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A legal avenue for Zimbabwe's investment recovery program
Marshal Mapondera
October 05, 2010

Introduction and Background

Probably before lifting off into the exploration of the article, the writer will begin by acknowledging Farai Mushoriwa-s thought stimulating piece entitled, "Business, politics and law in today-s Zimbabwe", published in the Zimjuris November 2009 edition on page 50. In particular the reference point is where Mushoriwa says; "Private business is the key economic driver and the role of government is to create an enabling environment. Going forward, this means putting in place a systematic and scientific policy of corporate indigenisation which must necessarily depart from the land model, abandoning command policies and abiding by legal means of dispute resolution." This is a valid observation in Zimbabwean economic and legal development that policy makers should take heed. The writer agrees to this proposition that Mushoriwa decides to call "systematic and scientific policy of corporate indigenisation", however he advances further from where Mushoriwa-s views end, in light of the recently promulgated Indigenisation and Economic Empowerment Act Chapter 14: 33 of 2007 (hereinafter the Act) and the investment recovery program launched by the Zimbabwe Investment Authority.

The begging question that surfaces in this exposition is whether government-s initiative to house both investment promotion and economic democratisation through indigenisation is actually feasible. In the valley of indecision, government is required to provide a workable balance if at all such balance should exist, keeping in mind that economic recovery depends on sound investment policy. Foreign Direct Investment (FDI) has become the ultimate answer to economic and social sustainable development for all developing countries as a means to depart from the dependency syndrome into emancipation. African governments have therefore fervently joined the race for attracting FDI as the last two decades of the 20th century have witnessed a worldwide increase in FDI. The international rate of market forces in the past quarter century however, has kept Africa impoverished, whilst simultaneously creating unimaginable wealth for the relative minority in the Global North.

Governments had been caught in a dilemma, seeking aid with one hand while the other feebly attempted to hold on to the millennial hope for a global partnership for development. It is against this background that African states have been frustrated into reverting to expropriation in an attempt to reconcile the economic rift within their sovereign territories, advancing economic democratisation. Public International Law demands that the respective capital importing states or host states be responsible for any actions of expropriating foreign owned property. Expropriation meaning the compulsory transfer of property rights by the capital importing state belonging to a foreign investor to the state or a third party, should be subject to responsible action in recognising property rights.

Customary international law has sufficient evidence to suggest that compensation for any deprivation of property is imperative. When one balances the costs and benefits of expropriation by developing states one may arrive at the conclusion that it may not be worthwhile. The capital importing state is likely to be burdened by the legal costs involved either in arbitration or in the international tribunal not to mention the compensation to be ordered.

National economic democratisation as a means of balancing economic inequality

It is not disputed that national economic democratisation is necessary for economic stability. When the country attained independence thirty years ago, it was the expectation by the masses that a comprehensive national democratic revolution would ensue encompassing all the civil and economic rights required to empower the disadvantaged majority. In the words of Mutumwa Dziva Mawere, it is no secret that the Rhodesian economy was race based and the asset ownership architecture was racially defined. Thus government has attempted to address this through indigenisation. Indigenisation terms of the Act is "a deliberate involvement of indigenous Zimbabweans in the economic activities of the country, to which hitherto they had no access, so as to ensure the equitable ownership of the nation-s resources." Effectively, government acquires a 51% stake in all foreign owned enterprises on behalf of the 'indigenous- Zimbabweans for economic empowerment. Indigenisation is not a new phenomenon as many developing nations have been implementing it to address economic imbalances caused by colonisation for instance our southern neighbour South Africa has the Black Economic Empowerment Act(notoriously BEE). The term 'blacks- for the purposes of this initiative includes Asians and 'coloureds-.

The sad reality however is that the Lancaster House Constitution did not provide for second and third generation rights such that socio-economic rights have not been fully implemented and are not justiciable in Zimbabwe. The basic fundamentals such as food, shelter, education and valuable amenities like power and water are provided scantly and even where availability is not in issue, discriminatingly between the haves and have nots. These are the basics that every Zimbabwean citizen is entitled to by the government of the day, before we even start arguing about national economic democracy and distribution of national wealth.

The challenges of the indigenisation policy

Historically there has been policy disparity where a genuine need for economic democracy has been addressed through micro-scale investment opportunity through the so called small to medium business enterprises, ignoring macro-scale. Reality has revealed that pioneering macro-scale black entrepreneurs have had to rise without the assistance of government policy because none was in place to facilitate such. A ready example is the successful acquisition of the entire shareholding of Shabanie Mashaba Mines (Private) Limited (notoriously "SMM") from a British-controlled company, T & N Plc in 1996 by a native Zimbabwean was an individual initiative.

