new leaders bent on national development; indeed, the record thus far would appear to be quite mixed.45 Yet because kleptocratic leopards don’t typically change their spots, only the context of a political-economic transition provides this opportunity for change. Indeed, the uncertainty of transitions in Africa—both from one civilian executive to another (itself a relatively new phenomenon) and from old economic patterns to new ones (despite, or perhaps because of, two decades of adjustment)—provides a ripe context for leaders who are willing to empower business organizations to embark upon reform coalitions. Arguably, this juncture presents one of few opportunities in which intrepid political leaders and an obliging bureaucracy can make a significant impact by embarking on building a coalition with the private sector to the development of both state and private sector institutions. In the absence of preexisting institutional strength within that private sector, however, state actors must conclude that engaging business is in their self-interest.

The Limits to Coalitions This book was not intended as an uncritical defense of the neoliberal model that was imposed on sub-Saharan Africa in the 1980s and 1990s and is only now beginning to be revisited. Nor was it intended as an apologia for globalization or big business. On the contrary, each of the chapters endeavored to

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illuminate the importance of a measured response to neoliberalism. Among the countries examined here, South Africa perhaps has come closest to the neoliberal ideal type—too close, in fact, according to many critics. At the other end of the spectrum, Zimbabwe has nearly rejected it altogether. Zambia, a decidedly poor performer in terms of coalition building, has hewed to a middle path in this instance, eschewing BAs and acting unpredictably toward business but apparently embracing multinational investors once again, especially in the mining sector. Coalitions will not necessarily deliver Pareto optimal outcomes—the best possible policy design and implementation for all groups. Yet the variation acknowledges that African economic policymakers face contending forces, from domestic interests both organized and not, international donors upon whom many states depend, and the international, and domestic, investors upon which many have pinned their hopes. Surely the menu of policy options available to Africa’s late-late developing states, particularly in the 1990s, was severely constrained by global pressures and “the Washington Consensus.” How state and business contend with those pressures—for example, devising the “working group” structure in South Africa—enables both sides to continue the dialogue. Moreover, there appears to be a correlation between cooperation and performance that merits additional research over a longer period. There is a certain degree of reductionism in blaming Zambia’s poor economic performance in the 1990s solely on the lack of a reform coalition. Still, Zimbabwe does provide us with a profoundly negative illustration of what can befall an economy whose business community had engaged in policy dialogue but saw those ties abruptly severed. Conversely, a reform coalition is not a prerequisite for growth: Zambia, Mozambique, Tanzania, Kenya, and a host of other sub-Saharan countries are growing, in some cases impressively, without them. Yet with few exceptions, the patterns of growth in these countries—reliant as they are on aid and still troublingly devoid of real economic diversification— are unsustainable in their present guise. The suggestion that reform coalitions— where the reform includes a strong dose of neoliberal orthodoxy—are the magic bullet for development is obviously an exaggeration, but they should be considered a vital component of a late-late developing state in an overwhelmingly capitalist global environment. Indeed, the cases explored in this book suggest that reform coalitions are necessary institutions that enable political and economic actors to more effectively manage the domestic impact of neoliberalism and globalization.

Notes 1. Deborah Bräutigam, “Institutions, Economic Reform and Democratic Consolidation in Mauritius,” Comparative Politics 30, no. 1 (1997): 45–62. See also Deborah

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Bräutigam, Lise Rakner, and Scott Taylor, “Business Associations and Growth Coalitions in Sub-Saharan Africa,” Journal of Modern African Studies 40, no. 4 (2002): 519–547. 2. Importantly, in Namibia “a focus on formal institutions representing business may hide important channels of influence over government policies” among predominantly white manufacturing, farming, and mining interests. Lise Rakner, “The Politics of Revenue Nationalisation: Explaining Continuity in Namibian Tax Policies,” Forum for Development Studies 1 (2001): 125–145, esp. 136–137. 3. Jeffrey Herbst, State Politics in Zimbabwe (Berkeley: University of California Press, 1990); Tor Skalnes, The Politics of Economic Reform in Zimbabwe: Continuity and Change in Development (London: St. Martin’s, 1995). See also Michael Bratton, “The Comrades and the Countryside: The Politics of Agricultural Policy in Zimbabwe,” World Politics 39, no. 2 (January 1987): 174–202. 4. Michael F. Lofchie and Thomas Callaghy, “Diversity in the Tanzanian Business Community: Its Implications for Economic Growth,” computer printout, USAID Mission, Dar es Salaam, Tanzania, 1996. 5. Not even in Botswana, which occasionally attracts the label. As discussed below, Botswana has pursued impressive state-led development and is export oriented, but its economy remains undiversified beyond primary commodities, and the private sector role has been comparatively limited. 6. The international community as a whole has been migrating toward a private sector development model that explicitly includes a role for the state since at least the end of the 1990s. This is reflected in policy formulations articulated by the international financial institutions, the United Nations, and the donor community. Donors increasingly seek to dovetail their aid programs with the goals of the poverty reduction mechanisms of the UN’s Millennium Development Goals (MDGs) and the Global Compact; the World Bank’s Private Sector Development (PSD) and Poverty Reduction Strategy Papers (PRSP) initiatives; and debt relief under the Highly Indebted Poor Countries (HIPC) program. For a broad overview of PSD, see World Bank, “Private Sector Development Strategy: Directions for the World Bank Group” (Washington, DC: World Bank, April 9, 2002). 7. E.g., Robert Axelrod, The Complexity of Cooperation (Princeton, NJ: Princeton University Press, 1997); Timothy Sisk, Democratization in South Africa (Princeton, NJ: Princeton University Press, 1995), 51. 8. See Evans, Embedded Autonomy (Princeton, NJ: Princeton University Press, 1995), 80–81. 9. The country is unique in that it has a salutary combination of a highly fungible commodity (diamonds), a history of damaging but less intrusive colonialism, unquestionably principled postcolonial leadership, and a very small population. These attributes enabled Botswana to resemble the “developmental state” inasmuch as the state, defined by a meritorious bureaucracy, has been instrumental in the transformation of that country from one of Africa’s poorest to a middle-income nation. Yet the state has retained the leading role in the economy since independence; entities like the Botswana Development Corporation and the diamond-producing joint venture Debswana illustrate the state role. Meanwhile, the private sector remains comparatively small and dominated by Indians, whites, and foreign firms, and BAs are weakly organized. See Abdi Samatar, An African Miracle: State and Class Leadership and Colonial Legacy in Botswana Development (Portsmouth, NH: Heinemann, 1999), 153–168; Phillimon Molaodi, “Private Sector Challenged to ‘Seize’ Economy,” Mmegi/The Reporter (Gaborone), February 8, 2006. 10. See Michael Bratton and Nicolas van de Walle, Democratic Transitions in Africa (Cambridge: Cambridge University Press, 1997), esp. 62–63.

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11. See Scott D. Taylor, “Divergent Politico-legal Responses to Past Presidential Corruption in Zambia and Kenya: Catching the ‘Big Fish,’ or Letting Him Off the Hook?” Third World Quarterly 27, no. 2 (2006): 281–301. 12. Bruce Heilman and John Lucas, “A Social Movement for African Capitalism? A Comparison of Business Associations in Two African Cities,” African Studies Review 40, no. 2 (September 1997): 141–171. 13. John Lucas, “The State, Civil Society, and Regional Elites: A Study of Three Associations in Kano, Nigeria,” African Affairs 93, no. 370 (1994): 21–38; Jon Kraus, “Capital, Power, and Business Associations in the African Political Economy: A Tale of Two Countries, Ghana and Nigeria,” Journal of Modern African Studies 40, no. 3 (2002): 395–436. See also Deborah Bräutigam, “Substituting for the State: Institutions and Industrial Development in Eastern Nigeria,” World Development 25, no. 7 (July 1997): 1063–1080. 14. Kraus, “Capital, Power,” 424. 15. Jeffrey Herbst, States and Power in Africa: Comparative Lessons in Authority and Control (Princeton, NJ: Princeton University Press, 2000); Patrick Chabal and Jean Pascal Daloz, Africa Works: Disorder as Political Instrument (Bloomington: Indiana University Press, 1999); Jean Francois Bayart, The State in Africa: Politics of the Belly (London: Longman Group, 1993); Richard Joseph, “Africa: States in Crisis,” Journal of Democracy 14, no. 3 (July 2003): 159–170; World Bank, Building Effective States: Forging Engaged Societies, Report of the Task Force on Capacity Development in Africa (Washington, DC: World Bank, September 2005). 16. In the wake of developmental policies, big business in Korea eventually supported public demonstrations and labor activism that brought an end to military rule in that country, thus affecting the nature of the state itself, although this process took more than a generation. Nigel Harris, “New Bourgeoisies?” Journal of Development Studies 24, no. 2 (1988): 237–249. 17. Kraus, “Capital, Power”; Antoinette Handley, “Business and Economic Policy: South Africa and Three Other Cases,” Occasional Paper 2 (Johannesburg: South Africa Foundation, February 2002). 18. Handley, “Business and Economic Policy.” 19. Kraus, “Capital, Power,” 416. 20. Elizabeth Hart and USAID, “Participation, Consultation, and Economic Reform in Africa: Economic Fora and the EG-DG Nexus,” Occasional Papers Series PNACM-002 (Washington, DC: USAID, October 2001), 19. 21. Osei Boeh-Ocansey (director general of PEF), “Private Sector Development in Ghana: The Challenges and the Lessons,” presentation to the Roundtable Meeting “Promoting the Private Sector Development: The Role of Research,” Accra, Ghana, July 17, 2005, text available at www.idrc.ca/en/ev-85356-201-1-DO_TOPIC.html. 22. Kraus, “Capital, Power,” 406. 23. EIU, Country Report: Ghana (London: EIU, February 2006). Of course, a victory by an opposition party in 2008 could jeopardize a nascent coalition if business and the NEF are identified as connected to the NPP rather than to the state itself. 24. See www.doingbusiness.org/ExploreEconomies. 25. “Ghana Moves Ahead,” Business in Africa Online, March 3, 2005, available at www.businessinafrica.net/features/infrastructure_development/421128.htm. 26. Kwamena Bartels, “Minister Says the Future of the Private Sector in Ghana Is ‘Beautiful,’” interview by Gaddiel Baah, AllAfrica.com, February 3, 2006. 27. Government of Ghana, “National Medium Term Private Sector Development Strategy, 2004–2008,” December 2003, 5, emphasis added, available at www.ghana .gov.gh/pbcopin/nmtp.pdf. Note that while this criticism certainly targets the Rawlings

