HomeBusiness DigestMawere decries abuse of property rights

Mawere decries abuse of property rights

Eric Chiriga

EXILED businessman, Mutumwa Mawere, has said that the state takeover of his firms clearly indicates that the government has no respect for property rights.

erdana, Arial, Helvetica, sans-serif”>Mawere’s comments come in the wake of questions recently posed in parliament by MDC St Mary’s MP Job Sikhala to Justice minister Patrick Chinamasa if he was aware that the Reconstruction of State Indebted Companies Act was in breach of provisions of property rights.

Sikhala also asked Chinamasa if he was taking any corrective measures especially in the light of the state of affairs at Shabanie Mashaba Mines.

However, Chinamasa dismissed Sikhala’s claims.

“I can state categorically that the Reconstruction of State-Indebted Insolvent Companies Act (the Reconstruction Act) does not breach the property rights enshrined under our constitution,” Chinamasa said.

“The constitutionality or otherwise of a piece of legislation or an administrative action is determined by our Supreme Court in terms of the constitution.”

Chinamasa said there is a presumption of constitutionality in the interpretation of our legislation and such legislation is presumed to be constitutional until declared otherwise by the Supreme Court.

Chinamasa said the Reconstruction Act referred to by Sikhala was constitutional until the Supreme Court rules otherwise.

“To my knowledge, SMM has not filed a constitutional challenge of the Reconstruction Order, which was issued on the 6th September 2004,” he said.

SMM has since filed an application in the High Court seeking the setting aside of the Reconstruction Order.

Chinamasa said it was difficult to understand the sort of corrective measures Sikhala wanted, given that SMM was as of September 6 last year indebted to the state to the sum of $115 billion and to other creditors to the tune of $22,4 billion and unable to repay.

He said SMM was also overwhelmed with debts to the extent that the state could no longer lend it funds while trade creditors and suppliers had ceased dealing with it for non-payment.

He said business had ground to a halt and government was forced to pay the creditors.

“All this was caused by the externalisation of SMM foreign exchange earnings of US$18,5 million by South African-based Mutumwa Mawere,” he said.

” It (SMM) faced imminent closure and thousands of jobs and livelihoods were at risk of loss. It could not repay its trade creditors and the mining concern was literally insolvent and incapable of proceeding.”

SMM was placed under reconstruction in terms of the Reconstruction Act, with government arguing that this was done with a view to rebuilding it (SMM) and ensure it returned to viability through a proposed Scheme of Reconstruction.

Chinamasa said in any event, it was also in the public interest that SMM be placed under reconstruction given the fact that it was owing public funds and was a debtor of the state.

He said based on the facts on the ground, one would conclude that SMM was indebted to the state and, therefore, the state acted in the national interest to pass a new law to prevent the imminent collapse of the company.

“The role of the state in relation to SMM needs to be examined in order to determine whether the actions of the state were justified,” Chinamasa said.

“In addition, the conduct of the state in relation to SMM and its shareholder are issues that the minister failed to address.”

However, speaking from South Africa, Mawere said SMM is a private company beneficially owned by another private company, SMM Holdings Ltd (SMMH), through shares registered in England.

He said the ownership of SMM goes back to 1965 and there has been no change of shareholding since then, adding that the shareholding of SMMH changed in 1996 when ARL, a company registered in the British Virgin Islands, owned by himself acquired by purchase, all the shares owned by T & N Plc, a company registered in England, but now in administration.

He asked why the government did not allow the due process of the law to take its course if the company was indebted?

Mawere said if the relationship between the state and SMM was that of a debtor and creditor, then the recovery or reconstruction of the company would certainly have been a civil matter.

He said the protection of a debtor against a creditor would be governed under Section 18(9) of the Constitution that states: “Subject to the provision of this constitution, every person is entitled to be afforded a fair hearing within a reasonable time by an independent and impartial court or other adjudicating authority established by law in the determination of the existence or extent of his civil rights or obligations.”

He said in the case of SMM, the indebtedness alleged by the minister was not independently determined as provided for in the constitution.

Instead, the state appointed its administrator who dismissed the board of the company and proceeded to unilaterally determine the indebtedness of the company.

“Even if SMM was indebted, the minister would still have been obliged to give notice to SMMH as the member most affected by the Reconstruction Order,” Mawere said.

“However, the minister chose not to inform SMMH although the constitution provides no latitude. By failing to afford the shareholder a hearing before issuing the Reconstruction Order, the decision to issue a Reconstruction Order by the minister in respect of SMM was contrary to the rules of natural justice. The minister did not address this issue in parliament.”

Mawere argues that Chinamasa failed to inform the House that there was no legislative framework which allows the state to loan funds to individual companies in Zimbabwe.

He said that the broadening of the definition of the state in the Reconstruction Act not only undermines the juristic persona of state institutions and the fact that it operates retroactively offends all rules of natural justice.

“The SMM saga illustrates the classic case of abuse of power by the executive on the pretext of national interests. The minister alleges that there was no ulterior motive in placing SMM under reconstruction,” he said.

“In the response of the minister it is clear that the government was in no way involved in the ARL acquisition and yet now has effectively dismembered a private company of its property rights in Zimbabwe.”

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