Monday, April 22, 2013

Govt to amend indigenisation law
Sunday, 21 April 2013 00:00
Business Reporter

Government is currently working on a legislative framework through which locals will be able to use mineral resources on mining claims as a contribution for equity in foreign mining ventures, while also relegating the vendor financing model, it has been learnt.

Information gathered by The Sunday Mail Business indicates that the Ministry of Youth Development, Indigenisation and Empowerment is working with the Attorney-General’s Office to legislate the proposed amendments.

Presently, the Indigenisation and Empowerment Act (especially Chapter 14 of 2007) does not allow for the expropriation of shares by the Government for indigenisation purposes but allows for shares to be acquired at fair market value.

However, the proposed amendments that are expected to be finalised soon are designed to ensure that “the people of Zimbabwe benefit fully, and without cost whatsoever, from enterprises that exploit their God-given natural resources”.

A white paper from Government seen by this paper indicates the desire to “revise materially” the policy and law on indigenisation and empowerment.
“The Ministry and Government of Zimbabwe would like to revise materially, the policy and law on indigenisation and empowerment with respect to the acquisition of 51 percent shareholding in all non-indigenous businesses operating in the country.

“The motivation for this position arises out of the desire to ensure that the people of Zimbabwe benefit fully, and without cost whatsoever, from enterprises that exploit their God-given natural resources.

“Government’s endeavour in this regard is to realise shareholding in such non-indigenous businesses in exchange for natural resources, thereby creating enterprise partnerships between non-indigenous investors and indigenous entities based on contribution of resource of capital in the measure reflected in by our 51/49 percent law,” read the white paper.

Last year, the Government, through General Notice No. 280 of 2012, tried to factor in the changes, but the Parliamentary Legal Committee, whose mandate is to ensure that proposed laws are not unconstitutional, issued an adverse report on some of the proposals.

In August 2012 it was, however, noted that the notice was “ultra vires” (beyond the powers of) its enabling legislation.
The proposed amendments are therefore tailored to ensure that provisions of the regulations are in line with the content of general notices.

In essence, if the amendments sail through, locals, as represented by the National Indigenisation and Economic Empowerment Board (NIEEB), will be able to use the valuation of mineral resources as contribution to their stake in mining companies.

Foreign companies have increasingly been using vendor financing models as ideal instruments to be used by locals to pay for their acquired stake in foreign mining companies.

Through this model, locals were expected to pay for their share in the companies using future dividends.
But policymakers view this as a flawed model as it is not considered as a fair or secure way of reclaiming the country’s non-renewable resources.

President Robert Mugabe is on record on as saying the value of minerals underground should be used as the payment contribution for the 51 percent indigenous shareholding.
“The ministry and the Attorney-General’s Office are working flat out to effect the amendments,” said a Government source who refused to be identified as he is not authorised to speak to the Press.

Government has so far approved 100 indigenisation plans out of a total of 397 initiatives proposed by mining companies as the country’s empowerment drive moves a gear up.

Summary of Proposed

Amendments:

* Provisions relating to thresholds, net asset values and time frames for achieving compliance (Amendment Sections 3, 4 and 5)

* Provisions relating to process after minister rejects either a provisional or revised plan (Amendment to sections 6 and 7)

* A new section 8 designed to implement the new policy directive requiring relinquishment of 51 percent share in non-indigenous businesses whose operations pertain to the exploitation of natural resources.

* New provision regulating businesses in the reserved sectors of the economy prescribed under the Third Schedule (Amendment to Section 9)

* Compulsory compliance certification bringing indigenisation process to logical conclusion (Amendment to Section 11)

* New provisions on procurement achieving the following (1) regulation of procurement practices of private and public companies and (2) preferential procurement for women, youths, disabled and local communities (Amendment Section 12 and a new Section 12A)

* A new comprehensive section, an establishment of community share ownership trusts (Amendment to Section 14 B)

* A new general section on minimum empowerment quotas for special interests group (New Section 15 (to be removed as a proposal )


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