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regime, coming three years after the NPP victory, it implicates the Kufuor government as well. 28. Bratton and van de Walle, Democratic Transitions; Nicolas van de Walle, African Economies and the Politics of Permanent Crisis, 1979–1999 (Cambridge: Cambridge University Press, 2001); Gretchen Bauer and Scott D. Taylor, Politics in Southern Africa: State and Society in Transition (Boulder: Lynne Rienner Publishers, 2005). 29. See van de Walle, African Economies, 16. 30. Ben Ross Schneider, Business, Politics, and the State in Twentieth-century Latin America (Cambridge: Cambridge University Press, 2004), esp. 25, 31. 31. Van de Walle, African Economies, 96, emphasis in original. 32. The transitional periods I discuss in this book substantially correspond to Schneider’s discussion of crises in Latin America, although the states responded by to the uncertainty of transition largely by maintaining institutional strength and business organization in the South African and Zimbabwe cases. In any event, Zimbabwe later subverted those same coalitional partners. 33. Namibia’s dominant white commercial farmers, mining companies, and retail establishments cooperate with and have benefited from the state, notwithstanding critical rhetoric from President Sam Nujoma (Bauer and Taylor, Politics in Southern Africa). See also Rakner, “Politics of Revenue Nationalisation,” 136–137. 34. Tom Ostergaard, “The Role of the ‘National’ Bourgeoisie in National Development: The Case of the Textile and Clothing Industries in Zimbabwe,” in African Capitalists in African Development, edited by Bruce Berman and Colin Leys (Boulder: Lynne Rienner Publishers, 1994), 133. 35. Moeletsi Mbeki argues that BEE is merely a smokescreen, intended to benefit the politically connected (“Mbeki’s Brother Slammed for Anti BEE Comments,” Cape Times, June 9, 2003). It is worth recalling, however, that commercial farming associations in Zimbabwe did not even go to the trouble of engaging in cynical window dressing. 36. Samatar, African Miracle, pp. 161–168. 37. M. Anne Pitcher, Transforming Mozambique (New York: Cambridge University Press, 2003). 38. See United Nations Commission on the Private Sector and Development, “Unleashing Entrepreneurship: Making Business Work for the Poor,” 2004; World Bank, Doing Business in Africa; Ernesto Hernandez-Cata, Africa Competitiveness Report 2004 (Geneva: World Economic Forum, 2004). 39. See the arguments in Colin Leys, “African Capitalists and Development: Theoretical Questions,” in African Capitalists in African Development, ed. Berman and Leys. 40. Lise Rakner, Nicolas van de Walle and Dominic Mulaisho, “Aid and Reform in Zambia,” in Aid and Reform in Africa: Lessons From Ten Case Studies, edited by Shantayanan Devarajan, David R. Dollar, and Torgny Holmgren (Washington, DC: World Bank, 2001); van de Walle, African Economies. 41. See Catherine M. Conaghan, “Capitalists, Technocrats, and Politicians: Economic Policy Making and Democracy in the Central Andes,” in Issues in Democratic Consolidation, edited by Scott Mainwaring, Guillermo O’Donnell, and Samuel J. Valenzuela (Notre Dame, Ind.: Notre Dame University Press, 1992). 42. See Vadim Volkov, Violent Entrepreneurs (Ithaca, NY: Cornell University Press, 2002). 43. See David Kang, Crony Capitalism: Corruption and Development in Korea and the Philippines (New York: Cambridge University Press, 2000). 44. Leys, “African Capitalists and Development,” in African Capitalists, 12, quoted in Bräutigam, Rakner, and Taylor, “Business Associations.” 45. Van de Walle, African Economies.

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Abbreviations and Acronyms

AAG ACCOR ACCOZ ACF AFC AGOA AHI ANC ARI ASCOM ASGI ASIP Assocom BA BBC BBWG BCEA BCI BEE BER BLF BMF BSA/BUSA BSAC BT BUSA CBM CFB

Affirmative Action Group Associated Chambers of Commerce of Rhodesia Associated Chambers of Commerce of Zimbabwe Agricultural Consultative Forum Agricultural Finance Company African Growth and Opportunity Act Afrikaanse Handelsinstituut African National Congress Association of Rhodesian Industries Associated Chambers of Commerce of Northern Rhodesia Accelerated and Shared Growth Initiative Agricultural Sector Investment Program Associated Chambers of Commerce business association Black Business Council Big Business Working Group Basic Conditions of Employment Act Business Confidence Index black economic empowerment Bureau for Economic Research Business Leaders’ Forum Black Management Forum Business South Africa/Business Unity South Africa British South Africa Company Business Trust See BSA Consultative Business Movement Commercial Farmers’ Bureau 225

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Abbreviations and Acronyms

CFU CHAMSA CMA CoM Cosatu CZI DANIDA DRC DTI EPZ ESAP ESKOM EU Fabcos

Commercial Farmers’ Union Chambers of Commerce and Industry of South Africa Crop Marketing Authority Chamber of Mines Congress of South African Trade Unions Confederation of Zimbabwe Industries Danish International Development Agency Democratic Republic of Congo Department of Trade and Industry export processing zones Economic Structural Adjustment Programme Electricity Supply Commission European Union Foundation for African Business and Consumer Services FCI Federated Chamber of Industries FDI foreign direct investment FEDECAMARAS Venezuelan Federation of Chambers and Associations of Commerce and Production FRA Food Reserve Agency FTA Free Trade Agreement GATT General Agreement on Tariffs and Trade GDP gross domestic product GEAR Growth, Employment, and Redistribution GFA Growth for All GOZ government of Zimbabwe GPRS Ghana Poverty Reduction Strategy GRZ government of the Republic of Zambia HIPC Highly Indebted Poor Countries program IBDC Indigenous Business Development Centre ICFU Indigenous Commercial Farmers’ Union IDA international development assistance IFI international financial institution IMF International Monetary Fund INDECO Industrial Development Corporation ISCOR Iron and Steel Corporation ISI import substitution industrialization JAG Justice for Agriculture LRA Labour Relations Act LSCF large-scale commercial farming MAFF Ministry of Agriculture, Food, and Fisheries MCTI Ministry of Commerce, Trade, and Industry MDC Movement for Democratic Change

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Abbreviations and Acronyms

MERG MERP MMD MNC MPSD Nafcoc NAMBOARD NAPSSFU NBI NDC NEC NECF Nedlac NEF NEM NERP NGO NLP NMC NP NPP NRFU NTB NUM OECD OGIL PEF PFUZ PRSP PSD PSI RDP RNFU SACCOLA SACOB SACP SAF SAP SAPES SARB

227

Macro-Economic Research Group Millennium Economic Recovery Programme Movement for Multiparty Democracy multinational corporation Ministry of Private Sector Development National African Federated Chambers of Commerce National Agricultural Marketing Association National Association of Peasant and Small-Scale Farmers’ Union of Zambia National Business Initiative National Democratic Congress National Employment Commission National Economic Consultative Forum National Economic Development and Labour Council National Economic Forum Normative Economic Model National Economic Recovery Program nongovernmental organization National Lima Party National Manpower Commission National Party New Patriotic Party Northern Rhodesia Farmers’ Union nontariff barrier National Union of Mineworkers Organisation for Economic Co-operation and Development open general import license Private Enterprise Foundation Peasant Farmers’ Union of Zambia Poverty Reduction Strategy Paper private sector development Presidential Special Initiative Reconstruction and Development Programme Rhodesia National Farmers’ Union South African Consultative Committee on Labour Affairs South African Chamber of Business South African Communist Party South Africa Foundation structural adjustment program Southern Africa Political Economy Series Trust South African Reserve Bank

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Abbreviations and Acronyms

SASOL SME SOE TAZ TNF TPZ UDI UN UNCTAD UNDP UNIP USAID USIS VAT WTO ZABO ZACCI ZAM ZAMTIE ZANU-PF ZAPU ZBF ZCCM ZCF ZCFU ZCICC ZCTU ZDF ZESCO ZFU ZIBAC ZIMCO Zimprest ZNCC ZNFU ZPA ZRA ZTA

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South African Coal, Oil, and Gas Corporation small- and medium-scale enterprise state-owned enterprise Tobacco Association of Zambia Tripartite Negotiating Forum Textile Producers’ Association Unilateral Declaration of Independence United Nations United Nations Conference on Trade and Development United Nations Development Programme United National Independence Party United States Agency for International Development US Information Service value added tax World Trade Organization Zimbabwe Association of Business Organisations Zambia Associated Chambers of Commerce and Industry Zambia Association of Manufacturers Zambia Trade and Investment Enhancement Project Zimbabwe African National Union–Patriotic Front Zimbabwe African People’s Union Zambia Business Forum Zambia Consolidated Copper Mines Zambia Cooperative Federation Zimbabwe Commercial Farmers’ Union (ICFU) Zambia Confederation of Industries and Chambers of Commerce Zimbabwe Congress of Trade Unions Zimbabwe Defence Forces Zambia Electricity Supply Company Zimbabwe Farmers’ Union Zambia International Business Advisory Council Zambia Industrial and Mining Corporation Zimbabwe Programme for Economic and Social Transformation Zimbabwe National Chambers of Commerce Zambia National Farmers’ Union Zambia Privatisation Agency Zambia Revenue Authority Zimbabwe Tobacco Association

