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PM disowns Kasukuwere public notice to mining companies: Not government policy - Bill Watch 16/2012
Veritas
April 06, 2012

The Prime Minister has released a statement rejecting a public notice by the Minister of Youth Empowerment, Indigenisation and Empowerment to “non-compliant” mining companies

The Minister’s Public Notice

The “public notice”, headed by the Zimbabwe coat of arms, appeared in newspapers on 5th April as an advertisement over the signature of the Minister of Youth Development, Indigenisation and Economic Empowerment. It reads as follows:

PUBLIC NOTICE TO ALL MINING BUSINESSES WHICH ARE NOT COMPLIANT WITH THE PROVISIONS OF GENERAL NOTICE 114 OF 2011

1. Government published the General Notice 114 of 2011 on the 25th of March 2011, which represents the legal framework for the indigenisation of the mining sector.

2. The Notice defined the minimum indigenisation and empowerment quota as 51%. The Notice required that disposal of the required equity must be to defined “designated entities”, which are as follows:

• The National Indigenisation and Economic Empowerment Fund.
• The Zimbabwe Mining Development Corporation
• A Statutory Sovereign Wealth Fund/the National Indigenisation and Economic Empowerment Fund
• Employee share ownership scheme and Management share ownership schemes or Community share ownership schemes or trust.

3. The notice applied to all mining businesses in which 51% equity or controlling is not held by indigenous Zimbabweans and whose net asset value is at least $1, i.e., all non-indigenously owned mining businesses had to comply with the provisions of this notice by 25th September 2011.

4. All mining companies that have not complied with this notice should note that 51% of their shareholding is now deemed to be owned by the State and any business transacted in respect of this 51% shall have been transacted on behalf of the Government of Zimbabwe with effect from the deadline stipulated in the said General Notice 114 of 2011, which deadline for the avoidance of doubt was 25th September 2011.

5. Any profits accruing to this 51% should be regarded as property of the State and any losses incurred will be charged against the company's assets, less the 51% indigenised portion, for any company that transacts without Government involvement with effect from 25th September 2011.

6. Companies are hereby advised that they are now dealing with assets of the State in respect to the 51% indigenised portion and any attempt to defraud the State will result in prosecution.

7. The Government of Zimbabwe, through the Ministry of Youth Development, Indigenisation and Economic Empowerment, enjoins all Zimbabwean citizens, top management, middle management, technical support staff and the general workforce of the companies involved that they are now expected to defend the Zimbabwean 51% equity stake and also to uphold and execute the national interest in respect of the administration, trade and any other business transactions so as to ensure total indigenous economic empowerment.

[signed] S. Kasukuwere

Honourable S. Kasukuwere (MP)

MINISTER OF YOUTH DEVELOPMENT, INDIGENISATION AND ECONOMIC EMPOWERMENT

Prime Minister’s Rejection of the Minister’s Notice:

Within hours of the appearance of the Minister’s notice, the Prime Minister’s Office released an official statement rejecting the Minister’s publication of the notice as surreptitious and unauthorised and categorically stating that the notice does not state Government policy. For affected mining businesses and members of the public the Prime Minister had this to say:

Businesses should ignore Kasukuwere’s notice

The Minister of Youth Development, Indigenisation and Economic Empowerment today issued a notice announcing that all mining firms that had not complied with the indigenisation regulations by the September 2011 deadline should assume that 51 per cent of their shares and proceeds of their transactions now belongs to the Government with effect from that date.

The Prime Minister would like to inform the public that there is no such Government position. That issue has not been discussed and agreed upon by Government. The Prime Minister wishes to inform the public in general and mining firms in particular that the inclusive Government has not sanctioned the Minister’s actions that are a threat to investment in the industry.

The Indigenisation and Economic Empowerment Act does not empower the Minister to unilaterally nationalise private entities and there is no reason to create panic among investors by projecting the image of a voracious government keen to grab compulsorily people’s companies without compensation. It is not the policy of this Government to nationalise the mining businesses or any other business.

The Prime Minister of Zimbabwe has executive powers and the Constitution of Zimbabwe bestows him with the authority to oversee and supervise “policy formulation and implementation.” The Government forum that deals with implementation of Government policy is the Council of Ministers, which has not discussed or approved the purported Government position captured in the public notice.

The Prime Minister notes with concern that the Minister chose not to attend the Council of Ministers on Tuesday, an executive forum of Government, only to surreptitiously publish a notice with far reaching economic consequences without consensus. The Prime Minister would like to inform mining entities that, should anyone or any institution be it private or public, attempt to enforce Minister Kasukuwere’s pronouncements, they would be doing so unlawfully and without the mandate of the Inclusive Government.

The Prime Minister takes a serious view of the Minister’s attempts to incite the public to act unlawfully against mining businesses. The Minister’s statement poses a real risk of creating anarchy in the industry and the PM will take corrective measures within the proper fora and channels of Government.

National economic interests of Zimbabwe demand a proper policy that creates jobs for the millions of unemployed people in the country. They want massive investment in the country and not a political campaign platform that will only benefit the elite at the expense of the majority of the people in the country.

