Maravi

(TALKZIMBABWE) Indigenization Act comes into effect

Indigenization Act comes into effect
Philip Murombedzi
Mon, 01 Mar 2010 15:58:00 +0000

A NEW Zimbabwean law, the Indigenization and Empowerment Act, that requires all companies in Zimbabwe to have a majority stake in their businesses owned by indigenous people, has come into effect despite being declared 'null and void' by Prime Minister Morgan Tsvangirai.

The regulations were announced last month by the Minister of Youth Development, Indigenization and Empowerment, Saviour Kasukuwere.

Under Sections 3 and 4 of the Act, overseas-owned firms with an asset value of more than $500,000 (£332,000) will have five years to sell a 51% stake to indigenous Zimbabweans. Failure to do so attracts a jail sentence.

The foreign-owned firms have 45 days from 1 March to inform the government how they will achieve majority indigenous shareholding within five years.

The regulations apply to "companies, associations, syndicates and partnerships whose object is the acquisition of gain; effectively this covers everything other than literary and charitable associations".

"Indigenous Zimbabwean as defined in the Act, refers to anyone who, before independence in April 1980, "was subjected to unfair discrimination [presumably in Zimbabwe] on the ground of their race, and includes a descendant of such a person".

Businesses must submit forms to Minister by 15th April. Under Section 4 of the regulations, all businesses with an asset value of more than US $500 000 must send the Minister a form [which is set out in the regulations] showing the extent to which they are indigenised and, if they are not majority-owned by indigenous Zimbabweans, their plans for indigenisation; these plans must conform with guidelines provided in the form.

Existing businesses must submit the form to the Minister by the 15th April but it is not a criminal offence to fail to submit the form — if a business fails to do so. The Minister can send it a form and order the business to complete it; only if the business fails to comply with the Minister’s order will it commit an offence [Section 4(4)].

Having received a form from a business, the Minister has 45 days within which either to approve the business’s indigenisation plans or to make his approval dependent on the plans’ conformity with a notice which the Minister is supposed to publish in the Gazette before the 1st March 2011.

If a person or company that controls a business whose asset value exceeds US $500 000 relinquishes control over the business, the transaction will have to be approved by the Minister, and the approval will be conditional on the transaction conforming with indigenisation targets set out in an approved indigenisation plan [Section 8].

Under section 9, anyone who “projects or proposes an investment for which an investment licence is required in terms of the Zimbabwe Investment Authority Act” will have to obtain the Minister’s approval before obtaining such a licence, and “any investor requiring a licence in terms of the Zimbabwe Investment Authority Act” will have to obtain the Minister’s approval before investing in sectors of the economy which are listed in the Third Schedule.

These sectors include agriculture, transport, “wholesale or retail trade”, barber shops, advertising agencies and milk processing.
If goods or services are obtained from a supplier under the Procurement Act and the supplier is not controlled by indigenous Zimbabweans, the supplier must subcontract to competent indigenous businesses — but only if the supplier “is required by the Act to subcontract to businesses whose controlling interests are held by indigenous Zimbabweans.”

Businesses will have to satisfy the Minister annually that they are indigenising in accordance with the law.

Under Section 15 the Minister will establish a database of people who want indigenous Zimbabweans to acquire an interest in their businesses, and of indigenous Zimbabweans who wish to “partner” those people.

The new law was passed by Parliament in 2007 but was only published as law last month.

Prime Minister Tsvangirai rejected the law, saying it was published without due process. But President Mugabe has repeatedly defended the law and said foreign companies would be "foolish" not to comply.

Speaking at his 86th birthday celebrations on Saturday, the president said the new Act was designed to broaden Zimbabwean participation in the economy.

"This law will enable us to examine every large company in the country and determine whether the ownership principle has been observed," President Mugabe told a crowd gathered in Bulawayo, Zimbabwe's second largest city.

Labels: INDIGENIZATION AND EMPOWERMENT ACT (ZIMBABWE)

posted by MrK @ 6:17 PM