BIZ Bulletin November 2009(1) Suppl. Business Information Zimbabwe
IndigenisationIn previous bulletins in this series, most recently on page 3 of the October 2009(1) bulletin sent to you on 5th October, we summarized the four limited circumstances in which the authorities might insist on 51% ‘indigenisation’. For the record, indigenisation is defined in section 2 of the Indigenisation & Economic Empowerment Act (Act 14/2007; Chapter 14:33 of the Statute Law) to mean ‘a deliberate involvement of indigenous Zimbabweans in the economic activities of the country to which hitherto they had no access’ (which would seem to exclude all politicians). Indigenous Zimbabwean means ‘any person who before Independence was disadvantaged by unfair discrimination on the grounds of his or her race – and any descendant (still looking after the extended family, I see) and includes any (organization) of which indigenous Zimbabweans… hold the controlling interest’ (which seems to contradict the hitherto-no-access premise above).
Anyway, moving on, the four limited circumstances where the authorities may ‘withhold approval’ are as follows –
(1) circumstances where a merger/restructuring/acquisition of controlling interest might interest the anti-monopolies Competition Commission
(2) circumstances where a de-merger/unbundling will result in the value of any resulting business rising above a certain value (still to be specified in statutory instrument – see rumoured figure of US$500 000 below)
(3) relinquishing the controlling interest in a business (except by donation or disposal ‘otherwise than for value’ to a family member, partner or shareholder in a private company or partnership) where the value of the controlling interest rises above a certain threshold (still to be specified in statutory instrument), and
(4) circumstances where investment in prescribed sectors requires an investment licence. These are laid down in section 3 of the Act.
If you do none of these things, indigenisation does not arise. Could there be stronger reasons to do nothing? And is that what is needed now? Recently there have been various and conflicting press reports about looming legislative developments on the indigenisation front. In our view, this is largely hot air at present, part of political gamesmanship and with one party casting an eye at a particular congress-bound constituency next month.
One such press report refers to ‘a draft document supposedly meant to amend the Indigenisation & Economic Empowerment Act… (proposing) indigenous Zimbabweans should own 51% of all foreign-owned companies… with asset values crossing US$500 000’. Any such document to amend an Act would need to be published as an Amendment Bill with the Government Gazette, debated and passed by Parliament and assented to by the President. It seems unlikely that any such Bill would pass through the House of Assembly.
Another press report refers to draft Indigenisation & Economic Empowerment Regulations to be eventually published as a Statutory Instrument with the Government Gazette. The wording is both oblique and convoluted (see examples below) – and displays ignorance of the relationship between subsidiary legislation, such as an SI, and its parent Act. For these and the reasons mentioned above, we are inclined to doubt these regulations are impending. Here follow examples of obliquity and convolution.
Oblique – The Indigenisation & Empowerment Minister shall be empowered to effect a merger or restructuring of a sector… (A neat trick if he could do it – but how?).
Convoluted –Any business that fails to enter into a transaction shall within the next 30 days submit a proposal within the next 6 months (what?).
The most important point is that the rumoured regulations purport to force businesses to enter into one of the four transactions mentioned in the third paragraph of this article above. However, that is not what the Act requires – and a mere minister cannot change an Act of Parliament by means of a statutory instrument. So our advice is to consider the source, take it with a large pinch of salt and carry on as before.
New ‘prescribed rate of interest’ for debtsOf more moment is SI 164 of 2009 gazetted on 23rd
October 2009 as the Prescribed Rate of Interest Notice, 2009. Formerly the rate of interest on overdue court-judgment debts in terms of SI 217/2000 was 30% p.a. and – in terms of new section 9 inserted into the Prescribed Rate of Interest Act (Chapter 8:10 of the Statute Law) by the Finance (No. 2) Act, 2007 from January 2008 – the in duplum rule whereby interest could not exceed the original debt was deemed not to apply to judgment debts. Belatedly catching up with multi-currencying, SI 164/2009 now prescribes the rate of interest on judgment debts as 5% p.a. The in duplum suspension apparently remains in place for the time being – but at 5% who cares?