Luke Tamborinyoka Spokesperson Office of the Prime Minister

No Legal Basis for Minister’s Notice

The Prime Minister’s use of the word “unlawfully” is absolutely correct. The Minister’s pronouncements are ultra vires the law on indigenisation and devoid of legal effect.

The Government cannot take over mining businesses without proper legal authority and there is no such legal authority – either in the Indigenisation and Economic Empowerment Act or in any other Act of Parliament, or in the Indigenisation Regulations or in General Notice 114 of 2011. General Notice 114, it will be remembered, was the subject of an adverse report from the Parliamentary Legal Committee for its inconsistency with the Constitution [see Bill Watch 31/2011 of 6th August 2011]. The text of the report follows:

ADVERSE REPORT OF THE PARLIAMENTARY LEGAL COMMITTEE ON GENERAL NOTICE 114 OF 2011

In pursuit of its constitutional mandate as provided for in section 40B of the Constitution of Zimbabwe, The Parliamentary Legal Committee met on the 15th of June 2011 at 1010hrs to consider General Notice 114 of 2011. After deliberations, the Committee unanimously resolved that an adverse report be issued in respect of the General Notice due to the following considerations:

The provisions of General Notice 114 of 2011 violate the Declaration of Rights in the Constitution of Zimbabwe, namely sections 16 and 21. Section 21 of the Constitution provides as follows:

Except with his own consent or by way of parental discipline, no person shall be hindered in his freedom of assembly and association, that is to say, his right to assemble freely and associate with other persons and in particular to form or belong to political parties or trade unions or other associations for the protection of his interests.

(2) The freedom referred to in subsection (1) shall include the right not to be compelled to belong to an association

In the Notice, the Minister has directed that non-indigenous mining businesses must sell their shares to designated entities in order to achieve 51% Indigenization. Section 3(1) of the General Notice states that:

Every non-indigenous mining business shall achieve the minimum Indigenisation and empowerment quota by the disposal …of its shares or interests to designated agents not latter …

The designated entities are:

• The National Indigenization and Economic Empowerment fund;
• The Zimbabwe Mining Development Corporation established in terms of the Zimbabwe Mining Development Corporation Act (Chapter 21:08); or
• And company or other entity incorporated by the Zimbabwe Mining Development Corporation or the fund for the purposes of this notice; or
• A statutory sovereign wealth fund that may be created by law; or
• An employee share ownership scheme or trust, management share ownership scheme or trust or community share ownership scheme or trust that complies with section 14, 14A or 14B of the Regulations.

The net effect of this directive is that in order to achieve the prescribed indigenisation quota, a mining business must sell its shares to designated entities. In other words, mining business entities cannot achieve the prescribed quota by selling their shares to partners of their choice. The Minister has already found partners for them without their consent. They have been compelled to belong to certain organizations, that it designated entities. This is clearly a flagrant violation of section 21 of the Constitution quoted above, which is the freedom of association provision.

Secondly, the General Notice violates section 16 of the Constitution. Section 16 provides that no property of any description or interest or right therein shall be compulsorily acquired. In the case of May & Ors v Reserve Bank of Zimbabwe 1985 (2) ZLR 358 at page 358, the Supreme Court defines shares in company as property. The effect of this judgment is that shares in mining business are property duly protected by section 16 of the constitution of Zimbabwe.

The entities designated are, in the main, state corporations. The notice by the Minister, therefore, provides for compulsory acquisition of property by the state. In so doing the Minister has clearly violated section 16 of the Constitution, which provides for the protection from deprivation of property.

The third point that caused the Committee to pass an adverse report is that the Notice is purported to have been passed in terms of section 5 (4) as read with section 5A of the Indigenization and Economic Empowerment Regulations. Section 5(4) only allows the Minister to prescribe by notice 3 issues only:

1. With respect to each sector, what lesser share than 51% shall be lesser share that indigenous Zimbabweans may hold in business operating in the relevant sector.

2. The maximum period that the sector may continue to operate in that way, and

3. The weighting to be assigned to any socially and economically desirable objective.

In the Notice, the Minister is obliged by law to dwell on these three issues only. Instead, the Minister dealt with issues that he is not empowered to deal with by the enabling statutory instrument.

The other glaring contravention of the enabling statutory instrument by the Minister is on the matter of asset value. Whereas the statutory instrument provides that only business with a net asset value of US$500 000, or more, must submit a provisional Indigenisation form, the General Notice reduces this to a single United States Dollar. Again, this is a matter that the Minister is not empowered by section 5 of the regulation to deal with. Matters that the MINISTER is prescribed to deal with by the regulation have been enumerated above. In this respect, the General Notice has gone beyond matters that are allowed by law to be dealt with through General Notices.

Therefore, from the foregoing, the learned opinion of the Parliamentary Legal Committee is that General Notice 114 of 2011 should be repealed because it is not good law. It is bad law because it violates sections 16 and 21 of the Constitution, it is bad law because it is ultra vires the provision of the enabling statutory instrument, which is the Indigenisation and Economic Empowerment Regulation 2010.

Hon S.L. Mushonga

Chairperson, Parliamentary Legal Committee

Documents Available

The following are available from veritas@mango.zw

• Indigenisation and Economic Empowerment Act
• Indigenisation Regulations updated to include all amendments [SI 21/2010]
• GN 114/2011 – Indigenisation of mining sector

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