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.***

Indigenisation loopholes open to challenges

‘Indigenisation loopholes open to challenges’

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 
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 
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.”


Govt amends Indigenisation Act

Govt amends Indigenisation Act | The Chronicle   Minister Patrick Chinamasa Oliver Kazunga, Senior Business ReporterGOVERNMENT has amended the Indigenisation and Economic Empowerment Act in line

Read More »

Govt, BAT in agric empowerment drive

Govt, BAT in agric empowerment drive February 9, 2017 Features, Opinion & Analysis Sydney Kawadza Senior Features WriterIn 1995, Laxer Matemayi completed her Ordinary Level education

Read More »

Joint Venture Act gazetted

Joint Venture Act gazetted June 1, 2016 Business Martin Kadzere : Senior Business Reporter THE Joint Venture Act, expected to promote major investment across economic sectors, came

Read More »

New Posts: