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Amendment of Indigenisation Regulations - Bill Watch 25/2010
Veritas
June 28, 2010

Amendments to the Indigenisation Regulations were made by SI 116/2010, gazetted in a Government Gazette Extraordinary on Friday 25th June, effective immediately. [Electronic version of [1] SI 116/2010 and [2] Indigenisation Regulations updated to include the amendments made by SI 116, available on request.]

No changes are made to:

• the US$ 500 000 figure for the prescribed asset threshold
• the 30th June deadline for submission of Form IDG 01 and indigenisation implementation plans
• the 51% control target stated in the regulations.

Changes Made by the Amendments

“Cede” replaced by “dispose of”: Section 3 of the regulations originally called for every business above the prescribed asset threshold [US$500 000] to “cede” at least a 51% interest to indigenous Zimbabweans by March 2015. The amendment replaces “cede” with “dispose of” and defines this term as meaning “sell, donate or otherwise dispose of”. [The Parliamentary Legal Committee [PLC] objected to the word “cede”, with its implication of compulsory acquisition without proper compensation. The term also attracted criticism from legal commentators and stakeholders.]

“Asset value” replaced by “net asset value”: giving more precision on which businesses are affected by the Regulations. The original regulations targeted businesses with an “asset value” of or above US$500 000. The undefined term “asset value” was criticised as vague, and has now been replaced by the more satisfactory “net asset value”, defined as the difference between total value of assets and total value of liabilities.

Only businesses above $500,000 threshold to submit Indigenisation Plans: The original regulations were unclear on whether indigenisation implementation plans had to be submitted by all businesses or only by businesses above the US$500 000 asset value threshhold. An amendment clears this up – the new section 4(2) specifically states that only businesses above the threshold have to submit what are now called provisional indigenisation implementation plans.

Changes to form IDG 01 and other forms: Form IDG 01 [the form that must be submitted by 30th June by all existing businesses] is changed by the addition of new paragraphs requiring contact details for the business submitting the form and a statement of the “net asset value” of the business. Similar changes are made to Forms IDG 02, 03, 04 and 05.

Provision of Sectoral and Subsectoral Committees to advise the Minister: A new section 5A provides for the appointment by the Minister of sectoral and subsectoral committees, to be chosen from lists of nominees submitted to him by the Ministers responsible for various sectors and subsectors of the economy [these are defined as the sectors and subsectors listed in item 3 of Form IDG 01]. The committees will be chaired by members of the National Indigenisation and Economic Empowerment Board. The committees will advise the Minister on:

• appropriate net asset value thresholds and compliance periods for their sectors and subsectors
• credits towards meeting their indigenisation quotas that may be allowed to businesses for socially and economically desirable activities

Provision of rules for share ownership schemes or trusts: The rules cover ownership schemes or trusts for employees, management and communities. New sections 14, 14A and 14B allow businesses that have established such schemes or trusts in compliance with these rules to have this fact taken into consideration towards meeting their indigenisation quotas.

• Trust deeds will have to be registered with the Deeds Office.
• Community share ownership schemes are intended mainly to allow the residents of rural district council areas [which include communal lands] to benefit from businesses that exploit the community’s natural resources. Other distinct communities may also be the beneficiaries where a business exploits natural resources adjacent to a community’s place of residence.

Provision for purchase of shares by Indigenisation and Economic Empowerment Fund:

• The Fund will be the “purchaser of last resort” where a business wishing to dispose of shares in compliance with the regulations is unable to find a suitable indigenous purchaser, even with the assistance of the database of potential purchasers kept by the Ministry for the purpose.
• Where a business wishes to dispose of more than 28% of its shares to an employee share ownership scheme or trust, the Fund will have the right of first refusal to purchase the shares in excess of that percentage.

No indigenisation levy until passed by parliament

In May the chairman of the National Indigenisation and Economic Empowerment Board said an indigenisation levy would be coming “soon”. The levy can only be imposed by statutory instrument gazetted by the Minister of Youth Development, Indigenisation and Empowerment, but no such statutory instrument can be gazetted until the draft has been approved by the Minister of Finance and by resolution of both Houses of Parliament. [Indigenisation and Economic Empowerment Act, sections 17 and 18.]

Presidential Powers Act invoked to protect Reserve Bank from its creditors

SI 115/2010, gazetted on 18th June under the Presidential Powers (Temporary Measures) Act, makes the State Liabilities Act applicable to legal proceedings against the Reserve Bank [RBZ], including proceedings already commenced. [This is only the third resort to the controversial Presidential Powers (Temporary Measures) Act since the formation of the Inclusive Government. Like all SIs made under this Act, SI 115 will expire 180 days after its gazetting – i.e., on 18th December 2010.]

RBZ assets now immune from forced sale: Under the State Liabilities Act State property cannot be seized under court orders and sold to raise money to pay off creditors. So the main effect of this SI will be to stop court-ordered auction sales of RBZ property to satisfy debts owed to its many creditors. [Both the Minister of Finance and the Attorney-General’s Office have previously said that the sales that have already taken place were illegal because RBZ assets are State assets. This SI will give the Government and the new RBZ board breathing space in which to organize the management of the RBZ debts problem.]

New procedures for legal cases against RBZ: Another effect will be to require RBZ creditors to follow special notification procedures before launching legal actions against RBZ. [Electronic versions of SI 115 and State Liabilities Act available on request.]

Judicial Service Act now In force

As foreshadowed in Bill Watch 23 of 12th June, SI 114/2010 fixed the 18th June as the date of commencement of the Judicial Service Act. [Electronic versions of SI and Act available on request.] As a result the Judicial Service Commission [JSC], not the Public Service Commission, now has responsibility for appointing, promoting and disciplining magistrates and fixing their conditions of service [see Bill Watch 23].

Civil society comment on this development has cautiously welcomed its potential for building a truly independent judiciary. There has also been a call for changes to the JSC’s composition and method of appointing of its members, given that the present constitutional provision [see below] leaves the appointments in the President’s discretion. [This is a point that needs to be taken up in the constitution-making exercise now at last under way.]

JSC membership is laid down by section 90 of the Constitution:

• 3 ex officio members: the Chief Justice [or in his absence the Deputy Chief Justice] as chairperson, and the chairperson of the Public Service Commission, and the Attorney-General [all of whom are appointed to the full-time posts by the President.]
• 2 or 3 members appointed by the President: [one of the appointed members must be a judge or former judge, a lawyer of at least 5 years’ standing or otherwise legally qualified] Currently Sternford Moyo and Canaan Dube, senior lawyers in private practice, fill two of these places. It has been customary for the Judge President to be the third appointed member, and Justice Makarau was on the JSC until her elevation to the Supreme Court. It is not yet known whether Judge President Chiweshe will be appointed a JSC member.

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