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“Racketeering by regulation,” Indig Act unconstitutional – RAU

“Racketeering by regulation,” Indig Act unconstitutional – RAU

The legal validity of the indigenisation legislation plan that aims to 
transfer the majority control of foreign mining firms to locals is open to 
legal challenge on many fronts.
Chief Reporter

The relevant act could be unconstitutional in several ways, says a report 
released last week by the Research and Advocacy Unit.

“They (regulations) violate the freedom of association and (if implementing 
provisions are put into place, as has purportedly been done in the case of 
mining companies) violate protections against the compulsory deprivation of 
property, as well as equality clauses,” says the report, entitled 
Racketeering by regulation.

“The first two constitutional provisions do not provide for any derogation 
from the rights protected on the grounds of an ‘affirmative action 
programme’, and while the last does, it is doubtful that the scheme 
envisioned by the Minister could be held to be such a programme.”

Zimbabwe’s mining companies have complained that the new government plan was 
silent on the commitment of designated entities to pay for the shares by 
September 25, raising fears the government wanted to expropriate the mines 
for free.

The minister of Indigenisation, Saviour Kasukuwere, who has been Zanu (PF)’s 
point-man on the legislation, disregarded recommendations of the Mining 
Sector Committee on Indigenization, which recommended 26 percent direct 
equity, 10 percent to communities in the form of a tax on gross profit and 
15 percent through social credits.

RAU said the regulations vest massive discretionary powers in the hands of 
the minister, which are open to challenge.

“The appointment of the maker of the regulations (the minister of Youth 
Development, Indigenisation and Economic Empowerment, Saviour Kasukuwere) is 
itself questionable,” RAU says.

“Zimbabwe’s Constitution provides for the appointment of 31 Ministers only.

Kasukuwere is one of the 10 ministers appointed beyond this quota. If his 
appointment is held to be invalid then so too may be any regulations made by 

Dubious decision

Principals in the GNU expanded the size of Cabinet after the GPA limiting 
the number of ministers to 31 to accommodate cronies such as Kasukuwere. The 
appointment of the 10 extra ministers was challenged in the High Court, and 
is currently being appealed after a dubious decision by the Judge President, 
Justice George Chiweshe.

The RAU said the Act only empowers the minister to make regulations 
governing indigenisation in respect of businesses which are merging, 
de-merging, restructuring, relinquishing a majority shareholding or similar 

“It does not grant the minister the power to make wide ranging regulations 
governing indigenisation for all non-indigenous business enterprises in the 
manner in which the Minister has arrogated to himself. Specific sections of 
the regulations are either ultra vires the Act, internally contradictory or 
unintelligible, and thus legally unenforceable, or any combination of these 
No control

“Many of these problems arise from the fact that the regulations seek to 
compel companies to do that over which they have no control; i.e. to dispose 
of shares which they do not own. Shareholders, and not companies, own 
shares. The legislative difficulties which arise are particularly acute in 
the case of publicly listed companies.

This problem is itself symptomatic of the fact that the minister has 
arrogated to himself the right to make regulations for all non-indigenous 
businesses, and not merely those undertaking specific transactions as 
provided by the act.”

Irene Petras, the Zimbabwe Lawyers for Human Rights executive director 
concurs that the regulations are open to legal challenge.

“The regulations are, in a number of instances, ultra vires the Act, and 
there are strong and persuasive legal arguments to indicate that there has 
been unlawful delegation of the legislative function to the minister,” 
Petras says.

“The minister is empowered through the regulations to apply these criminal 
sanctions at his whim, even for the most simple and unintentional breaches 
of certain procedural provisions, and clearly this can only lead to an abuse 
of powers with impunity. Indeed, one is left with a vague discomfort about 
what appears to be an abuse of broad principle to achieve something other 
than social justice through the promulgation of the Regulations.”

Petras says the manner in which the definition is laid out has not, however, 
been correctly drafted, and is open to an interpretation wherein even a 
non-Zimbabwean who suffered disadvantage prior to 18th April 1980 may claim 
that they can benefit in terms of the regulations.

“This flows from the definition of an ‘indigenous Zimbabwean’ being ‘any 
person’ who was disadvantaged prior to 18th April 1980, rather than ‘any 
Zimbabwean’,” Petras said.

The mixed race and coloured community has already lodged its objection with 
Vice President Joice Mujuru protesting their characterisation in the 
regulations as “aliens.”

RAU’s observations also dovetail with the Chamber of Mines president Victor 
Gapare that the regulations grant the minister wide powers that are subject 
to challenge.

Like many other economic observers, Gapare said the move was likely to 
discourage foreign investment. “The minister has decided to fast track 
indigenization without taking into consideration the negative consequences 
on investment and growth.

If a mining company cannot lay claim on the reserves or other inferred 
resource, it is not possible to raise capital,” he said.

Analysts said impoverished Zimbabwe does not have the money to buy 
controlling stakes through the investment vehicles. –
What the Act says

According to a government gazette extraordinary dated March 25 announcing 
the requirements for the mining sector to comply with the indigenization 
law, all foreign owned mining firms with a net asset value of more than US$1 
shall dispose of 51 percent of the shares to indigenous Zimbabweans.

The gazette says the disposal of the shares to indigenous Zimbabweans must 
be completed within a period of six months or by September 25 2011. 
Previously, a compliance period of five years had been given in Statutory 
Instrument 21 of 2010.


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