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Interviews

Zambia A. K. Banda, deputy secretary and director, Policy and Planning, MAFF, May 24, 1996, Lusaka Theo Bull, board member and acting chief executive (1994), ZACCI, September 9 and 17, 1992, August 6, 1994, June 19, 1999, and October 27, 2001, Lusaka Peter Canterbury, chairman of chamber, ZACCI, August 18, 1994, Ndola Elias Chipimo, founder Zambia Enterprise Network Association and Corpus Globe, June 30, 1999, Lusaka Derrick Chitala, deputy minister of finance, September 15, 1992, Lusaka Paddy Doyle, member, Beef Cattle Producers Association and ZNFU, June 18, 1996, Central Province David Frost, immediate past-chairman, ZACCI, May 6, 1996, Lusaka George Gray, executive director, ZNFU, August 9, 1994, and May 2, 1996, Lusaka Errol Hickey, chief executive, Radio Phoenix, October 29, 2001, Lusaka Stedman Howard, director, USIS, April 8, 1996, Lusaka Leonard Jones, consultant to the Zambia Privatisation Authority, May 6, 1996, Lusaka Emily Kachali Walker, general manager, Zambia Cooperative Society (ZCS), May 9, 1996, Lusaka Kay Kafka, German Technical Cooperation Agency adviser, Ministry of Commerce, Trade, and Industry, August 2, 1996, Lusaka Chibamba Kanyama, ZNBC TV News host, July 3, 1996, Lusaka Ben Kapita, president, ZNFU, May 23, 1996, Lusaka John Kasanga, principal, Independent Management Consultants Services, consultant to ZACCI, May 29, 1996, and June 23, 1999, Lusaka Kenneth Kaunda, former president and head of state, UNIP, April 29, 1996, Lusaka Patrick Matabini, secretary, Law Association of Zambia, June 2001, Lusaka Edith Nawakwi, MP and former Minister of Agriculture, former Minister of Finance, December 26, 2001, Lusaka Christopher O. Matonga, honorary secretary, Textile Producers Association (member of ZACCI), and general manager, Swarp Spinning Mills, June 13, 1996, Ndola David Matongo, chairman, ZACCI (1995–1996), May 8, 1996, Lusaka Bob May, general manager, Dunlop (member ZAM/ZACCI), June 14, 1996, Ndola

229

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Anderson Mazoka, managing director, Anglo American (Zambia) (member of ZACCI, ZAM), July 5, 1996, Lusaka D. K. Mendamenda, director of policy planning and research, MCTI, July 3, 1996 (with Muleya), and August 6, 1996, Lusaka Fred M’Membe, editor-in-chief, The Post, October 30, 2001, Lusaka Mathias Mpande, deputy minister, MAFF, May 14, 1996, Lusaka Kabeta Muleya, permanent secretary, MCTI, July 3, 1996 (with Mendamenda), Lusaka Dean Mung’omba, chairman, Zambia Democratic Congress, April 30, 1996, Lusaka Edna Musadabwe, administrative officer, Lusaka Chamber of Commerce and Industry, June 3, 1996, and January 4, 1999, Lusaka Anthony Mwanaumo, deputy director of planning, MAFF, July 3, 1996, Lusaka Alex Mwila, information officer, ZACCI (1996), finance and administration manager, acting chief executive, ZACCI (1999), May 8, 1996, January 5, 1999, and June 25, 1999, Lusaka Mahendra Naik, managing director, Mukuba Textiles, member and vice chairman, Ndola Chamber of Commerce, June 13, 1996, Ndola Mutembo Nchito, partner, MNB Partners, and member of Law Association of Zambia, June 8, 2001, Lusaka. J. B. Nonde, chief executive, Zambia Federation of Employers, May 6, 1996, Lusaka A. Nymann-Jorgensen, chair, ZNFU Grain Committee, June 6, 1996, Lusaka Mark O’Donnell, vice chairman, ZAM, 1994, and chairman, ZAM, 1996, August 9, 1994, and May 2, 1996, Lusaka Dipak Patel, former deputy minister of commerce, April 30, 1996, Lusaka Ramesh Patel, managing director, Swarp, Textile Producers Association (member of ZACCI), June 13, 1996, Ndola Gideon Phiri, ZACCI chief executive, August 9, 1996, Lusaka James Polhemus, democracy and governance consultant, USAID, August 7, 1996, Lusaka Mike Purslow, managing director, Monterey Printing (member ZAM and ZACCI), and secretary, Ndola Chamber of Commerce, June 13, 1996, Ndola Joseph Richardson, commercial officer, US Embassy, April 24, 1996, Lusaka Gaudenzio Rossi, former chairman, LCCI, June 28, 1999, Lusaka Asina Sibeta, project officer, USAID, August 7, 1996, Lusaka Moses Simemba, chief trade economist, ZACCI, June 20, 1996, Lusaka David Simpson, editor, Profit (ZACCI), August 7, 1996, Lusaka David Small, managing director, Colgate Palmolive (ZAM member), June 14, 1996, Ndola Frans van den Ven, World Food Program representative, MAFF, May 17, 1996, Lusaka Graham Wallace, executive director, Tobacco Association of Zambia (TAZ), June 4, 1996, and January 7, 1999, Lusaka Betty Wilkinson, private sector consultant, USAID, August 8, 1994, Lusaka Zambia National Farmers’ Union, Annual Congress, at Mulungushi International Conference Centre, April 25, 1996, Lusaka Simon Zukas, former minister, MAFF, June 27, 1996, Lusaka Songowayo Zyambo, executive director, ZNFU, June 24, 1999, Lusaka

Zimbabwe Confidential interview, Monitoring and Implementation Unit, Ministry of Finance, December 12, 1995, Harare Nigel Chanikira, chief executive, Kingdom Securities, July 15, 1999, Harare

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Misheck Chinamasa, deputy minister of finance, November 14, 1995, Harare Godfrey Chitambo, regional director, Business Extension Advisory Services, November 16, 1995, and February 13, 1996, Harare Patrice Chiwota, program officer, United Nations Development Programme, July 20, 1994, Harare Danny Dube, chief executive officer, Bard Discount House, and ZNCC adviser, July 8, 1999, Harare ICFU executives meeting, February 23, 1996, Harare ICFU First Annual Congress, November 9–10, 1995, Harare Joe Foroma, chief economist, CZI (1994), and chief executive, CZI (1996), July 25, 1994, and February 27, 1996, Harare Stephanie Funk, project development officer, USAID, July 8, 1999, Harare Martin Hanratty, director, Office of Private Enterprise Development, USAID, July 14, 1999, Harare David Hasluck, director, Commercial Farmers’ Union, Harare, January 11, 1996, and June 11, 2001, Harare Stanley Heri, chief executive, Horticulture Promotion Council, January 18, 1996, Harare Mike Humphrey, former chief economist, CZI (1988–1992), January 31, 1996, Harare Eric Kahari, chairman and CEO, Modus Group, December 20, 1995, Harare Enock Kamushinda, secretary general, IBDC, February 22, 1996, Harare Godfrey Kanyenze, deputy secretary general, ZCTU, March 20, 1996, and January 15, 1999, Harare Kumbirayi Katsande, managing director, Nestlé Zimbabwe, November 27, 1995, Harare Vincent Kwenda, secretariat staff member, Ministry of Industry and Commerce, April 12, 1996, Harare Don MacDonald, financial manager, Medix Holdings, and Nick Vingarai, chief executive officer, Intermarket Holdings, Ltd., June 11, 2001, Harare Joseph Made, director, Agricultural and Rural Development Authority, October 24, 1995, and November 22, 1995, Harare Wonder Maisiri, chief executive, ZNCC, November 30, 1995, and January 10, 1996, Harare E. S. (Ted) Makoni, president, ZNCC (1994–1995), emeritus president, ZNCC (1996), July 27, 1994, and February 6, 1996, Harare John Mw Makumbe, lecturer, Department of Political and Administrative Studies, University of Zimbabwe, October 16, 1995, and January 14, 1999 (SAPES), Harare John Manyanya, economist, Monitoring and Implementation Unit, Ministry of Finance, March 6, 1996, Harare John Mapondera, former secretary general and founder, IBDC, February 14, 1996, Harare Isaac Maposa, chief executive, Movement for Democratic Change (MDC), June 11, 2001, Harare Strive Masiyiwa, former president and secretary general, IBDC, December 22, 1995, Harare Danny Meyer, president, ZNCC, November 30, 1995, Harare Shadreck Mlambo, deputy secretary, Ministry of Lands and Water Resources, February 13, 1996, Harare Nkosana Moyo, managing director, Standard Chartered Bank (Tanz), January 22, 1996, Harare Sam Moyo, assistant director, Southern Africa Political Economy Series Trust (SAPES), January 17, 1996, and July 8, 1999, Harare Ben Mucheche, president, IBDC, November 13, 1995, Harare

