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Indigenisation regulations gazetted
Fanuel Kangondo, Herald (Zimbabwe)
February 10, 2010

http://www.herald.co.zw/inside.aspx?sectid=15256&cat=8

Government has gazetted the Indigenisation and Economic Empowerment (General) Regulations 2010, which spell out the country’s indigenisation policy and take effect on March 1 this year.

The regulations’ main objective is to achieve 51 percent indigenous shareholding in existing businesses with the owners given a five-year period to comply.

Youth Development, Indigenisation and Empowerment Minister Saviour Kasukuwere has repeatedly told stakeholders that the law was not against foreign investment and neither was it designed to scare away investors.

It had widely been misinterpreted as a way of chasing away foreign investors from Zimbabwe with others saying that it was nationalisation or expropriation of foreign-owned businesses.

There is room in the new regulations for each case to be treated on its merits, particularly considering the five-year spread to comply.

New investors will also be given five years from the date of commencement of business to comply with the regulations.

The regulations require that all existing businesses with a threshold of US$500 000 should within 45 days from March 1 2010, declare their shareholding status to the responsible minister through a prescribed form. New businesses will also be required to comply within 60 days.

Businesses that do not meet the 51 percent indigenisation requirement will be expected to submit a plan on how they intend to meet the requirements within 45 days from March 1.

Those with acceptable reasons will be afforded an extension not exceeding 30 days to furnish the authorities with their indigenisation implementation plans.

Every business will be required to notify the responsible minister the extent of present and future compliance with indigenisation requirements as spelt out in the new regulations.

"After considering submissions by businesses and information gathered, the minister shall within 12 months from the date of commencement of these regulations publish by notice in the Government Gazette the minimum lesser share that the required 51 percent indigenous shareholding in terms of the Act and the maximum period a business may operate with a lesser share until full compliance with the 51 percent indigenous shareholding requirement of the Act."

Among some of the considerations for a longer period for compliance is whether the business has undertaken or intends to undertake development work in the community within which it operates.

Transfer of new technology to Zimbabwe and the magnitude of the investment can also be considered as an exception.

Other factors that can be considered include utilisation of local skills or imparting of new skills to locals and beneficiation of raw materials extracted in Zimbabwe to a specified extent.

The Ministry of Youth Development, Indigenisation and Empowerment will keep a database of persons wishing to identify any indigenous Zimbabwean to acquire a controlling interest or lesser interest in his or her business and indigenous Zimbabweans wishing to partner a non-indigenous investor.

In the event of a successful pairing, the names are removed from the database, part of the regulations read.

The regulations also encourage employee share ownership schemes or trusts to be established and these will be taken into account in assessing the extent to which a business complies with the requirements of the Act.

Such schemes shall be constituted through a deed of trust with employees holding at least 5 percent of the shares in a business.

There will also be consideration for indigenisation of merged or restructured businesses whereby the minister will be furnished with the indigenisation plans of the concerned parties but with due regard to the 51 percent indigenous shareholding required under the Act.

The minister may also consider under special circumstances an application where the share held by indigenous Zimbabweans in the resultant merger or restructured business is less than the prescribed 51 percent.

The ministry has also reserved some sectors of the economy for investment by indigenous Zimbabweans and entry into these sectors will require approval from the minister and the Zimbabwe Investment Authority.

The sectors reserved for locals include agricultural production of food and cash crops, transport (buses, taxis and car hire services), retail and wholesale trade, barber shops, hairdressing and beauty salons.

Others are employment agencies, estate agencies, valet services, grain milling, bakeries, tobacco grading and packaging, tobacco processing, advertising agencies, milk processing and provision of local arts.

Minister Kasukuwere’s office will be required to carry out an annual audit to assess the extent of indigenisation of the business concerned, the specific sector of the economy and the economy as a whole.

There will also be considerations for applications where controlling interests in businesses are relinquished, and domestic or foreign investor projects that will also be subject to approval by the minister.

The regulations spell out that the supply of goods and services should be sub-contracted to businesses whose controlling interests are held by Zimbabweans.

Contractors who fail to abide by the minister’s directive to sub-contract indigenous Zimbabweans shall be guilty of an offence and liable to a fine and/or imprisonment not exceeding five years.

To guard against the abuse of the regulations, fronting and furnishing of false information in the declaration form or indigenisation plan will be considered a criminal offence punishable by a fine not exceeding level 12 or imprisonment not exceeding five years or both.

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