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February 10, 2010
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.
main objective is to achieve 51 percent indigenous shareholding
in existing businesses with the owners given a five-year period
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
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.
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
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.
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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