Commercial Farmers' Union of Zimbabwe

Commercial Farmers' Union of Zimbabwe

***The views expressed in the articles published on this website DO NOT necessarily express the views of the Commercial Farmers' Union.***

Court judgment deters investors

Court judgment deters investors

Friday, 18 February 2011 09:36

THE RECENT Supreme Court judgment on the constitutionality of State-Indebted
Companies and Reconstruction Act will further deter investors from doing
business in Zimbabwe as it proves that the country does not protect
individuals from losing their properties to the state, legal analysts have
Chief Justice Godfrey Chidyausiku and three other Supreme Court judges a
fortnight ago dismissed with costs a joint application by African Resources
Ltd (ARL), THZ and SMMH Zimbabwe contesting the constitutionality of the

Judges Mesheck Cheda, Paddington Garwe and Luke Malaba concurred with
Chidyausiku that the companies’ application had no merit and the law was
constitutional. Only Justice Wilson Sandura gave a dissenting judgment.
Sandura’s judgment is yet to be released.

The law allows the state to put under administration any company that is
deemed to be state-indebted and has likelihood to fail to repay its loans
because its management was involved in fraudulent activities or

State indebtedness refers to any loans or debts the company has to a
state-owned enterprise.

Legal analysts say the judgment reinforces the perception that Zimbabwe was
a country that did not provide protection of private property and it
introduced ad hoc laws to deal with commercial transactions that could be
handled by using existing legislation.

Scanlen & Holderness senior partner Sternford Moyo said the court’s decision
proved that individual rights in the country were not protected.

“All this reminds us that we do not, under the current constitution, have
much property protection.  Few will need to be persuaded to understand that
without adequate protection of property rights all efforts to inspire
investor confidence in our country will come to naught,” Moyo said. “

“The current constitution-making exercise should, consequently, have as
among its goals, the formulation of a stronger property protection clause
than Section 16 (of the current constitution), if we are to lift our country
from its current circumstances to greater prosperity.”

Moyo added that the current constitutional review process should take into
consideration protection of private property.

“The current constitution-making exercise should, consequently, have as
among its goals, the formulation of a stronger property protection clause
than Section 16,” Moyo added, “if we are to lift our country from its
current circumstances to greater prosperity.”

The Constitution of Zimbabwe Section 16 reads, “no property of any
description or interest, or right therein shall be compulsorily acquired
except under the authority of a law ….”

These exceptions include land for resettlement or any other property taken
in the public interest.

“The judgment is a disaster for investment,” a senior lawyer close to the
matter said, “Investors will continue to look at the political environment
stability and hope a new government will usher in respect of private
property and that that would mark an end to bad laws and judgments in the

The senior lawyer added that Zimbabwe had adequate laws to handle any
commercial disputes between and among business partners.

“No matter your offence, the government has no right to take over anyone’s
business,” the lawyer said, “Adequate laws to deal with these disputes, and
the David Whitehead case is a good example of handling liquidations, scheme
of arrangements and insolvency.”

The senior lawyer remarked that Sandura’s judgment should be fully analysed
and respected because his rulings invariably invite respect from law-abiding

Gutu & Chikowero Legal Practitioners senior partner and Senator, Obert Gutu,
said the Reconstruction Act was not good for business investment as it
paints a picture of state interference in private enterprise.

“The Reconstruction Act has the effect of unfairly introducing state
involvement in matters of commercial debt,” Gutu said. “Surely, if Zesa or
any other state-owned company is owed money by a debtor, there are adequate
legal avenues to enable the creditor to sue the debtor for the purpose of
recovering the debt.”

“The Reconstruction Act is a serious indictment on investment promotion and
more so, on the genuine and broad-based economic empowerment of historically
disadvantaged people,” Gutu added, “It is a draconian piece of legislation
that belongs to the Dark Ages particularly in a democratic nation that seeks
needs to stimulate foreign direct investment.”

The judgment is similar to the one passed by the same court on land
acquisition that was delivered in 2008. Chidyausiku, again, ruled that the
land acquisition cannot be contested in court by any aggrieved land owner
and the government would pay compensation when it has resources.

The judgment had a net effect of making investment in agriculture
unattractive to foreigners and locals alike.

Moyo said the Supreme Court judgment made investment in agriculture

“Agricultural land was effectively taken out of the realm of commercial
activity.  In an agro-based economy, this is a far-reaching development,”
Moyo said at an Economic Outlook Symposium held in Harare a fortnight ago.
“It does not make sense to buy agricultural land.  Consequently, it does not
make sense to take agricultural land as security for borrowings.  The
99-year lease is not freely transferable.  It cannot be auctioned by the
deputy sheriff to recover debts.”

Moyo added that Section 16 of the Constitution did not offer enough
protection to investors as their properties could be arbitrarily taken away
by the state.

He emphasised that under Roman Dutch Law, governments own the land “from
heaven to hell” and everything in between and therefore the business
community needs to lobby for restoration of agricultural land into the realm
of commercial activity.

Commercial Farmers Union, the umbrella board that represented the majority
of white former commercial farmers in the country, has since won an
application at the Sadc Tribunal in Windhoek, Namibia, ruling the land
expropriations illegal and racist.

Zimbabwe has, however, vowed not to respect the ruling of the tribunal they
say they did not recognise and therefore its decisions will not bind the

The analysts agree that the state actions are not consistent with upholding
the rule of law and protection of private property thereby making the
country less attractive to foreign and other serious investors. — Staff


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