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Mudariki, Zimbabwe Investment Centre, July 13, 1999, Harare Bernard Mufute, senior economist, CZI, July 13, 1999, Harare Davidson Mugabe, secretary general, Indigenous Commercial Farmers’ Association (predecessor to ICFU), July 30, 1994, Banket Robert Mugabe, president of Zimbabwe, speech to Indigenization Rally (IBDC), March 15, 1996, Harare Dennis Mungate, chief of agricultural education, Ministry of Agriculture, March 13, 1996, Harare Joseph Muzulu, chief economist, Finhold, April 11, 1996, Harare Trevor Ncube, editor in chief, Financial Gazette (1996), editor in chief, The Independent (1999), December 1, 1996, January 1999, July 10, 1999, and June 11, 001, Harare Kuba Ndoro, senior agricultural economist, CFU, February 16, 1996, Harare Thomas Nhambure, board member, Indigenous Commercial Farmers’ Union, March 8–9, 1996 (with other members), Masvingo Alfred Nhema, chair, Department of Political and Administrative Studies, University of Zimbabwe, January 12 and July 15, 1999, Harare Thomas Nherera, president, and Davidson Mugabe, secretary, ICFU, November 15, 1995, and both with Julius Ngorima, treasurer, January 26, 1996, Harare Vunguza Nyathi, deputy director, National Planning Agency/ National Economic Planning Commission, July 29, 1994, October 11, 1995, and December 12, 1995, Harare Doug Pascoe, chief executive, National Association of Dairy Farmers (1994), chief executive, Commercial Cotton Growers’ Association (1996), July 22, 1994, and March 18, 1996, Harare Brian Raftopoulos, associate director, Zimbabwe Institute for Development Studies, October 1995, January 14, 1999, and July 14, 1999, Harare Sandy Shapleigh, private sector consultant, USAID, October 20, 1995, Harare Levy N. Sithole, deputy general manager (commercial), AFC, February 20, 1996, Harare Chemist Siziba, founder, former president and vice president, IBDC, December 5, 1995, Harare Bob Swift, chairman, Beef Cattle Producers Association/CFU, July 22, 1994, Harare Tobias Takavarasha, deputy secretary for economics and markets, Ministry of Agriculture, November 30, 1995, Harare Lovegot Tendengu, director, Farmers Development Trust, January 18, 1996, Harare Edmore Tobaiwa, chief economist, ZNCC (1996), independent consultant (1999), March 21, 1996, and July 14, 1999, Harare Owen Tshabangu and V. Kwenda, senior staff, Ministry of Industry and Commerce, Permanent Secretariat, January 31, March 15, and April 12, 1996, Harare Robert Webb, vice president, Zimbabwe Tobacco Association, November 21, 1995, Harare Farai Zizhou, chief planner, National Economic Planning Commission (1994), and chief economist, CZI (1995), July 21, 1994, October 30, 1995, and December 6, 1995, Harare

South Africa Francis Antonie, senior economist, Standard Bank of South Africa, July 30, 1999, Johannesburg Anthony Black, economist and consultant to auto manufacturers association, University of Cape Town, July 26, 1999, Cape Town

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Philip Black, research director, SAF, July 30, 1999, Johannesburg Jenny Cargill, chief executive, and Andy Brown, analyst, BusinessMap, Johannesburg Richard Cornwell, senior research analyst, Institute for Security Studies, June 13, 2001, Pretoria Wendy Dobson, acting executive director and general coordinator, Office of the Executive Director, Nedlac, July 30, 1999, Johannesburg Friede Dowie, secretary general, Business South Africa, July 22, 1999, Johannesburg Steven Friedman, director, Centre for Policy Studies, July 19, 1999, and June 13, 2001, Johannesburg Paul Graham, executive director, and Lindiwe Ndlela, researcher, Institute for a Democratic Alternative in South Africa, June 13, 2001, Pretoria Gillian Hutchings, executive membership and communications officer, NBI, January 20, 1999, Johannesburg Institute for a Democratic Alternative in South Africa, June 13, 2001, Johannesburg Douglass Irvine, analyst, Centre for Development Enterprise, July 1999, Johannesburg Tom Lodge, professor, Department of Political Science, University of Witwatersrand, January 1999, Johannesburg Shaun MacKay, policy analyst, Centre for Political Studies, January 20, 1999, Johannesburg Johann Maree, professor, Department of Sociology, University of Cape Town, July 26, 1999, Cape Town Amy Marks, business professor, University of Cape Town, July 28, 1999, Cape Town Bongi Masinga, senior analyst, Real Africa Durolink, January 21, 1999, Johannesburg Atlee Masuku, senior analyst, Real Africa Durolink, January 21, 1999, Johannesburg Nicoli Nattrass, professor, Department of Economics, University of Cape Town, July 26, 1999, Cape Town Mpho Seboni, managing director, Tebco Investments, January 19, 1999, Johannesburg Thero Setiloane, executive director, Real Africa, January 20, 1999, Johannesburg Hussein Solomon, professor, University of Pretoria and associate of the African Centre for the Constructive Resolution of Disputes (ACCORD), June 13, 2001, Pretoria Michael Sudarkasa, chief operating officer, New Africa Advisors, July 20, 1999, Johannesburg Ben van Rensburg, director of economic policy, SACOB, July 21, 1999, Johannesburg Sibusiso vil-Nkomo, chairperson, National Policy Institute of South Africa, and director, School of Management and Administration, University of Pretoria, July 23, 1999, Pretoria Harry Zarenda, associate professor, Department of Economics, University of Witswatersrand, July 22, 1999, Johannesburg

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Abacha, Sani, 210 Accelerated and Shared Growth Initiative (ASGI), 182 Ad hoc policymaking, 23 Affirmative Action Group (AAG), 121, 133–135, 218 African Growth and Opportunities Act (AGOA), 41, 208–209 Africanization, 58, 92(n14), 167 African National Congress (ANC): coalition emergence, 16–17; concerns over economic transition to ANC government, 151–152; economic platform, 165–166; GEAR adoption, 179–182; Nedlac, 168–170; redefining business roles after apartheid, 166–168; regime transition and coalition emergence, 163–166; rejecting SAF’s Growth for All initiative, 181–182 Afrikaanse Handelsinstituut (AHI), 154, 162, 170, 175–176 Afrikaners, 157–159, 175–176 Agricultural Finance Company (AFC), 121 Agriculture: international environment constraining, 208–209 Agriculture, South Africa: colonial economy, 157; economic diversity, 154; employment by sector, 196(n78) Agriculture, Zambia: export diversification, 73–75, 98(n136); Northern Rhodesia’s decline under Kaunda, 60–62; politics of Zambia’s

business-state relations, 81–83; statebusiness responses to import competition, 65–72; value added tax, 74–76 Agriculture, Zimbabwe: CFU’s continuing domination after independence, 108–109; CFU surviving ESAP, 136–137; coalition collapse, 124–125; colonial business associations, 104–107; economic collapse, 101–102; economic contribution of Zimbabwe’s agricultural sector, 119(table), 144(69); indigenous business associations, 133; Mugabe’s seizure of land, 125, 126, 128, 137, 139–140, 147(n139); privatization, 120–122 Anglo American, 154–155, 159, 194(n30) Anglovaal, 159, 194(n30) Anti-inflationary policies, South Africa’s, 186–189 Apartheid: business against, 159–162; concerns over economic transition to ANC government, 151; expansion of business and institutional strength, 158–159; regime change and coalition emergence, 163–166; white minority businesses denying culpability, 198(n128) Armed resistance, South Africa’s, 160 Associated Chamber of Commerce of Rhodesia (ACCOR), 104

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Associated Chamber of Commerce of Zimbabwe (ACCOZ), 108, 142(n39) Associated Chambers of Commerce (Assocom), 195(n46) Association of Rhodesian Industries (ARI), 104 Bargaining for coalition formation, 26 Bartels, Kwamena, 213, 217 Basic Conditions of Employment Act (1997), 169–170, 185, 187–188 Big business, South Africa’s: BA merger failing to address small business concerns, 176–179; beneficiaries under apartheid, 159; deindustrialization, 187; institutional strength, 170–174; lobbying for trade liberalization, 184; multilevel nature of business-state relations, 154–156; NBI membership, 197(n99); postapartheid growth in institutional strength, 167–168; retaining institutional strength, 174–176; state reliance on, 164–165 Big Business Working Group (BBWG), 173–174, 173(table), 175 Binani Group, 70 Black Business Council (BBC), 176, 178, 197(n88) Black economic empowerment (BEE) companies, 155, 172, 174, 177(fig.), 223(n35) Black Economic Empowerment Commission (BEEcom), 177(fig.) Black Management Forum, 177(fig.) Boer republics, 157 Botchwey, Kwesi, 212 Botha, P.W., 161 Botswana, 206, 216, 221(nn5, 9) Brenthurst Group, 165, 168, 173(table) Britain: illegal British oil sales to Zimbabwe, 141(n10); Lancaster House agreement, 106–107; South African colonialism, 156–157 British South Africa Company (BSAC), 56–57, 103, 105. See also British South Africa Company Bull, Theo, 87–88 Bureau for Economic Research (BER) survey, 183, 199(n145)

