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Indigenisation and Empowerment analysis: Second Edition
Derek Matyszak, Research and Advocacy Unit
June 16, 2011

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Introduction

The Indigenisation and Economic Empowerment (General) Regulations, 2010, Gazetted on the 29th January, 2010, with an effective date of 1st March 2010, have generated heated debate. The proclaimed objective of the Regulations is that every business with an asset value of or above a prescribed amount must, within five years, "cede a controlling interest of not less than 51% of the shares or interests therein to indigenous Zimbabweans" unless a lesser share, or longer period within which to achieve the indigenisation, is justified.

An "indigenous Zimbabwean" is defined in the enabling Act, the Indigenisation and Economic Empowerment Act [Chapter 14:33] as:

• any person who, before 18th April, 1980 was disadvantaged by unfair discrimination on the grounds of his or her race, and any descendant of such person, and includes any company, association, syndicate or partnership of which indigenous Zimbabweans form the majority of members or hold the controlling interest.

Given the racist policies of the pre-independence governments, this definition would exclude almost every white person and include every non-white person. In short then, the proclaimed intention of the Regulations is that all foreign-owned businesses and all businesses owned by white Zimbabweans or permanent residents valued at a prescribed amount cede a controlling 51% share to black Zimbabweans.

Justifications

The furore which accompanied the publication of these Regulations lies, in part, in the extremely tenuous political, ideological, and economic justifications for such a policy.

a) Ideology?

Land seizures in Zimbabwe which commenced after 2000 have some ideological traction in President Robert Mugabe's claim that the policy merely restores land, misappropriated from autochthonic Zimbabweans without recompense, to the rightful owners (even though in reality the vast majority of the seized land was bought after independence).

Similarly, an ideological argument can be developed that Zimbabwe's mineral resources belong to Zimbabweans as a whole rather than multi-national companies which leave Zimbabweans with but a large hole in the ground when the resource is depleted. The concomitant of this argument is that it is Zimbabweans as a whole that should benefit from the exploitation of mineral resources within Zimbabwe. This, in turn, suggests full or partial nationalisation of mining companies. However, there is no provision in the enabling Act for state control of mineral resources for the benefit of Zimbabwe as a whole. In fact, the Government is omitted from the definition of specified beneficiaries - indigenous Zimbabweans. Public companies and "any other business" are required to indigenise. This requirement seems to include state enterprises. The objective of the Act thus appears to be to place these mineral resources into the hands of individuals. However, a General Notice (114 of 2011) published at the end of March 2011 has been read as effectively nationalising mining enterprises through a requirement to transfer shares to state owned institutions. The Notice thus sits uncomfortably with the Act, as is discussed below. Regardless of the intent of the Act and interpretation of the Notice, the effect on capital flight is unlikely to be any different if the policy were one of (partial) nationalisation. In any event, issues relating to the exploitation of mineral resources would have been better addressed by amendment of existing legislation dealing with mines and minerals or an appropriate fiscal regime.

b) Redressing Historical Injustices?

It is difficult to advance any ideological justification similar to that for mineral resources as an explanation for the wide range of people and businesses caught in the net of the Regulations. To give but one example, for what reason should a white Zimbabwean, born at independence, who has successfully established a business in Zimbabwe after completing his or her education, and after much toil, sweat and competition with ZANU PF aligned entrepreneurs (who may have gained favoured access to government tenders and scarce foreign exchange) be compelled to transfer 51% of the fruits of his or her labour, possibly, and even probably, to those self same competitors? What debt does he or she owe to the "indigenous" Zimbabweans who will benefit from the transfer of the shareholding? Why should he or she carry the burden of empowering black Zimbabweans? Attempts to answer these questions suggest that all Zimbabwean whites and foreigners, regardless of their backgrounds and benefit or otherwise from past privilege, owe an indeterminate and indefinite debt to black Zimbabweans, simply on account of their race or alien status. A policy with this as its rationale perpetuates the very inequity (unfair discrimination on the basis of race or origin) which is supposedly the raison d'être of the Regulations.

In this regard, it is worth noting that the definition of "indigenous" in the Regulations differs markedly from the commonly understood or dictionary definition of the term:

• born of or produced naturally in a region; belonging naturally.

