GOVERNMENT is working on a raft of amendments to the punitive indigenisation regulations, which were suspended by cabinet last week following a storm of protest from the business and international communities.The latest amendments are designed to remove rough edges to the draconian statutory instrument and devise a workable implementation mechanism of the Indigenisation and Economic Empowerment Act signed into law a month before the inclusive government was formed in February 2008.
The indigenisation campaign, which sometimes degenerates into a drive for nationalisation and seizure of foreign companies, has caused panic within the local corporate sector and international centres where most Zimbabwean-based multinational companies are headquartered.
Official documents exclusively obtained by the Zimbabwe Independent this week outline the amendments to the Indigenisation and Economic Empowerment (General) Regulations, SI 21 of 2010, currently being drafted by the Attorney-General’s office for consideration by cabinet.
The cabinet committee on legislation chaired by Justice minister Patrick Chinamasa will scrutinise the regulations before approval by cabinet and gazetting. Chinamasa’s committee’s key function is to prepare and manage the legislative programme for each parliamentary sitting as well as processing subsidiary legislation.
Other key cabinet committees which will be involved in the process include the committee on financial and economic affairs chaired by President Robert Mugabe, economic coordination committee chaired by Finance minister Tendai Biti (pictured), committees on investment and development chaired by Economic Planning and Investment Promotion minister Elton Mangoma, trade and international cooperation chaired by Minister of Regional Integration and International Cooperation Priscillah Misihairabwi, and the committee on indigenisation and empowerment chaired by Minister of Youth Development, Indigenisation and Empowerment Saviour Kasukuwere.
The documents reveal that Kasukuwere’s committee is tasked to “spearhead the implementation of the National Indigenisation and Empowerment Policy in the strategic sectors of the economy and to ensure broad and equitable participation by locals in the empowerment programme”.
The papers show that most of the changes to be made on the indigenisation regulations were recommended by the Council of Ministers after a critical meeting on March 11. The suspended regulations came into effect on March 1.
Following heated meetings on February 11 and February 25, the Council of Ministers resolved on March 11 that the regulations — which were gazetted without consultation within the inclusive government, business sector and the public — would be reversed.
Mugabe and his Zanu PF ministers were last week forced to make a dramatic climb down on the controversial regulations due to overwhelming pressure stemming from behind-the-scenes lobbying and negotiations. Cabinet suspended the old regulations last week on Tuesday.
Ministers have now decided that the new regulations would incorporate a series of amendments adopted by consensus in the Council of Ministers and cabinet.
Amendments to the regulations already agreed upon and are being drafted by the Attorney-General’s office include:
• Changing of item 15.2, section 3b of the regulations which relate to the need for companies to “cede” equities and replacing that with “sell” to reflect that this would be a commercial transaction and not seizure;
• Changing item 15.3 to incorporate the creation of a sub-committee functioning as a Compliance Board to monitor conformity and ensure companies fall into line;
• Item 15.4 to say the asset threshold of US$500 000 for companies to ensure 51% indigenisation is now raised to between US$3 million and US$5 million, which will be applied according to sector-specific recommendations,
• Consideration of the peculiar situation of 26 companies listed on the Zimbabwe Stock Exchange (regulations will aim to promote and strengthen black-owned businesses); and
• Recourse to the Administrative Court as an adjudicating forum for disputes to be incorporated in the regulations.
Kasukuwere confirmed this week in a media statement that changes to his regulations were being made. “I confirm that as we continue to refine our regulations, we will emerge with measures that are sector-specific and sector-sensitive as requested by our corporate bodies,” Kasukuwere said.
“In respect of this matter and in order to achieve closure, government will bring forward gazetting of sectoral thresholds from the original 12 months to four months. This will be a consensual decision involving the affected sectors and individual companies.”
The documents show that the regulations would be refined to ensure that the law is not manipulated for partisan interests and used as a blunt discriminatory instrument, something which may very well be unconstitutional and racist.
Ministers from all the parties in the inclusive government agreed at a Council of Ministers meeting on March 11 that they did not intend to come up with a discriminatory and racist policy which would damage the indigenisation programme.
As a result, there would be attempts to avoid discrimination against Zimbabweans of European and Asian origin. Zimbabweans of mixed colour (coloureds) would also now be protected.
“The Council of Ministers of March 11 adopted these amendments and the minister (Kasukuwere) was told to proceed to instruct the Attorney- General’s office to draft amendments although inputs from ministries and stakeholders will continue to be considered,” a senior government minister told the Independent this week.
The amendments will now allow non-blacks who are third and fourth generation Zimbabweans to benefit from indigenisation. Whites who are third and fourth generation Zimbabweans will not be forced to comply with the 51% requirement.
In framing the new regulations or amendments, Asians and Coloureds who run “model businesses” would be given protection because “they were discriminated against before 1980”, the documents say.
In instances where blacks fail to pay for their shareholding, the new plan is to use the Zimbabwe National Indigenisation and Economic Empowerment Fund to bail them out. It is not clear how this fund, which will also be involved in adjudicating disputes, would be financed.
There are also suggestions that the five-year custodial sentence for company executives who defy the regulations should be replaced with a fine. MDC ministers say imprisonment would leave the regulations draconian but Zanu PF ministers claim custodial sentences would force compliance.
Ministers have also proposed stringent vetting of foreigners who enter Zimbabwe purporting to be planning to set up “high-tech business enterprises” but “end up running flea markets and other ventures in areas such as the “the Gulf” in downtown Harare. Ministers say “the Gulf” should be investigated by the Ministry of Home Affairs to establish the nature of its operations and clear criminal elements.
In order to ensure proper consultations and amendments to the regulations, sector-specific committees would be set-up at various ministries and carefully examine the peculiarities of each sector.
While the Indigenisation and Economic Empowerment Act will remain in place, the regulations — which give effect to this law — will be revised. Thresholds on meeting the 51% indigenisation quota would now vary from sector to sector depending on the situation and circumstances.