Business associations (BAs): institutional choice influencing coalition establishment, 24; institutional weakness affecting statebusiness relations, 208–209, 209–210; postcolonial institutional strength, 32; posttransition decline in institutional strength, 43–44; state strength and business strength, 35(table) Business associations (BAs), South Africa: business against apartheid, 159–162; business conglomerates, 154–156; merger agreement, 176–179; national-level associations, 177(fig.); post-apartheid fragmentation of, 174–176; size and diversity of, 153–154 Business associations (BAs), Zambia: economic history, 57–58; government’s protectionist stance, 66–67; history of, 92(n10); MMD transition, 62–63; politicizing business-state relations, 79–83, 94(n57); Zambia under Kaunda, 60–62 Business associations (BAs), Zimbabwe: blacks’ underrepresentation in, 108–109; collapse of Zimbabwe’s reform coalition, 116–117; collective action attempts, 129–132, 148(n161); inadequacy in restoring economic stability, 139–140; indigenous business associations, 132–135; origins of institutional strength, 104–107; trade liberalization, 110–112; white minorities’ strength after independence, 142(n35) Business-centric model of business-state relations, 25–27 Business Confidence Index (BCI), 183–184, 199(nn143, 144, 145) Business Leaders’ Forum (BLF), 131 Business Leadership South Africa. See South Africa Foundation Business South Africa (BSA), 169, 175–176, 178, 179, 183, 197(n88) Business-state coalitions, 2–3; defining and characterizing, 6–7; explaining Zimbabwe’s economic collapse, 102;

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Zimbabwe’s CFU-state coalition, 120–124. See also Business-state relations; Reform coalitions Business-state relations, 2–3; balance of power as factor in coalition durability, 205–207; business-centric model of business-state relations, 25–27; business-state coalitions and, 15–16; business-state cooperation, 26; as crisis management, 43; crony capitalism, 218–219; Ghana’s commitment to private sector growth, 211–214; institutional weakness affecting, 208–209; neopatrimonialism threatening coalition emergence, 210 Business-state relations, South Africa: ANC’s post-apartheid transition, 166–168; big business, 170–174; business forums and communityoriented activities, 173(table); business unity, 176–179; conglomerates, 154–156; GEAR adoption, 179–182; Nedlac, 168–170; neoliberalism and, 182–189; regime transition, 163–166 Business-state relations, Zambia: impact of liberalization on Zambia’s farmers, 81–83; increasing gap in, 87; politicization of, 79–83 Business-state relations, Zimbabwe: colonial origins of, 103–104; high/low power advantage to the business sector, 108 Business Trust (BT), 172–173, 173(table), 175, 181, 216 Business Unity South Africa (BUSA), 171, 178, 197(n88) Business weakness, 10–12 Capacity: of business associations, 28; decline in South Africa’s, 164, 167 Capital mobility, 34 Central African Federation (CAF), 57 Chambati, Ariston, 146(n109) Chamber movement, 104, 142(n39) Chamber of Mines, 104 Chambers of Commerce and Industry of South Africa (CHAMSA), 176–178 Chanakira, Nigel, 122

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Chavez, Hugo, 37 Chidzero, Bernard, 107–108, 110–111, 143(nn55, 56, 59), 146(n109), 152, 213 Chiluba, Frederick, 62, 63, 71, 97(n126) China, 208 Chiyangwa, Philip, 134–135, 149(n188) Civil conflict: British-Afrikaner wars, 157; Zimbabwe, 106 Clothing industry, 69, 70–71, 146(nn112, 113), 184–185, 208–209 Coalition building, 26–29, 218–219 Coalition collapse. See Decline and collapse of coalitions Coalition durability, 38–40, 39(table) Cobalt, 58–59 Colgate Palmolive, 69, 70, 79 Collapse, economic. See Economic decline and collapse Collapse of coalitions. See Decline and collapse of coalitions Collective action, Zimbabwe’s attempts at, 129–132 Colonialism: institutional strength, 31–32; pact-making, 45; South Africa, 156–162; Zambia’s economy, 56–59; Zimbabwe’s institutional strength, 104–107; Zimbabwe’s statebusiness relations, 103–104 Commercial Agriculture Working Group, 173(table) Commercial Farmers’ Bureau (CFB), 60, 61 Commercial Farmers’ Union (CFU): CFU-state coalition, 120–124; Farmers’ Licensing and Levy Act, 141(n19); increasing strength, 105, 108–111; lasting influence on economic reform, 203; maintaining privilege under ESAP, 117; response to land seizure, 126–128; state hostility towards, 214–215; surviving ESAP, 136–137; ZTA’s independence from, 142(n20) Commercialization: Zimbabwe, 120 Company rule in Zambia, 56–57 Confederation of Zimbabwe Industries (CZI), 110, 114–115, 116, 136, 141(n18), 203, 214–215

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Conglomerates, South Africa’s, 193(n13); beneficiaries under apartheid, 159; contribution to economic growth, 183; dominating business-state relations, 171; GEAR launch, 179–180; intermediaries in business-state relations, 154–155; state access, 175 Congo, Democratic Republic of the (DRC), 135–136 Congress of South African Labour Unions (Cosatu), 164, 170, 195(n49) Consejo Mexicano de Hombres de Negocios (CMHN), 154 Consultative Business Movement (CBM), 161 Cooperation, 34 Copper industry, Zambia’s: colonial era, 58–59, 92(n11); decline in, 92(n18); export diversification, 86–87, 90; precluding small-scale industry development, 16; privatization, 77–78; Rhodesia, 103–104 Corporatism, 44–46, 53(n85), 128–131 Corruption: formal and informal institutional coalitions, 9–10; limiting BAs influence, 209–210; utility and coalition formation and durability, 38–39 Corruption, Zambia: dwindling private sector, 16; under Kaunda, 93(n23); under the MMD, 65; privatization process, 77–78; tariff regime, 72; Zambia Privatisation Agency, 96(n109) Corruption, Zimbabwe: exploitation of DRC resources, 135–136; indigenous business associations, 133; privatization and, 122; War Victims Compensation Fund, 125–126, 147(n132) Cotonou Agreement, 209 Cotton production, 146(n112) Coups and coup attempts, 80 Crafting coalitions, 26–29 Crony capitalism, 122, 132–135, 218–219 Crop Marketing Authority, 76 Cultural pluralism, 46–48 Currency devaluation: Zambia, 64; Zimbabwe, 109, 126

Danish International Development Agency (DANIDA), 212 Debt, Zambia’s, 59, 84 Decline and collapse of coalitions: businesses’ declining access to the state, 24; pacts and formal organizations for averting, 44–46; state-driven circumstances leading to, 40–46; Zambia, 55–56; Zimbabwe, 116–117, 124–125 Deconglomeration, South Africa’s, 166 Deindustrialization: South Africa, 187; Zambia, 68–72 de Klerk, F.W., 162, 163, 165 Democratic transition pacts, 44–46 Democratization as factor in coalition formation, 29–30, 218 Desai, Suresh, 83 Development. See Economic growth and development Developmental state, 204, 221(n9) Diamonds, 157 Dissent, political, 80 Distributional coalitions, 10–12, 103, 132–136, 218 Diversification, Zambia’s lack of, 58 Diversification as factor in coalition durability, 153–154 Doing Business survey, 213 Drought: Zambia, 74–76; Zimbabwe, 109, 122 Dumping, 66–67, 94(n59) Dunlop tires, 69, 70, 71 Durability, coalitional, 38–40, 39(table) Dutch East India Company, 156 Economic adjustment. See Economic Structural Adjustment Program; Structural adjustment programs Economic decline and collapse: antibusiness activities as state response to, 215; South Africa, 160, 160(table); vulnerability of Zimbabwe’s interracial coalitions, 216; Zimbabwe, 101–103, 109–110, 123(table), 125–128, 135–136 Economic growth and development: copper dominance hindering Zambia’s, 90; economic utility and, 39–40; Ghana, 213; growth coalitions, 7–9; growth without

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coalitions, 220; importance of constructive business-government interaction for, 2–6, 220; international community’s business-state development model, 221(n6); Rhodesia, 103–104, 104–107; South Africa, 160(table); South Africa’s growth since GEAR, 182–183, 182(table); statist model of development, 27–29; transition as factor in coalition formation, 29–30; Zimbabwe, 109; Zimbabwe’s economic trends by sector, 123(table) Economic liberalization: outcomes in Zambia, Zimbabwe and South Africa, 15–16; postcolonial institutional strength, 32; reform coalitions and growth coalitions, 8–9; Zimbabwe’s ESAP, 110–112; Zimbabwe’s premature implementation of, 112–115; Zimbabwe’s pressure for, 110. See also Economic Structural Adjustment Program; Structural adjustment programs Economic liberalization, South Africa: business-state relations, 182–189; economic impact, 184–186; GEAR adoption, 179–182; Growth for All initiative, 181–182; regime change and, 163–166 Economic liberalization, Zambia: coalition collapse, 55–56; economic impact, 65–76; economic impact on farmers, 81–83; MMD reinstatement of SAPs, 63–65; MMD transition, 62–63; state-business responses to import competition, 65–72; too-rapid liberalization under MMD, 64–65 Economic liberalization, Zimbabwe: CFU-state coalition, 120–121, 138–139 Economic reform, importance of coalitions in adopting, 203–204 Economic Structural Adjustment Program (ESAP): agricultural sector surviving, 136–137; business-state coalition inaugurating, 16; controversy over plan and implementation of, 112–115; resurgent state power after, 116–119; successors to, 150(n195);

257

Zimbabwe’s business-state relations, 102–103, 110–112 Economic utility, 41, 89–91 Economy size as factor in coalition durability, 153–154 Election fraud, 84 Electricity Supply Commission (ESCOM), 159, 194(n26) Embedded autonomy framework, 27–29 Embeddedness of state in society, 7–8 Emergence, coalitional: balance of power as a factor in, 204–207; institutional strength, 30–37; neopatrimonialism threatening, 210; private sector weakness threatening, 208–210; South Africa’s regime transition, 163–166; state weakness threatening, 210–211 Employment Equity Act (1998), 169–170 Employment figures: contribution of Zimbabwe’s agricultural and manufacturing sectors, 119(table); South Africa by sector, 168, 196(n78); Zambia’s manufacturing sector, 94(n66) Encompassing organizations, 10–11 Endurance, coalitional, 38–40, 39(table), 205–207 Entrepreneurship, 60 Ethnicity: complicating coalition emergence and durability, 215–216, 221(n2); political utility and coalitional collapse, 41–44; Zambia’s ethnic pluralism, 57. See also White minorities European Union-South Africa free-trade agreement, 184–185 Exogenous threats to Zimbabwe’s coalition, 127, 138–139 Export ban on maize, Zambia’s, 74–75 Export markets: business associations declining utility leading to coalitional collapse, 41; economic utility and, 39–40; Rhodesia’s economic growth, 104–107; Zambia’s business-sector support, 55–56; Zambia’s export diversification, 72–76, 73(table), 94(n53), 98(n136); Zambia’s export promotion, 89–91; Zambia’s inability

