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Racketeering by regulation
Research and Advocacy Unit
June 22, 2011

http://www.researchandadvocacyunit.org/index.php?option=com_docman&task=cat_view&Itemid=90

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Summary

This is a brief guide to the detailed paper issued earlier on the Indigenisation debate. Here see "Everything you ever wanted to know (and then some) about Zimbabwe's Indigenisation and Economic Empowerment Legislation but (quite rightly) were too afraid to ask. Second Edition, May 2011"

Validity

The legal validity of the Regulations is open to challenge on several grounds:

  • The Act (and thus the Regulations) may be held to offend the Constitution in several ways. They 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. 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.
  • The appointment of the maker of the Regulations (the Minister of Youth Development, Indigenisation and Economic Empowerment, Saviour Kasukuwere) is itself questionable. 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 him.
  • 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 transactions. 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 factors. 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.

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