Source: End of impunity for government, parastatals? | The Financial Gazette March 23, 2017
HIGH Court judge, Justice Judith Mushore’s drop of the judicial gavel last week, when she delivered a ruling in favour of a Mutare businessman who was challenging the constitutionality of a law that ring-fences State assets from seizure, could have disastrous and far-reaching effects on President Robert Mugabe’s already embattled government if the Constitutional Court (ConCourt) concurs that the law is inconsistent with the supreme law of the land.
On March 15 Justice Mushore delivered a landmark judgment that struck down Section 5(2) of the State Liabilities Act (Chapter 8:14) — the law which made State assets untouchable — saying it was unconstitutional.
The development puts every piece of government asset together with those of its companies and other departments — both movable and immovable — at risk of seizure by the creditors.
The watershed ruling followed an application by Tendai Blessing Mangwiro, a Mutare businessman, seeking an order declaring this section of the law unconstitutional.
Mangwiro has been battling for years to recover more than US$1,5 million he won in court from government without success as government ministers repeatedly ignored the court order and went on to evoke this law to frustrate him from attaching State assets for purposes of execution.
Justice Mushore ruled that the section was unjustly hindering Mangwiro from realising an award of damages granted in his favour by the High Court in case number HC4766 /13.
“Section 5 (2) of the State Liabilities Act (Chapter 8:14) be and is hereby declared to be inconsistent with the Constitution of the Republic of Zimbabwe and is therefore invalid,” said Justice Mushore before referring her judgment to the ConCourt for confirmation.
“If Section 5(2) is being used to frustrate justice as is clearly the case in the present case, then it is not justifiable in a democratic society based on openness, justice, fairness, human dignity equality and freedom,” she said.
Having identified that Section (5) 2 of the Act was destructive of important rights, which the Declaration of Bill of Rights speaks to and represents, Justice Mushore added: “If those rights are impeded, the Declaration of Rights implementation is severely impeded.”
The law — which analysts have in the past said provided the State with powers equivalent to those that it can only wield in war-situations to expropriate private property — has been used extensively to keep marauding State creditors at bay.
The ruling was delivered on the same day Vice President Emmerson Mnangagwa, who is also the Minister of Justice, was in Geneva, Switzerland where he was painting a rosy picture of the human rights situation in Zimbabwe at the United Nations Human Rights Council.
Legal experts said the ConCourt was likely to concur with Justice Mushore’s ruling, a development that would open floodgates of lawsuits and expose government assets and those of its nearly 100 parastatals — which until now have been safe and secure — to seizure to satisfy judgment debts.
“It is an important ruling that makes it clear that government won’t cause harm and expect to get away with it,” Jacob Mafume, a lawyer and opposition politician told the Financial Gazette.
“It can be chaotic as we have an insolvent government… our debts are more than our assets at the moment,” Mafume added.
It is under this law that the broke government and its loss-making parastatals — both of which are notorious for ducking creditors — have been taking refuge for years.
Officially, Zimbabwe’s government debt stands at US$8,5 billion, but this amount is disputed with figures as high as US$12 billion being mentioned once undisclosed debts to China and other African countries such as Libya are included.
Part of government’s debt includes the nearly US$1,4 billion incurred by the Reserve Bank of Zimbabwe before December 2008, which it took over in 2015.
In addition to this, virtually all the country’s parastatals have been mired in choking debts for many decades, with ZESA Holdings, which has various business units, being the most indebted as it owes creditors more than US$1,2 billion against its assets of just over US$500 million.
At the end of last year, Air Zimbabwe owed its creditors more than US$330 million, while the National Railways of Zimbabwe owed creditors more than US$200 million.
Other parastatals that are known for their debts include the National Oil Infrastructure Company of Zimbabwe (previously the National Oil Company of Zimbabwe), the Grain Marketing Board, the Cold Storage Company, the Central Mechanical and Equipment Department, the Civil Aviation Authority of Zimbabwe and many more that are spread across 13 ministries.
The removal of protection on State assets comes as a relief to many citizens and corporates that have been awarded damages by the courts in cases where they would have suffered losses or abuse at the hands of State agents, but like Mangwiro, found themselves stranded as there was no way of enforcing these court judgments.
Some former white commercial farmers have in the past resorted to attaching government properties abroad because they could not get joy locally. In 2015, some of the farmers who had won their case at the now disbanded Southern African Development Community tribunal based in Namibia caused the attachment and auctioning of a property belonging to the Zimbabwean government.
This comes at a time when the country has registered an increase in cases of defiance of court orders by Cabinet ministers and other senior government officials, a development that has left many injured parties infuriated.
The landmark ruling is the culmination of a culture of defiance of court orders as highlighted by Home Affairs Minister, Ignatius Chombo and his Finance counterpart, Patrick Chinamasa, when they both ignored Mangwiro out of existence, fully aware that he had no way of forcing government to pay him.
The law has also been subject to abuse.
In 2015, government came under fire after using the State Liabilities Act to put the assets of the mismanaged Premier Services Medical Aid Society (PSMAS) out of the reach of enraged creditors — who are owed nearly US$150 million — for a period of three years.
President Mugabe evoked the outdated Presidential Powers Temporary Measures Act to issue a Statutory Instrument (SI) stopping PSMAS’ creditors from attaching the firm’s assets over unpaid debts. The SI served to illegally evoke the State Liabilities Act, even though PSMAS is not a State-owned business entity or a government department.
“This is not good for the investment climate,” pointed law expert, Alex Magaisa, at the time. “It means the right to private property is insecure when dealing with State companies. If you cannot pursue your debts and get satisfaction through attachment of property, then there is no security of contracts at all. This type of law paints a very bad picture of the investment environment in Zimbabwe at a time when the country is desperate for investment.”
However, the State Liabilities Act has protected not all State-owned firms. Last year, Kingstons Holdings, a loss-making parastatal that falls under the Ministry of Information, Media and Broadcasting Services had its headquarters — Kingstons House — in central Harare attached and auctioned by ZB Bank over a US$300 000 debt.
The Zimbabwe Broadcasting Corporation had to negotiate with a former employee after virtually all its vehicles had been attached by the Sheriff of the High Court, while State newspapers group, Zimpapers had its vehicles and other assets attached last year over a US$45 000 debt arising from a defamation lawsuit the group had lost.
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