Zimbabwe: Legislation affecting Commercial Transactions 2018:
CHANGES MADE TO THE INDIGENISATION AND ECONOMIC EMPOWERMENT POLICY
The amendments to the Indigenisation and Economic Empowerment Act [Chapter 14:33] have been carried through in the Finance Act (No.1 of 2018) and these changes seek to rebuild confidence in the Zimbabwean economy. The Act is seen as a good step in the right direction to redress the disproportionate equity transfers and the impoverishment of the people of Zimbabwe.
Previously, the law required that there be a 51% ownership of shares in every company and any other business owned by indigenous Zimbabweans. The current position requires that this stipulation be applicable to the diamond and platinum industries alone and not to the entire mining sector. In these two extractive industries, ownership has to be effected through an appropriate designated entity, and the owners may opt for the participation of a community share ownership scheme or employee share ownership scheme or trust. The appropriate designated entities consist of the Zimbabwe Mining Development Corporation and any other entity incorporated by this organization, the Zimbabwe Consolidated Diamond Company and the National Indigenisation and Economic Empowerment Fund.
The raison d’etre of the amendments is to promote the ‘Open for Business’ policy initiative in a move to repair the country’s economy and instill investor confidence. The previous legislation was a hindrance to the promotion of trade and international relations which are key for a country’s economy. With this change, investors will have more confidence in the economy as there is an allowance for full ownership and control of other mining sectors. The existing businesses are not required to comply with the law with immediate effect, but instead can formulate a revised indigenisation plan which will be submitted to the designated Minister for approval.
The 12 reserved sectors which had been previously reserved for black Zimbabweans has now been made open to Zimbabweans of all races. Foreign investors who seek to invest in these sectors are required to seek permission from the Minister. Any person who is not a citizen who commenced operating in the reserved sector may continue to operate only if they register with the Zimbabwe Revenue Authority and the Unit, and opens and maintains a bank account in accordance with the Bank Use Promotion Act (Chapter 24:24). The Unit is established by the amendments to the Act. The rationale for compliance with these provisions is to curb illicit money flows and the promotion of local banks. These amendments serve to improve the economy as a whole and not just the mining sector. There is also a promotion of start-ups and small to medium enterprises
In as much as the previous policy was created to advance the ownership of key minerals by indigenous Zimbabweans, it cannot be argued that this policy was discriminatory and did more bad than good for the general populace The previous legislation regarding indigenisation was poorly implemented, as it was hampered by corruption and mismanagement. The amendments do serve to undo the effects of the former policy, and to promote investment, more so, foreign direct investment which is key for the recovery of an ailing economy. The country is adopting a systemic approach to lessening trade deficits and increase business investment. The transition from the previous extremist approach which resulted in the isolation of the country to a more inclusive policy is welcomed. This change does mean that there is a higher trajectory of economic growth which will be sustainable. Local and foreign businesses are both being given an opportunity to explore and invest in mining ventures in other sectors of the economy, which promise to be profitable. An example can be given by the small-scale miners who have proved that they are contributing more than the larger mines. This enabling legislation will empower the locals and foreigners and it will be beneficial to the economy.
It is important to note that investors seek a place where there is less resistance, has sure and unwavering economic policies which promote their interests and also protects their private property rights. Without these elements, investors will be hesitant to place their investment capital in this nation. The competitiveness of the business sector will be enhanced given the encouragement of foreign participation in the economy. These changes in economic policy are a good step in the right direction and actual investments do need to be made to counter the effects of the Mugabe-regime.
MONEY LAUNDERING AND PROCEEDS OF CRIME BILL GAZETTED
In the move to further curb illicit financial flows and to mitigate the risk of money-laundering, the Money Laundering and Proceeds of Crime (Amendment) Bill of 2018 has been introduced into the legal framework.The Bill serves to do the following:
The implementation in domestic law of the International Convention for the Suppression of the Financing of Terrorism (adopted by the General Assembly of the United Nations Organisation by Resolution 54/109 of 9 December, 1999 and related UN Security Council Resolutions 1267 of 15 October, 1999 and 1373 of 28 September, 2001)
Comply with FATF Recommendations
Strengthening of legislative defences against misuse of our financial system for the purpose of money laundering or the financing of terrorist activities
Zimbabwe is showing its commitment to the implementation of AML/CFT systems which are in compliance with recommendations and measures which have been placed and issued by inter-governmental organisations. These have been described as a representation of standards which all states should adhere to. It is important to note that compliance is crucial, as non-compliance will inevitably result in the isolation of the country from the international financial system. Zimbabwe is a member of the Eastern and Southern African Anti-Money Laundering Group (since 1999). By virtue of its membership of this group, the recommendations issued by the FATF are to be implemented. In the most recent evaluation and assessment of the country’s legislation and financial systems, the country was found to have been non-compliant with the recommendations and urged to improve these systems.
The Bill establishes the Financial Intelligence Unit, which was previously established as the Bank Use Promotion and Suppression of Money Laundering Unit under the Bank Use Promotion Act. This Unit will be in the administrative establishment of the Reserve Bank of Zimbabwe. The functions and powers of the Financial Intelligence Unit are set out, which are all in line with the recommendations set out by the FATF. The Financial Intelligence Unit is set out as an independent body, tasked with effectively combating financial crimes. In the Ministerial report dated of 12 April 2017, the Minister stated that in regard to the level of compliance with the FATF recommendations, the country was compliant with 11 recommendations, largely compliant with 8 recommendations, partially compliant with 15 recommendations and not compliant with 6 recommendations.
The key areas which the amendment addresses are professional bodies whose trust accounts were depicted as being instrumental to the carrying out of financial crimes. Safeguards have been put in place to eliminate these activities. The monitoring of non-financial businesses is also seen to be enhanced by the amendment. Customer due diligence measures are also put in place where the customer is to provide verification of their identity when carrying out transactions in certain circumstances. Customer due diligence obligations extend to correspondent banks, high risk customers and politically-exposed persons.
These additions to the current legal framework which have been put in place to counter terrorism financing and money-laundering are comprehensive. The enactment of the Bill will be a great step in the right direction as Zimbabwe cannot afford to be isolated from the international financial system, more so with regard to the moves being made to better international relations with regard to trade and investment.