‘Indigenisation loopholes open to challenges’
http://www.theindependent.co.zw/
Thursday, 14 April 2011 21:40
Chris Muronzi
GOVERNMENT could have exposed itself to legal challenges amid legal
consensus that the controversial Indigenisation and Economic Empowerment Act
and regulations violated constitutionally enshrined rights.
Legal representations made to the Chamber of Mines’ executive committee by
legal gurus Nick Willsmer and Sternford Moyo show that the empowerment laws
were ambiguous. The lawyers question the underlying premise of Zimbabwe’s
system of rights such as property rights, freedom of association and freedom
of expression.
Willsmer said definitions contained in the Act and regulations were
“poorly-drafted” with several legal loopholes.
He said: “The poorly-drafted definition of ‘controlling interest’ in
relation to any business other than a company is so broad as to be
nonsensical. The definition of ‘indigenous Zimbabwean’ and the general
application of the legislation are not restricted (as they could have been)
by references to citizenship of or residence in Zimbabwe, as was the case
with the Immovable Property (Prevention of Discrimination) Act No 19 of
1982, Section 5 (3) of that Act.
“There is no question, of course, that black persons who were born in
Zimbabwe qualify as indigenous Zimbabweans. Can it be said, however, that
persons of mixed race or other races who were born in Zimbabwe were born
‘naturally’ in the region? The poor definition of ‘indigenous Zimbabwean’
allows a Maori who suffered unfair discrimination in New Zealand as a result
of his or her race to qualify as an indigenous Zimbabwean.”
Willsmer said the term “indigenous Zimbabwean” was misleading arguing that a
“person who qualifies as an ‘indigenous Zimbabwean’ need not be either
indigenous or Zimbabwean”.
“The power apparently given by Section 3(1) (a) to publish regulations and
other measures (apart from statutes) which endeavour to secure indigenous
ownership of at least 51% of the shares of every business in the country is
a very wide one indeed, not least because it apparently allows the
indigenisation of all businesses which do not meet any net asset value
threshold whatsoever. The constitutionality of this apparent grant of power
has not been tested,” he said.
He said the question of whether the Act or the regulations were
“constitutionally permissible” and “legally binding” needed to be considered
and decided by the courts.
Willsmer said Section 25 of the Global Political Agreement could be
interpreted to mean that legislation such as the regulations should first be
presented and accepted by cabinet irrespective of the fact that it is a
subsidiary legislation and that it must then be presented to and approved by
parliament.
Prime Minister Morgan Tsvangirai was of the same view when Indigenisation
minister Saviour Kasukuwere gazetted the first regulations in January 2009.
He dismissed the regulations as “null and void” saying prior cabinet
approval and parliament had not been obtained.
Willsmer added that although Tsvangirai has not maintained this stance, his
original stance could still be legally correct.
“Even if retrospective decisions were taken by the Prime Minister and the
Cabinet (but not by Parliament) to approve the Regulations, this would not
legitimise the regulations if they were unconstitutional in the first
place,” he said.
Willsmer said an “indigenisation implementation plan” was not a legally
binding undertaking but a mere “proposal.”
“Section 3 of the Regulations says that the general objective of the
Regulations is that “every business of or above the prescribed value
threshold” is to be indigenised within five years.
“Section 3 is poorly-drafted,” said Willsmer.
He said the section supposes future disposals by businesses of controlling
interests while at law businesses cannot dispose of shareholding saying
“interests” can only be disposed of by the owners of such interests.
He added that companies cannot compel their shareholders to transfer their
shares at law.
“Subject to whatever rights of preemption may apply in respect of private
companies, companies cannot control share transfers and shareholders who
transfer their shares may well thereby upset the resulting ratio between
indigenous and non-indigenous shareholders,” he added.
Willsmer said it would be impossible to ensure that a company whose shares
are traded daily on a stock exchange is 51% owned by indigenous Zimbabweans.
He also attacked a section which states that if a valuation arranged by
Kasukuwere showed that a business undervalued its net asset value by 10% or
more, the business would be guilty of an offence and liable to a fine of up
to level 12 or imprisonment for up to five years saying a “a business cannot
be imprisoned”.
He said the introduction of official “designated entities” as the recipients
of mining interests was in conflict with the “plainly-stated” purpose of the
Act to empower indigenous Zimbabweans, arguing official bodies “do not
qualify as indigenous”.
He noted that the compulsory transfer of mining interests was the
“equivalent of nationalisation.”
Moyo, a senior partner at Scanlen & Holderness, also blasted a clause in the
regulations that gives Kasukuwere the discretion to come up with valuations
of companies by taking into account the state’s “sovereign rights” to
minerals as an attempt to ensure that “little or nothing” was paid for the
shares.
He added that the regulations’ provision that Kasukuwere can impose partners
on mining companies violated freedom of association protected by Section 21
of the constitution. Moyo also said freedom of expression would be trampled
underfoot should government compel companies to submit empowerment plans.
He said: “Section 20 of the constitution enshrines freedom of expression.
That freedom includes the right not to communicate if one does not wish to
do so. The constitution does not, therefore, provide for submission of
empowerment plans. Consequently, the duty to produce a plan within 45 days
appears to be challengeable.”