As a result it is submitted that the major defect in the policy is not the expropriatory nature itself but the fact that it takes the nature of an unrealistic overnight grab. It does not provide the required macro-scale capital empowerment to boost the indigenous people to achieve what entrepreneurs like Mawere did in acquiring individually, multimillion dollar conglomerates. The feasibility of a 51% acquisition by the calibre of people defined as the indigenous is questionable as ownership of such magnitude requires substantial funding. There is likely to be inequality in the implementation of the program at large as not all indigenous Zimbabweans can end up company owners. Reserve Bank of Zimbabwe Governor Dr Gideon Gono questions the motives of the policy against this unequal background. He says, "We must try and resist the lure of and the aroma and tempting opium of empowerment models that are driven by hate, racialism, greed by a few or absolute myopia on how the worlds of international trade, money and capital markets and the global economy in general functions and react to the interventions that national governments implement"

The indigenisation policy seems to have been misplaced in the economic recovery program, as it fails to run in tandem with general government policy. Several examples may be listed. In the context of mining, for instance, the government in 1983 enacted the Minerals Marketing Corporation of Zimbabwe Act that effectively nationalised the output of all mining companies in respect of exports. All mining companies were not allowed to export their minerals but were required to sell such minerals through the Minerals Marketing Corporation of Zimbabwe (MMCZ). The rationale behind the establishment of MMCZ was to ensure supervision of all mineral trade to prevent unauthorised mineral externalisation by all mining companies. If government is already in control of all mineral exports one would ask how the enactment of the indigenisation law can be justified on the basis that mining companies are externalising and hence the problem is solved by handing over 51 % to the "indigenous" Zimbabweans.

Recommendations

There is need to widen the scope of the Indigenisation and Economic Empowerment Act as economic democratisation goes beyond expropriation of foreign owned property. It encompasses the inclusion of socio-economic rights and the jusiciability of such; direct empowerment of previously disadvantaged groups through direct participation in all sectors including government parastatals without necessarily taking over the foreign owned ones. Empowerment is more importantly realised when national resources are shared equitably between the indigenous people, with macro-scale policy to pave way for 'indigenous- or 'black- entrepreneurship as the South African BEE initiative attempts. It may also be worthwhile to learn from Islamic Republic of Iran, a nation with a previously strict investment regime which has, liberalised in order to attract and protect foreign investments since 2002. The Foreign Investment and Protection Act of Iran (FIPPA), is premised on the policy of civil partnership as opposed to direct or indirect expropriation of foreign owned corporate businesses. Zimbabwean legislators can also address the policy disparity currently existing by following the Iran Act which clearly guarantees equal rights, protection and facilities between domestic and foreign investors as well as limited expropriation with appropriate compensation, where justified.

Conclusion

Farai Mushoriwa in the prized article rightly highlights that the current policies are laden with dirty politics reflected by greed that has alienated private business entrepreneurs who ought to be in a civil partnership with government. As Dr Gideon Gono puts it, "So a one- size-fits all as seems to be envisaged by the current legislation is a high hanging skirt that could lead to the commissioning of a crime by those without self-control." It is the writer-s strongest conviction therefore that the current investment policy is a rocky marriage between economic democratisation (through indigenisation) and investment promotion. A suicidal mission has ensued and a time bomb has been triggered that if not addressed as a matter of urgency will destroy what is left of Zimbabwe-s investment market. Sound policy, Parliament should note, can be achieved by respecting the elementary principles taught in the first class of law school; the law should be certain, yet dynamic and above all, just.

Dedication

This article is dedicated to four colleagues who have been influential in my career;

• Mr. George Murena Founding Dean Midlands State University, currently Founding Director & President of Southern African Corporate Governance & Investment Centre of Excellence, UK
• Mr. Admire Takawira Lecturer Midlands State University & Company Secretary, ZISCO Steel
• Mr. Abraham. K. Maguchu Lecturer Midlands State University & Managing Partner, The DMH Law Firm
• Mr. Gainmore Zanamwe Founding Chairman Midlands State University, currently Trade Policy Analyst, Commonwealth Secretariat, Fiji

Gentlemen, like it or not I am living proof of the extent of your capabilities!

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