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to compete in, 64–65, 65–66. See also Economic liberalization Export processing zones (EPZ), 72, 95(n85)

Hawkins, Tony, 129 Highly Indebted Poor Countries (HIPC) initiative, 84 Humanism, 58, 60, 92(n12)

Farmers’ Licensing and Levy Act (1942), 105, 141(n19) Fast Track Land Resettlement Programme (Zimbabwe), 127 Federated Chamber of Industries (FCI), 162 Federation of Chambers and Associations of Commerce and Production (FEDECAMARAS), 37 Foreign investment, 186–189, 209 Formal organizations, 44–46 Foundation for African Business and Consumer Services (Fabcos), 174–175, 176, 177(fig.) Fragmentation of South African business, 174–176 Freedom Charter (1955), 151–152, 195(n54) Free trade agreements, 184–185 Free trade coalitions, 7, 19(n25)

Import competition, Zambia’s response to, 65–72 Import substitution industrialization (ISI), 104, 105, 113, 159, 160 Incentives: as factor in coalition formation, 28; international community role in coalition building, 217–218; for pact negotiation, 45 Income inequality, South Africa’s, 155, 193(n15) Independence: CFU’s continuing domination after Zimbabwe’s, 108–109; collapse of the Central African Federation, 103; perpetuation of colonial-era institutional strength, 31–32; white minorities’ strength after Zimbabwe’s independence, 142(n35); Zambia, 57–58; Zimbabwe’s Unilateral Declaration of Independence, 103–104, 105–107, 141(n8) Indigenization, 218 Indigenous business associations, 121, 122, 124, 132–135, 218–219 Indigenous Business Development Centre (IBDC), 121, 133, 218 Indigenous Commercial Farmers’ Union (ICFU), 121, 133 Indigenous populations, decimation of South Africa’s, 156–157 Industrial Development Corporation (INDECO), 59–60 Industrialization: South Africa, 157–158; state-business relations and, 46–47; Zambia, 58 Industrial policy, 80–81 Industrial Review Committee, 111 Informal reform coalitions, 9–10 Institutional strength: balance of power as factor in coalition durability, 205–207; business and state strength in reform coalition emergence, 30–37, 35(table), 209–210; as coalition component, 30–32; Ghana’s expansion of, 212–214; institutional choice influencing coalition

General Agreement on Tariffs and Trade (GATT), 67, 184. See also World Trade Organization Ghana, 85, 211–214 Ghana Poverty Reduction Strategy (GPRS), 213 Gini coefficient. See Income inequality Globalization, 12–13, 185–186, 208–209 Gold rush, 103, 157 Gono, Gideon, 146(n109) Governing coalitions, 7 Government of the Republic of Zambia (GRZ), 72, 74–75, 81, 85, 87–88. See also Zambia Gray, George, 83 Great Trek, 157 Growth, Employment and Redistribution (GEAR) initiative, 166, 170, 179–182, 182(table), 186–192, 200(182) Growth coalitions, 7–9, 203–204, 204–205 Growth for All (GFA) initiative, 181–182 Guerrilla warfare: Zimbabwe, 106

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establishment and duration, 24; posttransition decline in business strength, 43–44; reform coalition endurance and, 38–40; state actors undermining private actors, 13–14; state power and business association power, 33; utility and, 39(table). See also Power Institutional strength, South Africa: big business, 170–174; colonial origins of, 156–162; expansion under apartheid, 158–159; post-apartheid decline in business associations, 174–176; post-apartheid growth by big business, 167–168; power distribution, 152–153 Institutional strength, Zambia: business associations’ failure, 88–89; coalition failure, 55–56; decline of businessstate relations under the MMD, 63–65; Northern Rhodesia’s agricultural decline under Kaunda, 60–62; privatization revealing institutional weakness, 76–79; ZNFUs lack of, 82 Institutional strength, Zimbabwe: business-state relations, 108; CFUstate coalition, 120–124; colonial origins of, 104–107; high/high status leading to rivalry and instability, 136–137, 205; indigenous associations’ lack of, 135; need for government restoration of, 139–140; post-ESAP surge in state power, 116–119; premature implementation of trade liberalization, 112–115; rapid decline and collapse, 102 Institutional structure as evidence of reform coalitions, 9–10 Institutions: coalition formation as institutional choice, 33–37 International community: business-state development model, 221(n6); donor targeting of Zambia’s private sector, 84–86; establishing Ghana’s PEF, 212; role in coalition building, 217–218 International Development Assistance (IDA), 59 International Monetary Fund (IMF), 59, 85, 109

259

Investment, 186–189 Iron and Steel Corporation (ISCOR), 159, 194(n26) Isomorphism, 31–32, 51(n44) Johnson and Johnson, 69 Kabila, Laurent, 135 Kadoma Declaration, 130–131 Kafue Consortium, 97(n117) Kalabo, Wamulume, 79 Kamushinda, Enock, 134 Kapita, Ben, 75, 82–83 Kasonde, Emmanuel, 72 Kaunda, Kenneth, 57–63, 68 Keys, Derek, 167 Kingstone, Peter, 26–27 Konrad Adenauer Foundation, 212 Korea, 35–36, 211, 222(n16) Kufuor, John, 211–214, 217 Kuruneri, Chris, 146(n109) Labor movement: impact on ZANU-PF’s cooperation, 149(n168); South Africa, 162; Zambia’s export ban, 75; Zambia’s MMD transition, 62–63 Labour Relations Act (1995), 162, 169–170, 185, 187–188 Lancaster House agreement, 106–107, 142(n27) Land Acquisition Act (Zimbabwe), 126–127 Land ownership and distribution: Lancaster House agreement, 106–107; Mugabe’s seizure of Zimbabweans’ lands, 125, 126, 128, 137, 139–140, 147(n139) Latin America: business-centric model for state-business relations, 26; embedded autonomy framework, 27–28; state-business relationships as crisis management, 43, 215 Leadership, importance in coalition building, 217–218, 219 Lever Brothers, 69 Liberalization. See Economic liberalization Liberty Life, 159, 194(n30) Limits to coalitions, 219–220 Lobbying, 137, 141(n17) Lyman, Princeton, 164

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Macro-Economic Research Group (MERG), 165, 190 Made, Joseph, 128 Magande, Ngandu, 74 Maize exports, Zambia’s, 74–76 Maize monopoly, Zimbabwe’s, 149(n183) Majority rule: Zambia, 57–58. See also African National Congress “Making Democracy Work: A Framework for Macroeconomic Policy in South Africa” (MERG), 165 Makoni, Simba, 146(n109), 149(n173) Malawi, 57 Mandela, Nelson, 152, 163–166 Manuel, Trevor, 152 Manufacturing sector: decline of Rhodesia’s, 105–106; economic contribution of Zimbabwe’s, 119(table), 144(69); impact of South Africa’s GEAR initiative, 183–184; institutional weakness undercutting Zambia’s, 64; international environment constraining, 208–209; protest over Zambia’s industrial policy, 80–81; Rhodesia’s institutional strength, 141(n11); Rhodesia’s lobbyists, 141(n17); South Africa’s apartheid policies, 161; South Africa’s employment by sector, 168, 196(n78); South Africa’s GEAR initiative, 186–187; Zambia’s deindustrialization, 68–72; Zambia’s employment figures, 94(n66); Zambia’s export diversification, 73; Zambia’s state-business responses to import competition, 65–72; Zimbabwe’s collapse, 101, 118 Market-dominant minorities, 215–216 Marketing boards, 60–61, 81–82, 120–121 Market-supporting activities, 11–12 Masiyiwa, Strive, 122 Matongo, David, 90–91 Mauritius: business and state strength in coalition emergence, 37; coalition durability, 203; institutional structure leading to coalition durability, 44 Mbeki, Thabo, 152, 166, 172, 200(n179)

Metals: gold rush, 103, 157; Zambia’s export diversification, 73(table). See also Copper industry Mexico: business empowerment as crisis response, 215; elite business organizations, 154; free trade coalitions, 19(n25); reform coalitions, 7 Military intervention: Zimbabwe’s intervention in DRC, 135–136 Military rule, 222(n16) Millennium Economic Recovery Programme (MERP), 150(n195) Mills, John Atta, 211 Mining industry: apartheid economy, 194(n31); historical origins of Zambia’s economy, 56–57; South Africa’s economy, 153–154, 157; South Africa’s employment by sector, 196(n78); South Africa’s use of cheap labor, 158–159; Southern Rhodesia’s mineral wealth, 103–104; Zambia’s export diversification, 86–87; Zambia’s privatization, 64–65. See also Copper industry Ministry of Agriculture, Food, and Fisheries (MAFF), 82, 98(n139) Ministry of Commerce, Trade, and Industry (MCTI), 77–78, 94(n61) Ministry of Private Sector Development (MPSD), 211–214 Minorities. See White minorities Mlambo-Ngcuka, Phumzile, 167 Mnangagwa, Emmerson, 149(n188) Movement for Democratic Change (MDC), 127–128 Movement for Multiparty Democracy (MMD), 55–56, 62–80, 89 Moyo, Nkosana, 149(n173) Mugabe, Robert: accepting economic liberalization, 111; CFU-state coalition, 137; land seizure, 126, 128, 147(n139); Zimbabwe’s independence, 106; Zimbabwe’s indigenous business associations, 133–134 Multinational corporations: dominating Zambia’s economy, 58; South Africa’s affiliates, 171; Zambia’s deindustrialization, 69–70

