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and Empowerment analysis: Second Edition
Research and Advocacy Unit
June 16, 2011
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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.
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.
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.
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).
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,
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.
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:
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.
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.
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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