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Indigenisation Regulations, extension of deadline to 30th June – Bill Watch 20/2010
Veritas
May 19, 2010

The Senate has adjourned until Tuesday 15th June, The House of Assembly has adjourned until Wednesday 30th June

Indigenisation Regulations: Extension of Deadline to 30th June Gazetted

SI 95/2010, gazetted on 14th May, [electronic version available on request] extends the deadline for businesses to submit their IDG 01 forms and indigenisation implementation plans. The original deadline of 15th April was extended to 15th May by Ministerial announcement and SI 95 extends it to 30th June. SI 95 also gives new businesses 75 days in which to submit form IDG 01 and indigenisation plans, in place of the 60 days allowed by the original regulations. It is only after the new deadline elapses, that the Minister of Youth Development, Indigenisation and Empowerment [Minister Kasukuwere] can take formal steps to compel non-compliant businesses to submit their forms and plans by serving notice on them to do so. And, it is only when there is non-compliance after notice has been served that a business can be prosecuted [see Bill Watch 17 of 16th April for more detail]. [Also available – updated electronic version of complete Indigenisation Regulations incorporating SI 95.]

Still No Other Amendments

The amendment agreed between the Parliamentary Legal Committee [PLC] and Minister Kasukuwere has still not been gazetted. This amendment would change the word “cede” in section 3, which was widely perceived as connoting takeover without compensation and which the PLC deemed unconstitutional. Minister Kasukuwere has said the word “cede” had been misconstrued and that what was intended was “a fair transaction where full value is compensated for”. Unless this amendment is made, however, the PLC will return an adverse report, in which case, if both Houses support the PLC report, that section of the regulations will be nullified.

Other amendments that have been talked about, such as increasing the asset threshold of companies to be indigenised, etc, have moved closer to gazetting, with the news that they were being considered by the Cabinet Committee on Legislation on 13th May. A recent statement by the Minister said some amendments may be gazetted by the end of the month but these are not yet at the printers.

When is the Minister Empowered to Cancel Licences?

Minister Kasukuwere has been reported as claiming that as well as prosecuting non-compliant businesses, he also has the power to cancel trading and similar licences held by businesses that do not submit their IDG 01 forms and indigenisation plans when given notice to do so. In fact the Minister has no such power. While there is a section of the Indigenisation and Economic Empowerment Act [IEE Act] that deals with cancellation of licences [section 5], it does not provide for cancellation of a licence where a business fails to submit its form IDG 01 and indigenisation plan. It allows the Minister to have licences cancelled only where certain transactions – such as mergers or unbundlings of businesses, or transfers of controlling interests – take place without prior notification to the Minister.

Do ALL Businesses Have to Submit Indigenisation Plans?

A Bill Watch reader questioned the statement in Bill Watch 6/2010 that the obligation to submit an indigenisation implementation plan applies only to businesses with an asset value of more than US $500 000 that are not already majority-owned by indigenous Zimbabweans. He points out that section 4(2) of the Indigenisation Regulations requires "every business” not already indigenised to submit an indigenisation plan and does not specifically say that this refers only to businesses with an asset value of more than US $500 000. This is true, but section 4(2) also says that the plan must be submitted “together with Form IDG 01”. Therefore it seems the better interpretation is that only businesses above the US $500 000 threshold have to submit indigenisation plans, because:

  • Only firms with assets exceeding US $500 000 are specifically required to submit Form IDG 01 [so the clear implication is that smaller firms are not required to do so].
  • Section 3 of the regulations states that their purpose is that "every business of or above the prescribed value threshold" [this is the $500 000 limit] must cede a controlling interest to indigenous Zimbabweans. If that is the objective of the regulations, there seems no point in requiring smaller businesses to submit indigenisation plans to the Minister – because it is not, apparently, the object of the regulations for their plans to be implemented.

National Indigenisation and Economic Empowerment Board Proposals

Proposed Indigenisation Levy

The chairman of the National Indigenisation and Economic Empowerment Board [NIEE Board], Mr David Chapfika, announced recently that consultations among stakeholders about imposing an indigenisation levy on companies had reached an advanced stage and that the levy would come “soon”. The IEE Act allows for levies “on any private or public company or any other business” [IEE Act, sections 17 and 18]. A levy is imposed by the Minister by gazetting a statutory instrument but certain preliminaries must precede the gazetting:

  • the approval of the Minister of Finance must be obtained; and
  • the draft statutory instrument must be laid before and approved by resolution of Parliament [meaning both Houses of Parliament], something that cannot be completed until after the House of Assembly resumes sitting on 30th June.

The statutory instrument imposing a levy must specify on what basis it is calculated, who must pay it, how it will be collected, etc. Levy proceeds must go into the National Indigenisation and Economic Empowerment Fund [NIEE Fund], which is administered by the NIEE Board. The objects of the NIEE Fund include providing financial assistance to indigenous Zimbabweans for “the financing of share acquisitions, the warehousing of shares under employee share ownership schemes or trusts and management buy-ins and buy-outs” and for “business start-ups, rehabilitation and expansion” [IEE Act, section 12].

Setting-up of Sectoral Committees of NIEE Board

Mr Chapfika has also announced the formation of 13 sector-specific committees of the NIEE Board to be chaired by Board members. He invited sector stakeholders to put forward names of persons to sit on the committees, which will assist the Board in advising the Government on indigenisation. The sectors are: mining; energy; agriculture; manufacturing; construction; financial services; tourism and hospitality; education and sport services; trading; arts, entertainment and culture services; telecommunications and ICT. More committees may be formed if needed. These committees will be able to suggest amendments to the regulations.

Legislation Update

Bill Gazetted

Zimbabwe National Security Council Amendment Bill [gazetted Friday 14th May]. This short Bill seeks to make the Ministers responsible for national security and justice members of the NSC. [Electronic version available on request.]

Bill Being Printed for Presentation in Parliament

Criminal Law (Protection of Power, Communication and Water Infrastructure) Amendment Bill: Veritas will make a copy available once the Bill has been gazetted.

Public Order and Security [POSA] Amendment Bill

Mr Gonese’s Private Member’s Bill awaits continuation of the Second Reading debate when the House of Assembly resumes on 30th June.

Statutory Instruments Gazetted 14th May

SI 95/2010 amends the Indigenisation Regulations [see above].

SI 94/2010 amends the recently-gazetted statutory instrument listing the numbers of “special interest appointed councillors” to be appointed to urban councils by the Minister of Local Government, Rural and Urban Development. The effect is to change the number of appointed councillors for the Chiredzi Town Council [from 2 to 3] and Marondera Municipal Council [from 3 to 2]. [Electronic versions of both SIs available on request.]

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