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Mulungushi Reforms (Zambia), 58 Murerwa, Herbert, 131, 146(n109) Mwanawasa, Levy, 74, 83–86, 90 Naidoo, Jayendra, 169 Namibia, 203, 216, 223(n33) National African Federated Chamber of Commerce (Nafcoc), 154, 174–175, 175–176, 176–178, 177(fig.) National Agricultural Marketing Act (1989), 61 National Agricultural Marketing Association (NAMBOARD), 60–61 National Business Initiative (NBI), 172, 197(n99), 216 National Economic Consultative Forum (NECF), 130, 148(n161) National Economic Development and Labour Council (Nedlac), 17, 44, 152, 168–170, 173(table), 175, 179, 196(n82) National Economic Forum (NEF), 173(table), 212 National Economic Recovery Programme (NERP), 131, 150(n195) National Manpower Commission, 173(table) Nationalism: post-UDI Rhodesia, 106; South Africa, 159 Nationalization: Zambia, 57, 58, 79, 92(n14) National Party (South Africa), 158–159, 163, 164–165 Nawakwi, Edith, 83 Negotiating forums for state and business: role in cooperation, 44–46 Neoliberalism. See Economic liberalization New Deal, Zambia’s, 83–86 New Patriotic Party (NPP) government, 211–212 Nigeria, 69, 209–210, 211 Nkrumah, Kwame, 212 Nkumbula, Harry, 57 Nontariff barriers (NTBs), 159 Nontraditional exports, 72–76, 73(table), 94(n53) Norman, Denis, 107, 121 Normative Economic Model (NEM), 163

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Northern Rhodesia, 56–59 Northern Rhodesian Legislative Council, 57 Nyassaland, 57, 103 O’Donnell, Mark, 67–68, 88, 97(n128) Oil industry: illegal British sales to Zimbabwe, 141(n10); South Africa, 160–161; Zambia, 59 Old Mutual, 159, 194(n30) Open general import license (OGIL), 114 Oppenheimer, Harry, 165, 197(n100) Organized labor, 187–188. See also Congress of South African Labour Unions, Zimbabwe Congress of Trade Unions Osafo-Maafo, Yaw, 213 Pacts, 44–46 Pamire, Peter, 134 Parallel economy: Zimbabwe, 133 Partial reform syndrome, 68–69 Pass laws, 158 Patel, Dipak, 85 Patronage linkages, ethnic-based, 42–43 Peasant Farmers’ Union of Zambia (PFUZ), 82 Penza, Ronald, 72 Phiri, Gideon, 66, 88 Political utility, 30, 41–44, 89 Population statistics: colonial Zambia, 57, 91(n6) Populism, ZANU-PF embracing, 128 Postcolonialism: institutional strength, 31–32 Poverty reduction programs, 200(n179), 213 Poverty Reduction Strategy Paper (PRSP), 84 Power: balance of power and coalition endurance, 205–207; explaining Zimbabwe’s economic collapse, 102–103; linkages between business and state powers, 34; pact-making and power sharing, 45; state actors’ perceived constraints in, 15; state power and business association power, 33; weak states with high perception of power undermining

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coalition emergence, 210–211; Zimbabwe’s post-ESAP surge in state power, 116–119. See also Institutional strength Preferential trade agreements, 208–209 Price-control regime, Zambia’s, 59–60 Private business sector: business against apartheid in South Africa, 159–162; business and institutional strength under apartheid, 158–159; coalitionbuilding incentives, 217–218; Ghana’s commitment to growth, 211–214; importance of leadership in coalition building, 219; institutional weakness affecting state-business relations, 208–209; institutional weakness of Zambia’s, 16; SAPs allowing emergence of, 12; size and diversity of South Africa’s, 153–154; state hostility towards, 214–216; support for Zambia’s trade liberalization, 55–56; transformation of crony capitalists, 218–219; undermining Zambia’s privatization, 77–78; white minorities’ privileges under new Zimbabwean rule, 107–110; Zambia’s economic change empowering, 86–88; Zambia’s export diversification, 72–76; Zambia’s Mulungushi Reforms, 58; Zambia under Kaunda, 59–60; Zimbabwe’s corporatism without the state, 128–131. See also Business associations; Business-state relations Private Enterprise Foundation (PEF), 211–214 Private sector development (PSD) initiative, Zambia’s, 84–86 Privatisation Act (Zambia), 70 Privatization: corruption during Zambia’s, 96(n109); results of Zambia’s, 97(n118); revealing Zambia’s institutional weakness, 76–79; South Africa, 199(n159); Zambia’s deindustrialization, 68–70, 87; Zambia’s mining sector, 64–65; Zimbabwe’s CFU-state coalition, 120 Productive development behavior, 30–32 Protectionism: Brazil, 25–26; Zambia, 87; Zambia’s business groups, 66–67 Protectionist coalitions, 19(n25)

Racial tension: Zambia’s historical lack of, 57; Zimbabwe’s coalition collapse, 16; Zimbabwe’s indigenous business associations, 133. See also White minorities Rawlings, Jerry, 212 Recession, economic, 59, 109–110 Reconstruction and Development Programme (RDP), 165–166, 181, 190, 198(n130) Reform coalitions: business-centric model of business-state relations, 25–27; factors influencing successful establishment of, 23–24; growth coalitions and, 7–9 Reforms: gaining legitimacy with time, 26; Zambia’s Mulungushi Reforms, 58 Regime change, 31 Rembrandt Group, 154–155, 159, 194(n30), 197(n99) Remgro. See Rembrandt Rent-seeking activities: decline of Zambia’s business-state relations under the MMD, 64; disorder thesis of BA failure, 14; as potential outcome of business-state coalitions, 10–12; utility and coalition formation and durability, 38–39; white minorities, 53(n75); Zambia, 70, 89; Zimbabwe’s indigenous business associations, 132–135 Resistance, political, 160 Resource benefits, economic utility and, 39–40 Revenue benefits: economic utility and, 39–40. See also Tariff structures; Taxation Rhodes, Cecil, 56–57 Rhodesia, 57, 103–104, 104–107 Rhodesia National Farmers Union (RNFU), 105 Salaula, 69, 70–71 Sanctions: Rhodesia, 104; Zimbabwe, 31–32, 141(n10) Sanlam, 154–155, 159, 194(n30) Secondhand clothing. See Salaula Security concerns, South Africa’s, 160 Sichinga, Austin, 75 Small-scale industry, 70

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Smith, Ian, 103–104, 141(n12) Socialism, 209; Zimbabwe, 107–108 Social pacts, 44–46 Social responsibility, 53(n77) South Africa: ANC redefining business roles, 166–168; big business’s institutional strength, 170–174; business against apartheid, 159–162; business and institutional strength under apartheid, 158–159; business forums and community-oriented activities, 173(table); business-state relations and neoliberalism, 182–189; business unity, 176–179; coalition endurance, 16–17, 151–156, 192–193; colonial state-business relations, 156–162; continuing challenges to the coalition, 189–191; economic growth since GEAR, 182(table); employment by sector, 168, 196(n78); encouraging foreign investment, 186–189; GEAR adoption, 179–182; importance of coalitions in adopting economic reform, 203–204; institutional fragmentation, 174–176; institutional strength and utility, 39(table); institutional structure leading to coalition durability, 44; maintaining business-state coalitions, 4; Nedlac, 17, 44, 152, 168–170, 173(table); pact-making, 45; privatization, 199(n159); race as strength and vulnerability, 215–216; sanctions strengthening institutions, 31–32; state weakness leading to business pressure, 205; threats to the coalition, 191–192; transition leading to coalition formation, 29–30, 34, 163–166; unemployment figures, 188(table), 200(nn174, 175); Zambia’s accusations of dumping, 66–67, 94(n59); Zambia’s trade agreement negotiations, 94(n61); Zimbabwe’s economic collapse and, 140 South Africa Foundation (SAF), 154, 165, 171–172, 175, 181–182, 185, 193(n11) South African Chamber of Business (SACOB), 154, 162, 164–165, 170, 175–177, 183, 195(n46), 199(n144)

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South African Coal, Oil, and Gas Corporation (SASOL), 159, 194(n26) South African Communist Party (SACP), 164 South African Reserve Bank (SARB), 186 Southern Rhodesia, 57, 103 Stabilization, economic, 64 Stals, Chris, 167 Standby agreement: Zimbabwe, 109 State actors: businesses’ access to state as key coalition factor, 24; circumstances driving coalition collapse, 40–46; as coalition component, 29–32; coalition formation as institutional choice, 33–37; competing with Zambia’s private sector, 60; culpability in Zambia’s deindustrialization, 69–70; embedded autonomy framework, 27–29; perceived constraints in power, 15; power distribution creating durable coalitions, 205–207; private sector weakness affecting business-state relations, 208–209; societal perception of strength in weak states, 210–211; state strength and business strength, 33, 35(table); terminology concerning, 19(n17); undermining private actors in reform coalitions, 13–14; Zambia’s export diversification, 72–76; Zimbabwe’s CFU-state coalition, 120–124; Zimbabwe’s corporatism without the state, 128–131; Zimbabwe’s postESAP surge in state power, 116–119. See also Business-state relations State of emergency: Zambia, 79–80 State-owned enterprises (SOEs), 76–79 State weakness: Zimbabwe, 107, 142(n35) Statist model of development, 27–29 Structural adjustment programs (SAPs): MMD reinstatement of Zambia’s, 63–65; South Africa’s GEAR initiative, 186–189; structural constraints on coalitions, 12–13; Zambia’s deindustrialization, 68–72; Zambia’s MMD transition, 62–63; Zambia’s state-business power imbalance, 56, 59; Zambia’s state-