The term "indigenous" for purposes of the Act, repeated in the Schedules to the Regulations, thus has been chosen, not because it is the correct word to use, but to exploit insidious political and racial considerations. By excluding whites from the definition of "indigenous" in the Act, the suggestion, when combined with the dictionary definition or common understanding of the term, is that whites do not "belong naturally" in Zimbabwe. The correct word to describe the original inhabitants of a geographical area is "autochthonous" rather than "indigenous", though such a term could be construed as excluding the Ndebele, who arrived in Zimbabwe only about 60 years before white colonialists.

Remarkably, whether one is to be considered "an indigenous Zimbabwean" is determined under the Act by the criterion of having suffered discrimination on account of one's race before 18th April, 1980. There is no need for such discrimination to have taken place in (pre-independent) Zimbabwe or for the person to be a Zimbabwean, as the definition specifies "any person" rather than "any Zimbabwean citizen" as it ought. A black South African discriminated against before 18th April, 1980, under the system of apartheid in South Africa, thus qualifies as "an indigenous Zimbabwean" in terms of the Regulations and is entitled to the benefits of empowerment under the Regulations - although to define such a South African as "an indigenous Zimbabwean" is oxymoronic. The position applies in a less absurd manner if the South African who suffered discrimination in South Africa has acquired Zimbabwean citizenship. The effect of the definition is clearly not what the Legislature intended, but it is certainly what the Act provides.

The most accurate term to give effect to the stated intention of the Act in the definition of indigenous is "non-white". However, the title "Non-White Economic Empowerment (General) Regulations" probably would be unpalatably, though not entirely inappropriately, redolent of the terminology of apartheid South Africa. Merely to state the title makes it quite clear why the correct, but imprecise, term "non-white" was eschewed in favour of the incorrect and euphemistic term "indigenous". Political considerations will determine who is, and who is not, deemed to be "nonwhite" (and thus having suffered discrimination) for the purpose of being considered indigenous as defined by the Act. The spectre of legislation defining "white" and "non-white" and the deployment of apartheid South Africa's notorious "pencil test" is thus unlikely even if, as a matter of jurisprudential logic, necessary. Apartheid style scenarios emerge elsewhere. For example, it is reasonable to assume that the vast majority of buildings in Harare's central business district are owned by companies rather than individuals. Since the objective of the legislation is that the majority shareholding in these companies is held by non-white Zimbabweans, virtually the entire CBD will be an area for non-white controlled companies only - the Group Areas Act in apartheid South Africa had a similar effect.

The racially neutral wording of the definition of indigenous Zimbabwean fools none as to its racially biased effect. It is analogous to legislation which claims to be impartial on the basis that "its majestic equality forbids rich and poor alike to sleep under bridges, to beg in the streets, and to steal their bread."

The claim that it is appropriate that black Zimbabweans should own a controlling share of Zimbabwe's economy does not address this issue or justify the proposed means to achieve this. While some representatives of lobbying organisations such as the Affirmative Action Group have stated that the 51% share or controlling interest will have to be paid for at a fair price, this is not in fact provided for in the Regulations or Act. In fact, as will be seen below, the words "sell" and "buy" have been studiously avoided in both the Act and Regulations. The original requirement was that each non-indigenous company "cede" 51% of the shareholding "therein" to indigenous Zimbabweans. After it was pointed out that the term "cede" did not require that payment would be made for the shares, the first substantial amendment to the Regulations replaced the word "cede" with "dispose of". This alteration was meaningless in that it did not change the sense of the provision at all, and, at the same time, meaningful in that it clearly signaled the reluctance of the Minister to close the door on the possibility of requiring the compulsory transfer of shares without payment. The General Notice relating to mining, referred to above, appears to be further evidence of this intention.

It is clear that although the legislation has been couched as "indigenisation", suggesting a restoration of "sovereignty" and ownership to Zimbabweans, the definition of "indigenous" makes it clear that the law would be more correctly described as "black economic empowerment" legislation. This is different to "indigenisation" as the emphasis is upon correcting imbalances caused by past racist polices, rather than ownership and sovereignty. The drafters of the laws may have felt it impolitic to title the legislation as "black economic empowerment" some 30 years after independence, even though this would have more accurately reflected its substance.

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