ZHUWAO: ‘Law of the land shall prevail’

via ZHUWAO: ‘Law of the land shall prevail’ | The Sunday Mail 20/03/2016

In 2015, Government gave foreign companies in Zimbabwe up to March 31, 2016 to submit their indigenisation compliance plans. However, several firms are yet to comply, prompting authorities to come up with stringent measures to deal with them. The Sunday Mail Chief Reporter Kuda Bwititi caught up with Youth, Indigenisation and Economic Empowerment Minister Patrick Zhuwao to discuss the matter. Below is Minister Zhuwao in his own words.

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Firstly, we must recognise that the Indigenisation and Economic Empowerment Act became effective on April 18, 2008.

However, there has been very little progress in implementing key provisions, mainly the provision stating that at least 51 percent of all business — public and private — should be owned by indigenous Zimbabweans.

We have seen significant non-compliance and disregard for the laws of the land to a point where His Excellency, the President, had to throw down the gauntlet as he closed Zanu-PF’s National People’s Conference in December 2015.

HE declared that Government would not accept companies that reject our indigenisation policies, and his order was that such companies should not operate in Zimbabwe come 2016.

I, therefore, wrote to all ministers on December 18, 2015, highlighting the President’s statement and soliciting their advice to ensure compliance.

I also engaged Finance Minister Patrick Chinamasa and Reserve Bank of Zimbabwe Governor Dr John Mangudya, as indigenisation and economic empowerment has an economic bearing.

Following all these consultations, it was clear that the Indigenisation and Economic Empowerment Act (Chapter 14:33) and its subsidiary legislation were comprehensive enough to enable companies to comply.

We then developed implementation frameworks, guidelines and procedures to help companies understand and comply.

All non-compliant companies were requested to comply by March 31, 2016, in accordance with the Head of State and Government’s order.

Not playing ball

It is disappointing that there has been very little movement since HE’s statement of December 2015 and our subsequent unpacking of the legislation to make it easier to understand.

This has been worsened by the fact that I have engaged business organisations at various fora at least bi-weekly to explain the Act’s provisions.

I have made myself available to anybody seeking clarification, but only one such request has been made.

Unfortunately, I have no option but to conclude that companies are not complying thus breaking the law.

It is important to adhere to the law as not doing so results in anarchy.

Those who have not complied are being contemptuous of the people of Zimbabwe on whose behalf Parliament enacted the law.

They are also being contemptuous of the Head of State and Government who issued clear instructions on compliance and who is in that position on an electoral mandate.

The net result of non-compliance is total disregard for the people of Zimbabwe and such disregard is unacceptable by any standards.

In attempting to make companies comply, our ministry had initially come up with the idea of a levy that could be moderated by the extent of indigenisation compliance.

However, on further reflection and consultation, we realised that such a levy would actually be payment for companies to continue disregarding the law.

I, as minister, would have been complicit in committing an illegal act.

Any similar levy that enables companies to continue breaking the law runs contrary to the spirit and intent of a Constitutional democracy like Zimbabwe.

I have previously stated that I will take the empowerment issue to Cabinet and Parliament for consideration, but will not do the same with the levy.

Instead, we will put in place appropriate measures to invoke Section 5 of the Act which speaks of cancelling operating licences of non-compliant companies.

What this means, effectively, is non-compliant companies will be stopped from operating.

Zimbabwe believes in the rule of law; we can never accept a situation where companies continue to wilfully and contemptuously break the law.

This is not policy inconsistency: I have always pointed out that the proposed levy was a means of ensuring compliance.

The levy was never imposed.

It was a proposal, and a proposal — by its very nature — is open to discussion.

This proposal should have been accepted by businesses and that acceptance would have been demonstrated by their implementation plans, with the proposed levy being one component.

However, the prospect of the levy is now off the table and what remains involves Section 5 of the Act: licence cancellation.

The message we should send investors is that Zimbabwe upholds the rule of law. We have legal provisions that must be followed.

Companies that operate illegally must stop operating.

On the occasion of his 92nd birthday anniversary interview, the President said we lost diamonds because of companies similar to those ones that do not want to comply with the law.

Now, the people of Marange are left with gaping holes; there are no diamonds, no resources to talk of.

And a lot of companies that are not complying are in mining.

These companies dig holes to no value.

It’s better to keep our resources until we engage businesses that respect our laws and the institution of Parliament.

Economic impact

One has to consider the true impact of some non-compliant companies. If we take, for example, the revenue that accrues to Government, one will learn that only 10 percent of such revenue is in the form of corporate taxes.

So, at most, the impact, for instance, on Government revenue is not more than 10 percent, considering that a number of companies pay taxes.

My message to the companies is in two parts.

Firstly, they had five years to comply. Secondly, after those five years lapsed, they had an additional year and were given an ultimatum by the President.

It is rather unfortunate that even I, as the minister responsible, did not adhere to that ultimatum and extended it by three months in concurrence with two of my colleagues.

And it is on the back of that extension that I think we should not give further leeway to contemptuous companies.

There is a law to be followed, and I am bound by Oath of Office which requires me to abide by the laws of the land.

It is a position of law, and this is what must happen. I must implement the law, so should line ministries, and I should add that it is the duty of Government to uphold the law.

As they contemplate their future, non-compliant companies must look at the principle of dirty hands, which says it is difficult for the court to hear you if you have committed any illegality.

Let us save each other the time of approaching the courts when it is blatantly obvious that you have breached the law.

We want to say to companies that have complied: “Thank you for respecting the laws of our country.”

In accordance with natural justice and equity, such companies must be given the opportunity to operate with a comparative advantage.

Are all these measures drastic, excessive?

That question must be read in line with amendments effected by Finance Act (Number 3 of 2014), which devolved management and implementation of indigenisation legislation to line ministers.

There has been little traction, though.

Indigenisation and empowerment

The thrust of this initiative is encompassed in the Act’s preamble which provides for two aspirations/pillars.

Pillar One deals with ensuring at least 51 percent of business shareholding is held by indigenous Zimbabweans, and that speaks to the indigenisation component.

The economic empowerment component (Pillar Two) relates to utilising natural resources to create micro, small and medium enterprises owned by indigenous Zimbabweans.

There is a distinction between empowerment and indigenisation.

Indigenisation is about correcting shareholding structures of companies that are not indigenously-owned in terms of shareholding.

So, the indigenisation component is about shareholding.

On the other hand, economic empowerment is about effective and judicious utilisation of human resources in a manner designed to create and grow micro/small/medium/large scale enterprises.

Property rights

Before one raises any point on this, one must interact with the legislation. Shareholding disposal is recognised and this is very clear in the law.

Vilification of indigenisation is not based on real economic considerations, but on political grounds.

And part of that political consideration is that indigenisation — by its very nature — talks to unjust, illegal and racial discrimination perpetrated on the indigenous people of this country.

So, you then find that entities that seek to vilify indigenisation, especially entities that want to propagate a narrative of “re-culturing terminology on indigenisation”, are really ashamed of the fact that we, as black people, were previously subjected to racial discrimination.

This is disrespectful and contemptuous to the people of Zimbabwe, and the root cause of this contempt is racism.

These are people who have spurned the hand of reconciliation extended by the Head of the Republic in 1980, and cannot countenance a black person as equal to them.

There are also black Rhodesians in these institutions who still consider themselves inferior to white people.

It is a shame that we have people who are conditioned to think they are inferior — 36 years after independence.

At a meeting I once attended, a chief executive of a financial institution indicated that financial institutions cannot be run by black people.

It’s so unfortunate.