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business responses to, 87; Zimbabwe’s economic collapse, 102. See also Economic Structural Adjustment Program; Growth, Employment and Redistribution initiative Structural constraints on coalitions, 12–13 Subsidies: Rhodesia discontinuing export subsidies, 106; urban populations benefiting from Zambia’s state intervention strategies, 61; western subsidies threatening African agriculture, 208; Zambia’s liberalization, 99(n164); Zambia’s trade deficit, 66 Subsistence farming, 82 Tanzania, 204, 209, 211 Tariff structures: South Africa’s tariff reduction, 184; South Africa’s use for protection of local industries, 159; Zambia, 65–68, 95(n83); Zambia’s salaula, 71–72; Zimbabwe’s ESAP, 114–115 Taxation: discouraging Zambia’s private business sector, 60; economic utility, 52(n69); South Africa’s big business, 168; Zambia’s value added tax, 73–74, 95(n87), 96(n89) Team Zimbabwe, 129–132 Textiles industry, 69, 70–71, 146(nn112, 113), 184–185, 208–209 Threats to coalitions, 214–216 Tobacco industry, 93(n38), 98(n136), 105, 126–127 Total Strategy, Botha’s, 161 Trade agreement negotiations, Zambia’s, 94(n61) Trade liberalization. See Economic liberalization Transition as factor in coalition formation, 29–30, 34–37, 43–44, 207 Transparency International, 70 Transvaal, 157 Tripartite Negotiating Forum (TNF), 130–131 Truth and Reconciliation Commission (South Africa), 180, 198(n128) Tsumba, Leonard, 149(n173) Unemployment, South Africa’s, 161, 187, 188(table), 200(nn174, 175)

Unilateral Declaration of Independence (UDI), 103–104, 105–107, 141(n8) Union Agreement (1910), 158 United National Independence Party (UNIP), 57–58, 59–62, 62–63 United States: Lancaster House agreement, 106–107 Urban Foundation, 173(table), 197(n100) Urbanization, 46–47, 61 USAID, 212 Utility, 15; declining utility leading to coalition collapse, 41; economic utility, 89–91; Ghana’s private sector, 213; institutional strength and, 39(table); political utility, 30, 41–44, 89; reform coalition endurance, 38–40; strengthening South Africa’s coalition, 152–153; Zambia’s failed coalition, 55–56; Zambia’s MMD, 89–91; Zimbabwe’s diminishing utility and coalition collapse, 16, 124–128 Value added tax (VAT), 73–74, 85, 95(n87), 96(n89) Vendanta, 90 Venezuela: business and state strength in coalition emergence, 37 War Victims Compensation Fund (Zimbabwe), 125–126, 147(n132) Washington Consensus, 220. See also Economic liberalization Weberian bureaucracy, 26 White minorities: business-state relations, 46–48; collapse of Central African Federation, 103; distributional behavior, 218, 221(n2); ethnoracial political utility characteristics, 42; as factor in Zimbabwe’s economic collapse, 138–139; institutional strength under the ANC, 174–176; Mugabe’s seizure of land, 125, 126, 128, 137, 139–140, 147(n139); privileges after independence, 107–110; protection under the Lancaster House agreement, 106–107; race as strength and vulnerability in South Africa and Zimbabwe, 215–216; rent-seeking activities, 53(n75); resettlement

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compensation for Zimbabwe’s, 142(n31); South Africa’s ANCbusiness coalition, 151–152; South Africa’s black business elites and, 174; South Africa’s regime transition, 163–166; strong bourgeois class as heritage of institutional strength, 206–207; Zambia’s colonial population, 56–58, 91(n6), 92(n11); ZANU favoring Zimbabwe’s, 122, 124; Zimbabwe’s coalition collapse, 117, 124–125. See also Colonialism Working groups, South Africa’s, 10. See also Big Business Working Group World Bank: Doing Business survey, 213; early advocacy of state-business dialogue, 12–13; Zambia’s adjustment package, 59; Zimbabwe’s conversion to liberalization, 110, 111 World Trade Organization (WTO), 67, 184 Zambia: business and state strength in coalition emergence, 35–36; coalition decline and collapse under Kaunda, 59–62; deindustrialization, 68–72; economic adjustment, 15–16; economic change empowering the private sector, 86–88; export diversification, 72–76, 94(n53), 98(n136); failure of business-state coalitions, 4; formal and informal institutional coalitions, 9–10; historical origins of the economy, 56–59; impact of trade liberalization, 65–76; institutional strength and utility, 39(table); Kaunda’s corruption, 93(n23); manufacturing employment, 94(n66); Mwanawasa’s New Deal government, 83–86; nascent coalitions, 23; politicizing business-state relations, 79–83; postcolonial institutional strength of business associations, 32; private sector weakness, 208; privatization of state-owned enterprises, 76–79; SAP during the MMD transition, 62–63; state actors undermining private actors, 13–14; state-business responses to import competition, 65–72; state weakness undermining

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coalition emergence, 210–211; tariff structures, 95(n83); trade agreement negotiations, 94(n61); white colonial population, 91(n6), 92(n11) Zambia Associated Chambers of Commerce and Industry (ZACCI), 65–68, 77–80, 85–86, 92(n10) Zambia Association of Manufacturers (ZAM), 67, 74, 80–81, 87–88, 97(n128) Zambia Business Forum (ZBF), 1, 84–85 Zambia Consolidated Copper Mines (ZCCM), 77–78, 90 Zambia Cooperative Federation (ZCF), 61 Zambia Industrial and Commercial Association, 60 Zambia Industrial and Mining Corporation (ZIMCO), 92(n14) Zambia International Business Advisory Council (ZIBAC), 85–86 Zambia National Farmers’ Union (ZNFU), 61, 67, 74–76, 81–86, 93(n36) Zambian Farmer magazine, 82–83 Zambianization program, 58 Zambia Privatisation Agency (ZPA), 77, 96(n109) Zambia Revenue Authority (ZRA), 73, 95(n87) Zero Option coup plot, 80 Zidco Holdings, 135 Zimbabwe: business and state strength in coalition emergence, 36–37; CFUstate coalition, 120–124; chamber movement, 104, 142(n39); coalition collapse, 16; colonial history of, 57; colonial origins of business-state relations, 103–104; colonial origins of institutional strength, 104–107; corporatism without the state, 128–131; CZI’s inadequacy in restoring economic stability, 139–140; diminishing utility and coalition collapse, 124–128; distributional coalition, 132–136; economic contribution of agriculture and manufacturing sectors, 119(table); economic growth, decline, and collapse, 101–103, 125–128; economic trends by sector,

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123(table); ethnoracial political utility characteristics, 42; formal and informal institutional coalitions, 9–10; importance of coalitions in adopting economic reform, 203–204; increasing state power after ESAP, 116–119; institutional strength and utility, 39(table); institutional weakness leading to coalition collapse, 215; liberalization and institutional strength, 112–115; narrowing of business-state coalitions, 4; nascent coalitions, 23; pact-making, 45; political utility, 30; protection of white minorities’ businesses, 107–110; race as strength and vulnerability, 215–216; sanctions strengthening institutions, 31–32; state actors undermining private actors, 13–14; trade liberalization, 110–112; transition as factor in coalition formation, 29–30; white minority as factor in economic collapse, 138–139; Zambia’s’ manufacturers relocating to, 69; ZCTU as part of opposition, 127–128 Zimbabwe African National Union (ZANU): CFU-state coalition, 138–139; Lancaster House

agreement, 142(n27); looting War Victims Compensation Fund, 125–126; political opposition to, 127–128; post-ESAP coalition collapse, 116–118; privileging whites, 107–108; suppressing black businesspeople, 108–109, 142(n37); Zimbabwe’s transition to ZANU governance, 106. See also Zimbabwe Zimbabwe African Peoples’ Union (ZAPU), 106, 107–108, 142(n27) Zimbabwe Association of Business Organisations (ZABO), 110, 112, 118 Zimbabwe Chamber of Commerce, 142(n39) Zimbabwe Congress of Trade Unions (ZCTU), 126, 127–128 Zimbabwe Farmers’ Union (ZFU), 133 Zimbabwe National Chambers of Commerce (ZNCC), 129–132, 141(n18), 142(n39) Zimbabwe Programme for Social and Economic Transformation (Zimprest), 150(n195) Zimbabwe Tobacco Association (ZTA), 126–127, 142(n20) Zimbabwe United Chamber of Commerce, 142(n39) Zukas, Simon, 81

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About the Book

Why are productive, development-supporting relations between business and government still so rare in Africa? Scott D. Taylor addresses this question, examining state-business coalitions as they emerge, and endure or collapse, in three representative countries: Zambia, Zimbabwe, and South Africa. Taylor illuminates three possible trajectories: an abortive state-business coalition, as in Zambia; the emergence of a short-lived coalition, as in Zimbabwe; and a relatively successful and thus far durable coalition, as in South Africa. Though rooted in the southern African experience, his cases reflect much of the variance in outcomes throughout sub-Saharan Africa and shed light on the prospects for economic reform and development on the continent. Scott D. Taylor is assistant professor of African studies at Georgetown University. He is coauthor of Politics in Southern Africa: State and Society in Transition.

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